Thoughts on populism and post-Italian elections

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Credit: The Financial Times

Despite the election of Emmanuel Macron at the helm of France less than a year ago, the populist wave has maintained a strong footprint and influence over European politics. The outcomes of the recent legislative election in Italy confirm that a core EU member state and Eurozone’s third largest economy has chosen a populist movement, the Five Star Movement (M5S), and an extreme right party, Northern League, to lead Italian politics for the upcoming years.

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The story behind the results of the Italian election of March 4, 2018 is shaped by a series of factors: migration (influx of over 750,000 migrants since 2011 from Sub-Saharan Africa), frustrations towards the EU and Eurozone governance, ethno-nationalism (especially for Northern Italy), stagnating economy and increase of poverty (11.1% unemployment rate and 37.8% youth unemployment rate), and disillusionment with Italian political establishment. In addition, the results highlight the division between several Italies: in the North, the Northern League gained the most voices; in the South, M5S was the big winner; and in the middle, a faction of center left.

In the upcoming weeks, party leaders will be working on building a coalition in order to gain a majority. It was projected to see a coalition between Forza Italia and the Northern League, but in recent days Party leader Matteo Salvini expressed openness to join a coalition with M5S and other parties, at the exception of the Democratic Party. “The choice of speakers for the lower house of parliament and the Senate, due after March 23,” writes Giada Zampano of Politico “will provide the first hint as to possible alliances before parties consult with President Sergio Mattarella about forming a new government.” Mathematically, no future government can be formed without either M5S and/or the Northern League.

Here is my discussion with eTBS This Morning‘s host, Alex Jensen, on the populist wave over Europe in light of the Italian election, and the transatlantic link between European and American populist movements: audio file here or on iTunes here.

(COPYRIGHT 2018 BY POLITIPOND. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED WITHOUT PERMISSION).

A Half-Tone Victory for Merkel

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Credit Hannibal Hanschke/Reuters

Angela Merkel won a fourth term at the helm of Germany ensuing the German federal parliamentary election. In postwar Germany, she is now one of the longest serving Chancellors after Konrad Adenauer and Helmut Kohl. Despite winning her fourth mandate and maintaining her status of most seasoned European politician, she is facing some serious challenges at home. Her conservative party, the CDU, scored one of the lowest results in recent memory and lost almost 1 million voters to the extreme-right anti-immigrant party, Alternative for Germany (AfD). Time will tell, but this general election sends a signal to Germany, Europe and the world: traditional postwar german politics appear to be changing. This election marks very well a substantial political shift.

Data and Political Landscape

The big story of this election is the rise of the AfD as the third largest bloc in the parliament with over 88 deputies, as it received 12.6% of the vote. As argued by Gideon Rachman of the Financial Times, “Germany now looks more like a ‘normal’ western country. And that, ironically, is not something to be welcomed.” The normality implies a Western country with a relatively strong presence by a extreme-right anti-immigrant party. Germany is not immune anymore.

The AfD was founded in 2013 in response to the bailout of the Eurozone economies. It was an eurosceptic party created by conservative intellectuals six months prior to the 2013 elections, led by a professor of economics at the University of Hamburg, Bernd Lucke, opposed to the bailouts by Germany of other eurozone economies. At that time, the party failed to make it into the Bundestag receiving only 4.6% of the vote, or 0.4 percentage points below the 5% cutoff. The 2015-16 refugee crisis leading to an open-door policy by Chancellor Merkel, welcoming over 1 million refugees, was used by the AfD leadership in order to shift the party ideology from eurosceptism to anti-immigration. The three figureheads of the party being Alexander Gauland, Alice Weidel, and Frauke Petry have used incendiary rhetorics and not shied away from addressing Germany’s nazi past.

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Source: The Guardian

With 32.9% of the vote, Merkel’s CDU won the night and a significant share of the Bundestag. However, it is a half-tone victory considering one of the worst results for the CDU losing over 8.6% of the votes compared with the 2013 general election. Furthermore, Merkel’s CDU saw the migration of roughly 1 million voters towards the AfD (see chart below). Merkel’s agenda throughout the campaign was mainly based on the concept of continuity. But the migration towards the AfD may not be only about immigration policies. Chancellor Merkel played a considerable role on making Germany one of the strongest world economies and the economic power of the European bloc. The reforms began in the 1990s, continued by Merkel, implementing neoliberal economic programs permitting to grow the economy, lower unemployment and averse the debt. For instance, four of the world largest companies are German and the country has one of the lowest unemployment level at 5.7%. But these policies came at a cost as the trade-off allowed a huge wealth to companies and low wages. Over the 12 years under Merkel, the disparity between the wealthy and the poor has widened and 16% of the population is at risk of poverty.

Arguable one of the major losers of the 2017 election is the SPD receiving its worst defeat since40674809_303 postwar with 20.5% of voters. In a four year period, the party led by Martin Schulz, the former President of the European Parliament, lost over 5% of voters. One of the major problems for Schulz, whom lacked strong domestic presence, was his inability to articulate a clear alternative to Merkel’s CDU. In addition, traditional SPD voters, its blue-collars base, is declining and represents roughly 19% of the electorate. This number almost mirrors the final results of the SPD at this election. In addition, almost half a million of SPD voters migrated towards the AfD during this election cycle. Schulz’s call to bring the party into the opposition, meaning it won’t join the coalition with the CDU, is no surprise. During his announcement, the SPD leader declared that “in a democracy the opposition is perhaps a more decisive force than the government.” The hope and strategy is to redefine the values, policies and ultimately ideology of the SPD for the next general election in order to attract more voters.

Voter Migration - 2017 German Elections
Source: Deutsche Welle

This illustration below provides a substantial and brief analysis of the Bundestag since the end of the World War two. As one can observe, the SPD-CDU have historically held a substantial majority until the 2017 elections. Last, as illustrated at the bottom of the illustration, a extreme-right party, the AfD, makes his first appearance in the Bundestag since postwar Germany.

Screen Shot 2017-09-25 at 11.09.52 AM
Source: Financial Times

Jamaica Coalition

In order to govern, Chancellor Merkel will need to form a coalition. The evening of results, SPD leader, Martin Schulz, called for the party to stand as the opposition and not forming a grand coalition with Merkel’s CDU. This leaves Merkel with the possibility to join forces with the pro-business Free-Democrats, or FDP, and Green party. This triumvirat is known as the Jamaica Coalition, considering that the colors of each party mirror the colors of the flag of the Caribbean island (Black, Green and Yellow).

The development of the coalition is a priority for Merkel, which will be a major challenge for the Chancellor. For starter, candidates of the FDP and Green party disagree on substantial issues and won’t be imageseasily brought together. A “deal to form a coalition” writes Stefan Wagstyl “could take months to put together, given stark policy differences between the parties on several issues including environmental protection.”

