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It appears as if there are some new developments going in on the Continent, that unfortunately appear to be old memes being resurrected for the 21st Century.
Let’s take a look at the highlights of recent events:

1. Greece continues to have widespread protests and riots as unemployment remains above 25% (25.4%, when measured in August, 2012) and austerity measures continue to be implemented.
2. Spain is in a deep recession, and has been since 2008.  The banking industry in Spain alone could require 60 Billion Euros to remain solvent.
3. Portugal and Italy are in similar straits to Spain and all three are close to emulating the protests, strikes, and general unrest taking place Greece.
4. Germany has provided a foundation for the EU economically but has taken major spending cuts in order to support that activity.
5. Britain, and France have scrapped or idled their capital ships.  In other words Britain and France no longer are operating carriers and have limited power projection capabilities as we saw from the Libyan events.
6. On Tuesday minority members of the Hungarian parliament “urged the government” to draw up a list of Jewish members of the government that might be security risks.

We know that the ethnic melting pot that Europe has never blended well and remains stratified.  There has never been a bending of cultural characteristics and acceptance of differing religious beliefs. Over the centuries the conflicts that have been fought in Europe have at their lowest levels either been about resources, or cultural clashes.  The Balkans have devolved into a set of small “city-states” for lack of a better description, that are essentially cultural enclaves.  Areas in this part of Europe remain a hotbed of ethnic conflict, and have been the scene of genocidal conflict since the end of the Cold War.
In 1984 Sarajevo was the host to the Winter Olympic games.  The city was a shining jewel of modern architecture blended with the “old world”.  Nestled in the mountains the area was one that had been unseen by most Westerners until the Iron Curtain had begun to tear and dissolve.  Four years later, civil war in Yugoslavia resulted in massive damage to the city.  The source of this conflict remains today, the ethnic division within this region.

This is not a new conflict as it has its roots far back in history with genocidal atrocities taking place every half century or so. The great experiment that was Soviet Communism and Central planning failed.  In Western Europe over the past 60 years we have seen a trend toward big government, and broad social entitlement programs with the offset being less individual freedom.  This too appears to be a form of government that is producing less than optimal results, as we see Greece, Spain, Portugal, and to some degree Italy on the verge of failure.  We see Germany  trying to support these states to prevent total economic collapse that will result in a flood of refugees to the more prosperous nations, and in turn pull the entire Euro zone into the quagmire.  Governments have made major reductions in their ability to project power.  Whether this is through elimination of capital ships, reduction of air, naval, and ground forces is immaterial.  The bottom line here is that training, maintenance, and knowledge has been lost such that rebuilding these forces in an emergency will be close to impossible.
If the Eurozone were to collapse into distinct nation-states, with varying degrees of domestic strife I think we would see:

1. A rise in the implementation of extreme policies in their governments.
2. A broad rearming / rebuilding of forces. Which in turn will decrease unemployment by providing direct and indirect jobs, as well as shift government spending to the defense sector.
3. An increase in genocidal actions, that is the result of the expulsion of large ethnic enclaves to…someplace.  Where is that place?  Unknown, it could be concentration camps, or it could just be the “anywhere but here approach”.
4. As we see point 3 accelerate, we will see the need for stronger border protection to prevent immigration, which may lead to the concentration camp approach.
5. Eventually the nation states of Europe will remember that they really need the other nations for trade because they cannot produce food or goods to support their population.  At this point the situation on the ground has already devolved, and food is scarce, power is scarce, neighborhood level law enforcement will result in some areas being able to maintain some sense of the rule of law.  Many areas will be in anarchy.  I think at this point, if the sense of despair is widespread across the continent we would see historians refer to this as The Second Dark Age.
6. In some regions we will see “strong men” and “warlords” take control and work to exercise age old hatreds.
7. In some regions we might see a charismatic individual strike a chord with the populous that leads to a rapid change in government.  In many respects, the situation in Europe is beginning to resemble that period from 1920 where the National Socialist German Workers’ Party was born and began it’s rise to power.
8. Stabilization will only occur when population levels and concentrations are reduced to a level that can be supported by the local region.  Then we will begin to see smaller regional governmental units form to support open markets, and defend their resources.  It will be a long way out of that dark time.

Could this tale of gloom and doom spread globally   Absolutely.  Would other factors weigh in to prevent the deepness that my crystal ball foretells   Most likely.  Would we like those other factors?  Probably not.  

What could happen?  Let’s see, Turkey could move to unify Muslims in Eastern Europe pushing the western boundaries of the old Ottoman empire into the Mediterranean and Balkan states.  The Vatican would likely have a resurgence in the Catholic Church and push the boundaries of their influence back to the levels held in the 13th and 14th centuries.  The Russian Federation would exploit their large resource holdings to gain political influence in Scandinavia and Eastern Europe, eventually taking some level of control of these areas.  Africa will be waiting for someone to come rescue it, as Western aid will all but dry up and there will be anarchy, chaos, and tribal conflict on an epic scale over most of the continent.  This creates opportunity for China, and other nations with global aspirations (Iran, etc.).
I could go on and on but, my crystal ball is somewhat murky and obviously pretty gloomy right now.
These are observations and potential consequences of the situation that we see in Europe.  We can learn much from the recent events in Europe, as well as history.  It is up to you to draw your own conclusions and take the appropriate actions.

For what is worth, my thoughts are:

1. The global economy is fragile.  That will never change, their are too many variables that are driven by human beings that may or may not have altruistic motives.
2. Keynesian Economic Theory is a bust.
3. On the other hand I believe that the 2nd Law of Thermodynamics is valid, and so is Chaos Theory
4. Europe is going to remain unstable for the foreseeable future.  We will see cycles of civil unrest throughout the continent.  The key for governments will be to dampen the cycles over time.
5. There are consequences to actions and policies, in Britain the National Health Care program is a disaster with doctors making decisions to let patients die, from starvation and dehydration rather than care for them.
6. High Tax programs are driving the wealthy out of their native lands.
7. China, Russia, and Iran will not support any programs that the US might put forth to help Europe dampen the chaos that is brewing there.
8. The US is at an inflection point.  The make up of the Congressional and Executive Branches of government have created and adversarial situation that will cause a form of gridlock.  During that period, globally, the US will seem to be adrift.  While we can most likely survive with our foreign policy being muddled and unclear we can only recover from this situation by having a vibrant, market driven economic growth that can be leveraged to provide a foundation for the larger global economy.
9. Budgets are important, and deficit spending is bad.
10. We must pay attention to what is happening to Europe at both the societal level, and the economic level.  The high tax, high entitlement approach to government has had limited success in Europe.  Around the Mediterranean we see the results of what happens when governments are on the verge of failure.  Couple that with the ethnic conflicts that are historical, and endemic in Europe and there is the potential for a serious meltdown of society and civilization.

I will offer you this advice: As you are living through an event it may not seem significant or a turning point in history.  When we look back though, we can see just how pivotal it was.  Trust the “coalmine canary” inside your head, if it starts to tell you something dramatic may be underway, then pay attention.  Keep your eyes on the events in Europe, we may see the same thing happening here in time.