Paradise Papers – A Story of the Disdain for Democracy by the Transatlantic Elite

The “paradise papers” shine a light on the mechanisms utilized by global elites and corporations to avoid paying taxes. These latest revelations on the dark mechanisms of global finance, known as the “paradise papers,” emerge a little more than a year after the “panama papers.” But a clear distinction must be made between the two giant leaks: the panama papers were about illegal financial activities, while the paradise papers expose the legal financial and fiscal instruments available to the global elite and corporations.

Over a period of a year, 13.5 millions documents were analyzed and verified by the International Consortium of Investigative Journalists (ICIJ) and its 96 partners, such as the BBC, The New York Times, and Le Monde. These revelations are based on a leak of documents in 2016 shared to the german newspaper Süddeutsche Zeitung. This year long investigation has permitted to expose the complex mechanisms of fiscal optimization utilized by corporations and the global elite (see here the documentary by Vice on the investigation). The documents are composed of three major categories:

• 6.8 million internal documents belonging to the international offshore law firm, Appleby, located in Bermuda with branches in ten tax heavens,
• 566,000 internal documents from the law firm Asiaciti Trust in Singapore,
• and 6.2 millions documents from confidential registries in 19 tax heavens.

The paradise papers are particularly damaging for the transatlantic global elite involved in this massive tax evasion. The “paradise papers” are in fact the obvious demonstration of a total disrespect of democratic and social values by a segment of the transatlantic elite. As argued by an editorial of the french newspaper Le Monde, this mechanisms “endanger the principle of the equality of all in front of taxation.” Among them, so far the Queen of England, Elizabeth II, members of Trump and Trudeau’s entourages, and other wealthy individuals appear to have had prior or ongoing activities to avoid contributing to national taxation.

Politipond argues that the “paradise papers” are even more scandalous than the “panama papers” considering the current transatlantic political, economic, ideological and social climate. The “paradise papers” ought to be put into perspective along four points.

The first point ought to be political. The transatlantic political class has increasingly been more connected to, or simply is, the global elite. In the US, Donald Trump was brought to D.C. on the pledge to ‘clean up the swamp’ and on a variety of ‘America first’ slogans. Even though these rhetorics gathered great appeal on the campaign trail, the composition of his administration tells a completely different story. These latest papers show that three leading figures of the Trump

@Tom

 administration, Wilbur Ross, Secretary of Commerce, Rex Tillerson, Secretary of State, and Gary Cohn, Economic Advisor at the White House have or are utilizing these optimization mechanisms for personal profits. Other individuals and influential republican donors, such as Robert Mercer and the Koch brothers, appear in these documents. So far the most damaging allegations go against Mr. Ross, whom is potentially facing a conflict of interests, as he is still retaining “investments in a shipping firm he once controlled that has significant business ties to a Russian oligarch subject to American sanctions and President Vladimir V. Putin’s son-in-law.” This financial connection does not imply that Mr. Ross is a piece of the Russian puzzle involved in the meddling of the 2016 American elections. To the contrary, Ross’ spokeperson claimed that Mr. Ross has been supportive of the American sanctions against Russian entities. But this connection demonstrates an absolute lack of morality in the behavior of some members of the American elite and government officials. In a ‘normal’ democracy, Mr. Ross should have already provided his letter of resignation to the President (watch here Mr. Ross’ response).

The second point is economic. The Euro-Atlantic community has been confronting a considerable decline since the 2008 financial crisis. If the US has recovered quicker than European economies, the economic crisis has considerably affected a wide segment of the transatlantic citizenry. In both American and European economies, taxpayers were the one to fit the bill to bail-out, rightfully so, the banking and financial sectors in order to avoid a complete collapse of the transatlantic economies. But since then, the stock market, particularly in the US, has done fantastically well, while transatlantic wages for the middle class have stagnated. Unfortunately, strong financial data and performance have not translated into the real economy. Taxation is an important equalizing instrument in the hand of governments in order to finance the state and social programs among others.

The third point is related to ideology. These allegations contradict the push occurring in the US and some countries in the EU, lately in France with President Macron, to promote trickle down economics, meaning tax cuts on the wealthy, in order to promote investment. The concept/theory implies that income and capital gains maintained thanks to tax breaks and financial benefits to wealthy individuals and businesses permit to stimulate economic growth. This theory was, once more and recently, demonstrated as fantasy by the Kansas experiment.

In the US, the blame usually falls on the shoulders of the poorest and weakest. Elected officials have historically blamed welfare programs, such as food stamps, in order to explain the ever expanding  deficit. In this case, the American elite is demonstrating that in a country wherein taxation is not the highest in the world, fair contribution via taxation is not as automatic as expected. The New York Times reports that “Americans — companies and people — dominate the list of clients.” Among these American corporate giants, Apple, Nike and Uber, have avoided taxes legally through creative bookkeeping.

Helping the wealthy getting richer through offshore maneuvers is not a “benign benefit,” said Harrington, a Copenhagen Business School professor. “When the rich get richer, the poor get poorer, because individual wealthy people are not paying their fair share of taxes.” The inequalities within the Euro-Atlantic societies are increasing and the gap is becoming wider between the ultra-wealthy and the middle class.