The Jamaica coalition will affect the ability of Merkel to work with French president, Emmanuel Macron. The FDP agenda, as advanced during the campaign, goes in opposition with Macron’s proposals, as it opposes the French proposition to reform the Eurozone (i.e. creation of a European budget). On this point, President Macron will be announcing his vision for the reform of the Eurozone on Tuesday, September 26, as he was waiting for the official results of the German election. Ensuing his speech, FDP reactions will be critical for Merkel in order to define the terms of the coalition and therefore her future line with regards to European reforms.

Finally, Chancellor Merkel will need to deal with a growing opposition within her own party. For instance, Merkel is starting to see some opposition coming from Klaus-Peter Willsch, a conservative CDU, opposed to Merkel’s immigration policy. The dealing with the FDP and Green party will be challenging, but keeping in check her own party will be major dilemma.

German Political Realities and Beyond

Despite winning a fourth term and a clear mandate, the outcomes of this election cycle respond to Merkel’s most critical policy-choices: the bailouts of some of Germany’s Eurozone partners and open-door policies vis-à-vis refugees. Both decisions taken by Chancellor Merkel were the right one at the time (for the bailouts avoiding a collapse of the Eurozone) and morally justified and politically courageous (welcoming over 1 millions refugees). Unfortunately, she is now confronting the reality of a changing German electorate.

The strong result by the AfD to the 2017 federal election sends a significant signal that German politics is changing. Populism, which has been present and rising all around Germany and across the pond, finally arrived in Germany. AfD will be a force to reckon with in the legislative process, but could be the necessary evil in order for mainstream parties to craft more substantial social and integration policies.

However, the day ensuing the results, co-chair of the AfD, Frauke Petry, surprised her colleagues by announcing that she will not be part of the AfD group, but will be present as an independent. This announcement illustrates a reality regarding extreme-right parties in Europe. Winning elections has become easier for these parties, like the Front National (FN) of France and even the UKIP party in the UK, able to attract a substantial

Frauke Petry flounces out
Credit: Reuters/Fabrizio Bensch

share of the electorate. But they are unable to maintain unity once elected and even less able to govern. The most striking case is exemplified by the FN arriving, as expected, to the second round of the French elections in front of two mainstream parties, Les Républicains (right) and the Socialist Party (left). Marine le Pen, president of the party and presidential candidate, was correct when claiming that the FN was the largest party of France. However, after losing the second round with a high percentage (33.6%), the party has been dealing with major internal crises and is now almost irrelevant in shaping the debate and agenda. Petry’s announcement seems to prove the point that extreme-right parties grow strong as an opposition force using identity politics and deeply inconsistent policies in order to get elected. But their lack of political consistency and leadership tension affect their abilities to survive, despite stronger results at elections, and therefor to govern.

This elections mark a turning point in German politics and may bode some major difficulties ahead for Merkel. Furthermore, ensuing the election of Macron in May and its legislative majority, the world expected France and Germany to be finally on the same political page in order to advance and reform the EU. Hopefully, Europe will not be the big looser of this election.

(COPYRIGHT 2017 BY POLITIPOND. ALL RIGHTS RESERVED. THIS MATERIAL MAY NOT BE PUBLISHED, BROADCAST, REWRITTEN OR REDISTRIBUTED WITHOUT PERMISSION).

Cameron’s Gift to Europeans

Britain's Prime Minister David Cameron arrives to pose for a family photo during a European Union leaders summit in Brussels April 23, 2015. European Union leaders who decided last year to halt the rescue of migrants trying to cross the Mediterranean will reverse their decision on Thursday at a summit hastily convened after nearly 2,000 people died at sea. REUTERS/Francois Lenoir
REUTERS/Francois Lenoir

If reelected, David Cameron, British Prime Minister, promised to organize a referendum on British membership with the European Union (EU). With his reelection in May 2015, David Cameron is now working on the details of the referendum scheduled to eventually take place between autumn 2016 and winter 2017. Initially the government had designed the following question “Should the United Kingdom remain a member of the European Union?” The response would have been ‘Yes’ or ‘No’. But in early September, the Electoral Commission argued that such question was biased and gave an advantage to the ‘Yes’ camp. Ultimately, a new question was drafted and now read “Should the United Kingdom remain a member of the European Union or leave the European Union?” Citizens will have to choose between “Remain a member of the European Union” and “Leave the European Union.”

Aside from political, economic and social considerations, the British referendum on its future inside the European club is an excellent thing for Britain and the other 27 Membereu-referendum-british-eu-flags States. The reason is simple. Since Cameron’s reappointment, the question of the EU has been ever present in European and world press. Cameron is in fact offering a gift to the EU and his 27 partners as for a very long time – or even for the first time in European history – Europeans and their leaders will have to finally reflect on the meaning of a EU membership, the role of the EU, and the concept of Europeanness.

Since the 2007 financial crisis, the EU has become synonymous with oppression, incomprehension, and in short the enemy of national sovereignty and regional diversity. These ideas are not new and have always been shared throughout European history. But the degree of integration occurring right after the Cold War with the first stone laid by the Maastricht Treaty in 1992 created a complex problem for governments. Integration has led to a double process of deepening (institutionally) and widening (enlargement). The degree of integration attained today requires more Europe for more cohesion in economic, financial, fiscal, immigration, security and defense policies. But Member States, for many different reasons, are reticent in moving towards deeper integration.

The United Kingdom, like Denmark, is an interesting Member State as it is neither a founding nor a British anti-EU‘fully integrated’ member considering its opt-out clauses. With the collapse of the financial markets, David Cameron, leader of the Conservative Party, has driven its country based on highly conservative and ideological policies. He has been focusing on cutting British debt by slashing most of government spending from social policies to defense. In addition, he has sought to attract to the ultra-nationalist base, led by the UKIP party, and one way was to put British membership to EU on the table. As illustrated below, British public opinion is closely divided in either remaining in the Union or leaving it.

Source: The Economist
Source: The Economist

Over the next two years, the press, leaders, and European citizens will have to finally reflect on the EU organized around two questions: what has the EU done for us, Europeans? What can we – Europeans – do for the EU? The first question is historically redundant as Member States are always trying to denigrate the massive contribution of the EU in the quality of life, which includes a ‘perpetual continental peace,’ of its Members and citizens. For instance, Spain, Portugal and Greece all highly beneficed from their membership in terms of development. In a matter of a decade, the standard of living in these countries was considerably increased. Certainly the Eurozone crisis has caused great harm in these countries, but all cannot be blamed on the euro. National governments ought to receive their share of the blame.

The second question is the most interesting of the two, as it will lead to a bottom-up reflection. What can European citizens and countries provide and offer to the EU? Member States and their citizenry ought to finally see how their contributions are necessary in order to grow and shape the EU of the 21st century. Most European citizens complain about the lack of connection between Brussels and themselves. European citizens are not doing enough in order to have their voices been heard when one reflects on the degree of abstention at the latest European elections. Being opposed to specific EU policies is one thing, contributing to European civic life is another. By asking the second question, European citizens will re-discover the sense of togetherness, identity, Europeanness, and the ‘we’ in European.

