Not all is well in Europe

 

Australian Prime Minister Malcolm Turnbull Meets Angela Merkel
@ Getty

With the election of President Macron in May and the guaranteed re-election of Angela Merkel, the European Union and the state of European affairs were supposed to return to the positive. Unfortunately, a series of recent events have exposed deep problems in Europe with the rise of AfD in Germany, the call for independence by Catalonia, the UK-EU tensions over the terms of Brexit, the election of Sebastian Kurz in Austria, and the recent assassination of a Maltese journalist. These recent events, prior to the European Council meeting on October 19/20 in Brussels, display domestic tensions and the need for greater unity at the EU level. But both seems incompatible at the moment.

Despite winning a fourth-term as Chancellor (past analyses here and here), Angela Merkel has yet to finalize the structure of her government. The strong results by the Alternative for Germany (AfD), extreme right party, was a response to Merkel’s Willkommenspolitik towards refugees since 2015. AfD capitalized on the fear associated to immigration and the perceived undermining of German identity. Chancellor Merkel is working on the coalition talk. On Sunday, Merkel’s CDU lost an election in the northern state of Lower Saxony to the SPD, which could affect her upcoming coalition talks. With the decision by SPD not to enter in a coalition with the CDU, Ms. Merkel will have to move towards the option of a Jamaica Coalition (with the pro-liberal and green party). The talks to form a coalition will be difficult considering the differences of policies and options on fundamental issues from immigration, EU reforms, taxation policies and environmental protection.

In the case of the UK-EU relationship as part of the Brexit negotiations, the current tension is centered around the financial obligations of the UK, or the net contributions of the UK to the EU’s budget in 2019 and 2020.

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@ Olivier Hoslet/EPA 

 Until an agreement on the UK financial obligations is set, the EU is not willing to move forward regarding the terms and type of relationship between the UK and the EU post-Brexit. Prime Minister May changed the tone with her recent speech in Florence and confirmed that the UK will “honour commitments we have made during the period of our membership.” But the EU is expecting more concrete terms coming from the British leader. At home, PM May is facing a difficult front from the hard brexiters, framing the financial obligations as a ‘divorce bill,’ and members of her own party. She appears to have lost credibility domestically affecting her ability to shape a common position, and her European counterparts are concerned about her ability to stir the negotiations and ultimately deliver. Until the question of financial contributions is settled, PM May will not be able to move forward and discuss the terms of the future relationship between the UK and the EU. As reported by the Guardian, European leaders are the ones overruling EU chief negotiator, Mr. Barnier, whom suggested opening talks about the transition phase. But it appears that some European capitals are not ready to respond to May’s call. Ultimately, “the problem is not in the commission so you will not find the solution in the commission.” Therefore, the upcoming European Council will be critical for PM May to make a her case with as many EU leaders as possible.

On Sunday, Sebastian Kurz became one of the youngest elected leaders, at 31, as the Chancellor of Austria. Mr. Kurz, leader of the conservative right wing Austrian People’s Party (ÖVP), won the national election with 31 percent of the vote. The Social Democratic Party of Austria, which currently governs in coalition with People’s

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@ David Sailer/FT

Party, received 26.7 percent, while the Freedom Party, extreme-right, had 27.4 percent. Traditionally, the People’s Party and the Social Democratic Party govern in a coalition, but this time, Kurz may be forming a coalition with the extreme-right taking the country back to 2000 when Jörg Haider led the country triggering political sanctions by the EU. Austria is one of the wealthiest EU countries with one of the lowest unemployment level and highest standard of living. But during the 2015-16 migration crisis, Austria took part of Merkel’s Willkommenspolitik welcoming a considerable number of refugees. During his tenure as Foreign Minister, Mr. Kurz, was behind the drive to seal the Western Balkan route in 2016 and was critical. The theme of the election, as it was the case in the other western countries, was identity, in particular anti-immigration and anti-Islamization. For instance, he has been calling for effective defence of the EU’s external borders, a stop to illegal immigration and curbs on foreigners’ access to welfare payments. “Anti-immigration populism and nationalism” wrote Steven Erlanger and James Kanter of the New York Times “are challenging the European Union’s commitment to open borders for trade and immigration.” In the coming days, Kurz will be building his coalition, but a move to the extreme-right appears as the new normal for Austria.

The continuous tension between Madrid and Catalonia represents a considerable crisis in one of the largest Eurozone economies (read two recent analyses here and here). After a referendum, considered by Carles Puigdemont, as a victory towards the independence of Catalonia from Spain, he has failed to call for it during his address to Catalan lawmakers on October 10. PM Rajoy asked Mr. Puigdemont to clarify his address by tomorrow (October 19). In case of a failure to comply, Madrid may use its emergency powers to take administrative control of the region by invoking the article 155 sending the country into a deeper political crisis. The tensions between Madrid and Catalonia continue to escalate despite a recent call by Mr. Puigdemont asking PM Rajoy to initiate a negotiation in order to find a solution.

