Global Crisis: Second Wave?

The upcoming G20 summit on November 3-4, 2011 is unlikely to reverse the negative trends in the world economy. Russian political scientist Igor Panarin believes that another wave of the global crisis is quite possible.

­In the article below, Panarin explains his view. 

Outside the European Parliament in Brussels, you can often see people taking pictures of each other posing against the statue of a haggard-looking woman holding the euro symbol. With the second wave of the global crisis looming, you can see all the current troubles of the euro reflected in the woman’s face. Her purposeful, even fiery, gaze seems to declare: the euro is here to stay.

Yet the Second Wave is in the offing and there are plenty of indicators that point to it. The latest in the row is the bankruptcy of MF Global, one of America’s biggest brokers, due to significant write-offs on the value of its European bonds. It’s the first major victim of the European debt crisis. There were attempts to save the company, but even former New Jersey governor and, more importantly, Goldman Sachs co-chairman, Jon Corzine failed to keep it afloat. This indicates that the European fiscal system is extremely shaky and it may soon face drastic changes.

The fact that the continuing debt fever in Europe demonstrates quite negative trends was proven by the latest reports from the eurozone leaders’ summit, where it was agreed to write off 50% of Greek bond debt and scale up the European Financial Stability Facility to €1 trillion. Many experts regard these steps as “too little too late.” It’s also alarming to see such a prompt increase of the EFSF to gigantic volumes. So far, its capacity has not been raised and remains at €440 billion. But its guarantee commitments have been significantly extended to €1 trillion. Herman Van Rompuy, the president of the European Council, went further, saying the leveraged volume could rise to €2 trillion.

Another adverse factor for the social and economic situation in Europe has been the military conflict in Libya.

NATO has officially declared its campaign in Libya accomplished, but the war in that country is likely to rage on. The alliance assumed command of all air and naval operations over Libya on 31 March, 2011, titling the war effort Operation Unified Protector. From that day on, NATO air forces (mainly comprised of British and French jets) conducted over 26,000 sorties, including 9,600 air strikes. Needless to say, every single one of those missiles and every gallon of fuel and every day of fighting had a very hefty price tag attached to them. Meanwhile, most allied nations’ budgets for 2011 were not designed to accommodate multi-billion war costs. The expenses assumed by the main sponsors of NATO’s Libya campaign (i.e. Britain and France) make a full-blown European crisis all the more likely – and such a crisis could spark a second global meltdown.

Bound to aggravate the European Union’s economic woes are illegal immigrants from Africa, who have already arrived in their thousands through the infamous Italian island of Lampedusa. Refugees from Libya and Tunisia may soon be followed by hundreds of thousands of people from Sub-Saharan Africa funneling through war-torn Libya. Then again, a recurrence of the war in Libya would also mean another influx of refugees. Such an onslaught of illegal immigrants is sure to destabilize Italy and then France, to be followed by the rest of Europe.

Faced with this kind of situation, Europe will be forced to seek help from the dynamic economies of the BRICS countries, primarily China. Beijing is prepared to invest $100 billion in the European Financial Stability Facility, but it expects to extract quite a few economic benefits and geopolitical advantages for itself. And this is unlikely to go down well with either the United States and Britain, or the global multinational business elite. 

Ergo, the world is in for a relapse in the global crisis, and both the political and economic world maps are likely to be redrawn in the foreseeable future.

Professor Igor Panarin, Doctor of Political Sciences, for RT

­The statements, views and opinions expressed in this column are those of the author and do not necessarily represent those of RT.

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