Source: The Economist.
Source: The Economist.

David Cameron is facing a very tricky battle head, but the history of Britain inside the Union is quite complex. Back in 1967, French President Charles de Gaulle opposed to the inclusion of Britain within the European Economic Community (EEC). His rationale was that de Gaulle “accused Britain of a ‘deep-seated hostility’ towards European construction.” De Gaulle was not totally wrong and understood the complexity of a British inclusion within the Union. Once in, Britain has played an important role in the integration of the common market, defense policy, and foreign policy.

China and the US have expressed their opposition to a Brexit and are worrying about the negative consequences of Britain’s departure from the Union and global markets. In addition, European diplomats, civil servants and the national capitals have all expressed some degree of frustration with London as no clear points of negotiation for reforming the EU-Britain relationship have been sent to Brussels. Aside from broad wishes – limitation of movement of labor and people, greater power for national parliaments, limiting the growth of the single market in favor of Eurozone members, reduction of social benefits for EU nationals – and calling for Treaty change, Brussels has yet to receive very clear and implementable demands. Cameron has his back in the corner and is now managing to survive a very complex domestic debate. Until 2017, the EU will be at the heart of political debate around the world. Politically speaking, David Cameron does not want his legacy to be remembered as the PM whom could not keep Britain in the Union.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Tsipras, a Political Master

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Europe and the world should be taking a moment and reflect on the political mastery of Alexis Tsipras of Greece. In less than a year, Mr. Tsipras won two general elections, won a referendum and implemented contradictory policies, all this by changing his political standing and under terrible domestic and economic conditions. Aside from political ideology, Alexis Tsipras is undeniably one of the most talented European politicians. However has his mastery of politics translated into sound governing skills?

Early 2015, most Europeans, including a some Greek citizens, had never heard of Alexis Tsipras. The 41 year old tieless politician finds his political ideology in extreme left affiliated at first to the Communist Party. His political house is centered in the extreme left side of the political spectrum. After years of internal evolution in the Greek lefts, he then became the leader of the exteme-left wing party, Syriza (which means Coalition of the Radical Left) and was elected at the helm of Greece in February 2015. This was the beginning of his true political exposition.

Chapter 1: His election in February 2015 marked the end of the decade long transfer of power between the two leading parties. Tsipras was elected based on a program of anti-austerity policies, fight for Greek interests before the Troika (ECB, IMF, and Commission), increase of minimum wages, restauration of state employees and increase of pensions. If European media were deeply skeptical about his rise and thought that he would not last a year, they have appeared to be wrong. Ensuing his election, Tspiras disappeared from European minds until the looming of the deadlines for debt repayments of the IMF and ECB.

Chapter 2: The second chapter of his reign started several weeks prior the eventual default 478861728of Greece for the repayment of a  €1.5 billion to the IMF on June 30th, and a second one to the ECB mid-2015. These negotiations at EU finance ministers level and EU leaders level were extremely tense as neither Tsipras nor his finance minister, Yanis Varoufakis, wanted to accept the deal put on the table by the Troika and Germany. At the last minute, PM Tsipras called for a referendum on July 5th asking Greeks to decide on their fate: voting yes to the deal implied more austerity measures; a no vote was a rejection of the deal and could lead to a Greek default and leaving the Eurozone, known as a Grexit. Not only did Tsipras organized the referendum without noticing his European partners, but he campaigned for the no vote.

Chapter 3: The no camp, or Oxi, won the referendum with 61.3% and Europe was expecting a progressive departure of Greece from the Eurozone. Even President Juncker of the European Commission asked for a report on how to accompany Greece outside the Euro area. Instead of using his domestic mandate, Tsipras fired his finance minister (officially he resigned desipte winning) and went back to the negotiation table

ATHENS, GREECE - 2015/06/29: The word 'OXI' (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a 'NO' vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE – 2015/06/29: The word ‘OXI’ (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a ‘NO’ vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)

requesting the initial deal. Germany refused and France played an important role of holding together the parties and the negotiations alive. Ultimately, Greece agreed on a worst deal than previously offered and Tsipras implemented additional austerity measures and required reforms. The deal entailed the following aspects: raising the age for retirement; a VAT hike at 23% across sectors; privatization of key sectors of Greek economy; and removal of tax breaks for some Greek islands. These reforms would permit to unlock a third loan package of €86 billion until 2018.

Chapter 4: Tsipras agreed on the second deal, agreed at EU level on July 13th, which was worst than the initial offer, and brought it back home for a vote. The Greek Parliament voted and agreed on July 15th, on the bailout deal, which was approved with a 229-64 majority. However, Tsipras’ party, Syriza, seems to have lost some unity with 32 Syriza MPs defying their leader’s pleas and rejected the deal. Throughout July and August, Tsipras was facing serious political criticism and opposition by the members of his own party. Syriza was divided between a radical branch, led by Mr. Lafazanis, and a more centrist one counting Tsipras. The radical branch of Syriza had not accepted the political move by Tsipras to go against the popular vote of the referendum. “Mr Lafazanis’s supporters speak of an ‘ideological betrayal’ and ‘treachery’ by Mr Tsipras’s faction.”

Chapter 5: On August 20th, PM Tsipras announced his resignation and his candidacy for the next general election that would take place mid-September. His rationale was to get reelected without the radical branch of Syriza. His political gamble worked as he was reelected with 35.5% of the vote and was able to drop the hard-liners from his party. Syriza won 145 seats out of the 300 seats of the parliament, only four fewer than after the January elections. In order to assure a majority, Tsipras agreed on a coalition with right-wing party Independent Greeks (ANEL) with its leader Panos Kammenos. ANEL is an ultra-nationalist anti-immigrant party, often compared to UKIP in the United Kingdom. With this alliance, the Syriza-ANEL coalition offer the majority with 155 seats in the Parliament to Tsipras. Even President of the European Parliament, Martin Schulz, expressed his concerns directly to PM Tsipras about this political alliance.

Political Talent over Governing Skills?

In less than a year, PM Tsipras has demonstrated his political talent in remaining alive and electable despite party, domestic and European pressures all this under dire economic conditions and an unemployment level around 25%. If Tsipras proved to the world that he cannot lose an election, he needs to now tackle the true problems of Greece: crony capitalism, clientelism, systemic corruption, and implementing structural reforms of the economy and state. The country has been on life line for over 5 years, its intellectuals are fleeing away, higher education is barely financed and Greece cannot even protect its borders. Winning elections is one thing, implementing reforms and governing are another.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Once upon a time, the EU was a Nobel Peace Prize Laureate

 

europee-crisis_0

Three years ago I wrote a piece beginning by: “It all started in the aftermath of World War II and in the emotional and material rumbles of Europe. The visionary great men of Europe — Jean Monnet, Robert Schuman and Konrad Adenauer —understood that peace in Europe would only be possible through deep economic integration, strengthening an irreversible degree of cooperation between Western European powers.” This was in mid-October of 2012, when the Norwegian Nobel Committee gave the Nobel Peace Prize to the European Union (EU). The rationale behind the prize was that the EU was a process permitting to make war unthinkable and allow for economic growth. This was a proud moment for Europeans, even though most of them did not pay much attention, and for Europeanists.

