Germany, The EU and The Russian Option

Germany’s bailout of Greece has exposed an underlying weakness within the European Union and has demonstrated that  fracturing within the European Union a real possibility:

Alternatively, Europe could continue to move forward as it is, with each nation trying to balance its own finances and the community coming together when calamity arises. Yet no state wants to bail out another that it doesn’t think is fiscally responsible. Witness the rising resistance in Germany – a pivotal player in the Greek bailout plan.

It doesn’t help that the debt crisis in Greece has triggered a reflowering of national self-interest in a number of European nations. In simplified terms, richer and supposedly more fiscally prudent northern states are reluctant to surrender sovereignty because of the perceived spendthrift ways of their southern neighbors. In response, more dispassionate observers point out that the frugal north is prospering largely because its exported goods are flooding south. (emphasis added)

Germany has the strongest economy in Europe and other nations on the continent will find it necessary to forge alliances in an effort to compete. However, Germany is not so strong it can go it alone and will need to seek out an alliance of its own. One possible alliance for Germany is Russia.

What would the Russian Option look like? Via STRATFOR:

A great deal of potential synergy exists between the German and Russian economies. Germany imports large amounts of energy and other resources from Russia. As mentioned, Russia needs sources of technology and capital to move it beyond its current position of mere resource exporter. Germany has a shrinking population and needs a source of labor — preferably a source that doesn’t actually want to move to Germany. Russia’s Soviet-era economy continues to de-industrialize, and while that has a plethora of negative impacts, there is one often-overlooked positive: Russia now has more labor than it can effectively metabolize in its economy given its capital structure. Germany doesn’t want more immigrants but needs access to labor. Russia wants factories in Russia to employ its surplus work force, and it wants technology. The logic of the German-Russian economic relationship is more obvious than the German-Greek or German-Spanish relationship. As for France, it can participate or not (and incidentally, the French are joining in on a number of ongoing German-Russian projects). (emphasis added)

One such ongoing German-Russian project is the  construction of equipment to pump natural gas through pipelines.

And a final thought on the subject from the brilliant VDH:

As much as we suspect the pretensions of the European Union, Americans must appreciate its achievement in lessening European tensions after the fall of the Cold War, the end of a common enemy in the Soviet Union, and the gradual diminution of a U.S. presence. If this implosion begins to unravel the EU, I think we will be once again right in the middle, rather than at the end, of history. There is simply too much history, too much memory, too many players over here to think a post-EU continent is going to always look like the Netherlands rather than from time to time the former Yugoslavia. Just think of Cyprus, the Turkish-Greek rivalry in the Aegean, the rise of radical Islam within Europe, Russia energy extortion, the large number of nuclearly capable but now non-nuclear states, and a hundred other scenarios that would have been unthinkable a year ago (but then so was the current meltdown). (emphasis added)

The dynamics are interesting and possibly dangerous to our economy.