schadenfreude (but in moderation)

French President Jacques Chirac and German
Chancellor Gerhard Schroeder share a tender
moment at the 60th anniversary commemoration
of the D-Day landings, 6 June 2004.

(Via Brothers Judd)

On 22 May, Gerhard Schroeder's party was trounced in North Rhine-Westphalia, Germany's largest state—merely the latest in a string of defeats for the ruling Social Democrats. Schroeder's response was to call national elections a year early. Presumably, this decision was prompted by fears that the party will be in even worse condition a year hence.

And of course this past Sunday, the French voted decisively against the profoundly undemocratic abomination otherwise known as the EU constitution. The blow to President Jacques Chirac—not to mention the rest of the Gallic elite, left and right—was nothing less than devastating. Today the Dutch will follow suit: the result will likely be closer to 60-40 against than to the 55-45 split from the French poll.

From my somewhat parochial perspective, the Chirac and Schroeder governments have been marked by nothing so much as rampant anti-Americanism. But presented in markedly different ways: with the French, it was with a smile and a stiletto, as administered by the unctuous Dominique de Villepin, while the German socialists made their point in characteristically crude fashion.

As such the events of the past weeks have left me delighted. Unfortunately, however, it's not just European leftists and weasels who are facing a crisis; it's the entire continent. Schroeder's Social Democrats are on the ropes because of the German economy, which last month had a whopping unemployment rate of 11.6 percent (down from a previous high of 12 percent). Recall that a rate just half that nearly sent our own President packing last fall—and then consider that several other western European economies make Germany's look good by comparison.

Italy faces 'horrible martyrdom' while in the eurozone

Italy is in much the same mess as Argentina in the last throes of its disastrous dollar-peg and faces a “horrible martyrdom” as long as it remains inside the eurozone, according to a market report issued yesterday.

Banque AIG, the financial wing of the US insurance giant, said Italy needed a 20pc devaluation to prevent a slump and a “horrendous” explosion of public debt. The warning came as fresh data from Portugal and Italy point to the worst budget deficits since the launch of the euro.

Portugal's central bank has revealed that the country's deficit was likely to reach 7pc in 2005, far higher than earlier estimates. Lisbon is mulling “Draconian” cuts that risk driving the debt-laden economy into deep recession. Rome's REF research institute forecasts an Italian deficit of 5.7pc next year, smashing the EU's 3pc limit.

Both countries have seen a sharp loss of competitiveness under the European Monetary Union, chiefly through higher wage inflation than Germany. They now face grinding “deflation” to claw their way back to health.

The AIG note, by chief economist Bernard Connolly, a former EU official and stern critic of EMU, said Italy was “being asked to bear the unbearable”.

It has lost 30pc of its world share of exports since the late 1990s and is now “on its knees”, according to the industry federation.

Stagflation fears beginning to stalk eurozone

Fears of stagflation cast a pall over the eurozone yesterday as fresh data pointed to the double curse of rising unemployment and inflation.

The Organisation for Economic Co-operation and Development said inflation had edged up to 2.2pc across the 12-nation bloc, reaching levels that are starting to unsettle economists. At the same time, the EU's Eurostat data office reported that the eurozone's jobless rate rose from 8.8pc to 8.9pc in March. Unemployment for those under 25 was 19.2pc.

Italian Prime Minister Silvio Berlusconi is a business tycoon, not a leftist. But the European Union is socialist to its very core, and nations like Italy—which were unwise enough to be early adopters of the euro—have lost control over much of their fiscal policy. No national government can survive such economic conditions for long, and odds are that the next Italian PM will be a leftist like Roman Prodi. In such case Italy's economy will continue to circle the drain, along with France's.

The economic conundrums facing European nations have been decades in the making: falling birthrates, overgenerous welfare states, unassimilated immigrant populations, &tc. But it is beginning to appear that the socialist dreamers will be paying their piper much sooner than later. If the price is merely in euros, the Italians and Portuguese and Germans and French (especially) will have gotten off easily.

And given that Chirac and Schroeder once hoped to ride a crest of anti-Americanism, yearning to be borne upon a tide of European moral [cough] and economic power, in the vanguard of a continent destined to serve as counterweight to the despised hegemon—well, it is just so very fitting that a primary beneficiary of their current woes is none other than George W. Bush.

In the rarified club of world leaders, President Bush has taken his share of lumps. Critics have railed against his handling of Iraq, his perceived disdain for the United Nations and what they say is a swaggering approach to foreign policy.

But Bush probably would not want to trade places with any other head of state.

Nearly all his fellow leaders of the world's big industrial democracies have stumbled. It has left them vulnerable at home and weakened on the world stage.

The president, through it all, is riding what he sees as a strong re-election mandate to trumpet his goal of spreading democracy.

That helps explains why Bush, despite a slip in his approval rating among Americans, may find himself holding the stronger hand when he travels in early July to Scotland for the annual summit of the leaders of the eight major industrialized democracies.

“His counterparts all face ill political winds that make their domestic positions rather precarious,” said Charles Kupchan, director of European studies with the Council on Foreign Relations, a private research group. “I do think it puts Bush in an advantageous position.”

Yes: a certain degree of schadenfreude is in order. Might even be a moral imperative.

UPDATE. More from the Times of London.

The people of France, Germany, Italy and the Netherlands may be angry about globalisation or ultra-liberalism or immigration, but this reflects a deeper malaise. Their living standards are falling, their pensions are in danger, their children are jobless and their national pride is turning into embarrassment and even shame. In sum, they feel that their countries, which numbered among the world’s richest and most powerful nations as recently as the middle of the last decade, have gone to the dogs under the leadership of the present generation of politicians. And, at least in the economic sense, they are absolutely right.

The relative economic decline of “old” Europe since the early 1990s — especially of Germany and Italy, but also of the Netherlands and France — has been a disaster almost unparalleled in modern history. While Britain and Japan certainly suffered some massive economic dislocations, in the early 1980s and the mid-1990s respectively, they never experienced the same sort of permanent transformation from thriving full-employment economies to stagnant societies where mass unemployment and falling living standards are accepted as permanent facts of life.