The Disintegration of Europe?

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Could the greatest threat to the unity and future of the European Union come from within the member states? For a long time, the concerns were coming from capitals seeking to leave the block, economic difficulties or even foreign pressures. With the 2016 Brexit vote, the national decision to exit the EU has in fact proven to foster unity among the member states on maintaining the integrity of the Union. But with the 2014 Scottish referendum (calls for a second referendum are being advanced), the movements within the nation-states to seek for greater regional autonomy, influence, and power from the national capital have been relentless.

The Catalan crisis is an illustration of a region seeking for independence from its state. The fraught relations between Madrid and Barcelona are real (read past analyses here and here). The crisis continues to escalate. Over the weekend, Prime Minister Mariano Rajoy declared that Madrid, the central government, would remove the region’s secessionist leaders. PM Rajoy announced the use of the Article 155 of the Spanish constitution, a radical step and an unprecedented event, which will dismiss the Catalan Cabinet, see Madrid assume all the powers of the regional executive, curb the role of the regional parliament and call for new regional election in the coming six-months. The central government does not seem keen at the moment to seek for mediation, but rather continues down the road of confrontation.

In addition, over the weekend, two wealthy Italian regions, Lombardy and Veneto, voted in non-binding referendums in favor of greater autonomy and seeking more power from Rome. These referendums, promoted by the Northern League ruling both regions, are not calls for secession from Rome, but instead a call for greater say and influence on issues of tax distribution and financial independence on several areas such as security, immigration and education.

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@ European Commission

Both Northern Italian regions contribute to a significant share of the Italian economy, with 20 percent for Lombardy and 10 percent for Veneto. Despite a significant share of Italian GDP, last summer Veneto received a €17bn rescue deal to address the banking crisis.

Even though it is too early to talk of a full fragmentation of some member states and the European Union, several trends and observations shall be advanced in order to rationalize and explain these forces at play. Prior to looking at a series of questions, which could contribute to the development of a series of hypotheses, one ought to recognize the complexities and particularities of each secessionist movements and the unique histories of the member states within the EU and their relationships with Brussels. These hypotheses try to identify commonalities between the recent movements in order to comprehend the reemergence of these regional forces.

  • Are wealthy regions done with solidarity via financial redistributions to other regions/states? Should the EU or the state be blamed for it?
  • Are these referendums informed by a conscious desire to guarantee cultural and linguistic survival, authenticity and uniqueness in a globalized world? This feeling is very much represented in Catalonia (despite being a major global touristic destination), in Nice and Corsica (France), and so forth.
  • Is the EU perceived as the enemy? In some regions of the EU, the EU or Brussels and in particular the Commission, are perceived as the actor promoting economic liberalism and ultimately undermining a certain savoir vivre. But in the recent case of Catalonia, the EU is called upon to mediate in domestic politics and national matters. Even further, there are some cases of desire to join the Union as a full member, which is a fantasy considering the responses of most European capitals and support to PM Rajoy.
  • The regional calculus takes for granted the core responsibility of  the nation-state: national security and survival of the state. War and peace are forgotten concepts in Western Europe, which is quite ironic considering the state of European peripheries from the East (Ukraine) to the Mediterranean basin.
  • Are referendums the way to proceed in order engage with the central government? Do referendums serve the interests of the majority or only of the few?
  • Do these separatist movements inform us of a higher desire of activism and democratic inclusion? Meaning, there is a feeling of deposition to control civic life and influence the making of the nation. By scaling down from the national capital to the regional capital, there is a belief that one can have a greater say and influence in shaping the policy-making process and therefore the policy outputs. This democratic argument was very much present in the Brexit vote. These movements represent to some extent the end of centralized nation-states. But does this feeling of democratic inclusion at a lower level illustrate a narrow understanding of the world? It is not certain that an hypothetical sovereign Catalan state can, on its own, weather global forces from flow of capital to people.
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@ Roland Brückner

Lastly, could we go even further and see these regional forces as the success of the European Union emphasizing that the state is now unable to fulfil the need of national citizens. In the case of Catalonia, the EU flag has been flown along the regional symbols. However, it is not certain that other regions would feel the same way. But if this were the case, the current EU would not be suited for the move towards a federation of regions considering that it is currently a Union of Sovereign States.

(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).

 

Putin, Master of Europe?

Credit: Alexei Druzhinin / RIA Novosti / Associated Press
Credit: Alexei Druzhinin / RIA Novosti / Associated Press

Is Russia winning its war against Europe? It surely looks like it. Since 2008, Putin’s Russia has been over active in dividing and conquering the members of the European Union and the Euro-Atlantic community (the North Atlantic Treaty Organization). Vladimir Putin, President of Russia, has been successful by implementing a strategy on two fronts: regional/international and domestic. Despite his track record of not bidding himself to any agreement, Putin has transformed Russia into the ‘indispensable nation’ in Europe.

