excerpts from the book

The United States of Europe

the new superpower and the end of American supremacy

by T. R. Reid

Penguin Books, 2005, paper


At the dawn of the twenty-first century, a geopolitical revolution of historic dimensions is under way across the Atlantic: the unification of Europe. Twenty-five nations have joined together-with another dozen or so on the waiting list-to build a common economy, government, and culture. Europe is a more integrated place today than at any time since the Roman Empire. Americans have largely ignored this European revolution. Like one of those heavy, powerful SUVs that Detroit turns out, the United States has been cruising along at a comfortable speed, completely unaware of the well-engineered European sedan coming up fast in the passing lane. It's time to take a look over our shoulder. The new United States of Europe-to use Winston Churchill's phrase-has more people, more wealth, and more trade than the United States of America. The New Europe cannot match American military strength (and doesn't want to, for that matter). But it has more votes in every international organization than the United States, and it gives away far more money in development aid. The result is global economic and political clout that makes the European Union exactly what its leaders want it to be: a second superpower that can stand on equal footing with the United States.

Since it was born, in the rubble of World War II, the vision of a united Europe has grown dramatically from a coal-and-steel trading arrangement to a "common market" to a "community" to today's European Union, a new kind of state in which the member nations have handed over much of their sovereignty to a transcontinental government in a community that is becoming legally, commercially, and culturally borderless. The EU, with a population of nearly half a billion people stretching from Ireland to Estonia, has a president, a parliament, a cabinet, a central bank, a bill of rights, a unified patent office, and a court system with the power to overrule the highest courts of every member nation. It has a 60,000 member army (or "European Rapid Reaction Force," to be precise) that is independent of NATO or any other outside control. It has its own space agency with 200 satellites in orbit and a project under way to send a European to Mars before Americans get there. It has a 22,000-person bureaucracy and an 80,000-page legal code governing everything from criminal trials and corporate taxation to peanut butter labels and lawn mower safety.

In pursuit of economic union, Europeans have thrown their marks, francs, lira, escudos, drachma, and so on into history's trash can and replaced them all with the new common currency, the euro, a form of money that has more daily users than the US. dollar. At the end of the twentieth century, the strong US. dollar reigned supreme. Five years into the new century, the young upstart, the euro, ranks as the world's strongest currency. In the first three years after it hit the streets of Europe, the common currency rose more than 50 percent in value against a struggling dollar. Europeans want to see the euro replace the dollar as the world's reserve currency-a development that would cost the United States a pretty penny ... But Europe's new money is more than money. It is also a political statement-a daily message in every pocket that cooperation has replaced conflict across the continent.

To forge a physical linkage that enhances their political and economic union, Europeans have invested hundreds of billions of those euros in an ambitious network of bridges, tunnels, ports, and rail lines. Most of the continent has done away with customs and immigrations controls. When I drove recently from the Arctic Circle to the Mediterranean, I passed through eight countries, never saw a border guard, and never had to bother with foreign exchange. The New Europe has all the symbolic apparatus of a unified political entity. The citizens of the EU use a standard license plate, birth certificate, and passport (although each country still gets to pick its preferred passport color: a red cover for Britain, dark blue for Poland, and of course green for Ireland). The whole continent plays a common lottery. Europeans tune in by the tens of millions each May to watch the Eurovision song contest, the pancontinental TV extravaganza ... The EU has its own flag, its own anthem, and its own national day ... Europe's new constitution even establishes an official EU motto: "Unity in diversity," or "Unite dans la diversité," or "In varietate concordia," and so on in three dozen languages.

At first glance, the disagreements in 2003 surrounding the Iraq war seemed to expose more diversité than unite in Europe. In fact, the dispute over Iraq turned out to be another powerful unifying force for Europeans, particularly for the largely borderless young people known as Generation E-people who consider themselves not Spaniards or Czechs but rather Europeans who happen to be living in Toledo or Prague. No matter what their prime ministers said about the war, large majorities of the population in every European state opposed the American-led effort. The war enhanced the growing feeling across the continent ... that Europe and America are fundamentally different places-and that Europeans need to stick together to confront the behemoth across the Atlantic. Among diplomats and scholars who study the transatlantic relationship, the concept of a united Europe standing as a superpower to match the United States is taken so seriously that the idea has a name of its own: the "counterweight thesis," or the "countervailing power thesis." Naturally, this theory is more popular in Europe than in the United States. And it is not just Europe's professional America-bashers-a fairly large category on the continent these days-who see the EU as a counterweight to US. dominance. At one of the union's endless summit meetings-the one where the Finnish and Italian prime ministers argued bitterly for two days whether the European Food Agency should be headquartered in Helsinki or in Parma-I went up to Britain's prime minister, Tony Blair, the closest US. ally in Europe. I asked him whether these long, wordy sessions around the conference table were worthwhile.

