Europe in crisis

Markets have a habit of shaking off tragedies. But with Europe, says John Stepek – this time it's different.

Terrorist attacks, like natural disasters, are horrific wherever they occur. But when it happens closer to home, as with last week's Paris attacks, it's only human to feel the loss and the pain, and the fear of your fellows more keenly. That's one reason why the Paris attacks have had such a huge impact in the West at a time when the number of deaths globally from terrorism has been soaring in countries like Nigeria and Syria. But beyond that, do the Paris attacks have any more significance for the economy and for markets than, say, the Madrid bombings in 2004 did? Or the London bombings of July 2005?

I look at the issue in our cover story this week, but the short answer is that, while markets usually treat terror attacks in a similar way to natural disasters a brief spasm of fear and uncertainty, before a return to business as usual I don't think it'll be quite the same this time. That's not because of the nature of this attack itself, awful as it was it's more because of its timing, and the knock-on impact it has in highlighting the deep structural problems that are already putting Europe's governance under incredible pressure.

At the start of 2015, mention Europe and all that anyone could talk or think about was Greece and how terrible it would be if the country ended up leaving the single currency. That crisis alone demonstrated how difficult it is for Europe's institutions to unite to resolve what by most standards should have been a relatively simple dispute between close partners on how to deal with another troubled partner whose problems were years in the making and obvious for all to see.

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Now, in the face of mass migration from Syria and beyond which is a hugely complex issue, requiring serious planning and organisation to either stem the flow, or to help migrants settle and integrate, or both Europe is stuck with a genuine crisis and it is clear that it simply doesn't have the tools or the ability to cope.

Before the events of last week, we'd been planning to make this week's cover story about the case for Brexit, and we'll be returning to the topic next week. But the key point for me is that Europe, as a governing unit, doesn't work, and whereas the guiding principle of the European Union so far has been to do a half-baked job, ride rough-shod over objections, and hope that momentum just keeps carrying the grand projet toppling forward until one day we have a full-blown, irreversible United States of Europe in place, what we face now is a problem that can't be resolved by printing money, or through holding mock elections, or by "muddling through" until the next crisis.

This doesn't have to be the death of the European Dream but it is about time that even the most ardent europhiles woke up and realised that the muddle we have currently just isn't working, and it's time for a serious rethink.

John Stepek

John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.