In Gold, 2017

As illustrated above in the chart from an analysis published by Chicago Booth Review, the gap is not only wider, but the income of the bottom 50% earners has not increased in the last 34 years and the middle 40% only show a rise of its income by 42%. A 42% increase is not small, but compared to a 121% for the top 10 and 205% for the top 1%, it is quite minimal. In addition, over the last 30 years, the quality of the American welfare state has declined forcing Americans to increase their spending on their healthcare spending. Income inequality has considerable grown wider in the US since the 1960s. For instance, a recent report explained that “the richest 1% of families controlled a record-high 38.6% of the country’s [the US] wealth in 2016.”

Last but not least, the greatest consequence is social. Tax evasion, in this case legal, undermines that basic structure of Euro-American democratic societies. These directly undermine the basic ‘social contract’ and fabric that citizens have with their fellow citizens and governments. Taxation for too long has been framed as a punishment, when in fact it is an individual contribution, a civic duty, to the construction, physically and psychologically speaking, of the society, country and ultimately the defense of the public good. In a Western democracy, citizens are expected to contribute. But as it was demonstrated by the Trump campaign and rhetorics, a significant number of American voters agreed and supported a man proudly exposing his successful cheating (he has yet to release his taxes, which could prove the contrary). In an even more grotesque move, Mr. Trump pushed the argument further claiming that because he had successfully cheated, he would be the best person to ‘fix it.’

So far, we are only in the first weeks of the release of the documents. The “paradise papers” demonstrate the facility for the global elite to hide their wealth in all legality and impunity in tax havens through shell companies or other complex mechanisms. It is difficult to image Euro-Atlantic states pushing for an end to this legal loopholes, when states are increasingly in the hands of the global elite. “It won’t be lost on wealth managers and those in the offshore industry,” Professor Harrington said, “that we are reaching sort of French Revolution levels of inequality and injustice.”

In the case of Europe, the EU and other international organizations such as the OECD (listen here in French the recent interview of Pascal Saint-Amans, Director, Centre for Tax Policy and Administration at the OECD), have put pressures on offshore havens in order to reform their laws. As argued by Samuel White of EurActiv, the “paradise papers” may “provide the impetus the EU needs to finalise an effective tax havens blacklist and end tax competition between EU member states.” In the case of the US, the Congress has had no desire to address these issues in recent memory and the data in this latest leak demonstrate it. The Euro-Atlantic societies need to wake up and start pressing elected officials in order to tackle these systemic tax avoidance mechanisms. These inequalities are directly at the heart of the problem of the Euro-Atlantic societies seeking for alternatives in the extremes. Surprisingly enough, these allegations have not had the impacts as one would have expected. Impunity can only continue if the citizenry is consenting.

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

 

Interview with O’Globo – Russia, France and Syria

The interview was conducted in English for O’Globo, a Brazilian newspaper, over the phone on November 20th and then a written follow-up several days later. Here is a discussion in Portuguese about the intervention of Russia in Syria and its regional consequences. The interview took place before two majors events: the destruction of a Russian fighter jet by Turkey, a NATO member; and the terrorist attacks in Paris at the end of November. Both events have directly affected the situation in Syria by creating serious tensions between NATO and Russia as well as mobilizing European powers in contributing to the war efforts against ISIS.

O’Globo. Published on November 24, 2015. Section: Mundo. p.25

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

Let’s talk Schengen, and the Future of European Ideals

Photo: Oona Raisanen

Most of the killers of Charlie Hebdo in January and of November 13th were European passport holders (read here an analysis on the terrorist attacks of November 13). So why should European leaders propose to close Schengen? And why would Europeans feel more secure behind national borders, when French nationals are killing other French citizens? The rationale in dismantling the Schengen agreement is quite ludicrous and ideologically-based. Schengen is one of the great European endeavors, like the Euro, that is facing serious scrutiny because of political unwillingness and reticences by the Member States to fully complete it by fear of losing national sovereignty. Today, the EU Member States, and their citizenries, can only blame themselves for having failed to complete such mechanisms in the name of national sauvegarde. The EU is facing its worst crises not because of its inefficiency, but rather because of its incomplete construction. No one should expect a sailing boat to sail without its sails.

Protecting the Homeland

Should Schengen be blamed for the attacks on Paris? Not at all. Schengen is a legal agreement not an actor. The open-border agreement was put into force 20 years ago and counts 22 EU Member States plus 4 non-EU states. Schengen can only succeed if its members are willing to guarantee that all the mechanisms are properly enforced. Not enough coverage has been done about the lack of police and intelligence cooperation between EU Member States. In order to enforce Schengen and guarantee its success, which implies national security, the Frontex agency was created, but has never been empowered or even properly funded. The best example is the border assistance program off the coast of Italy, wherein Frontex has a huge mandate without substantial human and material capabilities, as well as fund (read here a recent analysis on the Joint Operation Triton). In an interview for the New York Times, Jan Techau of the Carnegie Europe said “those trying to benefit from the situation, are trying to redefine the entire Schengen debate in a way that makes Schengen look like the culprit here.”

Schengen can only be as good depending on the protection of the European common borders and neighborhoods. EU Member States have been risk-averse for too long and have free-rided their security responsibilities on NATO. Now Ukraine is split in two and is fighting a vicious civil war. Europe let Russia took Crimea almost two years ago and has yet to fully criticized such violation of international law. In the Middle East and North Africa, Europe has not followed up on its promises and short-term engagements like in Libya and Syria. Since 2011 (in the case of Libya) and 2013 (in the case of Syria), Europe has been looking the other way and avoiding to deal with the root causes of today’s crises. Now Europe is dealing with the worst migration crisis of the 21st century, and instead of seeking to address the root causes and take a human approach to welcoming refugees, EU Member States have chosen short-termism once again and blamed the other. Only Germany and Sweden have welcomed refugees in large quantity and the rest of Europe is instead talking of building fences, selecting only christian among the Syrian refugees, and so forth.

