White House Chronicle

News Analysis With a Sense of Humor

Europe Faces Winter on the Edge of the Abyss

by 1 Comment

BURGENLAND, Austria –There is another world crisis brewing – and one for which President Obama cannot be blamed. The Europeans and have made a mess of things, and now the wolves are at the door.

The first snarling wolf is deflation. Europe’s economies are so weak, so close to recession, that the very real danger of deflation – falling prices – has its economists petrified. It ought also to have its politicians in anguish, but whether it does is less clear.

Europe’s big-driver economy, Germany, as well as France and Italy, are on the edge. The German miracle is ailing, and Berlin may have been writing the wrong prescriptions for the rest of the 18 countries that share the euro as their currency. It has been aided in this effort by the International Monetary Fund.

That prescription, which often seems to harm the patient, as in Greece and Spain, is for austerity – which appears to work better on paper than in the real world. Germany worries about profligate borrowing throughout the European Union. But if the German economy is to escape recession, Chancellor Angela Merkel may have to borrow some money herself and inject it into infrastructure spending to keep Germany competitive and its workers on the job.

The European Central Bank (ECB) has been slow to institute a badly needed program of buying qualified bonds, known as quantitative easing. In the United States, the Federal Reserve, in a program that is now ending, has pumped more than $1 trillion into the economy and helped pull the economy out of recession. But ECB has been timid because it has no clear direction from the European political establishment — pointing up how cumbersome and directionless the European Union structure has become. It has a parliament, which has no power, and is increasingly attracting members who are actually opposed to the European project.

The European Commission has arguably too much power centered in the bureaucracy in Brussels, but no clear direction form its controller, the Council of Ministers. Trouble is the ministers can disagree and veto needed courses of action.

The economic crisis points up the ungovernable nature of Europe and its present institutions. If Washington is gridlocked, Europe is by structures that cannot deal with crisis and what often appear to reflect as many policies as there are members (28) in the EU.

But it is not just the economic wolf that is at Europe’s door. The Russian bear is there, too. Already there is an undeclared war raging in Ukraine.

At the Association of European Journalists' meeting here, a spokesman from the Ukrainian government, who asked not to be identified by name, expressed the sense in Ukraine that it has been betrayed by EU bungling.

“Europe sees Ukraine as its European neighborhood partner. But in Ukraine, the truth is different: Ukraine’s view is that Europe let us down. We are hurt, bleeding. We have been betrayed by a neighbor that, six months ago, we saw as a brotherly nation,” he said.

What was not said was that Europe may freeze this winter if the Putin regime — a growling wolf — wants to punish Ukraine and its neighbors. Europe is hopelessly dependent on Russian gas, which is used mostly for heating. Germany gets 40 percent of its gas from Russia, and Finland, Estonia, Latvia and Slovakia get 90 percent. Russian gas makes its way — largely through Ukraine — down into Italy, and even the United Kingdom has some small exposure.

If the gas goes off, Europe freezes and its economies go south in an avalanche. The most hopeful thing for Europe this winter is that with the world oil price falling, Russia’s own fragile economy may dictate that it keeps the gas flowing — but it will force up the price where it can.

Washington, with a new Congress, might want to brace for Europe’s winter of crisis and disaster. If Europe goes into severe recession, can the U.S. economy escape major harm? The new Congress will be on a sharp learning curve. — For the Hearst-New York Times Syndicate

Merkel Finds German Engineering not Good Enough for Nuclear

by 7 Comments

Question: What is Germany most famous for these days? Answer: engineering.

In light of the worldwide respect for German engineering, precision and management, why has Chancellor Angela Merkel taken up arms against her most admired national talents?

For that is what she has done in turning Germany against its nuclear future — a future she endorsed last fall. She has closed seven reactors permanently and has the 10 others set to cease operating sequentially by 2022.

Ostensibly, she has taken this draconian action in light of the Fukushima-Dai-ichi crisis in Japan; but more especially because her conservative-led Christian Democratic Union party and its coalition members have taken a drumming from the Green party in local elections.

Since the Japanese crisis, the German Greens have mobilized large anti-nuclear demonstrations throughout Germany. Indeed, the party was formed immediately after the Three Mile Island accident in Pennsylvania in 1979. Since then it has been a force to be reckoned with in German politics — always there, but sometimes more vocal than others.

To German commentators, Merkel’s about-face speaks of just one thing: opportunism. Fearing the dissolution of her fragile coalition, she gave the Greens what they wanted: complete surrender on the nuclear issue.

While buying a political-life extension, Merkel has cast a shadow over Germany’s future as the economic engine of Europe. Without nuclear, Germany will face severe economic and even environmental challenges ahead.

Merkel says that the nuclear slack will be taken up by boosting its renewable energy sources – wind, solar and hydro — from 17 percent of the mix today to double that. Nuclear has been providing 25 percent of German electricity. It would take about 20,000 windmills alone to replace that.

Also, Merkel says, electricity consumption will be cut by 10 percent.

Quite how any of this will be achieved is uncertain. Already, conservation is a high priority in Germany and alternative energy has been a high priority for years.

Most likely there will be electricity shortages in parts of the country, mostly in the south; there will be more brown coal burned; and Russia will further extend its energy hegemony over Northern and Eastern Europe by upping the amount of gas provided to Germany for electricity production. Another ironic likelihood is that as Germany will have to import more electricity and it will have to do so from countries with a large nuclear base like France.