"They do go on a bit," Blair said. He sounded bored and weary. But then, as he got talking about the prospects for the EU's future, he came to life. "You know, these summits makes sense if you try to have a sense of history. I mean, when the thing is getting tiresome, you have to remember what we are doing here. We are building a new world superpower. The European Union is about the projection of collective power, wealth, and influence. That collective strength makes individual nations more powerful-and it will make the EU as a whole a global power.

"Look-the United States is plainly the superpower of the world today," Blair continued, now rising to his rhetorical finish. "But the argument is that a single-power world is inherently unstable. I mean, that's the rationale for Europe to unite. When we work together, the European Union can stand on par as a superpower and a partner with the U.S. The world needs that right now."

While this historic transformation has been taking place, Americans have been asleep. For decades the American foreign policy establishment, both Democratic and Republican, didn't seem to notice-or, perhaps, didn't want to notice-the emergence of a new kind of political entity on the European continent. It was easier for the United States to continue dealing with familiar national governments in Paris, Rome, Madrid, and Dublin than to face up to the rapidly growing power and authority of the EU government in Brussels.

Official Washington particularly scoffed at the idea that the proud nations of Europe would jettison their traditional currencies. In 1999, Henry Kissinger opined that the euro was one of those good ideas that would not come to fruition, because the people of Europe would never accept it.

In fact, euro coins and notes did replace the national currencies of twelve European countries on New Year's Day of 2002-the largest currency conversion in history. The changeover was carried off smoothly and successfully, with universal acceptance ... A little more than three months after the conversion was completed, at a time when 350 million people were contentedly using the euro every day, I attended a lavish breakfast-the meal must have cost 40 euros per person-where Kissinger spoke to a group of continental leaders. After his remarks, he agreed to take a few questions from the audience. The first questioner, predictably enough, asked "how the eminent Dr. Kissinger could explain his totally misguided prediction about the new common currency." The eminent doctor ate crow, more or less. "I am often right," he replied, "but I have never claimed to be infallible."

... the American business community has also suffered-grievously, in some cases-from its failure to understand the processes, the ambition, and the sheer market power of the European Union. The legendary CEO Jack Welch learned the hard way ... that American companies have to follow European rules these days. Because the united Europe is the world's largest trade market, it is the "Eurocrats" in Brussels, more and more, who make the business regulations that govern global industry. There's a reason why the quintessential American whiskey, Kentucky bourbon, is sold today in 75 cl bottles. It's not because American consumers suddenly demanded to sip their sour mash by the centiliter.

Sometimes Americans seem to be in a state of denial about what Europe has achieved. American presidents from both parties, for example, have repeatedly declared that the United States has "the greatest health-care system in the world." That claim is hard to support. The unified Europe has higher life expectancy, lower infant mortality, lower rates of heart disease and cancer, and health insurance that covers every person-all for about half as much per capita as the United States spends... Since the United States pays much more and gets much less in return, it might behoove American policymakers to stop bragging about their own health-care system 10 g enough to take a look at what the EU nations have done.

American scholar Anthony Judt

"The U. S. is a selfish, individualistic society devoted to commerce, profit, and the despoliation of the planet. It is uncaring of the poor and sick and it is indifferent to the rest of humankind. The U.S. rides roughshod over international laws and treaties and threatens the moral, environmental, and physical future of humanity. It is inconsistent and hypocritical in its foreign dealings, and it wields unparalleled military clout. It is, in short, a bull in the global china shop."

Brian Reade a columnist for the London tabloid the Mirror, summarizes this widespread European belief:

They [Americans] are wonderfully courteous to strangers, yet indiscriminately shoot kids in schools. They believe they are masters of the world, yet know nothing about what goes on outside their shores... People who believe the world stretches from California to Boston and everything outside is the bit they have to bomb to keep the price of oil down. When I first visited America in 1976, teenagers asked if we had cars, and, if so, how we could drive them on our cobbled streets. Two months ago, a man from Chicago asked me how often we vote for a new Queen. Only one in five Americans hold a passport and the only foreign stories that make their news are floods, famine, and wars, because it makes them feel good to be an American. Feeling good to be American is what they live for. It's why they call their baseball league The World Series, why they can't / take our football because they didn't invent it.

..."the European social model ... is an elaborate and expensive network of publicly funded, cradle-to-grave programs designed to protect everyone in Europe against the vicissitudes of contemporary life. Whether the threat to a person's health, comfort, or economic status is natural or man-made, the European social model is there to assist.

... Access to the generous benefits of the social model is seen as a basic right of every European-and the word every is crucial here, because the social model is relentlessly egalitarian. At the same time, paying for the social model is seen as a basic responsibility of every European. And this widely shared sense of the government's social responsibility to everybody is another unifying force that makes Europeans feel they all belong to a single place-a place, they believe, that is definitely not American.