Cartoon: KAL in the Economist of November 21st, 2015

No EU Member State, at the exception of France, has been willing to participate in the war effort against ISIS and even finding a political solution for Syria. EU Member States are incapable to think strategically and refuse to spend money in their national foreign and defense policies. Instead of building an army, why not strategically pooling ressources at the European level through the empowerment of the CSDP and military industrial production (here is the link to a book on CSDP). EU Member States, France included, rather protect one military industrial sector, for short term political gain, than really building up a common army and a common industrial military complex. If EU Member States are unwilling to go it alone or simply spend money into their militaries, then the EU alternative should be the appropriate one. What the 21st century has proven to experts and leaders is that realpolitiks are well alive and shaping foreign policy decision-making. The European neighborhoods are demonstrating the need to boost-up military capabilities in order to assure the basic security of the homeland, which most EU Member States are unable to do and provide.

Falling into the Nationalist Trap

In the whole debate about freedom, empowering the state, and dismantling the core aspects of the European Union, one player has been purposely absent, British Prime Minister David Cameron. If Britain has demonstrated warmly its support to France ensuing the attacks, Cameron has been quiet and to some extent welcoming the ideological debate about the EU and Schengen. Weeks after sending his letter to President of the Council, Donald Tusk, wherein PM Cameron is asking for less human Europe and more for a trade agreement (read here an analysis on the letter), David Cameron is simply looking at European capitals offering him what he has been asking and campaigning for: less Europe and more national power. It is very unfortunate to see these attacks against the European project and the reactions from European capitals.

The Schengen agreement is one of the greatest successes and materialization of the European project. Seeing France overreacting and shifting towards an almighty executive-power led country is worrisome. The extension of the ‘state of emergency’ for an additional three months can be explained considering the existing threats representing by ISIS affiliates in the homeland and the upcoming COP-21 meeting in December. The French government does not

Photo: GettyImages/AFP

want to see another attack during the international climate talks as it would undermine its abilities to protect the homeland and offer a primetime moment for terrorists. France is shifting dangerously towards extreme right. The call to extent the state of emergency is one thing, but closing the borders and seeking to remove French nationality to bi-nationals are straight from the Front National playbook. Not only they violate French republican values and principles, but they validate to a scared and emotional french electorate that the policies advocated by the Front National for decades are actually legitimate. The Socialist government is empowering the extreme right and could make such fascist party even more acceptable. Marine le Pen, President of the Front National, is absolutely correct when talking to the press that the current government is implementing her policies.

Intensifying the bombing over Syria and building a coalition, which has legal legitimacy after the approval of the United Nation Security Council Resolution 2249, which condemns the terrorist attacks and calls on members states to act against ISIS, are appropriate foreign policy measures. But at home, François Hollande ought to lead by empowering the existing European mechanisms, calling for greater cooperation at the European level, and sticking to French democratic values without falling into the nationalist trap. These steps would be symbols of leadership and show to Europeans and terrorists that France is not scared and feels confident in its legal and political structures developed by President Charles de Gaulle in the early years of the Fifth Republic. For the French government and citizenry, this is not just about terrorism, but as well about how France deals with the migration crisis, the euro crisis and national social tensions and inequalities. Right now, it looks like ISIS is winning and this is well too bad. François d’Alançon, a french analyst, said about the Europe ideal and project that “it’s all gone, it’s just a big fog.”

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

Interview with O Globo on Russia in Syria

Earlier this week, Henrique Gomes Batista, the foreign correspondent of the O Globo in Washington D.C., a daily major national newspaper in Brazil, wanted to talk about Syria, Russia and the West. Politipond previously posted an analysis on the Russian incursion in Syria and what it means for the West. Here is the interview below (in Portuguese):

 

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

Syria – Russia Returns to the Table of Great Powers

Photo: Reuters

Russia just started its airstrike campaign in Syria after approval by the upper house of the Parliament. “We [Russia] ’re talking exclusively about operations of Russia’s Air Force,” announced Mr. Ivanov, Mr. Putin’s chief of staff, “as our president has already said, the use of armed forces on the ground theater of military operations is excluded.” The airstrikes have for objectives to assist the Bashar al-Assad regime in his war against the Islamic State.

After more than four and half years of war, Syria is the home of a complex crisis seeing a war between the Bashar al-Assad regime, Syrian militias, and many terrorist networks. The Syrian war has permitted the rise of the Islamic State in Syria and Levant (ISIS), and has been costing the lives of 250,000 civilians and a million injured, displaced millions displaced, and put million refugees on the road. The Syrian civil war is taking a new turn with the direct military involvement of Russia. A simple, but yet complex question, ought to be raised: Does Russia dictate global politics in the European sphere of influence?