Last but not least, Daphne Caruana Galizia, Maltese journalist, was assassinated on Monday in a car bombing in the smallest EU member state, Malta. She had made a name for herself exposing ramping corruption at every levels of the Maltese society and political arena. During the Panama Papers’ scandal, she exposed the link between politicians and shell companies. More recently, she uncovered financial dealings between family members of Azerbaijan’s president and Malta’s prime minister, forcing snap elections. Her assassination is latest attempt to undermining freedom of press and expression in Europe and it requires proper response and inquiry by the Maltese government and the European Union.

EuopeAll these recent issues illustrate considerable challenges for the future unity of the bloc, but as well expose major systemic and domestic failures. These issues related to ethno-nationalism, populism, secessionist desires are ramping and require stronger domestic initiatives to shrink economic and social inequalities, address sub-national identity and cultural fears, and bring back a certain civility in the political discourse. At the EU level, these crises illustrate the  a growing disconnect between Brussels and the capitals. Fascinating enough the EU is being criticized for being too little integrated on issues of migration and being too passive on questions of regional secession, but the EU does always not have a mandate to dictate policies and rules in certain areas of political life.

Each selected case exposes the undermining of core EU values from freedom of expression, to maintaining democratic values, inclusion, and ultimately the centrality of the rule of law. Austria is another piece of the European populist puzzle and highlight the shift toward the extreme-right. Hungary and Poland are the examples of the undermining of EU values and a clear shift towards non-democratic regimes. For instance, Hungarian Prime Minister Viktor Orban has championed what is refered as “illiberal democracy.” Austria illustrates that the East-West divide continues to widen. Populism is vibrant and spreading throughout Europe and it is shacking the democratic foundations of EU countries and the EU.

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

 

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Rediscovering a Forgotten Past – State, Identities and Cohesion

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Credit Emilio Naranjo/European Pressphoto Agency

Politics in Europe are alive; Catalonia is the latest example. The financial crisis was the axiomatic moment in contemporary European politics fermenting domestic crises throughout and within the Union, occassionally bursting ever since. These crises have equally affected all EU Member States leading to the rise of nationalist forces (notably in France, the Netherlands, Austria, Germany, the UK, Poland, Czech Republic and so forth) shaping the national political rhetorics and policy-agenda.

The latest crisis is undeniably Sunday’s referendum in Catalonia, which exposes an absolute dilemma and threatens the integrity of Spain, one of the largest EU Member States and Eurozone members. In a European Union composed of 28 sovereign states wherein domestic politics remain in the realm of the sovereign states (unless under a policy-area of a European competence), one core commonality remains binding democratic values and principles. Catalonia is one of these cases wherein state sovereignty and regional call for self-dertmination meet and clash.

The Catalan Nightmare

The crisis in Catalonia has changed gear, and potentially seen a shift in legitimacy from Madrid to Barcelona, with the reprehensible response by the Mariano Rajoy’s government on October 1 ensuing the unilateral Catalan referendum. Prime Minister Rajoy had the law on his side as the Spanish constitutional courts have ruled on several occasions on the illegality of a referendum on the independence of Catalonia. But “Spanish Prime Minister Mariano Rajoy has transformed” argued Frederiga Bindi “what would have otherwise been a unilateral, unconstitutional, and useless referendum into a major victory for the separatists.”

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Cartoon: Chappatte

The legal baseline is Spain 1978’s constitution, which stipulates that Spain cannot be broken up as “the indissoluble unity of the Spanish nation” and “the common and indivisible homeland of all Spaniards.” Only the Spanish Parliament can changed the constitution.

Catalonia is a critical piece of Spain, which is the 14th largest world economy and the 4th largest in the EU (post-Brexit). Catalonia counts about 16 percent of Spain overall population Catalonia is one of the richest regions of Spain contributing almost 20 percent of the Spanish economy. One of the arguments in favor of the independence is the lack of proportionality between Catalan contributions to the overall budget and the return. From the 20 percent of contribution, Catalan residents receive 14 percent back for public expenses. Economically, Spain may certainly face serious internal trouble if Catalonia were to secede.