Geopolitics – Maintaining Regional/International Chaos

Putin understands one thing: safeguarding Russia’s neighborhood and empowering its sphere of influence at any cost. In order to fulfill both goals, Putin has been using military force in order to limit the horizontal expansion of NATO and the EU. On the European continent, Russia is the only state willing to use military force to advance its interest. It has done so in Georgia in 2008 and in Ukraine since 2013 (this does not include the lengthy war in Chechnya). In 2008, Putin saw the need to attack Georgia as the Bush administration was foreseeing the incorporation of Georgia within NATO. By attacking Georgia, Putin forced Euro-Atlantic leaders to rethink about the consequence and strategic soundness of including a small state like Georgia within the Alliance. The Article 5 was a powerful deterrent during the Cold War, but could be in the current multipolar order a threat to the security of the Euro-Atlantic community.

In 2013, Ukraine was on its way to sign a trade agreement with the EU. Putin saw it as a threat and pushed its influence over the corrupted and pro-Russian leadership, Viktor Yanukovych. Ukrainian President abruptly ended the talks causing pro-Western manifestations in Kiev. In a matter of months, Yanukovych had fled Ukraine, Russia had annexed Crimea and continues supporting pro-Russian militiamen in Eastern Ukraine. Though the annexation of Crimea was not enough to unite the 28 EU Member States against Russia, the evidences gathered by NATO demonstrating the clear military involvement of Russia in

Picture: Reuters
Picture: Reuters

Eastern Ukraine permitted the 28 EU leaders to implement sanctions against Russian individuals and corporations.

Putin was again the heart of the February negotiations with Angela Merkel of Germany and François Hollande of France in order to agree on the baseline for a ceasefire in Eastern Ukraine. The Minsk provisions have not lived to the promises hoped by Europeans.

Aside from the use of military power, Putin has been working on the creation of a Eurasian Union. This Union initiated by Vladimir Putin is a way to balance out the European Union and the North Atlantic Treaty Organization. The Eurasian Union has allowed Putin to attract regional countries from the EU to his Union. As per Nico Popescu of the EU-ISS, it exists two Eurasian Union: one real, an economic union; and, one imagined with geopolitical aspirations. The first one, the Eurasian Economic Union, is led by the Eurasian Economic Commission, which has a staff of 1,000 employees, which was established by the Eurasian Union treaty in May 2014. While the second union, with geopolitical role, is the center point of Putin’s third term seeking to become an organization, like the EU, NAFTA among other, and reintegrating former states of the Soviet Union under one entity.

The Eurasian Economic Union (EEU) is currently under construction. The Treaty came into force on January 1st, 2015 with three core members, Belarus, Kazakhstan and Russia, and Armenia (entering on January 2nd) and Kyrgyzstan joining in May 2015. As presented by Ian Bremmer of the Eurasia Group the EEU in perspective is quite considerable: “The size of the EEU is not the primary cause for concern; rather, it’s what it reveals about Vladimir Putin and his commitment to maintaining regional dominance. It’s why he will go to such extremes to keep Ukraine from joining Western institutions like the EU or NATO. He’s not willing to cede this sphere of influence, and Ukraine is the crown jewel; there is no viable, robust Eurasian Union without Ukraine.”

Vladimir Putin has masterfully locked in the control of geopolitics in Europe, the Caucasus and Central Asia. Additionally, Putin has increased his influence in the conflicts in the Middle East. Bashar al-Assad, President of Syria, owes his power to Putin as he reached at the last minute to his American counterpart, President Obama, in order to agree on an international deal to destroy Syrian chemical weapons.

Playing with European Domestic Malaise

Within the European Union, Russia has been highly successful in creating disunity among the 28 Member States. Putin has used two aspects to Russia’s advantages: Europe’s energy dependence and the sluggish European economic context.

On the question of energy, the EU-28 are highly dependent on Russian hydrocarbons (gas and oil). Germany, France, Italy, Greece and Eastern EU Member States need a constant influx of Russian energy in order to maintain their economic and industrial engines going. Europeans have dealt, poorly, with the security of supply of energy as illustrated below.

Chart: European Dependence on Russian hydrocarbons (2002-2012)

3. Chart 1- EU dependence on Russian energy-B&W
Source: Eurostat. 2014. “Energy Dependency Rate, EU-28, 2002-2012 (percent of net imports in gross inland consumptions and bunkers, based on tons of oil equivalent) YB14

The graph above demonstrates the high degree of dependence on Russian hydrocarbons. The trend has certainly be declining, but the overall average remains too high in order to guarantee a security of supply. In recent years, the Europeans have been working on lowering their dependency on Russia through renewable energy and, for a long time, on nuclear energy.