Radicalization of Domestic Politics

Today it is with real sadness to realize that in less than three years the survival of the EU appears in direct jeopardy and on the brink of implosion. Domestically, nationalism is ramping through either the rise of extreme-right wing parties, like the Front National in France, UKIP in Britain, Golden Dawn in Greece, or more recently through the

Image: AFP/Getty Image
Image: AFP/Getty Image

reemergence of extreme leftist parties like Podemos in Spain, Syriza in Greece, and the newly elected Jeremy Corbyn in Britain. In addition, the narratives and actions demonstrated by the Obrán government in Hungary talking of a Christian Europe is affecting the overall normative message of EU (read a previous analysis here). These movements demonstrate a radicalization of the political debate directly informed by a highly emotional and confused electorate witnessing a continuous and unstoppable decline of their socio-economic condition.

Directly related to the rise of European nationalism is the financial crisis, which has spilled over to the Eurozone. The euro crisis has left the 17 Eurozone economies, at the exception of Germany, into a state of economic lethargy. In the case of Greece, the country has been on the brink of default for years and its future does not look promising based on the reports produced by the International Monetary Fund, a member of the Troika. In the case of France, still an economic pillar of the Eurozone, the succession from right to left has demonstrated the inabilities of traditional political parties to build confidence, implement meaningful structural reform, and lower inequalities. Part of the problem is the divide between a common currency and national fiscal policies.

Regional Inefficiencies

Regionally, the lingering war in Ukraine is a direct illustration that war on the European continent continues to live on. A last minute cancelation by Ukrainian President Viktor Yanukovych of a bilateral agreement between Ukraine and the EU in November 2013 sent off Ukraine into one of its darkest periods. Two years later, Ukraine lost a piece of its territory, Crimea, which was annexed by Russia in spring 2014 after a quickly organized referendum (read here an analysis on Russian influence over Europe). Since the annexation of Crimea, not only as Ukraine lost the peninsula, which is never mentioned by

Photo: Kremlin.ru [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons
Photo: Kremlin.ru [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)%5D, via Wikimedia Commons

the 28 EU Member States, but the war in the Eastern border of Ukraine has severely affected the political, economic and stability of Ukraine. The only instrument implemented by the EU, which has been very successful, is a series of sanctions against Russia. But unity among the 28 on keeping and deepening the sanctions is slowly disappearing in favor of national gains.

The second serious regional crisis is the current migration crisis. After the 2007 Arab Spring, many in the West and the Middle East and North Africa (MENA) were hopeful for a democratic transition of many countries under long-term dictatorships like in Egypt, Syria, Tunisia and Libya. The time of euphoria quickly turned sour for Arabs and Westerners, witnessing either the reemergence of authoritarian regimes (Egypt), their survival (Syria) or simply collapse of the state (Libya). Since then, the EU, which has not done enough with its American counterparts in assisting in the transition of these states, is seeing an unprecedented number of refugees fleeing their homes, which have become war zones like in Syria, Afghanistan, Eritrea, Somalia and so forth. The mass of refugees seeking for asylum in the richest EU countries is not new, but the current mass of refugees is unprecedented and is underlining the weaknesses of the EU (institutional) and dismantling European solidarity.

A Crisis for Ages – The Migration Nightmare

If the Eurozone crisis, or at least a Greek default, were framed as the event that could kill the Euro and ultimately the Union as whole, these were the good old days. The migration crisis is directly threatening the future of the Union. If Germany and Sweden have been the good Samaritans in welcoming refugees (in 2015, it is estimated that Germany could welcome between 800,000 and 1,000,000 asylum seekers), Chancellor Merkel with her Minister of Interior, Thomas de Maizière, have reinstalled border control at the frontier with Austria. This move by Germany has started a snowball effects with other EU Member States implementing similar measures. The closing of borders to control the movement of people is a direct violation of the Treaties. The border-free Schengen agreement is one of the most successful and visible symbols of the European Union. It is too some extent a sacrosanct dimension of the EU.

European Integration in Danger?

The European integration process is a complex story of crises and adequate responses through policy changes and bargaining power. The period of the empty chair, the end of european_crisisthe Cold War and the reunification of Germany, the war in Kosovo, the divide between old and new Europe around the Iraq crisis, the no to the 2007 Constitutional Treaty and the Eurozone crisis have all been serious crises, but yet manageable for the European leaders. It appeared that European actors understood the need to solidify the Union and put aside differences in order to solve a crisis. The migration crisis is showing the worst of Europeans and their leaders, and European solidarity remains to be seen. Jean-Claude Juncker, President of the Commission, called for courage in remaining altogether and implementing meaningful measures like quotas. With a weakening Euro, as the Eurozone crisis has yet to be solved, the Schengen agreement under attack, a possible Brexit in 2016/17, the EU appears to move towards an ‘ever-lesser Europe.’ Yes, once upon a time, the EU was a Nobel Peace Prize laureate.

(Copyright 2014 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

 

Will Tsipras 2.0 be better than Tsipras 1.0?

Photo: AFP
Photo: AFP

Alexis Tsipras resigns after seven months in power, but is seeking for reelection in elections in late September. His time at the helm of Greece was marked by a impossible conundrum: defend Greek interests against powerful European and international forces, ending the austerity while finding growth, and dealing with an ideological split within his party.

Prime Minister Tsipras is calling for a new round of elections, most likely scheduled for September 20th, and he will lead the Syriza party. “I believe we haven’t yet seen our best days” announced the Prime Minister on television “and I’m going to ask for the people’s vote to govern this country – with more experience, with my feet more firmly on the ground.” With a disastrous economic and fiscal situation, Greece is now facing even deeper political uncertainties. With his resignation the country will be governed by an interim-government until the next snap elections in September 20th. Tsipras is leaving office for a better comeback and freeing himself from the rebels of his party. He is looking to “return to power with a more manageable coalition.”

Reflection on Tsipras’ First Tenure

Several points need to be reflected upon his time in office. First, PM Tsipras came into power based on an anti-establishment campaign. His extreme-left party, Syriza, took the power based on many promises: defending Greek interests by ending the international and european austerity measures; and an anti-establishment campaign.