The responsibility for all to help pay is reflected in the tax structure that supports the continent's extensive welfare programs. European nations have the same panoply of corporate and personal income taxes, inheritance taxes, property taxes, and so forth as the United States, with the same type of exemptions that essentially exclude the poorest citizens from paying these wealth-based taxes. But the European countries rely much more heavily than most of the world on sales taxes-the Europeans call them value-added taxes-which are paid by just about anybody who buys anything. This system was created deliberately to make sure that lower income people help pay for the social system.

... But if the burden is spread fairly equally, the benefits of the public welfare programs in the European social model are also distributed with a fairly even hand. To Americans, it is simply a matter of common sense that rich families get better medical care and better education than the poor; the rich can afford the doctors at the fancy clinics and the tutors to get their kids into Harvard. But this piece of common sense does not apply in most of Europe. The corporate executive in the back seat of the limo, her chauffeur up front, and the guy who pumps the gas for them all go to the same doctor and the same hospitals and send their children to the same (largely free) universities.

... This zeal for spreading the wealth fairly equally is reflected most dramatically in poverty rates. European nations certainly do have families living below the established poverty line (according to the definition preferred by the Organization for Economic Cooperation and Development, "poverty" means a family income at least 50 percent below the mean personal income in the nation as a whole). But they have a lot fewer poor families than the United States does. In America, about 20 percent of adults are living in poverty at any given time. In France, the comparable figure is 7.5 percent; it is 7.6 percent for Germany and 6.5 percent in Italy. Britain, with a somewhat leaner benefit system than its continental neighbors, has about 14.6 percent of its adults in poverty.

The helping hand of the social model is particularly evident when a worker becomes unemployed. Americans on the unemployment rolls tend to get a monthly government check, together with help in buying food and paying heat and light bills. At some level, when his savings fall low enough, an unemployed American worker may also apply for free government-supplied health care through Medicaid. In Europe, by contrast, a worker who is "made redundant"-that's the brutal British term for being laid off-will get a housing benefit, a heat and light benefit, a food benefit, a child care benefit, and a monthly unemployment payment that is almost always higher than the American standard. The European, of course, will have the same access as everybody else to the public health-care system. The American system, in which you lose your health insurance when you lose your job, strikes the Europeans as exactly backward. "I don't understand your approach to health care," a junior minister in Sweden's health department told me once. "It seems to me that your country takes away the insurance when people most need it."

Economists have a gauge to measure the relative generosity of unemployment assistance programs. It's called the replacement ratio-that is, how much of the worker's former income is replaced through benefits. In the United States, the figure varies from state to state, but overall a couple with two children and an income a little below average will have about 50 percent of earnings replaced by public assistance in case of unemployment. In France, the replacement ratio for the same family is 86 percent; in Britain, 83 percent; in Germany, 74 percent; in Sweden and the Netherlands, 90 percent. j

This benevolent helping hand, funded by the taxpayers, tends to be described in the United States as a "welfare state," a phrase used derisively by American politicians to attack those who want to give away huge sums of public money. In Europe, too, the social safety blanket is known as the "welfare state," but in Europe people are proud of that term. I learned this on the campus of one of the world's greatest educational institutions, Oxford University. On a cold fall day, the students were holding a mass protest against one of Tony Blair's more daring government innovations: a tuition fee for college students. In Britain, as in most of Europe, nearly all universities are public institutions. Until 1999, university education was free in Britain, as it still is in most of Europe. To help balance his budget, Blair proposed a modest tuition fee, based on each student's family income, with a maximum payment of 1,000 euros per school year-about $1,500. Since then, Blair has raised the fee to a maximum of 3,000 pounds. Compared to, say, Princeton or Harvard (both running about $38,000 per year), this is a fantastic bargain.

"Our welfare state"-that phrase nicely sums up the sense of ownership, the sheer pride, that Europeans feel toward their network of social support mechanisms. The social model is often cited as one of the basic elements that make a European country European. "Europe's welfare states," asserts the British analyst Will Hutton, "arise from ... core European values and the European settlement. They define Europeanness. They are non-negotiable European realities." The Europeans argue that the generosity of their social model is the main thing that makes Europe different from other developed regions of the world.

... Citizens of the United States of Europe particularly like to brag that their social model makes them superior to the United States of America. "The simplest difference between the USA and Europe is that we have welfare states, and they do not," wrote the Irish political scientist James Wickham. Wickham applauds Americans' willingness to support charity and volunteer programs, but he argues that charity is not enough. "Social rights cannot depend on the voluntary goodwill of others .... The welfare state, enforced by law, is a defining feature of Europe."