The Syrian Civil War

In Syria, Bashar al-Assad never lost his power. Even though the country is highly divided among a multitude of militias, terrorist networks and the al-Assad forces. The interesting case of Syria is that the West did not see coming the fall of Mubarak and Qaddafi and wanted to be proactive in the fall of al-Assad. In September 2013, the West was trying to build a coalition in order to start bombing Syria and the al-Assad forces after he was found guilty of having used sarin gas against civilians. Two forces played in favor of al-Assad, and

Photo: AHMAD ABOUD/AFP/Getty Images

still are, avoiding the launch of airstrike against Syria’s al-Assad: Russia and Western public opinion.

Vladimir Putin has played an important role in sponsoring the al-Assad regime through military and financial assistance. Putin’s rationale is that the Assad regime is a better alternative and protection against radical Islamic groups than rebels. In the case of western public opinions, they had grown war-worn especially for the Americans and Brits both involved in Iraq and Afghanistan for over a decade. British citizens, through the UK House of Commons rejected to grant authorization to Prime Minister Cameron to participate in military airstrikes in Syria. The British aversion to use force in Syria was a powerful signal for the Obama administration, whom refused to intervene despite the fact that al-Assad had crossed the ‘redline’ in using sarin gas. Ultimately since 2013, the war in Syria has seen the rise of refugees, displaced individuals, rise of ISIS and a continuation of war without any direct role being played by the West to stop the conflict.

US-Russia Divergences

Mr. Putin has been very clear. Russia uses military force in order to fight ISIS and support the al-Assad regime. Vladimir Putin does not want to see his regional ally go and wants to maintain Russia’s influence in the region. Putin sees Russian intervention in order to stop the expansion and rise of ISIS in the region. If attention has been raised about radical islamists trying to conduct terrorist acts in Western Europe (like in Toulouse, Charlie Hebdo, the Thalys) and the US, Russia has as well been dealing with radical islamic terrorism for decades. Since being in power, Vladimir Putin has been fighting a lengthy war in Chechenya. Major Russian cities have been the targets of acts of terrorism over the years. In Syria, President Putin has played his game carefully by first bringing military capabilities, like fighter jets, in Syria at the airbase base of Latakia, in Western Syria.

In the case of the US, President Obama is neither interested in protecting al-Assad nor keeping him in power. As demonstrated by his two mandates, President Obama has been trying to leave the Middle East and readjust American power towards Asia. Obama’s presidential promises were to end the wars in Iraq and Afghanistan, which he has done even though some military forces are still on the ground. During the Arab spring, the US with his European allies missed the moment. The US was leading from behind in 2011 in the implementation of a no-fly zone in Libya. The mission was led by France and the UK, under the UN Security Council Resolution 1973 (2011), which facilitated the fall of the Qaddafi regime. Since 2011, and especially after the killing of US ambassador in Benghazi, the Americans have been extremely reluctant in playing an active role on the ground and rather remain in the sky. But ISIS has brought back the US in the region. As demonstrated in recent polls, Americans consider ISIS as the greatest threat to the US.

Chart: Global Perceptions of Major Threats (Only the ‘Very Concerned about’ are being represented here)

Source: Carle, Jill. 2015. “Climate Change Seen as Top Global Threat Americans, Europeans, Middle Easterners Focus on ISIS as Greatest Danger.” Pew Research Center. July 14. Online: http://www.pewglobal.org/files/2015/07/Pew-Research-Center-Global-Threats-Report-FINAL-July-14-2015.pdf [Accessed on September 15, 2015]

With the rise of ISIS over the region, President Obama was obliged to send some hundreds of military advisors in Iraq in order assist the Iraqi army and leadership. Since then, the US with France have conducted airstrikes over Iraq in order to limit the rise of ISIS.

Even within the US team, there is a certain division as reported by the New York Times between President Obama and his Secretary of State, John Kerry. “Obama seems to approach Syria with a professor’s detachment”said David Schenker, the director of the Program on Arab Politics at the Washington Institute for Near East Policy, “while Kerry — perhaps because of his high regard for his own diplomatic acuity — sees it as something he can solve.” President Obama deeply distrusts President Putin, while Kerry feels that he can work on a deal with the Russians in order to bring in the long-term Bashar al-Assad down from his leadership position.

But the tension between the US and Russia can be sensed. During his address before the UN General Assembly, Russian President underlined that the US air campaign against ISIS in Iraq and Syria were illegal and a violation of international law. Putin claimed that the US used military force with neither a UN Security Council Resolution nor with the consent of Syrian President Bashar al-Assad. Now it will be interesting to see if the UN Security Council agree on a resolution in order to fight ISIS in Syria.

Europeans, Russians and Americans

The Syrian crisis is, and ought to be perceived by the Europeans, as the top priority. From Europe, the civil war in Syria is causing regional instabilities all around the Mediterranean front, is at the origins of the worst migration crisis since World War two, and is exposing the failures of Europeans address a direct security threat to its continent. The massive number of migrants seeking for refuge in Western Europe is exposing the weaknesses of European cohesion and solidarity, European integration (see the failure of the Schengen agreement and Dublin rules), and is destroying the myth of Europe as a civilian/normative power.

The only power in Western Europe to be military active is France. Under Presidents Sarkozy and Hollande, France has sought to maintain its global and regional influence and interests. France has been flexing its muscles in Central African Republic (CAR), Mali, Iraq, Libya and now Syria. Back in 2013, France was waiting on the Americans in order to start airstrikes against the al-Assad forces after he was proven to have used sarin gas against civilians. If French air power has been used as part of the coalition with the US over Iraq in order to fight ISIS, but it started its bombing campaign over Syria several days ago. However, François Hollande has maintained the fact that a solution in Syria cannot exist with Bashar al-Assad. As demonstrated during the nuclear talks with Iran, French diplomacy has been one of the toughest in order to assure that French and Western interests would be protected and enforced. On the Syrian case, Laurent Fabius is keeping the similar cap.