Second, his time in office was quite smooth until the looming of the deadlines for repayment of the IMF and ECB loans. Even though he remains one of the most popular politicians in Greece, the summer has created serious political tensions within his party Syriza. The fight between Greece and the Troika (ECB, Commission, and IMF) over an agreement after missing the initial deadline forced the Tsipras’ government to close Greek banks for almost three weeks. Tsipras was obliged to agree to the terms requiring tax hikes and further spending cuts under the threat of complete collapse of the Greek banking system (read here a past analysis). The deal with European creditors infuriated members his party Syriza, but Tsipras managed to get it approve through the Parliament with the help of the opposition.

Third, the resignation of Alexis Tsipras, which should be seen as a two-step process – first the referendum, and second the agreement to the terms of the bailout – marks in some ways a complex existence and survival of socialism in Europe. To many, Alexis Tsipras was the last embodiment of socialism in Europe. Now the question is: was the international market seeking to make a point in going after Tsipras? With Tsipras’ departures, it seems that austerity measures have become the European landmark in solving deep structural economic crisis. But if reelected, Tsipras would be a much more centrist politician than seven month ago. Tsipras had to move towards the middle creating a split with the radical core of his party.

Referendum, Bailout and Political Tension

When did it go all wrong for Tsipras? And, did it go wrong for Tsipras? For many Europeans, PM Tsipras lost the battle after calling for a referendum and advocating for the no vote (remember the oxi?). In retrospective, the results of the referendum actually did not matter, aside for many Greeks feeling that Tsipras tried to defend them. The referendum was perceived by European partners, especially the Germans, as an act of treason. Greece was already on the thin line with his Eurozone partners since the collapse of its economy and the first bailout five years ago. Greece had mis-behaved and lied to its partners (read here a previous interview on the topic). The referendum was another act of treason for European partners. Once Greeks had voted in favor of the no

ATHENS, GREECE - 2014/10/13: MP with the SYRIZA political party, Mr Panagiotis Lafazanis, talks with a megaphone to the demonstrators expressing SYRIZA support. Kurdish people that live in Athens organised a demonstration in support of the Kurdish fighters that defend the Kobani town in Iraq from ISIS insurgents. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
Photo: George Panagakis/Pacific Press/LightRocket via Getty Images

vote, and a week later PM Tsipras agreed to the new terms of a third bailout, his time was counted. His vocal lieutenant, finance minister Yanis Varoufakis, announced his resignation days after the victory of the no vote. Once Varoufakis was gone, and Tsipras agreed with the terms (criticized by the IMF) and started his transition towards the center. But in some ways, Tsipras’ fate was sealed, or not? In addition, it created a real ideological split within Syriza. Tsipras is undeniable moving towards the center, while the old guard of Syriza, led by the former Energy and Environment Minister, Mr. Lafazanis, have not changed their position. On the referendum, The Financial Times reported that “Mr Lafazanis’s supporters speak of an ‘ideological betrayal’ and ‘treachery’ by Mr Tsipras’s faction.” The paradox between calling for the referendum opposing the bailout and then accepting the terms of the bailout created an unsustainable political condition for Tsipras.

Some experts and media are comparing Greece to a European protectorate (at least in the leftist literature) after the agreement on the third bailout’s terms. But aside from asking for the approval of his policies, does Greece need another election in such dire times? Tsipras is gambling on a new election in order to get rid of rebels, or what The Economist calls the ‘wild ones,’ build on its domestic legitimacy, and try to govern and reform Greece with a fresh flow of money. Let see if Tsipras can win another election, and how different will Tsipras 2.0 be from the Tsipras 1.0? Can Tsipras 2.0 bring Greece to reform and become a growing and sustainable country under the current conditions? This remains to be seen.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

It is Politics, Stupid!

CREDIT: ANADOLU AGENCY
CREDIT: ANADOLU AGENCY

“I really cannot remember, in all my time in European politics, whether I have come across a situation like this. This is really all about the European Union. If the EU is going to have any credible force, it is going to have to demonstrate it is capable of solving its own problems.” – President Martin Schulz on July 12th, 2015 during the Euro Summit Meeting

Forget about economics, finance, banking regulations, social welfare policies, debt forgiveness; the future of Greece solely depends on politics. “The answer [of endless negotiations on solving the Greek crisis these last five years] cannot be found in economics,” writes Yanis Varoufakis, the former Greek finance minister, “because it resides deep in Europe’s labyrinthine politics.” Greece’s destiny is a simple political question based on several concept: trust and confidence.

The Deal

After a week long of back and forth between Greece and the European capitals, Brussels is once again the siege of a Greek marathon. A meeting of the Eurogroup finance ministers started on Saturday, July 11th and ended the next day around 3pm. Ensuing it a general EU summit, with the 28 leaders, was supposed to take place, but was instead cancelled and transformed into a crisis summit of the 19 EU leaders of the Eurozone. The future of Greece as a member of the Eurozone was clearly on the line with a very reticent German team (Chancellor Merkel and her Finance Minister Wolfgang Schäuble proposing an eventual ‘temporary Grexit’).

As reported by the Financial Times, the finance minister negotiations, which were fruitless and tense, let the way to the EU leaders, whom could not do better considering Germany’s position. Until François Hollande, President of France, whom had been extremely active in advising, helping and defending Greece in the last mile, called for a meeting in Tusk’s office. Preisdent Tusk was reported saying “Sorry, but there is no way you are leaving this room” until a deal is reached.

Credit: Aris Messinis/Agence France-Presse — Getty Images
Credit: Aris Messinis/Agence France-Presse — Getty Images

Interestingly enough, Tsipras’ proposal prior the July 11th meeting included: raising the age for retirement; a VAT hike at 23% across sectors; privatization of key sectors of Greek economy; and removal of tax breaks for some Greek islands. These reforms would permit to unlock a third loan package of $59.6bn until 2018. Tsipras’ proposal was highly similar to the one offered by the international creditors. Even Jean-Claude Juncker during the meeting recognized the proposal brought by Tsipras as almost identical to the one put on the table by the creditors weeks earlier. And the President of European Parliament, Martin Schulz, called for avoiding a Grexit and find a solution.

Based on the deal reached on July 13th, the Greek Parliament voted and agreed on July 15th, on the bailout deal, which was approved with a 229-64 majority. However, Tsipras’ party, Syriza, seems to have lost some unity with 32 Syriza MPs defying their leader’s pleas and rejected the deal. Clearly the terms of the bailout are in direct contradiction with Syriza’s policies, beliefs, and promises, as well as sidelining the results of the referendum. These contradictions could push even further the political crisis in Greece and lead to yet another election during the summer.

Chancellor Merkel, the Finish government and others are not convinced about the proposal and especially Greece’s commitment. The Greek drama is taking more than a simple economic/financial turn, it is purely political. It appears that some EU Member States, like Germany, Finland, Slovakia and others, are more inclined to go after Greece and its leftwing government led by Alexis Tsipras, than finding a real deal that would help in the long term the country.