The three German utilities that own various nuclear plants are in a state of shock, even disbelief. One, Eon, already is talking about billions of euros of compensation for loss of business and capital goods. The others are likely to follow suit. There is likely to be litigation in the German and the European courts.

Early polls show that while the German people do not want nuclear, they also see the Merkel move as political and cynical. One poll found that 70 percent of the electorate found the chancellor’s actions to be opportunistic.

First calculations, not denied by Merkel’s administration, expect electricity prices – already among the highest in Europe – to bound by nearly 20 percent.

The untold damage is to the concept of the invulnerability of German engineering – that something special that has made German cars the gold standard of the world. If Germany does not believe that it can engineer its reactors to levels of safety and manage them with Prussian zeal, then what has happened to the German ethic?

Brown coal — the dirtiest there is, being somewhere between bituminous coal and peat in its makeup — is the default position in German energy. Dirty to burn but plentiful, it may now make a comeback with severe environmental consequences for Germany and its neighbors.

When Merkel talks about alternatives, she is really talking about wind and at thousands more turbines will now have to be added in a country with limited land area for diffuse energy sources.

Although the Germans have been more successful than thought possible with solar, it remains a cold, gray northern country that requires a lot of reliable affordable electricity to keep its place in the global economy. Merkel appears to have put her own future above that of her country. –For the Hearst-New York Times Syndicate

How Russia Coerces Europe

by Leave a Comment

No building in Moscow so much says “Soviet Union” as the headquarters of Gazprom, the Russian gas monopoly. It is more foreboding than the Lubyanka, the former headquarters and torture emporium of the KGB. The romantic charm of the czarist era, epitomized by the Kremlin itself, is wholly absent. Like the state monopoly itself, the structure is gigantic, threatening and very hard to get into.

It is set back from the road, and there are layers of security a visitor has to negotiate to see an official. It is easier to get into the Kremlin, No. 10 Downing Street or the White House than it is to get into Gazprom HQ. I know because I have gotten into all of them. No wonder old KGB hand Vladimir Putin loves the gas company.

As president, and now as prime minister, Putin grew Gazprom and its oil counterpart, Rosneft, not to be normal companies but agents of political implementation. Between them, they were tasked to gobble up the pieces of Yukos when its luckless founder, Mikhail Khodorkovsky, was thrown in jail.

But even more than Rosneft, it is Gazprom that has emerged as the right hand of Russian policy in Europe.

At the moment, in the dead of winter, it is Gazprom that has cut off supplies of gas to more than 12 European countries. Ostensibly, the argument is over the price paid for gas by Ukraine, the transshipper of gas to all of Europe. But the Russian political agenda is not concealed. Putin, and the siloviki (the men of power around Putin and President Dimitry Medvedev) are angered by the defiance of former members of the Soviet Union, especially Ukraine. Despite its large Russian-speaking minority (about 40 percent) it has talked of joining NATO and the European Union–a red rag to Russia. Russia is angry at the West, in general, for trying to route new pipelines from Central Asia through Georgia, avoiding Russia. It is also mad at the West for recognizing Kosovo, and has responded by buying the Serbian gas fields.

Russian gas, which now makes up 30 percent of Europe’s need, does not look such a good idea–particularly to Germany, where pressure from the Green party led to the retreat from nuclear and the push for gas turbines. Before Germany turned its back on nuclear, it was a leader in the development of promising pebble bed technology. Now, sadly, Germany depends on Russia for nearly 40 percent of its gas supplies.

The gas crisis is worst in countries like Bulgaria, where there is very little gas storage and demand is in real time. But it is also affecting Italy and Southern Europe. Having closed their coal-fired power plants and shelved their nuclear plans, those countries now feel the full pain of the Russian bear’s embrace: gas droughts and electric shortages are leaving their populations cold and hungry in the dark.

So dependent has Europe become on Russian energy that every step to ameliorate the situation is a possible irritant to Moscow. If the pipelines bypass Russia, or the hub in Ukraine, that is a provocation. If new gas comes by ship from North Africa, that is an excuse for Russia to try and price its pipeline gas at the higher price of liquefied natural gas.

Belatedly, Britain and Finland commissioned new nuclear power plants. But Germany, whose former chancellor Gerhard Schroeder took a lucrative job with Gazprom, has chosen to increase its energy dependence on Russia.

Most observers believe that the current crisis will not last. Most likely, it will conclude with a jump in the price of gas, and some satisfaction in the Kremlin that Europe has been taught a lesson. But that lesson may have to be repeated over issues far from energy–such as the expansion of NATO and the European Union.

While the Russians appear to take some satisfaction in upsetting Western Europe, it is their Soviet-era satellites that most annoy them. Why, they wonder, can’t all of Eastern Europe remain suitably deferential, like Belarus and Armenia? Both toady to Moscow.

For the rest of Europe, the message is clear: build more gas storage, arrange more imports and diversify away from gas turbines.

For our part, we can help our friends and allies by thinking through our own actions, from the European missile shield to the willy-nilly expansion of NATO. This is a European problem. But if Europe has to make geopolitical compromises with Russia, it becomes problem for the Western alliance. That is us.