The US travel alert issued on Sunday, warning of a potential terror threat in Europe, could not have come at a worse time. The economy in Europe has been on the brink of a sovereign debt disaster since the beginning of the year. A series of protests and strikes last week caused major disruptions as public employees aired their anger over cuts in salaries and benefits. Now, tourism could take a significant hit as the US, Japan, and other nations warn their citizens about a Mumbai style terror plot which may have been planned in Europe.
Much of the terror threat centers around two British brothers and a group of Germans reportedly from Hamburg. Recent US drone attacks in Pakistan by unmanned combat air vehicles (UCAV) allegedly have killed five German Muslims training with al Qaeda and the Taliban, as well as one of the British men. Phone traffic and the capture of one German in Afghanistan, Mir Ali, alerted the Inter-Service Intelligence agency that a Mumbai style terror plot was being prepared, targeting popular tourist landmarks such as the Eiffel Tower, as well as hotels, train stations, etc.
On Monday, Japan, the UK, and Sweden issued similar travel alerts to their citizens planning to visit continental Europe. While there has been no immediate drop in tourism, the coming weeks may show a decline. The effect of the terror threat is already having an impact on Europe’s economy.
Markets are responding to the warnings. Already jittery due to the sovereign debt and banking crisis, the past few weeks have not been good ones in Europe. Spain and Portugal have been downgraded again, as well as Ireland, which faces another possible downgrading for their bonds by Moodys. Those who thought that the bailout of Greece would end the problem were mistaken.
The European Union is rife with systemic issues. The recent Basil III accord on banking is leading to tougher regulations on Europe’s financial markets, which will further hamper credit and growth. The European Central Bank (ECB) and the European Commission are calling on national governments to comply with mandatory debt limits or face expulsion from the EU.
With this as a backdrop, we are also seeing an increase in violence due to the austerity measures being enacted upon by national governments. During last week’s protests, there was considerable property damage, including police cars set ablaze by demonstrators. This leads me to consider whether this new travel alert is really about terror threats spawned by al Qaeda or is actually from a growing concern that radical elements within public employee unions may become more violent?
We also saw last week how austerity measures caused a failed coup attempt in Ecuador as angry police and soldiers, enraged by cuts in salaries and benefits, kidnapped the president of Ecuador and almost overthrew the government. Last year, we saw in Europe, particularly in France, business owners being kidnapped by their employees demanding more jobs and better pay. While al Qaeda may be the ever present boogey man, the real concern throughout the world may lie in a wave of terror unleashed by disgruntled public employees.
We shall see how this plays out. Will the terror threat and travel warnings from the US and other nations hurt Europe’s economy further? What about the same here in America? Federal Reserve Chairman Ben Bernanke is again warning of our own sovereign debt and high unemployment. How long will it be before we see similar protests here as public employee unions fight to stop any austerity measures here? Will countries like France and Germany soon be issuing travel alerts to their citizens about visiting the United States?