One core reason is trust, or at least ‘lack of trust.’ Some experts have argued that Tsipras was now on Merkel’s black list after his political coup, the referendum. Merkel and others EU leaders do not trust any longer Tsipras and his government. Or even has argued by Yanis Varoufakis, “based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone.”

Death of the European Project?

The Greek file should be considered as an overall failure for the European ethos. Many economists, like Joseph Stiglitz, have been very critical of the negotiation process and the agreed deal. One of the most virulent denunciation of the deal was Paul Krugman, writing that “it’s [the deal] a grotesque betrayal of everything the European project was supposed to stand for.” Even the International Monetary Fund, a global advocate for austerity measures and straightjacket policies, has been critical of the dealbroken_euro_fit calling instead for a huge debt relief for Greece.

Last but not least, Nicolas Gros-Verheyde of Bruxelles2 wonders about a core question: “Is Europe becoming the sum of its egos?” The Greek file embodies more than solving an economic problem, it has become a vicious fight between powerful EU Member States. These egos are affecting their global visions and understandings of the core principles and values of the European endeavor. But right now, the EU is failing at this important crossroad. The EU cannot find a real solution on any major crisis from counterterrorism in Mali, to migration crisis in the Mediterranean, to Ukraine/Crimea, to the domestic rise of nationalism, and naturally Greece. Are politics killing the EU? It certainly looks like it.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Greece votes Oxi, Europe says Grexit

ATHENS, GREECE - 2015/06/29: The word 'OXI' (NO) written on a banner in front of the Greek parliament.  Greeks demonstrate in Syntagma square in support to a 'NO' vote in the referendum that will take place on the 5th of July, whether to accept the  new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)
ATHENS, GREECE – 2015/06/29: The word ‘OXI’ (NO) written on a banner in front of the Greek parliament. Greeks demonstrate in Syntagma square in support to a ‘NO’ vote in the referendum that will take place on the 5th of July, whether to accept the new agreement between Greece and it creditors. (Photo by George Panagakis/Pacific Press/LightRocket via Getty Images)

“All of us are responsible for the crisis and all of us have a responsibility to resolve it.” – President Donald Tusk, July 7th, 2015

Greek citizens voted in majority Oxi to the July 5th referendum. The question asked by the Tsipras government, which was campaigning for a ‘no’ vote, was yes or no to accepting a continuation of the bailout program with all the austerity measures coming with it (read here a previous analysis). The results were very clear throughout the country with 61.31% for the no vote and 38.69% for the yes vote (see here the map produced by the Gr20150711_woc001_0eek Ministry of Interior showing that the no vote won in each Greek region). Greek citizens felt that the best option – out of two bad – was to reject the terms of the bailout on the table. If for a day the discussion was about the meaning of the ‘no’ vote (is it against the EU, the Euro, or simply a desire to remain a member of the Eurozone), today’s reality is about the future of Greece as a member of the Eurozone. So where do Greece and the EU go from now on?

Negotiations and Survival

In less than two days, a succession of events has taken place. For over five years, it seems that the Greek file was dragging, it has certainly taken an all new meaning and urgency. Prior to the results, Chancellor Merkel of Germany was meeting her counterpart, President Hollande, in Paris in order to find a common ground. The day ensuing the political victory of the Tsipras government, the infamous Greek finance minister, Yanis Varoufakis, announced his resignation. Many advanced that Tsipras had to go in order to demonstrate to his European counterparts that Greece was serious in seeking for a viable option. Varoufakis had gone too far and had lost some of his support within the Eurogroup of finance ministers.

Then on Tuesday, an emergency summit meeting took place with no substantial results.

Credit: Yves Herman/Reuters
Credit: Yves Herman/Reuters

Tsipras was supposed to bring, as highly recommended by the French government, a new proposal. But the summit meeting failed as Athens did not provide an acceptable option. Tsipras has now until Thursday (as requested by Merkel) in order to present a new proposal to his creditors. A failure in finding an agreement could lead to “the bankruptcy of Greece” warned Donald Tusk, the president of the European Council, “and the insolvency of its banking system.” Tusk added that “tonight I [Donald Tusk] have to say it loud and clear — the final deadline ends this week.” On Sunday, as announced by the 19 eurozone countries on tuesday, the 28 EU leaders will be deciding on the future of Greece.

In addition, the New York Times reported that for the first time – at least publicly – the President of the Commission, Jean-Claude Juncker, has announced that he has “a Grexit scenario prepared in detail.” If a Grexit scenario is now on the table, Tsipras will be defending his case before the European Parliament on Wednesday morning.

Consequences of Staying in the Eurozone, or Leaving It?

In the middle of the negotiations and in finding a solution, a key player is the European Central Bank (ECB). Currently the ECB is the institution that is keeping the Greek banks alive by providing liquidity. Because today Greece is unable to borrow money on the international market and the Europeans are the one providing money to Greece in order to have its economy and banking systems going. The ECB will continue to do so if a deal is agreed. However, in the case of a break-up, the ECB will remain a central player as it will stop providing liquidity to Greece. In addition, even if Greece missed its first payment of July 1st to the International Monetary Fund of $1.8bn, the second deadline of July 20th to the ECB of $3.8bn will be key for Greece and the EU.

If Greece wants to stay in the Eurozone, they will have to implement a set of policy measures that will require: tax reforms; fixing the pension program, which will affect early retirement program; labor market practices. Once these are ongoing the international and european creditors will have to give meaningful debt relief.

In the case Greece decides to leave, or is expelled from the Eurozone, then it will have to introduce a new currency. The country will ultimately default on their debts, and will have to create its own economic agenda in order to lay down the foundation for future economic growth. This scenario will naturally require serious structural reforms.

If Size does not matter, Precedent does

The Greek case is not about the size of the Greek economy. In fact the Greek economy only represents 2% of the Eurozone GDP. So far it does not appear that a Greek default could take with it the whole Eurozone and send a massive shockwave throughout the global markets. No, the case of Greece is a matter, for the EU and its Member States, of establishing a precedent. Germany and other wealthy Eurozone members want to avoid such precedent, where a member state refuses to pay its debts and call for a national referendum in order to provide such country leverage at the European level. Chancellor Merkel was correct in claiming that Greece is a sovereign state and has the right to organize such a referendum, however what type of legitimacy does that provide the Tsipras government in coming back at the bargaining table?

The Greek referendum is national decision on a complex financial question. But the Greek referendum does not affect the decision of Greece’s creditors. If the vote empowers Tsipras domestically, it does not at the European level. Now, Tsipras has to navigate in these tumultuous waters of a domestic electorate, opposed to additional austerity, while providing a proposal acceptable to his creditors, most of them highly in favor of additional austerity measures. Tsipras seems to be facing a conundrum, either remaining in the Eurozone and what it entails, or leaving the Eurozone, and dealing with the consequences of a default.