Of course, the welfare state also forces Europeans to pay sky-high taxes. And the plush arrangements provided for people who are out of work may explain why Europeans who are laid off tend to accept their fate as a fairly permanent condition, rather than getting up and looking for a new job. But these problems tend to be ignored, except by a few marginal voices on the right, because Europe in general assumes the social model is preferable to what's going on in other parts of the world. "The reason why Europe compares so favorably with the US in respect of social and income mobility," Will Hutton says, "is that every European state sets out to offer equality of opportunity to all its people; the American neglect of the bottom 50 percent in the name of individualism is not reproduced in Europe."

The European social model involves a much bigger role for the public sector in daily life than Americans are comfortable with. The Public Broadcasting System (PBS) in the United States fills a fairly small niche in a TV and radio world dominated by giant private companies. In most European countries, by contrast, the public broadcaster tends to be the largest and the most prestigious by far. Britain's BBC, funded by a tax of $170 per year paid by every home and office that has a television set, operates six TV and five radio stations. France's TFI, Germany's ARD, and Italy's RAI are more popular and more respected than any private network. Public transit systems are much more pervasive in Europe than in the United States, as are public art, public universities, and public medical systems. Public housing is so common in major European cities that it can't all be stuck away in a few big complexes. Instead, government owned homes and apartment buildings are found in every neighborhood of every city and town. The inhabitants include not just the poor but a good proportion of the middle class as well.

Still, Europe's welfare state is not "European" in the sense that it is standardized or uniform across the EU. Brussels sets some minimal standards, but each country establishes its own menu of public assistance. Not surprisingly, considering its importance in everybody's daily life, the welfare state has been studied to a fare-thee-well by European academics. They divide the various approaches to state welfare into various categories: there's a Nordic model, generally covering the Scandinavian countries. There's the Rhineland capitalism model, developed in Germany and now common in Austria and the Benelux countries. There's a southern Catholic style, common in the Mediterranean nations. At the EU'S eastern edge, the former Soviet states have largely maintained welfare programs inherited from Communist times. Britain, which is struggling to run a European welfare state with tax rates somewhat closer to the American standard, is in a class of its own. The Irish are more European than the Brits in this regard. Still, common features mark the social model across the continent.

Europe's welfare state begins at birth, with government payments to each newborn citizen and generous support for parents. In essence, the European governments pay new parents to leave their jobs temporarily and stay home. "We have made a fairly basic decision," Valgard Haugland, the leader of Norway's Christian Democratic Party and the cabinet minister for children and family affairs, told me. "We have decided that raising a child is real work. And that this work provides value for the whole society. And that the society as a whole should pay for this valuable service. Americans like to talk about family values. We have decided to do more than talk; we use our tax revenues to pay for family values."

... The United States pays a small percentage of its mothers a monthly stipend to help them raise and feed their children. The recipients are known as "welfare moms," and are generally stigmatized as women who can't find a real job. Norway, in contrast-like most other European countries-treats the monthly payment to parents as a salary. Income and social security taxes are withheld, just as with any paycheck. The payment is specifically designed for working parents, to encourage them to leave their jobs for a while and raise their children. Parents who don't have a job outside the home also get a monthly benefit for raising children, but it is considerably less than the "surrogate salary" provided those who leave a job to be full-time parents. In America, the White House and state governors routinely boast about how much their welfare rolls are being reduced. In Norway, the government takes pride in statistics showing that the number of recipients has been growing rapidly. For the past few years, the national parliament, or Storting, has been debating proposals to extend the plan to the child's third year.

... Beyond that, European parents can expect a monthly benefit check from the government for the first eighteen years of each child's life. Health care and prescriptions are free for children up to a certain age, even in those countries that require a co-payment from adults at the doctor's office. Education tends to be free, or at least extremely cheap by American standards, all the way through college. In Europe, the most prestigious universities are nearly all public, so the best college education in Sweden, say, or Scotland is available essentially for free to those who can gain admission.

Once a European is educated, she moves on to the labor market an the broad array of employment rights that are considered a basic element of the social model. Wages are often not left to market mechanisms. They are set, either by unions or by government formulas, generally on a regional or sectoral basis, so that all auto companies, for example, pay all workers about the same weekly amount. As we have seen, mandatory programs of sick leave and family leave are far more expansive in Europe than the United States. Working hours tend to be restricted by law or union agreement. Italy and France have both made the thirty-five-hour week de rigueur. This doesn't mean that no worker can stay on for the thirty-sixth hour in a given week; rather, thirty-five hours is the point at which an employer is required to start paying overtime rates. This is supposed to encourage companies to hire more people-on the grounds that it is cheaper to pay a second man at the basic rate than to keep the first one on at overtime-but the economists don't agree on whether the laws have achieved that purpose. Holidays and paid vacations are generous; in much of Europe, a worker can expect five weeks of vacation from the first year on the job. British law mandates at least twenty-three days of paid holidays per year; France requires twenty-five days or more; Sweden, at least thirty. In contrast, the wretched overworked Americans have to get by with a meager four to ten mandatory paid holidays, depending on the state. The results of all this are evident in the OECD's ranking in average hours worked. In 2003, Americans worked an average of 1,976 hours; German and French workers averaged some 400 hours less. That is, Joel Sixpack works some ten weeks more in one year than his counterparts Jacques and Johann. Even British workers, who put in more time on the job than anybody else in Europe, work 200 fewer hours per year than Americans do. And while they are enjoying those long vacations, European workers don't have to worry much about losing their jobs; in many European industrial sectors, layoffs are illegal.

