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Europe’s Fake Normal

NEWPORT BEACH – August is traditionally Europe’s holiday month, with many government officials taking several weeks off. In the process, important initiatives are put on hold until the “great return” at the beginning of September.

This year, there is another reason why Europe has pressed the pause button for August. With a looming election in Germany, few wish to undermine Chancellor Angela Merkel’s likely victory. After all, Germany is central to Europe’s well-being, and Merkel’s steady hand has allowed the continent to overcome a series of challenges over the last few years. As a result, many are eager to postpone any controversial policy decisions rather than rock the German political boat.

Some of the recent economic news has seemed to justify this approach. At the end of July, the widely watched indicator of European manufacturing activity crossed the threshold signaling expansion for only the second time in 23 months.

Adding to the sense of comforting normality, several European officials have taken to the airwaves with optimistic pronouncements. Whereas the euro and the eurozone were “under threat just nine months ago,” European Council President Herman Van Rompuy recently declared, “this isn’t the case anymore.”