In the mid-term, there are many technicalities that need to be figured out if Greece decided to leave the common currency. The legal baseline is the 1992 Maastricht Treaty,

Photograph by Federico Gambarini — picture-alliance/dpa/AP
Photograph by Federico Gambarini — picture-alliance/dpa/AP

which does not provide any information in order to leave the common currency. In the contemporary European history (aside from the collapse of Habsburg empire), there are no precedents, no rules and no plans in order to leave a common currency. But with a return of the Drachma, the real question for the Greek government will be about the exchange rate between the Drachma and the Euro as all Greek accounts are in Euros. At the end of the day, the Greek savings will be severely devaluated causing massive financial losses.

The Greek drama illustrates the complexity of the unfinished European construction. Since the Treaty of Maastricht of 1992 laying out the current foundations of the European Union, the Member States have avoided any decisions for furthering/deepening the integration process or completely loosening it. Today, if Greece is in such trouble, is certainly because of its domestic problems (high level of corruption and lack of structural reforms), but as well because of an integration à la carte of the Eurozone. At the end of the day, a Grexit or not is only a technicality. The real question is: will the Eurozone members be working once and for all on finalizing a fully integrated and functional Eurozone?

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Grexit, Zombies and Back to the Future

grexit

With the looming Greek deadline, it is interesting to revisit an interview conduced back in 2011 about the future of Greece as a member of the Eurozone. Not surprisingly, not much as changed since then aside from the perpetual rotation of Prime Ministers unable to balance the debt, european and international pressures, and domestic forces.

In almost five years, the EU, the Eurozone and Greece are in the same situation that they initially were. Today Greece is on the verge of defaulting on its debt of €1.5 billion to the IMF on June 30th. Since the election of Prime Minister Alexis Tsipras, the fight between Greece and the Troika+Germany has been tense with no real solution (read a previous analysis on Syriza here). The bargaining process has brought the EU and Greece in front of a wall. The only difference between 2011 and 2015 is the acceptance of the concept of Grexit. In 2011, Grexit was only a word to express the unthinkable. In 2015, Grexit is an option.

Here is the interview of Dr. Lorca-Susino taken place in Miami in 2011:

“What makes a currency unique? The symbols, monuments, leaders figuring on the paper money, are exemplifications of the collective identity and shared culture. In the case of the Euro, as underlined by Gideon Rachman, the symbols on Euro’s coins and bills are fictitious.

Last week [September 15th, 2011], I ask one of my close friends, Dr. Maria Lorca-Susino, and also co-worker at the EU Center of Excellence at the University of Miami to grant me a little of her time for an interview on the future of the Euro and its impacts on the EU as whole. The fraternity among Europeans living abroad is such that she could not refuse. Dr. Lorca-Susino has emerged as one of the top thinkers on the Euro and recently published an outstanding book, The Euro in the 21st century, from the ashes of her dissertation. I had in mind to do the interview à la Financial Times, unfortunately neither lunch nor coffee were part of it.

Zombies have become a very trendy concept to use in International Relations and mass culture [it was the case in 2011 with all the movies, tv-shows and Drezner’s book Theories of International Politics and Zombies], and I could not resist on using it for this piece. Is Greece a zombie? Can a bite from Greece lead to contagion to the other members of the Eurozone? and ultimately to the European Union as a whole? Could it lead to the comeback of national currencies? Would a default of Greece be like a heat shot to a zombie? These were my general questions throughout our discussion.

I started straight with a large, contentious and complex question, “How do you see the future of the Euro?” As a true academic, she replied by “it depends,” and then claimed that it will be “without Greece.” Greece has been at the heart of a massive political storm in Europe for several reasons: first, Greece is seen by the Troika – EU, IMF, ECB – as not doing enough; second, Greece could be considered as a failed-state. The problem with Greece is that the Greek government is unable to raise money [this changed in 2014 in Greece], as opposed to be unwilling to. Furthermore, from an economic standpoint, the case of Greece is a problem of solvency – no more assets – as opposed to have a problem of liquidity, which is the case of the Italy.

Dr. Lorca-Susino underlined that the Eurozone without Greece is not a “big problem” as the Treaties have been already breached many times. The no bailout rule has been breached, so why would it be a problem to remove Greece for the Eurozone? At that time, I should have raised the fact that one of the problems is perhaps not political, but instead unethical. But even the notion of ethics on the Greek fiasco lost its value a long time ago, when the Greek government cooked the books. The fact is that Greece lied and did not report the “real” data concerning its deficit and debt. The expulsion of Greece from the Eurozone is not a question of economic weakness, as argued by Dr. Lorca-Susino, but instead a consequence of its dishonesty to the other Member States. The cover-up by the Greek government did put the entire system in jeopardy, as she recalled, but also limited the time for action or reaction of the other Member States in dealing with such crisis.

I, then, wondered about the need to restructure, redesign the architecture of the Eurozone. She replied very simply that, “the Eurozone has all the requirements. But the only problem is that they have not been respected.” Originally and “in good faith” – as underlined several times throughout our discussion – Member States were allowed to maintain their fiscal autonomy. She went on and argued that the “unwritten rule for this fiscal independence” was because of a shared belief that Member States were part of a so-called “gentlemen club.” In other words, Member States’ words were the only guarantee needed for a stable and safe economic climax within the Eurozone. Short-term breaching was permitted, as it was the case with France and Germany, as long as Member States readjusted their deficits.

What about a common EU fiscal system? “Fiscal unity is complicated,” argued Dr. Lorca-Susino, “because it would send the entire European political class to unemployment.” Her vision of the role of politicians is reduced to their abilities to make the budget in accordance with the country’s needs. Fiscal unity is not a fiscal question, but instead a political one. However, another problem would be to design a common European taxation system with all its complexity around the question of redistribution in accordance with national taxation and European needs. Fiscal unity would ultimately lead toward a federal state along the lines of the United States.

But, what is the role of the European public in all that? Have European citizens been removed from the equation? Since the beginning of the crisis in 2008, the European public, all across the Union, has been extremely critical and vocal of all the austerity measures undertaken, especially the ones implemented in Greece, Spain, Italy, Britain, and to some extent France. A large segment of Europeans see the European Union as the supra-entity forcing national governments to cut their budgets and ultimately weakening the power of the welfare state. Her answer, once more, was sharp and clear, “the Euro is like Bush! Everybody blames it!” Her argument is that European citizens truly believe that life post-Euro was better. To some extent, the economic rationale is valid, monetary autonomy. Furthermore, national governments have used the Euro as a shield in order to push unpopular national economic policies without affecting the electability of its political class.

On the international stage, the Euro has been used as an instrument from diversion especially in the US. On the money market, the Euro is not seen anymore as a strong, stable currency leading investors in buying massive amount of Swiss Franc with all the consequences it entails for the Swiss authorities.