It is conventional wisdom among American economists-and many of their continental counterparts as well-that this extensive coddling of employees who don't work all that much and can't be laid off is a key reason for Europe's relatively weak economic performance. In good times and bad, European countries tend to show lower gross domestic product (GDP) growth rates than the United States does. In good times and bad, unemployment rates for many European countries are far higher than in the United States. In the first years of the twenty-first century, U.S. unemployment rates ran near 6 percent; for Europe as a whole, the figure was about 9 percent. This lingering malady, marked by slow growth and high unemployment, is commonly known as Eurosclerosis. The reasons for it seem blatantly clear. A French employer who can't fire any employee is going to think twice before hiring any employee. A German factory that has to pay its workers for ten weeks of holidays and vacations out of each fifty-two is going to spend more, and produce less, than a U.S. factory that gets five more weeks of work from each hand for the same annual pay. The American system is more flexible, and accordingly more dynamic; jobs are more easily eliminated in the United States, but they are more easily created as well. To Americans, this all seems plain as day.

But there's another point of view. Europeans who support the labor protections built into the social model point out that many European companies do just fine, thank you, despite the rigid regulatory regime imposed on them.

... The Europeans also challenge economic comparisons based on gross domestic product, the standard measure of a nation's wealth. When American citizens or governments spend money on deadbolt locks, barred windows, car alarms, police, and prisons, all that expenditure creates employment and adds to the GDP total. But does it make the United States a more desirable place to live than Europe, where there is less need for home security or prison guards? Those extra ten weeks of paid leave that a French worker enjoys have a negative impact on GDP statistics. But are Americans better off because they have to work ten more weeks per year.

... Although the mechanisms and the finances of medical care vary significantly from one country to the next, all European ç nations have health-care plans that cover all citizens, with the government paying most (or all) of the bills. By many measures, these systems of "socialized medicine" work better, and more efficiently, than the mainly private American health-care system. The European countries have better public health statistics than the United States, and a higher rate of satisfaction among patients, even though they spend a much smaller share of national income on medical care...

Some European health-care systems-notably those in France and Germany-use an insurance model for payment. Citizens join a plan and pay fairly small premiums, with government making up any shortfall. For someone who has a job, the employer is expected to pay a sizable chunk of the health insurance premium; for others, the government makes up the difference. In other countries, the state not only pays for, but also provides, medical service.

... The advantage for European industry comes in avoiding the kind of health-care costs that pose an increasingly heavy weight pressing down on American companies. With the government picking up most of this burden-even in the Netherlands, with the biggest private-sector medical industry in the EU, the government pays 70 percent of health-care costs-the cost to employers is small, at least in comparison to the medical costs American firms have to pay. William Clay Ford Jr., the chairman of Ford Motor Company, says that fact is a key reason that a company like Volvo can compete on global markets; wages, pensions, and other benefits are more costly in Stockholm than in Detroit, but the huge saving on health insurance costs makes overall labor costs roughly equivalent. In the United States, more and more employers are responding to the sharp increase in health-care expenses by dropping medical insurance altogether for their employees (or at least for their blue-collar employees). In the spring of 2004, some 45 million Americans had no health insurance whatsoever. That option is simply unthinkable in Europe. The notion that everybody must have equal access to health care is a basic and incontestable fact of European life. Universal medical care is one of the things Europeans always mention, with pride, when they talk about the differences between the EU and the United States.

The Charter of Fundamental Rights of the European Union

... there is a basic human right to health care, a right to free education, a right to join unions and go on strike, a right to "limitation of maximum working hours, to daily and weekly rest periods, and an annual period of paid leave," and a right to "parental leave following the birth or adoption of a child."