The United Kingdom has expressed a less clear position. British Prime Minister Cameron said “I know there are people who think Isis is even worse than Assad, so shouldn’t we somehow cut a deal with Assad to team up and tackle Isis.” But the Brits, in order to show support to their American partners, underlined that a long-term solution cannot include Bashar al-Assad remaining in power. The French and Americans have been clear on the fact that any peace deals cannot include Bashar al-Assad.

Prime Minister Matteo Renzi of Italy said that Russia was a central actor in the fight against ISIS in the region. His tone towards Moscow is much softer than his European partners, as Italy and Russia have always had deep relationship, especially in recent times. For instance, Italy has been the least supportive of European sanctions against Russia.

Russia, The Return of the Global Power?

Since the arrival of Putin to power in 2000, his priority has been to make Russia a great power once again. He has demonstrated that Russia not only plays an important role, but can shape global events. If Putin put himself in a corner after the annexation of Crimea and lingering war in Eastern Ukraine, he has brought Russia back at the table of great powers with his actions in the Middle East. If this aspect has been lost in translation as the world is more concerned about the approval of the deal by the US Congress, Russia played an important role on bringing a deal for the Iranian nuclear program. In the case of Syria, most powers have been reluctant to act aside from airstrike bombings over Syria and Iraq. Now Russia is actually forcing the West to act and do something about the vicious war in Syria.

Europeans have been inactive on dealing with Syria and have struggled on welcoming Syrian migrants. Aside from boosting border patrols in the Mediterranean and increasing financial assistances to countries hosting Syrian refugees, Europeans were unable to agree on a clear military operation in order to address the root causes of the migration crisis. The Americans, under Obama, have been much more reluctant to start another military mission in the Middle East. Obama promised in 2008 to quit the greater Middle East, he certainly does not want to leave office in 2016 with another war in Middle East.

With the escalation of its military intervention, Russia is bringing itself outside of the corner and rejoining the table of great powers. This last decade, Putin has demonstrated his ability to promote Russian influence and interests where and when desired. By using realpolitik, Putin has been able to promote Russia’s interests without any moral dilemmas, while the West is trying to act morally (which is highly debatable) and is actually limiting its flexibility and interests. Russia is back and the West needs to work with a complex partner.

(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

 

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

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)%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 the 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).

 

Dying for the European Union?

Credit: REUTERS/Jean-Marc Loos

Can a national soldier be asked to die for the European Union? In other words, can a Hungarian soldier be sent under an EU flag on the battlefield for another national and/or European cause?

With all the recent talks about the creation of a EU army (read here a recent analysis on Juncker’s proposal), or a European Defense Union, and the perpetual French calls for increasing burden-sharing in defense spending and actions, one variable is missing, would it be acceptable for Member States and European citizens to let their soldiers die for the EU? Can national Member States require their soldiers to fight on the battlefield exposing them to possibility of death for the EU? Would European citizens support such idea? Such questions may appear as a futile intellectual exercise, when in fact it is at the heart of the overall issue of European integration in the realm of security and defense.

Geopolitical Realities

There is no army without a demos, an identity, shared symbols and a common national vision (see the excellent book by Christopher Bickerton on the subject of integration from nation-states to member states). The Europeans and Americans have now since the end of the Cold War tried to create armies in Afghanistan, Iraq, Nigeria, Mali, Niger, in the Balkans, and other countries around the world. This is a complex and lengthy process requiring specific criteria such as a state, a national identity, and a will to defend the values and institutions of such state. The recent examples of the Iraqi and Afghan armies are demonstrating how difficult it is and in some instances unrealistic. In the case of the EU, the talk of a European army goes back to the failed attempt of the European Defense Community (EDC) in 1954 foreseeing the creation of a European army composed of 100,000 soldiers (read here a book review of Debating CSDP). Since then, the topic reappears and disappears as quickly as it emerges. The question of a European army is directly intertwined with the old-federalist vision.

Additionally, the case of the EU is a little different from the other regions of the world. The EU has grown under the protection of the nuclear umbrella of the Americans for the entirety of the Cold War. With the implosion of the Soviet Union, the EU was for over 20 years leaving with no major direct threats to its survival. With today’s reemergence of a more aggressive Russia, NATO has re-become the primary instrument for defense. Ultimately, the core perception of European security and defense incorporates two dimensions: American protection and lengthy regional stability. But with the collapse of world markets and the Arab Spring, the EU is now encircled by serious threats with Russia, the Islamic State (IS), mass-migration and rogue regional countries. The European reactions have been to ignore the realities and instead focus on domestic problems.

In some ways, the Europeans have to re-learn in accepting the threats affecting one’ security requiring the use of force. For decades, Europeans did not have to worry about basic existential survival. Europeans were instead deploying forces based on liberal beliefs. Today, the world and Europe are much different places. Despite the lethality of the regional threats, most European leaders and citizens are unwilling to consider the use of military force. For instance, in dealing with Crimea and Eastern Ukraine, Europeans have never mentioned the deployment of troops on the Eastern European borders and even less the use of military force in stopping Russia. Europeans are not thinking in terms of hard power on their owns, only with NATO.

