European Parliament President Martin Schulz said on April 26 that the collapse of the European Union is a realistic scenario. According to Mr Schulz, a disturbing trend toward "re-nationalization" and "summitization" has taken hold in the last few months, with heads of state and governments "arrogating more and more decisions to themselves, debating and taking decisions behind closed doors and in disregard of the community method."

Mr Schulz also characterized the Fiscal Compact as an attempt to bypass the Commission and Parliament in forging a fiscal union. Meanwhile, European Council President Herman Van Rompuy said in a speech in Romania that the "winds of populism" are threatening the open borders of Europe.

Stratfor has long argued that the financial crisis is in fact a political crisis. The European Union was not designed to withstand an economic crisis that would adversely impact different nations and social classes in a variety of ways. The resurgence of nationalism was an inevitable result as political leaders scrambled to protect their own nations first. A rise in populism was also inevitable, as the classes most affected by austerity reacted on a number of fronts, from immigration to the reduction of social benefits.

A political process

National political leaders are bypassing the European Parliament and Commission for two reasons. First, because their positions depend on national political processes. Europe tried to combine national sovereignty with supranationalism. In practice, that means national electorates determine who governs and national governments are answerable to that electorate. The United States also began with an ambiguity concerning whether the federal or state governments were sovereign. The southern states seceded based on their understanding that sovereignty rested with the states. Only after a brutal civil war was the federal government affirmed as the ultimate seat of sovereignty.

This leads to the second problem. In the United States, plenty were prepared to fight and die to uphold either national or state sovereignty. For both sides there was a moral principle involved concerning the nature of the United States. Europe has a long history of citizens fighting and dying for the sovereignty of nations, but who is prepared to fight and die for the European Parliament or the European Commission?

The rise of populism and nationalism in Europe is a consequence of lost sovereignty. It can be seen in leaders taking control in extra-EU discussions. It can also be seen in the rise of nationalist sentiment hostile to both the EU and to immigration. National leaders are responding to political and institutional realities. Their fate is bound to the nation, not to the EU. Populists are expressing the sense that European institutions are indifferent to their concerns. Both leaders and populists exhibit real passion, whether born of fear or patriotism.

One of the EU's more defining traits is its deliberate lack of passion. In a continent where passion has led to endless slaughter, the goal of the EU was to ban passions and govern according to the principles of disinterested management.

A promise of peace and prosperity

The EU promised peace and prosperity. But the EU suffers from what one thinker said about Weimar Germany: that it offered a pitiful image of justice without a sword. The EU lacks the ability to force compliance. It is, in the end, a convenience designed to reach an end; it is not an end in itself.

Mr Schulz and Mr Van Rompuy's warnings about the collapse of the European Union are not idle scaremongering. Both leaders sense an important dynamic at play: that nation-states speak for the European public in a way that the European Union does not. In the United States, Union forces fought and died at Gettysburg. No one seriously expects anyone to fight a war to preserve the EU. It is said that no one would fight for Europe’s nation-states any longer. That may be true for many, but not all. The trajectory of populism indicates to us that some will.

That is a sobering and even frightening thought when one considers what Europe was not very long ago. The grand illusion of the European Union was that it had abolished that impulse, that Europe had watched it disappear during times of prosperity. But times of austerity revive impulses toward nationalism and populism, and railing against them will not make them disappear. The real test of Europe is not the financial crisis, but whether the rise of nationalism and populism can be stopped and eventually reversed. It is a possible outcome, but from our point of view not the most likely.

This edited version of “The state of the world: Germany's strategy” is reprinted with permission of Stratfor