... Europe's commitment to foreign aid-often referred to on the continent as ODA, or "overseas development aid"-is the mirror image of Washington's determination to maintain the strongest military forces on earth. The same global crises that prompt a big jump in Pentagon spending in the United States lead to increased ODA in Europe. In fact, the Europeans refer to foreign aid as "soft security"-that is, another form of national defense. The result is that the European Union countries give more aid to more poor nations than any other donors. For 2003 (when the EU still had only fifteen member nations) aid payments from the EU-both the union itself, and the individual countries-totaled about $36.5 billion; the United States, with roughly the same total wealth, gave only $13.3 billion in development aid, about 36 percent of Europe's donation. (Japan, the third biggest foreign aid donor, gave about $9.2 billion.) European foreign aid spending has more clout than the American dollar, partly because there's more money coming from Europe, but also because the Europeans spread their donations more widely. The basic tendency-driven, perhaps, by post-imperial guilt-is to direct aid money to former colonies. That means the Europeans are funding aid projects all over Africa, in the Caribbean and South America, and in East and South Asia. U.S. foreign aid, in contrast, is fairly sharply concentrated on the Middle East.

The United Nations has set a standard to guide the rich nations in deciding how much of their wealth to give away to the poor. The basic rule is that developed countries should give 0.7 percent of gross domestic product (that is, a country's total annual earnings) each year in foreign aid. Very few of the two dozen wealthiest nations meet this standard. All of those that pass the UN test are European. The OECD's ranking showing the most generous donor nations-in terms of what percentage of their national wealth they give away in foreign aid-looked like this in 2002, which was a typical year in this regard:


Nation ODA as a percentage of GDP
Denmark 0.96%
Norway .89
Sweden .83
Netherlands .81
Luxembourg .77
Belgium .43
Ireland .40
France .38
Japan .23
United States .13

... Western Europe-the home of the world's biggest religious denomination, the Roman Catholic church, and the birthplace of most major Protestant faiths-has turned its back on religion. The Dutch sociologist Nan Kirk de Graaf, who studies faith and belief around the world, reports that twenty-first-century Europe has "one of the least religious populations in the world." A continent that is full of ancient churches and religious shrines is increasingly empty of practicing religion. In Britain, France, Germany, Holland, and Belgium, fewer than 10 percent of the population attend church as often as once a month. Only 12 percent of Britons describe themselves as "active" members of the Anglican Church. In Scandinavia, the handsome high-steepled churches that mark every city and village attract less than 3 percent of the people, and governments no longer subsidize the disestablished Lutheran Church. In Amsterdam, the Dutch Reformed hierarchy is converting cathedrals into luxury apartments to pay its bills. In the former Soviet satellites east of the iron curtain, nobody has seen a need to restore many of the ancient churches that the Red Army turned into barracks or warehouses.

I have attended church on Sunday morning in dozens of European cities and villages. Sitting in those marvelous old cathedrals, listening to the mighty organs echo in the vaulted ceilings, two things always struck me: how beautiful those structures were, and how empty.

... the striking fact remains that "Christian Europe" is hardly Christian anymore, except as a collection of inspiring Gothic reminders of Christianity's past. "For the first time in 1500 years," wrote historian Norman Davies in the late 1990s, "Christianity was becoming a minority religion" in Europe. The European Union in particular is a pervasively secular institution. When Giscard d'Estaing's Constitutional Convention produced its proposed constitution to govern the expanded, twenty-five-nation union, the draft text made no mention of Christianity or God. The Vatican and other Christian leaders complained loudly about this omission. But the members of the drafting committee argued that Europe's constitution should deal with government, not faith-this on a continent where nearly every nation has had an official, government-subsidized Christian denomination.

It may be a sign of the demise of religious practice that the institution of marriage is also in decline among Generation E members, particularly in Western Europe. Europeans still form monogamous unions, raise children, attend parent-teacher night at school, and buy out the toy stores in the weeks before Christmas. But they do all this without bothering to get married. The result is that the wealthy nations of Europe - particularly the northern countries - have the world's highest rates of children born out of wedlock. Americans who are disturbed that some 30 percent of babies in the United States are born to single mothers should perhaps be relieved they don't live in Norway (49 percent of all births to unwed parents), Sweden (48 percent), France (41 percent), Britain (38 percent), or Ireland (31 percent). On the other hand, most of the "out-of-wedlock" children in Europe are actually living with both parents-a significant difference from the United States, where the typical single mom doesn't have the father around the house. It's just that European cohabitors-they call themselves "partners" or "companions" or sometimes "spouses"-don't ever go to church, not even to be married. A Norwegian named Haakon lived happily with his partner and their child for years without being married. Eventually, Lutheran leaders convinced Haakon that he should, indeed, find the time for a formal marriage ceremony-since he is, after all, Norway's crown prince. In Ireland, Prime Minister Bertie Ahern raised a few eyebrows when his unmarried companion moved in with him-but not many, evidently, because Ahern was easily reelected at a time when the whole nation knew that he was "living in sin," as the church used to say. Perhaps because they are eager to encourage marriage in any form, European countries have been significantly more open than American jurisdictions to same-sex unions. Belgium and the Netherlands both offer full legal recognition of gay marriages, and most other European countries have authorized civil ceremonies that give gay couples all the legal benefits that their heterosexual neighbors are entitled to.