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Emilio Morenatti/Associated Press

Without going back to 16th century Spanish history, Catalonia has always considered itself unique and separate from Spain with its own history, language, culture and therefore nation. In contemporary Spanish history, 90 percent of Catalonia supported the 1978 constitution. But the separatist movement and feeling have always remained underneath. The recent financial crisis, shifting into the Eurozone crisis, leading to the near collapse of the PIIGS country counted Spain in the mix contributed to exacerbate the tensions between Madrid and Catalonia. Adding to the financial crisis, Spain’s constitutional court struck down parts of the new statue of autonomy for Catalonia in 2010. Since then, Madrid did not reach several opportunities in order to continue talks with the region.

Prior Sunday’s violence, polls were always consistent in proving that only 40-45 percent of Catalans have been in favour of independence. 2013 was the year with a peak in the support level at 49 percent. Prior the announced referendum on October 1, a majority of Catalans were in a difficult position between Catalan authorities to hold the referendum on independence and the strong-hold position by Madrid.

Mariano Rajoy of Spain called on the separatist leaders, behind Carles Puigdemont, President of the Generalitat of Catalonia, to stop the “disobedience” and the “escalation of radicalism.” In a rare televised speech on the evening of October 3, the King Felipe VI of Spain condemned the actions by the separatists framing them as illegal and infringing the legal structure of Spain. “They have tried to break the unity of Spain and national sovereignty” he went on to claim. Ensuing the banned referendum, Catalonia has announced that it will move forward and declare independence from Spain in the near future (after a parliamentary session on Monday). Legally, if a declaration of independence were to be made, the central government of Spain could suspend Catalan autonomy under Article 155 of the 1978 Constitution. Such option would bring the country in a major constitutional and political crisis.

And, the European project?

Where does the European Union fit in this complex political puzzle? The EU is indirectly the cause and the remedy. But it is as well, rightfully so, a reluctant actor. In the case of the Catalan crisis, the EU and its set of institutions have remained as distant as possible from this domestic crisis. For the EU, this is not only bad news, but a sign of major internal forces at play within Member States. “Separation and secession within a member state is very bad news for a block” argued Stephen Beard of Marketplace “that is striving to hold itself together and is currently doing its utmost to punish Britain for daring to break away from the EU.”

The Treaties of the EU are clear regarding the competencies of States and the EU. For instance, Article 4.2 of the TEU stipulates that, It [the Union] shall respect their essential State functions, including ensuring the territorial integrity of the State, maintaining law and order and safeguarding national security. In particular, national security remains the sole responsibility of each Member State.

Ensuing the use of force by Madrid on Sunday in Catalonia, the EU called out and condemned government violence against citizens. On October 2, the Commission released an official statement underlining the illegality of the referendum under Spanish law. Without directly targeting PM Rajoy, the Commission ended the statement by claiming that “Violence can never be an instrument in politics.” However, Spain may be one of the largest and Western EU Member State, the Commission must be as critical as it has been in Poland and Czech Republic. “It is the kind of violence the European Union” writes Steven Erlanger of the New York Times, “would ordinarily condemn in high moral terms and even consider punishing.”

On Wednesday, the Commission called for an open dialogue between the Catalan authorities and the Spanish government. Frans Timmermans, the Commission’s deputy head told before the European Parliament that “it’s time to talk.” Timmermans still maintained the official position of the Commission endorsing the legal position of Spanish Prime Minister Rajoy. During the European Parliament’s session, two leading MEPs, Bavarian Manfred Weber and Flemish Guy Verhofstadt emphasized on the fact “strong regional identity and autonomy did not mean breaking up existing nation states.” What is certain is that “if Catalonia were to leave Spain,” underlined Jonas Parello-Plesner of the Hudson Institute, “it would also leave the EU, only to start a cumbersome reentry process.”

EU Member States, all sovereign states, are not usually in favor of secessionist movements, especially within the Union. In the current context of the Brexit negotiation, the EU and the 27 Member States are quite reticent to see a region of a Member State calling for self-determination and seeking independence. “Throughout my life,” wrote Javier Solana, a former Spanish minister, former NATO Secretary General, and the first EU High Representative, prior the Sunday violence, “I have witnessed the fragmentation of many countries, and I cannot conceive of that happening in the European Union of today.” Despite the reprehensible past action and poor tactic by PM Rajoy, it is difficult at this time to foresee any support from the 27 European capitals for Catalonia’s independence.

Lastly, the Catalonia case brings home a reality, which seems to have been forgotten in 220px-2012_Catalan_independence_protest_1021.jpgone of the richest regions of the world: history tells us that states will use force to maintain their integrity and unity. In his address to the nation, King Felipe VI, “Today Catalan society is fractured and in conflict,” he said. “They (the Catalan leaders) have infringed the system of legally approved rules with their decisions, showing an unacceptable disloyalty towards the powers of the state.” The message is direct, the state shall remain and fight any types of fragmentation.

