Madrid view: wobbly BRICs

José Ignacio Torreblanca. Professor. IE School of Arts & Humanities

14 February 2012

Europe is seeking a solution to its crisis by looking at the economies of countries like Brazil, Russia, India or China, without realizing that they have traumas of their own.

One consequence of the crisis in Europe is a return to the tendency for introspection. The past decade was wasted on institutional debates such as picking up the pieces of the failed European Constitution after the debacle of the referendums in France and the Netherlands, and rebuilding the consensus necessary to get the unity plans going again, consuming a lot of time and energy along the way. This is why, when the Treaty of Lisbon came into effect two years ago, a firm resolution was made to leave institutional debate behind, renouncing new reforms of the treaties. Lisbon, it was said, would be the last treaty for a long time. In future the Europeans would practice politics, not institutional engineering. But now, two years later, that Europe capable of united action in defense of its interests and values has yet to gel, and there is talk of yet another treaty.

Meanwhile, the economic crisis is tending to fragment the EU’s external focus as its members pressed by the crisis compete with one another. There has been a rush toward the BRICs (Brazil, Russia, India and China) in search of investment and at the same time markets for national goods and services aimed at stimulating Europe’s deteriorating economies. This competition not only projects weakness and deteriorates the EU’s image, it also affects Europe’s negotiating capacity on key questions such as security, human rights, climate change and world economic governance. The EU, which is the world’s largest trading bloc, and which to prosper needs an open, well-regulated international commercial and financial system, is sacrificing its long-term interests by taking a short-term approach based on fomenting a new mercantilism in which governments swap trade and investment for political favors.

Likewise, Europeans underestimate the damage done to their image when, being still far more prosperous than the BRICs, they call on the latter to help finance their debts, either by a reinforcement of the capacities of the IMF, which they consider unfair and disproportionate, or by asking that they invest in funds, such as the European bailout fund, in which the Europeans themselves are investing only meanly and insufficiently. All this, while they refuse to call on the ECB to help out, preferring to safeguard its purity and integrity as a guardian against non-existent inflation. The result is that, in the G-20, the IMF and the WTO, the Europeans increasingly appear as actors concerned more with what they can get out of these organizations than with helping to strengthen their rules and capacity for global action.

In their self absorption, the Europeans fail to see that the BRICs also have their problems, and that they are more vulnerable than they appear to be. Indeed they fail to see that the same crisis that is leading them to call on the BRICs for help, is also weakening the latter’s capacity for growth. With a slightly negative growth in the third quarter of this year and a growth forecast of 3% for 2012 compared with 7.5% in 2010, Brazil is already feeling the first symptoms of cooling, which may puncture financial and real estate bubbles caused by the rapid growth of recent years. In China and India the signs of a downturn are also becoming visible. It seems that while Europe seeks to import solutions by asking for help from others, it fails to see that these others are more vulnerable than they seem, and that Europe is one more element in their vulnerabilities. The US is also feeling the impact of the European crisis, lowering its growth forecast for 2012. The European crisis is becoming an important factor in the re-election of Obama - which would offer a cruel irony, if it turns out that the president who wanted to begin an age of peace for the US is unable to do so because of a pack of Europeans bent on remaining, in their own way, at the centre of the world.

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