Does it make any difference in daily life whether Europeans still believe in God, or go to church? It is hard to argue that twenty-first century Europe is a less moral or caring society than the church-going United States. Yes, Americans put up huge billboards reading "Love Thy Neighbor," but they murder and rape their neighbors at rates that would shock any European nation. Corruption in business and government seems equally prevalent on both sides of the Atlantic. Norwegians don't go to church much, but they give away ten times as much per capita as Americans do in aid to poor countries. Indeed, every West European government devotes a considerably higher share of its budget to foreign aid than the United States does.

Perhaps the most significant implication of the secularization of Europe is that it deepens the divide between Europeans and Americans. Depending on how the question is asked, up to 95 percent of Americans say they believe in God; in most of Europe, the figure is closer to 50 percent. The public religiosity that is part and parcel of American life is rarely seen on the continent; the only televangelists on European screens are piped in via cable from Newport News and Houston. Europeans tend to be surprised, or amused, when U.S. politicians end a speech with the words "God bless America." "When they hear that, the intellectuals break out in a little smug smile," reported Jonathan Freedland, a columnist with London's Guardian newspaper. "It's almost impossible to imagine a prime minister over here saying 'God bless Britain' or 'God bless Sweden." When George W. Bush cited "holy scripture" and argued that going to war in Iraq was a straightforward matter of "good against evil," demonstrators by the million took to the streets of Europe. "Don't send us to fight religious wars," read a banner I saw at a demo in Salzburg. At a time when many European leaders are vigorously promoting the notion that the united Europe should stand as a counterweight to American influence in the world, the different status of religious belief serves to heighten the notion that there is a basic difference of woridview on the opposite sides of the Atlantic.

Another element of the New Europe's global power is the euro, the common currency that has been a skyrocketing success in the financial markets since it hit the streets of Europe on New Year's Day of 2002. When the new European money first appeared, most American financial advisers urged their clients to bet against the EU and its currency; the consensus view was that investors should cling to their dollars and watch the new euro fall off a cliff, Of course, any investor who followed that advice lost a lot of money. As it turned out, it was the dollar that plummeted in value in the years following the euro's arrival, while the euro became the darling of currency speculators everywhere. As America's "twin deficits"-that is, the government's budget deficit, reaching nearly 5 percent of GDP, and the nation's balance-of-trade deficit, which was nearly as large as the government shortfall-rose larger and larger, the EU went the opposite direction. The nations of Europe maintained a fairly steady balance-of-trade surplus that is, they sold more goods and services overseas than they bought-and the Stability and Growth Pact held government deficits to a fairly low level. For investors around the world, it was a fairly easy decision to stock up on the currency of a nation in surplus, and unload American money. In March 2002, when the last of the traditional European currencies was withdrawn from circulation, 1 euro was worth 86 American cents. Two years later, a euro was valued at $1.30-a 50 percent gain against the dollar-and looked likely to grow stronger as long as the American deficits persisted.

Except for a small platoon of professional currency traders who spend their days in front of computer terminals tracking the minute ups and downs of the dollar, the euro, the pound, the yen, and the yuan, this aspect of the revolution in Europe has so far had little impact on Americans. But it could have a huge, and heavily damaging, impact, if the trends in currency values continue along the tracks they've followed since Europe's new currency came into existence. If traders, consumers, and finance ministries around the world come to the conclusion that the rising euro is a more reliable currency than the falling dollar, it could spell the end of the dollar's long reign as the world's preferred reserve currency. That could cost Americans a lot of dollars.

As long as nations have used money (rather than straight barter) as a means of trading with each other, there has always been a currency (or sometimes two currencies) that people adopt as the money they want to hold in reserve, as a fallback in case their own currency loses its value. Since the Bretton Woods agreement in 1944, the reserve currency preferred almost everywhere on earth has been the U.S. dollar. Basically, the "reserve currency" is the money that any seller will accept from any buyer. In Kathmandu, Cairo, or Cartagena, a hotel manager or shopkeeper may be unwilling to take payment in, say, Thai bhat or Kenyan shillings; but the same manager will happily do business in dollars. International oil transactions have long been priced in dollars, even if the seller's home currency is the dinar and the buyer's is the rupee. The dollar is so ubiquitous and so popular that even currency exchange tends to involve dollars most of the time; a Mexican heading off to a vacation at a beach resort in Malaysia will usually find it easier and cheaper to turn his pesos into dollars, and then use the dollars to buy Malaysian ringits, than to make a direct conversion from Mexican money into Malaysian.

The international stature of the dollar is a huge boon to American citizens and businesses. The former French president Charles de Gaulle complained that the dollar's global position "confers an enormous privilege" on the United States and its citizens. Because the rest of the world has been eager to obtain our money, Americans often don't have to bother with the time and expense of currency exchange. If a Canadian traveler finds herself in Nairobi, she will have to buy Kenyan money to pay for room, meals, shopping, and so on. An American can generally skip that step, because any business in Kenya will happily take the money that the American already has in her pocket. That's one value of the dollar. But the dollar's global allure is far more important as a crutch to prop up America's incorrigible habit of deficit spending.