For decades, Europeans have watched separatist efforts in Iraq-Turkey (Kurdistan), Sudan (South and North), Serbia (Kosovo), Chechnya (Russia), Nepal (China) with a certain distance condemning state violence and believing in some sort of European exceptionalism, that it would not happen here inside the Union. Well Spain demonstrated a forgotten reality.

“As it forms the basis for an experience of freedom, the history of democracy,” Pierre Rosanvallon, Professor at the Collège de France noted, “is therefore not simply a history of frustrations or betrayed utopias: it has become a deeply intertwined history of disenchantment and indeterminacy.” The Catalan case opens the European Pandora box of a forgotten past forcing European citizens and leaders to reflect on the questions thought buried under the rumbles of World War two, but briefly emerging since with the reunification of Germany and the wars in the Balkans, of identity, democracy, power, oppression, nation-state, region-state and cohesion. The fraught between Madrid and Catalonia is serious and could have considerable ripple effects if a thoughtful and open dialogue is soon implemented.

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

 

Greece – Failure of Leadership with Global Consequences

Photo: EPA
Photo: EPA

“Le drame grec n’est pas et ne sera pas seulement national : il a et il aura des effets sur l’ensemble de l’Europe, dont la Grèce fait partie intégrante par son histoire et sa géographie” – Jacques Delors, Pascal Lamy et Antonio Vitorino in Le Monde of July 4th.

Greece and the European Union have their backs against the wall. Greece faces two deadlines, June 30th repayment of €1.6bn to the International Monetary Fund (which remains unpaid until the results of the referendum), and the July 20th of €3.5bn to the European Central Bank (ECB). Even if Greece were to repay the first bill, it would be unable to do so on July 20th.

So far, Greek Prime Minister Alexis Tsipras and his finance minister, Yanis Varoufakis, feel that the terms of the new bailouts are too destructive and would require more cuts on Greek social programs that they have asked Greek citizens to vote on their futures (the referendum is currently taking place in Greece). Without an extension of his first debt, Greece has no chance of receiving the remaining of the credit of €7.2 billion and would ultimately default. So, how has a crisis starting in October 2009 been so poorly managed and is putting at risk the stability of Europe and global markets?

A Call for Democracy?

On the night of Saturday  27th, Prime Minister Tsipras announced on television, at the great surprise of his European counterparts, that he would be holding a referendum on July 5th asking the Greek citizens to decide on the future of Greece, either by accepting the deal and the ensuing austerity measures, or by rejecting the deal and ultimately having to default. In order to hold the referendum, Tsipras asked his creditors to postpone the June 30th deadline by five days, which has been rejected. For instance, the leader of the Eurogroup of Eurozone finance ministers, Jeroen Dijsselbloem, said at a news conference that “The Greek government has broken off the process. However regrettable, the program will expire on Tuesday night.”

International public opinions have been deeply divided when reflecting on Tsipras’ call. On the one hand, some have argued that Tsipras is gambling with the future of Greece and ultimately the Eurozone and the stability of global market. While others have talked of a smart political move by Tsipras. On the question of the referendum, Prime Minister Tsipras has already expressed that he will be campaigning for a ‘no’ vote (read here Varoufakis’ recommendation for a no vote). Two of the top American economists, Joseph Stiglitz and Paul Krugman, announced in separate editorials that they would vote ‘No’ at the referendum. Joseph Stiglitz said clearly in his op-ed that the tension between Greece and its creditors (troika) is about power and democracy rather than economics. Yet, many media outlets have been very critical towards Tsipras as one can see the recent cartoon published by the Economist:

The Economist - July 4th
The Economist – July 4th

Merkel & Hollande, European Leaders? Think again…

The current crisis is more of a political failure than an economic/monetary one. It is the failure of Chancellor Angela Merkel of Germany and François Hollande of France to recognize that saving Greece is more important than letting a Eurozone member

Photo: EPA/WOLFGANG KUMM
Photo: EPA/WOLFGANG KUMM

defaulting on its payments and obligations. Chancellor Merkel has been portrayed as the leader of Europe, which seems to be a wrong assessment in retrospective. A leader is not an individual working on protecting solely the interest of his/her country, but in the interest of the system as whole. In addition, one needs to recognize that Merkel rejected a last minute call by Tsipras to redefine the terms of the agreement. She reiterated that there was no point in holding talks with Greece before the July 5th referendum. Her finance minister, Wolfgang Schäuble, was more critical, saying, “Greece is in a difficult situation, but purely because of the behaviour of the Greek government … Seeking the blame outside Greece might be helpful in Greece, but it has nothing to do with reality.” As hard it may be to justify another rescue of Greece to her electorate, Angela Merkel needs to recognize that a Greek default would endanger Germany, the Eurozone, the EU and global financial markets as a whole.

