Peter Morici

The Germans and the Americans have the economic resources but have demonstrated inadequate commitments to giving real meaning to the economic and security commitments the West made to Eastern Europe, for example through the 1994 Ukrainian security agreement, at the end of the Cold War.

Now, Putin and his political allies, chastened by the loss of empire and emboldened by Russia’s petroleum wealth, are exploiting western neglect of former Soviet states.

In America, President Obama’s economic policies have boiled down to raising taxes, cutting defense spending and building out a European-style welfare state—universal health care and broadening the earned income tax credit.

Stiffening NATO commitments to Eastern Europe will require German and U.S. governments to step up and pay for stronger militaries.

In Germany and the United States taxes are already quite high, even by Cold War standards, and the obvious tradeoff between guns and butter will hit the Obama and Merkel governments where it hurts most—their standing with voters who have come to expect wider and wider welfare benefits.

The greatest courage will be required from Angela Merkel and Barack Obama or each will bequeath to their successors a much more dangerous world.

Russia will enjoy a stranglehold over European energy supplies and boast a modernized military to gradually coop and reclaim former Soviet states and expand its influence throughout Europe.

The Cold War never really ended, it just took a Black Sea vacation.

Peter Morici is an economist and professor at the University of Maryland Robert H. Smith School of Business and a widely published columnist. He tweets @pmorici1

Peter Morici

Professor Peter Morici is a recognized expert on economic policy and international economics. He has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.