America is such a rich country that it can buy foreign goods and services-not just meals and hotel rooms, but cars, clothes, airplanes, food, industrial machinery, and oil-in huge proportions. All those American jobs that are being "outsourced" to India and other developing nations increase the outflow of American dollars to foreign countries. Americans sell goods and services-including Ken Palmgren's corn and wheat-overseas as well. But we don't export enough to pay for all the goods we buy. Every month, the United States spends about $50 billion more on foreign goods than it earns in foreign sales. That monthly $50 billion-reaching a total that will top $700 billion in 2005-is the balance-of-trade deficit. Most nations could not continue to run a deficit like that for very long; their currency would crash, their loans would be called, and the nation would face bankruptcy. A visit to Argentina, a formerly wealthy country where millions now dig through garbage cans every day looking for something to eat, will make it plain how painful that can be.

But the United States can sustain this steady outflow of money because the rest of the world has been willing to send back the dollars we use to buy foreign goods. This return flow comes in the form of investment-foreign investors buying American stocks or, more commonly, lending us money by buying corporate or government bonds. When the US. Treasury spends more than it receives in taxes-early in the twenty-first century, the US. government was spending nearly half a trillion dollars more each year than it took in-it makes up the difference by floating Treasury bonds. A bond is a loan from the bond buyer to the United States; the Treasury agrees to pay back the value of the bond, plus interest, in twenty years or so. Every year, a major share of Treasury bonds is purchased by foreign investors, and this, in effect, brings home many of the dollars that went overseas in trade. Those foreign investors putting their finds into Treasury bonds are lending Americans the money we use to buy more imports.

For years, the United States has gotten away with this recurring cycle of spending and borrowing largely because investors around the world have had no better place to put their money. The huge American economy and the always-reliable US. Treasury made the United States the world's safest haven for investors. Central banks around the world, in fact, have had rules requiring that they lend their excess money to the United States. When the People's Bank of China, for example, receives tax revenues each spring, it quickly invests the money in Treasury bonds, knowing that it can depend on the U.S. government to repay the loan without quibble. For most of the past half century, there's been no investment vehicle as trustworthy as the almighty dollar.

The threat facing the United States is that the euro, a strong currency backed up by some of the world's strongest economies, is beginning to look like a reliable alternative to the dollar. Barely three years after its arrival on the world financial scene, in fact, the euro had virtually achieved equity with the dollar as a vehicle for international investment. According to the Bank for International Settlements, the world's watchdog of global credit transactions, the value of euro-denominated bonds both corporate and governmental) rose from zero in 1998 (when there was no euro) to some $4 trillion in 2004-virtually equal to the amount of money invested in dollar-denominated bonds in 2004. The members of OPEC, the cartel of oil-exporting countries, are already moving coward selling their product in euros. (Before he was overthrown, Saddam Hussein did offer to price Iraqi oil exports in euros, but this was more a political snub than an economic decision.)

The explosive increase in euro-based international transactions suggests the worrisome possibility that foreign investors may have found a place other than the United States where they can safely store their money. By 2005, private investors and central banks around the world were making major shifts in traditional investment patterns, putting significant portions of their reserves into euro bonds rather than dollar bonds. Central bank chiefs in Russia, Japan, South Korea, and several other countries announced that they would buy fewer U.S. treasury bonds in the future, and more euro-denominated securities. Indeed, a survey of central banks in early 2005 showed that two-thirds of the world's sixty-five richest nations were planning to shift investment out of dollars and into euros. If this trend continues-and most economists say that it will-it will be much harder for America to continue its import-and-borrow pattern of consumption. And if euro bonds are seen to be as reliable, as normal, as dollar bonds,

foreign investors may decide to lend their money to the euro countries rather than the United States. The US. Treasury would then have to raise the interest rate it pays on bonds, to attract foreign loans. At a time when America's twin deficits are skyrocketing, in short, America could be forced to pay much more to borrow the money required to finance those deficits. To put it simply, the success of Europe's common currency could bring America's financial house of cards tumbling down. The dollar could lose much more value on international markets; foreign investors could pull out of American markets, sending stock market indexes steeply downward; the U.S. government could be forced to raise taxes to make up for the bonds it can no longer sell around the world. If all that happened, Americans would wake up to the revolution in Europe in the most painful way.

[Europe] covers just 6 percent of the earth's total area and is home to just 12 percent of the global population; yet Europe has 40 percent of the world's wealth and accounts for more than half of ail global commerce. European countries comprise five of the world's ten richest nations.

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