The Two Wars That Could Potentially ‘Dissolve’ Europe

With the possibility of direct American intervention in Iran over the weekend, almost every other event seems to lose significance. Nevertheless, this moment is too crucial to observe dispassionately, as it becomes evident that whether or not what we all dread occurs, it is undeniable that the two wars currently taking place—both within European borders (Ukraine) and near the EU in the Middle East—have struck the Eurozone as an international economic and political entity at its most vulnerable point: energy insufficiency. The war in Ukraine and Brussels’ inexplicable belligerent persistence have deprived the euro-economy of one of its three pillars of prosperity for decades: cheap natural gas supply until the transition to clean energy is achieved. Currently, the steadily increasing dependence on affordable Russian gas and its connection with the far more expensive American LNG has dismantled the cost-effective energy foundation of European production. Now, with the conflict extending to the Middle East and the Israel-Iran clash, the damage to energy costs involving oil, gasoline, and other fossil fuels from the Gulf and the broader Middle East region leads to the same path of loss for the euro-economy experienced with natural gas. If Trump decides—ignoring even his MAGA supporters who oppose war involvement—to bomb Iran, dismissing even CIA reports confirming Iran’s lack of nuclear weapons, the situation for the Eurozone escalates into a state of emergency. Finance ministers of the Eurogroup discussed this issue in their latest meeting but have no clear solutions. Here lies the problem: the ECB can’t do much this time because it has run out of ammunition. By ‘ammunition,’ we don’t mean tanks and missiles promoted by Mr. Stoltenberg (NATO), but the ECB’s sole ‘weapon’: producing cheap loan money for already heavily indebted and deficit-ridden Eurozone economies. This means low-interest rates and liquidity provision. Lagarde, contrary to Powell, whom Trump called ‘stupid’ yesterday for not lowering rates (which remain at 4%-4.25%), has already reduced euro-interest rates to 2%, roughly matching inflation, meaning real interest rates are slightly above zero. Simply put, the ECB must resort to negative interest rates and increase Euro printing to help the struggling euro-economy amidst the energy crisis, trade wars, Trump tariffs, and excessive debt. Meanwhile, the ‘stupid’ Powell keeps U.S. rates steady at 4.25% despite threats from the president to prematurely dismiss him from the Fed. Why? Because he knows there won’t be another tool to counter the impending tsunami except drastic rate cuts, which require sufficient initial size, like U.S. rates being far higher than euro rates. Returning to the two wars in Ukraine and the Middle East, Eurogroup finance ministers obviously can’t find either natural gas or oil. So, they decide to procure arms using borrowed funds (via the infamous ‘escape clause’) that Europeans will eventually pay back. This is the Eurogroup’s ‘solution’ to mitigate the EU’s damage from these wars, seemingly planning to load the burden onto our own shoulders.