Darkest before the sunset

 

Darkest before the sunset

Why Europe is on the cusp of existential change - and why “wrong” pessimists and optimists are right

• Europe has been slowly changing allegiance from some kind of “western” value based one to a “China” based system;

• So far, it has managed to do so without alerting citizens of that (they are such children). This is fast becoming untenable, hence the internal and external pushback, see my previous piece;

• The Stated EU model , “rule based change from above towards an environmentally friendly and uniform social contract” has its optimists and pessimists, and the same happens for those postulating that it won't work and opposing this;

• Both positions are based on the unstated assumption that while it's possible to exchange a religious oligarchy for another, religious oligarchy works long term. The assumption is wrong;

• All else being equal, from this starting point, the continents most likely to become prominent are the Asian NON CHINESE Far Eastern loose alliance, and some kind of Milei – inspired South America. Jury is out on the US, Canada less probable as a survivor, Europe dead on arrival.

• HOWEVER, there IS hope for Europe, since there is huge untapped potential, only not where it's discussed. Vast capabilities, Ma'am.

   

DISCLAIMER: the author is a self proclaimed investment journeyman and none of the thoughts imply or constitute “advice” under the present utterances of the current law. Do your own homework, exercise regularly, drink responsibly.

“He lifted his staff and pointed to a high window. There the darkness seemed to clear, and through the opening could be seen, high and far, a patch of shining sky. ‘Not all is dark. Take courage, Lord of the Mark; for better help you will not find. No counsel have I to give to those that despair. Yet counsel I could give, and words I could speak to you. Will you hear them? They are not for all ears. I bid you come out before your doors and look abroad. Too long have you sat in shadows and trusted to twisted tales and crooked promptings.”[...]

‘It is not so dark here,’ said Théoden.

‘No,’ said Gandalf. ‘Nor does age lie so heavily on your shoulders as some would have you think. Cast aside your prop! “

[From "The Lord of the Rings", J.R.R. Tolkien] 

 

The first signs of Christmas are upon us (re: advertising), so it is time for me to check on the year rushing to its end and the year or two that are upon us, and as I wrote, boy oh boy those will be.... interesting. But for once I wanted to write something cheerful, or at least constructive, about the continent and country I live in (Italy).

So I have good news and bad news: good news is, it is indeed possible to write something positive about Europe. The bad news is that this “positive” is premature, in that we'll probably have the negatives first, hence the title. It's darker before the Dawn, but for Europe it's not even dusk yet, and the long winter night hasn't started yet.

The long night is due to one of the oldest problems of mankind, the inability to control a political class that went way off the reservation and spent two generations of resources into the bargain. One of Italy's themes of this 2025 is the good performance relative to other Western European countries like France or Germany, but that can be easily explained with a graphic example. Imagine three identical cars with good brakes having to ascend a steepening slope. The one with less fuel (Italy) stops first, engages the brakes lest it falls backwards too fast, then basically stops. The other two, having more fuel in the tank, go further up the slope, BUT when their fuel finishes , they are indeed further up the slopes and fall bask faster than the first one.... since the place where braking power equals gravity is the same for all three. Play convergence at your peril. Now that all engines are stopping, people all over Europe will start clamoring for a change in drivers.

It's called “elections” and given the various declarations by incumbents, these latter object to people voting against them. Heck, they may even succeed in keeping AfD out of power and Le Pen out of the Elysèe.... for a time. But the secular forces at work, in my opinion, imply that going forward Europe can have the present leadership or Democracy, not both.

 This is embarrassing given that skeletons in the closets are plentiful, and that contrary to the tame and consensus based opposition of yore, the new entrants are liable NOT to keep silent about , for example, pre-eminence of the state over judiciary considerations. Yes, Europe has a tame information Arena and state owned and controlled media, plus “misinformation” control to ward off with threats anyone being too loud in saying the emperor has no clothes, but information control has a value only if it's not daily experience of the majority: Eastern Europe didn't need a free press to tell them they were hungry and there was lack of basic goods. Hence my basic premise is that, as Abraham Lincoln is attributed, "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time."

So, where's the positive angle? Initially there is none: 2026 will be a “political” year since Chancellor  Merz is faltering, the French presidential campaign will start in earnest given that the polling is in 2027, and in Italy the Pope will pray for the good health of president Mattarella, since not only the Vatican and the Quirinale are joined at the hips but there have been rumors that Meloni would consider going for that post, becoming the first right wing occupant in ages, and following two left wing Presidents who flouted the unwritten convention where any president would only serve one seven year mandate.

Add wars, slowing economies, bringing less fiscal revenues on top of runaway spending and deficit trends, and the risk of something snapping is palpable. Moreover no politician has so far indicated any intention of letting go of any pork barrel spending, however frivolous or patently wasteful, and central banks, which provided some kind of fig leaf covering debt monetization by claiming that they are <checks notes> “indipendent”, are themselves running out of runway.

But... “never allow a crisis to go to waste” cuts both ways, and most importantly, cuts income to private sector earners (“muggles”) and government dependents alike. And while for the first attention to running costs is an everyday occurrence, at the aggregate level that hasn't happened for the wider public sector and its dependents since 1996 (Greenspan). But why is this any good?

Yet it IS good. Take Italy, for example, where from time to time idiotic politicians say something along the line of “Tourism is our oil” (it's not). Where is the huge, UNTAPPED source of wealth and income that Italy doesn't realize is there and doesn't want to touch?

Why, the same huge pool of riches that Europe has:

Denial.

Europe has been led by what Professor Nassim Taleb calls “IYI” , intellectuals yet idiots, for DECADES. And in practically all fields, Europe lives in a pretend world where objective realities like physics or economic constraints do not intrude. This is a tragedy, but on the other hand it creates some kind of opportunity.

Being like that, in current and past expenditure there is a huge pool of inefficiencies that can be resolved simply by adopting recent technologies, or OLDER technologies, or altogether abandoned, freeing REAL returns for income producing private initiative. That is the golden pot at the end of the rainbow.... provided that the storm that will have to leave the rainbow behind leaves some paltry remnants of the previous social compact behind.

Italy, in its idiocy, is BETTER off than the others because it has methodically destroyed economic opportunity here, hence it has the added bonus of its best and brightest having fled abroad... with the potential of coming back to rustle through the wreckage to build something, in a similar way to Greece which is leveraging its diaspora after the cruel but needed crisis has destroyed part of the “fakelaki” culture and bureaucracy. I can give an example: one of the recent price hikes in Italy has been on diesel fuel since the government, goaded by the EU's climate religious zeal, has increased taxes on diesel fuel and reduced those on gasoline. Yet, cars and vehicles also pay an yearly stamp duty, which could be easily and fairly added to fuel taxes, eliminating it altogether.. and eliminating the organization costing 1 bn EUR annually, with 6.000 headcount, who have a pretend job. Italy is replete of such impediments that if eliminated à là Milei would do NO harm to the functioning of the economic system. Akin to an overweight man on the Medusa wreck, we're comparatively more likely to survive as a system, if we abandon illusions and actually work to improve our country. Alas, that will have to wait for a crisis to FORCE it upon us, with tears and anguish, but still.

Or, at the European level, think about Strasbourg: it is impossible to close the EU offices there and send everything to Brussels.... for now. Until “money's too tight to mention”.

But, to continue with “The Lord of the Rings” quotes:

‘No,’ said Gandalf. ‘That is not the road that you must take. I have spoken words of hope. But only of hope. Hope is not victory.”