European Demos, Identity and CSDP

In most EU Member States, the mandatory military draft has been abolished. The military conscription policy in most EU Member States, at the exception of Austria, Denmark, Greece, Estonia and Finland, does not exist or is possible only in case of emergency. Most European armies are in fact composed of professional soldiers.

ChartsBin statistics collector team 2011, Military Conscription Policy by Country, ChartsBin.com, viewed 4th April, 2015, <http://chartsbin.com/view/1887&gt;.

Additionally, since the financial crisis, EU Member States have seriously cut their military expenditures at the national and european levels. As illustrated below, the military expenditure of the EU in 2012 (with 1.5% of GDP) was one of the smallest in comparison to the other world powers. Taking into account to overall proportion of the percentage in the overall world economy, the 1.5% seems inappropriate. As per, many institutions (World Bank, European Commission) and agency (CIA), the overall GDP of the US ($16.7tn)  and EU ($15.8tn) in 2013 were almost equal, but not their military spending.

Source: SIPRI 2013

Certainly, the US is a unitary state (in terms of national security), while the EU is an international organization composed of 28 Member States. The US has its own yearly federal defense budget, while the EU does not have an united defense budget, but rather 28. But with 28 Member States, it is difficult to claim that solely 1.5% of the EU’s overall GDP is a fair share in military expenditure.

In January 2015, the European Parliament (EP) published a report about European perceptions on a variety of policy areas (access the report here). This report permits to shine a light on the perceptions of EU citizens on policy areas related to the eventual creation of a EU army.

European Parliament Eurobarometer. 2015. “Analytical Overview”. (EB/EP 82.4) 2014 Parlemeter. January 30. Brussels.

Based on the figure above, the strongest factors in composing the European identity are the values of democracy and freedom and the Euro. Interestingly, the three least recognized elements are in fact the ones that are the most symbolic in the formation and fostering of national unity: the anthem, the flag and the motto. Europeans principally feel united through the common share of beliefs – democracy and freedom – which are strongly ingrained in the membership process, the Copenhagen Criteria, in order to become an EU Member; and the currency, which is visible on daily basis in 19 Member States. However, the symbols remain strongly national. European citizens are in fact keeping their allegiance to their national symbols: flag, anthem and motto.

These symbols are necessary to be Europeanized in order to create a European army. Until European citizens do not envision the European symbols over their nationals, the creation of a European military allegiance won’t be possible.

European Parliament Eurobarometer. 2015. “Analytical Overview”. (EB/EP 82.4) 2014 Parlemeter. January 30. Brussels.

 The figure above illustrates the policies wherein European citizens feel that the EU should prioritize. In the case of high politics (defense, security and foreign policy), most Europeans disagree with a common policy. For instance, in the development of a ‘security and defense policy […] to face up to international crises’ EU citizens oppose it at 74%. In combating terrorism, once again the EU citizens are opposed at 71%, and in shaping a common foreign policy, 81% of EU citizens are opposing it. With such numbers, several explanations can be drawn: first, they consider high politics a national priority; second, the national governments are fighting in order not to loose the grip over the control of these policy-areas; third, citizens are overall against foreign, security and defense policy, caused by a certain power-aversion.

A United States of Europe?

All EU Member States are neither risk- nor power-averse. For instance, France since the turn of the century has not shied away from its rank of middle-power. In a matter of five years, it has waged war in Libya, Mali, Central African Republic, Iraq, the Sahel region, and almost in Syria. The United Kingdom was a very active international actor and French partner, but has been less interested in military action since the coalition in Libya in 2011. The UK is still dealing with the Iraq syndrome and lengthy Afghan war. Since the opposition of the legislature to go in Syria, the UK has been irrelevant in security and defense affairs at the great concern of its American partner. Other Member States have been more vocal. With the Arab Spring, the Russian incursions in Georgia (2008), Crimea, and now Eastern Ukraine, the rise of the Islamic State (IS), the Europeans may be united in rhetorics, but are neither willing to deploy forces nor empower the EU in doing more.

Ultimately, the creation of a true European army would require two things: first, the creation of a clear European demos; second, a federal entity where most European interests are common. The creation of a United States of Europe will be necessary. In the US, the Congress or the President, under special circumstances, can declare war to other states. The different military branches – Army, Navy, Air Force – are all regulated under the Department of Defense (DoD) and can be deployed at anytime even if a Governor of a state is opposed to it. The Federal government is in charged of world military operation. In the case of the EU, there is no such thing as a European DoD. The European External Action Service (EEAS) is a ‘service’ in charged of shaping a common European Foreign policy with the consent of the Member States. Only the Member States can decide on using military force. A European army will remain a topic of discussion, nothing more.

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

RIP Cold War – Cuba, Diplomacy and the Miamian Emotional Distress

 

Listening on the radio John Kerry’ speech and the sounds of the trumpets and drums accompanying the rise of the American flag in Havana from Miami was an historical moment. It marks the end of the Cold War politics thanks to a sound diplomatic move by the Obama administration under a complex emotional cloud in the mind of some American policy-makers and Cuban-American citizens. Cuba and its authoritarian regime are the reminiscence of the “amber of Cold War politics” that technically ended with the implosion of the Soviet Union in 1991. If the ceremony led by the US Secretary of State, John Kerry, symbolizes in some regards the last days of Cold War politics, it can be perceived from Miami as some sort of treason.