Figure: Production of Primary Energy in Europe

5. Fig 2-Production of Primary Energy in Europe-B&W
Source: Eurostat. 2014. “Production of Primary Energy, EU-28, 2012 (percent of total, based on tonnes of oil equivalent) YB14.”

Renewable energy – composed of biomass, hydropower, wind, solar and geothermal energies – are increasing and offering an alternative to Europeans. However, renewables cannot be the only source of energy as they need to be backed up by either hydrocarbons or nuclear power. If Europeans are working on moving towards greener economies, they still require hydrocarbons. Germany has been the prime example with the Nord Stream pipeline bringing Russian hydrocarbons directly at home without depending on transit countries. With the crash of oil prices, hydrocarbons remain an important share of European consumptions.

The second door for Russian intrusion and/or attraction is money. Despite a dire domestic economic and financial situation, Vladimir Putin has been able to attract the most desperate EU Member States such as Italy and Greece as well as building strong ties with some national political parties. Since its financial collapse, Greece has proven to be the weakest EU and Eurozone member. Greece’s default was avoided by a series of multilateral bailouts by the troika – ECB, European Commission and IMF -, keeping the country within the Eurozone. However, these bailouts have come at great costs requiring  large spending cuts in social and welfare programs. Unemployment levels are through the roof, young Greeks are fleeing to Germany to get a higher education, and dying in Greece

Photograph: Sasha Mordovets/Getty Images
Photograph: Sasha Mordovets/Getty Images

is once again a reality (read here a previous analysis).

In addition of this dire domestic context and the succession of powerless former government, Syriza, the extreme-left party led by Alexis Tsipras, was elected in January 2015 (read here a previous analysis on Syriza). Tsipras’ platform was based on renegotiations of the terms of the bailouts and rebuilding Greek national psych. From electoral promises to governing realities, Tspiras was unable to do so and is now seeking for outside funding in order to “come up with money to pay off maturing debts, revive its devastated economy and renegotiate its loan agreements with other countries in the eurozone.” Prime Minister Tsipras was in Moscow last week. Both countries are claiming that Tsipras did not ask for money. Considering Putin’s behavior and Tsipras’ desperation, it is difficult to believe that Tsipras and Putin only talked of the new gas pipeline through Greece and discounts on gas prices. Additionally, Tsipras has been advocating for a removal of the European sanctions against Russia. Such comment is a departure from European unity in order to maintain economic sanctions on Russia.

From state to party-sponsoring, Putin has found a way to change the perceptions within Europe about Russia. In France, recent allegations and press coverage have demonstrated that a Russian bank has been financing the extreme right wing political party, the Front National. Reports show that the Russian bank, First Czech Russian Bank (FCRB), had lent EURO9 million to the party. The party claims that no French banks were willing to lend them money, forcing them to find foreign funding. However, the Front National has been very vocal in defending Vladimir Putin’s domestic and foreign policies and portrayed him as a great leader. The French government is reflecting on launching an investigation to look into the campaign financing of the FN.

The relationship between Putin and the European far-rights has grown thanks to the dire socio-economic context and the rise of euroskepticism all around Europe. “The far right is attracted by Putin’s Russia,” argued Pierre Lellouche, a member of a mainstream conservative party, the Union for a Popular Movement, “because it embodies the traditional social values they feel Europe has abandoned.”

europe-russia

Divide and Conquer

Putin is the key to regional stability and instability. Since his arrival to power in 2000, Vladimir Putin has worked on rebuilding the grandeur of Russia and perceives the collapse of the Soviet Union as the greatest catastrophe of the 20th century. Vladimir Putin is using all aspects of Russian power to increase Russia’s regional and international influence. He has been very successful at it. Bashar al-Assad of Syria is still in power of a destroyed country, Crimea is now part of Russia, Eastern Ukraine seems englobed in a long and nasty war and could end up as the next piece of Russia, and Russia is regularly interfering with national sovereignty of EU and NATO members.

In response, the members of the Euro-Atlantic community have only condemned Russia’s actions, agreed on mild sanctions and are hoping to stop conflicts and tensions through diplomatic agreements. Are Putin’ strategies sustainable? and, what are the endgame? Putin certainly emerges as being very successful in creating discord, affecting the unity of EU Member States, and underscoring the power-aversion of the EU and to some degree the US. Putin has made Russia the indispensable European state.

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