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A declining West?

By MARTIN WALKER, UPI Editor Emeritus   |   Feb. 18, 2013 at 12:06 AM   |   Comments

CAMBRIDGE, Mass., Feb. 18 (UPI) -- Europeans, seeing the keystone economy of Germany drifting back into recession, are pinning more and more of their hopes on U.S. President Barack Obama's proposal for a Trans-Atlantic Trade and Investment Partnership to kick-start growth.

But on the evidence of this year's German conference at Harvard, Europeans are equally keen on the idea as a way to symbolize the enduring strength of the Atlantic alliance and to reassure allies made nervous by the Obama administration's talk of a strategic pivot toward the Pacific.

"Some may be concerned by the pivot but we should be more worried if the United States ignored these historic shifts under way in Asia," Frank-Walter Steinmeier, former foreign minister and current leader of the Social Democrat opposition in the German Parliament, told the conference.

"We should support and ask what we Europeans can do for our part," he went on, stressing that the TTIP was evidence that the U.S. focus on the Asia-Pacific region wasn't to the detriment of the European allies.

"We Europeans need a firmer footprint in the Asia-Pacific region and we need a regular and ongoing strategic dialog with our American allies to address the fundamental changes sweeping Asia," Steinmeier added.

German and U.S. economists, academics and diplomats echoed Steinmeier's welcome for the TTIP plan which Obama outlined in his State of the Union address, adding that its geopolitical importance was at least as significant as the prospect of more trade and economic growth that it carries.

"The trade pact has much more meaning than just economics," said German Ambassador to the United States Peter Ammon. "It shows that the West is not and need not be in decline but that Europe and America to work together in support of their common interests and values."

But the economic effect of the TTIP would be more than welcome. In the final quarter of last year the German and the whole eurozone economy contracted 0.6 percent, a sobering warning of stagnation or recession to come, despite the historically low interest rates set by the European Central Bank. In Germany, the contraction was marked by a fall in exports, hitherto the bright spot of the economy, of more than 2 percent.

"The economic crisis is far from over in Europe," warned Professor Henrik Enderlein of the Kennedy School. "Even some of the good news is not what it seems. Germany has a relatively low unemployment rate of 6.9 percent but that reflects demographic decline, with the working age population shrinking by 150,000 people every year. Unless we import a large number of skilled immigrants or many more women join the workforce, Germany is looking at a growth rate of zero to 0.5 cent for years to come."

"We live longer and not enough babies are born," noted Ursula von der Leyen, Germany's minister of labor and social affairs, who argued that Germany's low birth rate would leave it competing with much of the rest of the industrialized world for skilled migrants.

"Today, only Germany and Japan have more than 30 percent of their populations over the age of 60 but by 2050 that will be true of all the G8 countries except for the U.S. and it will also be true of China", she said. "We are going to have invest more in employing and retraining the elderly and change our education system so that it can accommodate the needs of people over the age of 50."

The theme of this year's conference, at which this columnist spoke on future economic prospects, was whether the long economic and political dominance of the West was ending.

"The West has lost a considerable amount of its clout and of its appeal. With meager economic growth, fiscal crises and welfare states many consider to be unsustainable, the West has yet to come to terms with a world in which China is the world's economic powerhouse and largest creditor," said Kai Bruckerhoff at the Kennedy School, leader of the student committee which organized this year's conference.

"Over the next three to five years, the West will come out of this recession and get its mojo back," said Professor Charles Kupchan of Georgetown University and a former member of the National Security Council at the White House. "But by the time that happens, it will be a different world with no Western anchor, and with China no longer willing to play by the West's rule-based system."

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