In the case of François Hollande, he has been too quiet and distant on the question of the Greek default. François Hollande, a socialist by political affiliation, missed a strategic moment in establishing himself as the axiom between the members of the South with the ones of the North. François Hollande’s gamble has been to bandwagon with Germany rather than positioning himself with a clear strategy and eventually offering alternative options in favor of Southern members. Hollande’s gamble is not only failing, but he has become irrelevant on the Greek dossier (not what French finance minister, Michel Sapin, would claim). Such strategic absence by France is regrettable, as the country economic base is so fragile that a Greek default would certainly put a halt to the more than timid recovery if one considers the degree of involvement of French banks in the Greek economy. It is difficult to imagine France striving through another Eurozone crisis with GDP growth rate of 0.6% and an unemployment level at 10.5%.

Global Earthquake, and American Powerlessness

A Greek default would have serious global consequences causing contagion throughout the world. Since Monday morning, global stock markets have been declining and are waiting on the eventual repercussions of a Greek default as many unpredictable consequences could occur considering the complex interconnection of world financial system.

The United States has been following the European drama very closely and powerlessly from the other side of the pond. Even though the US economy is slowly picking up, it has remained very timid with strong quarters and weaker ones. President Obama has been in directly contact (and through his Jack Lew, his Secretary of Treasury) with his European counterparts, Ms. Merkel and M. Hollande, expressing his concerns about the eventual consequences on the global finance and calling for a resolution. Speaking at a news conference, the Chairman of the Federal Reserve, Janet Yellen, said that “To the extent that there are impacts on the euro-area economy or on global financial markets, there would undoubtedly be spillovers to the United States that would affect our outlook as well.” The US have been very worried about the course of actions taken by the Europeans and has urged Greece and the Europeans to reach a deal in order to avoid a default.

A second reality, beside economics, is pure geopolitics and security. With a Greek default, the country would become unable to secure its borders, a real problem with the current migration crisis in the Mediterranean – wherein the EU and its Member States are failing to address – (read previous analyses here and here). Even if most of the coverage has focused on Italy, Greece is the second entry point to Europe by the sea and land. The second geopolitical reality is the rapprochement of Athens with Moscow. This rapprochement is taking place at a time

Reuters
Reuters

wherein the EU is extending its economic sanctions against Russia (so much for European unity vis-à-vis Russia). Greece and Russia are working on an deepening energy and agricultural ties. “Russia wants to build a pipeline through the Balkans, and Greece wants it, too” said Dimitris Vitsas, a ruling leftist Syriza party lawmaker, “We can develop a common enterprise not only in this, but for agricultural products and so on.” From Moscow’ standpoint, the gas deal with Athens is an important entrypoint into European politics. Moscow has been financing European radical parties and worked on transforming its image from within (read here a previous analysis on Russia in Europe).

Geopolitics highly matter in the Greek dossier and seem to have been sidelined for obvious economical and financial realities. With or without a Greek collapse, geopolitics will remain and affect the stability of Europe.

A New Meaning of Europe?

The European project is based on core principles, norms and values: solidarity, peace, democracy and respect. At several occasions, German Chancellor Angela Merkel used the phrase, “If the euro fails, Europe fails,” in order to talk about the need to save Greece. With the Greek fiasco, it seems that each normative dimension has been violated by all European parties. The concept of European solidarity is not embedded in punishing but assistance.

Greece is so indebted with a debt representing 183.2% of the GDP with an unemployment rate above 25% that its future can only be with a serious assistance by its European counterparts. Even if Greek debt is abysmal, Greece’s economy only represents 2% of the eurozone. In order to make Greece stable and functional, it will need to go through serious structural reforms and clean up the high level of corruption. Certainly some Eastern, Central and Baltic Member States, like Lithuania and Bulgaria, feel that Greece should implement the necessary reforms as the quality of life in Greece, especially the level of pensions in Greece, are much higher than in poorer EU Member States. But this could be adjusted once Greece is under European protection. Can these take place under additional austerity measures?

Last but not least, the European political narratives have evolved these last five years. Back in 2009, the concept of Grexit was not an option, just a concept describing an unthinkable future (read an interview on the topic here). Today, a Grexit appears as an option and eventually a reality. On the verge of a default, it seems that the EU project may be endangered because of lack of flexibility and lack of understanding of its heritage. Letting Greece default would be a failure of leadership and failure of strategic thinking.

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