The US Mission in Havana

Kerry’s visit and remarks in the Cuban capital of Havana is historical as it is the first US Secretary of State to visit Cuba since 1945. The ceremony comported of Kerry’s remarks, the rise of the US flag by the three marines that brought it down for a last time in 1961, and a poem read by Cuban-American poet, Richard Blanco. The opening of the diplomatic relations with Cuba should not be framed as an Obama gamble, but rather as a sound diplomatic move by the Executive Branch (read here a previous analysis on the concept of diplomatic victories regarding Cuba and Iran). However, the opening of the US embassy, which officially took place on July 20^th, does not mean that the embargo on Cuba has been lifted. Only Congress can decide and vote on the future of the embargo. Even if travel to Cuba has increased since January, travel restrictions for American citizens are still in place. In addition, American and Cuban diplomats are still confined to the capitals in terms of movements. They both require authorization in order to travel outside of the capitals.

So far, the leadership of the US mission in Cuba will be in the hands of long-time diplomat Jeffrey DeLaurentis. The Obama administration is waiting on the nomination of an Ambassador for Cuba. Such nomination will have to go through the confirmation by the Congress and will most likely translate into a deep ideological fight between the Democrats and the Republicans. In addition the nominee could become a hot-potato for both Democrats and Republicans currently seeking for the nomination of their respective parties for the 2016 presidential elections.

The Power of Diplomacy

The diplomatic opening between the US and Cuba is in many instances a textbook case of the diplomatic literature. The traditional definition of diplomacy implies that diplomacy is an act of negotiation processes between states. Diplomacy permits to inform the foreign policy making of states. Such diplomatic opening seeks to normalize US-Cuban relations by advancing American interests despite the ideological foundation of the Castro regime. Based on such assumption that Obama should not interact with the Castro regime because of the authoritarian nature of the Cuban regime, the US should in fact cancel most of its diplomatic missions and rethink some of its most important ones like the ones in Russia (a ‘managed democracy’), China (Communist regime), Pakistan (authoritarian), Afghanistan, Saudi Arabia and so forth. For the US not to be diplomatically engaged with such powerful and relevant state would be a serious strategic error.

The diplomatic smoothing of the US-Cuban relations demonstrates a certain strategic rationality by the Obama administration informed by fact rather than political ideologies. “We [the United States and Cuba] are separated by just over 90 miles” said President Obama in his speech in December 2014 announcing the opening of the relations. “But year after year, an ideological and economic barrier hardened between our two countries.” President Obama underlined that the opening of the relations marked a policy turn and “will end an outdated approach that, for decades, has failed to advance our interests.” If the embargo’s primary goal was to contain Cuba leading to the survival of the Castro regime for over five decades, then it has succeeded. However, if the embargo was implemented in order to lead to political change and transition in the long term, then it has failed. August 14^th ceremony was “a day for pushing aside old barriers” said John Kerry “and exploring new possibilities.”

The Emotional Embargo

Naturally, some American policy-makers, like two senators and presidential hopefuls, Senators Marco Rubio of Florida and Ted Cruz of Texas, former Governor of Florida, Jeb Bush, are all in favor of maintaining the embargo. In a speech last week at the Foreign Policy Initiative in New York City, Senator Marco Rubio argued: “President Obama has rewarded the Castro regime for its repressive tactics and persistent, patient opposition to American interests.” He went on denouncing the fact that the Obama administration has offered “legitimacy to a state sponsor of terror.” If all three are seeking for the support of the powerful Cuban leadership in Miami and South Florida, the case of Marco Rubio may be a little different as he in fact illustrates the general feeling of the Cuban-American community of absolute opposition to interact and deal with the Castro regime. In some level Kerry responded in his address to such concern by arguing that “we [the United States] will continue to urge the Cuban Government to fulfill its obligations under the UN and inter-American human rights covenants – obligations shared by the United States and every other country in the Americas.”

If most of the United States does not take heart at the opening with Cuba, for Cuban-Americans, whom are making of a powerful lobby in Washington D.C. in influencing Congress, it is a different narrative. A recent poll produced by Bendixen & Amandi illustrates such argument. 69% of Americans living outside Miami support the normalization of relations with Cuba against 41% in favor living in Miami. In addition, 60% of Americans born in the US support the end of the embargo.

Source: Bendixen&Amandi. 2015. p.9

Source: Bendixen&Amandi. 2015. p.24

The Cuban file illustrates a generational gap between the elder generations – born before 1980 – and the younger ones (as well called ABC, American-Born Cubans) – born after 1980 – maintaining the status-quo. The concept of ‘emotional embargo’ is very much present in the mind of the Cuban-American community creating an emotional reaction to the policy-change of the Obama administration, which has been perceived as a betrayal from the leadership. The opening of the US embassy in Havana is principally a symbolic move because most of the work remains to be done. Obama is in fact dealing with a complex situation of working with an authoritarian regime on the one hand, and seeking to assist Cuban dissidents and civil society on the other.