To conclude this piece, I would emphasize two points: first, the Euro is far from being perfect, however, it has become an European scapegoat. At least, Member States can agree on something; second, as argued by Dr. Lorca-Susino, “Greece is not buyable as a country, as an economy.” Greece looks like a zombie. One of the problems with zombies is the difficulty to find a vaccine. “

0,,18530052_303,00Putting this interview in perspective and as a concluding remark, one should mention the call by Prime Minister Tsipras to put the decision in the hands of the Greeks by holding a referendum on July 5th. This fascinating political move by Tsipras put the Greeks in the driver seat. Tsipras and his finance minister, Yanis Varoufakis, are opposed to the terms of the new bailout. For instance, in his public address on June 26th, PM Tsipras said “After five months of tough negotiations, our partners ended up with a proposal in the form of an ultimatum,” with “new, unbearable measures,” which would force for additional cuts to pensions, salaries and tax increases. He added that “the goal of some of Greece’s partners is the humiliation of an entire nation.” It is the first time since the beginning of the eurozone crisis that a government is asking directly its citizenry to make a choice on their future.

In order to do so Tsipras had asked to his creditors and the Eurogroup to give a 5 days extension. The next day, June 27th, the finance ministers of the Eurogroup rejected Tsipras’ demand. Jeroen Dijsselbloem, the leader of the Eurogroup of eurozone finance ministers, told a news conference that “The Greek government has broken off the process. However regrettable, the program will expire on Tuesday night.” Ultimately, Greece seems on the verge to leave the Euro. A Grexit is now a reality.

This piece was initially published on Foreign Policy Association’s Blog on September 23rd, 2011 under the title of “Euro, Zombies, and Greece: A Discussion with Dr. Lorca-Susino”
(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).

Euro-tic – The European Nightmare?

trash

The EU is stuck for one reason or two, its euro-tic dilemma. The EU is stuck between 1+28 chairs: the European chair (European level) and the National chairs (Domestic forces). The challenges facing the EU can be solved through two types of policies: either through more integrated policies, or through individual/national policies. However, the current status-quo centered around this Euro-ticism is unsustainable in the short-, mid-, and long-term.

Today two pressing issues are facing the EU with serious consequences if left unresolved, the migrant crisis in the Mediterranean Sea and the Greek debt crisis. Both crises are challenging and complex in their root causes, in the policy design to solve them, in the policy implementation, and on top of it the outcomes – positive or negative – will only be visible in the mid- and long-term. Considering the current negotiations process at the EU level due to the institutional design of the EU and the domestic pressures no viable and sustainable long-term solutions can neither be designed nor adopted.

Fortress Europe

In the case of the migration crisis in the Mediterranean sea, the EU and its 28 Member States are failing in trying to solve the crisis. So far the only solution has been to increase the funding of the EU agency, FRONTEX, by providing more money and capabilities to EUNAVFOR Med. Nevertheless, the CSDP operation does not have a search and rescue mission, only a border management mandate (refer to chart here). So the EU will be patrolling around Italy and Greece in order to assist the member states in the protection of Europe.

_82453476_migrant_routes_624_14_15_v3

The solution seems quite simple, an orchestrated distribution plan between the 28 Member States to accept a number of refugees over a 10 year period by offering them a blue-card (similar to the American green-card) allowing them to integrate and find a job in Europe. Such policy is sustainable and acceptable based on European values and norms. Additionally, it would work as most of the migrants trying to reach Europe are principally composed of members of the middle-class in their home countries destroyed by war, terrorism and

Source: The Economist
Source: The Economist

other sorts of crisis.

It is difficult to imagine that neither France nor Germany cannot assimilate 1000 refugees on year basis. Even if this policy could work on the long-term, it would be political suicidal for Chancellor Merkel and President Hollande to come home with such plan. The domestic radical forces (right and left) would build such a front against the leadership that their political parties would not survive another elections.

Grexit or Nothing?

In the case of the Greek debt crisis, the Euro-tic dilemma is once again ever more present. For over five years, the Greek hot potato has been switching hands in Europe. The present crisis, between Prime Minister Tsipras and the Troika (Commission, ECB, and IMF)+Germany, illustrates the euro-tic tension facing the EU and its Member States. Greece is on the verge of defaulting on its debt of €1.5 billion to the IMF on June 30th (some news in the media claim that an agreement will be reached). The

Photo: AP
Photo: AP

country is dealing with a debt of €130 billion representing 180% of its GDP.

Like the migration crisis, the solution would consist in deepening the integration process of the Eurozone. The Eurozone cannot have several gears with on the one hand the ECB in charge of monetary policy and on the other 19 individual fiscal policies.

In the case of Greece, one solution could be to pool the debts of all Eurozone members, naturally keeping track of the percentage of each national debt. One common debt would allow better interest rates and strengthen the Eurozone. Naturally, most European citizens would feel cheated if their elected officials came back home after agreeing on such policy. The domestic price for such policy choice would be serious for national leaderships.

Photo: AFP
Photo: AFP

The solution for Greece is only long-term at the EU and national level. For the EU, the Member States may have to revisit the treaties and address the weaknesses once and for all. This will not happen as most EU leaders are reticent to touch at the treaties – the last one, Treaty of Lisbon, was a continuity of the failed Constitutional Treaty of 2004 -. Several EU Member State’s constitutions require a referendum in order to validate a Treaty. That would probably not pass the domestic vote.

Greece, one of the weakest Eurozone members, is seeking for a ‘silver bullet’ at home. The Grexit seems a possibility – as opposed to five years ago -. Tsipras is now talking with Russia and signed an energy deal with the country, which is under European sanctions. Moscow and Athens deny talks of an eventual financial assistance. Such move by Athens is quite an aberration considering the current sanctions implemented by the EU against Russia for its annexation of Crimea and continuous involvement in the war in Ukraine.

If Greece is in such precarious situation it is because of its recurrent and embedded problem of corruption and mismanagement of money. In order to really make Greece a sustainable EU and Eurozone member, Greece will need to do some serious structural reform and get once and for all ride of corruption. These will take at least a generation.

Euro-tic nightmare, or the end of solidarity

The tension between European and domestic levels has always been present throughout the European construction. So far, it was manageable because of lesser number of Member States, ‘better’ national leadership, and most importantly a continuous economic growth. The 2007 financial crisis changed everything. Solidarity is much easier in time of growth than hardship. Today, domestic public opinions, throughout the Union, feel more comfortable with extreme political parties – see the latest results of elections in Poland and Denmark – calling for a return to inward looking and revisionist policies than with more center political parties unable to govern. Big Member States, like France, are flirting with extreme right and Britain is getting ready for an eventual secession from the Union.

Ultimately, the Union and its national governments are unmanageable. In this period of socio-politico-economico troubles surrounded by serious geopolitical crises and shifts, the European dream of an ‘ever closer union’ seems on the brink of collapse. EU leaders ought to bring more EU into their domestic policies and narratives, and the EU needs to build new bridges towards domestic electorates. Europe is entering a real period of darkness.

(Copyright 2015 by Politipond. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed without permission).