A Timely Opening

The diplomatic relations with Cuba is a fascinating foreign policy case for several reasons. First, it holds a strong emotional and human dimension upheld within the mind and heart of many Cuban-American citizens. Some have accepted the situation, others are still,

Photo: AP

understandingly, opposed to any relations with the Castro regime. Second, diplomatic relations are not about approval of ideologies and political regimes, they are about ‘government to government’ relations. “The establishment of normal diplomatic relations” argued John Kerry “is not something that one government does as a favor to another.” Nixon did it with China as part of the ping-pong diplomacy in the early 1970s and he was certainly not trying to empower Mao Zedong. Third, diplomatic opening is not an illustration of weakness but rather of character. Diplomacy was not designed to maintain relations with ‘friends’ but rather with ‘foes’ and ‘enemies.’ Opening relations with Cuba will allow both countries to turn the page of the Cold War and move on into the 21^st century.

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

 

Does the World Hate Russia?

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

A large segment of the academic literature reflects on the power of attraction, known as well as soft power, of the European Union and the United States. But what about Russia? and Putin? What are the global perceptions of Putin’s Russia since the turn of the century? In a recent survey produced by the Pew Research Center, most of the world – aside from China, India, Ghana and Vietnam – has a largely unfavorable opinions of Russia and Putin (see below).

The concept of soft power is a very theoretical concept famously developed by Joseph Nye in his book ‘Soft Power: The Mean to Succeed in World Politics’ (1998). His argument is directly connected with the earlier work produced by Antonio Gramsci. But Nye was able to take the core of Gramsci’s argument and bring it at the global level in order to talk about foreign policy. Gramsci was mostly concerned about domestic Italian politics and non-change in the 30s. When talking about opinions and perceptions, the concept of soft power is certainly directly connected as it does influence state’s foreign policy. But let’s take a look at the way the transatlantic community see and perceive Russia and Putin.

Transatlantic Perceptions of Russia and Putin

The US-Russian perceptions are very much aligned with change of leadership in the US (from Bush to Obama), policy change (failed 2009 reset policy and the pivot), and the regional crises (Ukraine, Syria) and domestic narratives controlled by Putin. The graph below claims that the opinions have worsened on both sides of the Altantic. The last two years of the Bush administration were a period little more stable between the two superpowers despite the 2008 Russian invasion of Georgia. With the election of President Obama and his tentative to soften and deepen the relationship with Russia, the opinions of one another become more favorable in Russia (+13 point of %) than in the US (+6 point of %) though. From 2010 to the invasion of Crimea, the options were pretty stable. The lowest point was in 2014 with the annexation of Crimea and the beginning of the war in Eastern Ukraine.

Considering the European views and opinions of Russia, the Pew did not produce a graph, but included a set of numbers at the end of the survey. The transatlantic opinion is very homogenous since 2007 (since chart below). Not surprisingly France and the United Kingdom have had the most favorable opinion of Russia, and Poland the lowest in recent years. The US is in the mix of the transatlantic opinion. However, it would have been interesting to see how the Baltic and Nordic EU Member States (Finland, Sweden, Lithuania, Latvia, Estonia, Denmark) and Eastern EU Member States (Hungary, Romania, Bulgaria, Czech Republic, Austria) perceive Russia over the years. The survey failed in providing the data for these states.

Source: Pew Research Center. 2015. p.11 / Data compiled by Politipond

Vladimir Putin, Global Villain?

A big part of the negative views of Russia in the US and Western Europe is directly connected to the person of Vladimir Putin. The press, academia, and think tank communities (here are some excellent works and examples such as book by Fiona Hill, and a book review of Karen Dawisha’s manuscript) have created some type of admiration/incomprehension around the person of Vladimir Putin. There is a certain fascination about Putin in the US and Western Europe as Vladimir Putin has been framed as either an irrational actor, or a master of realpolitik (read here and here previous analyses). In any case, the US and Americans have never had the highest degree of confidence in Putin.

Even though the impacts of Russian influences on the 2004 Orange Revolution in Ukraine and 2008 war in Georgia were not major, as demonstrated by the data below, in affecting the confidence in Putin, the turning point was the incursion in Crimea and ultimately its annexation. Then with the lingering war in Eastern Ukraine, and even the ‘accidental’ targeting of the civilian Malaysian flight last summer, they have contributed in lowering the confidence and trust in Vladimir Putin. In some ways, the low degree confidence has been materialized in the isolation of Vladimir Putin, whom has been absent (or more accurately kick out of the G-8) of the recent G-7 meeting. In addition, Putin has not demonstrated being serious in trying to solve the Ukrainian crisis, as he was never committed to make the Minsk Protocol II work.

All these graphs and data provided by the Pew highlight one common trend, most of the world share a common negative perceptions of Russia and his president. In the 21st century, it is quite rare to find such unanimous position on an issue. More seriously these data demonstrate that Putin’s Russia is not concerned about global perceptions. Putin has a vision for Russia and has demonstrated that he can not only remain in power (which he has done since 2000), control the domestic narrative (through playing the nationalist card and  limiting the freedom of press and civil society), and advance Russian interests where and when required.

European and American sanctions are certainly hurting the Russian economy, already weakened by the historically low prices of hydrocarbons, but Putin has been tactical in choosing which issues are important to fight for. For instance Ukraine is, but Iran was not so much as Putin, with his Chinese counterpart, agreed on the Vienna agreement in July. Putin will continue to fascinate and certainly won’t stop in leading Russia where he desires, with or without the approval of global opinions.

(Copyright 2015 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

“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 5^th 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 30^th 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

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

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

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).