“We are no longer the coolest dudes on the planet.” Jan Techau from Carnegie is right. In just a few years, Europe has lost much of its appeal and is now mired in problems. Though the continent’s many strengths are underestimated, the current challenges can seriously undermine our position if we don’t act soon.
Many of the structural problems are to be found across Europe. The difficulty is that they cannot be tackled at the European Union level. Issues like an ageing population, economic competitiveness and immigration all need to be addressed at a national, even local level. Furthermore, the powers of ‘Brussels’ are fairly limited; especially social policies, which are still primarily a national competence. Therefore, the future of Europe lies in the hands of national politicians in each of the 35-odd capitals.
The laundry list consists of various challenges, ranging from pure economic to social and geopolitical issues. But many of them are intertwined. Losing our competitive edge is related to the ageing (and shrinking) of Europe’s population. Because of the mess of the eurozone, social and economic divisions sharpen. The increasing powers of the EU only make the legitimacy gap wider. And Europe is not ready to beef up its hard power capabilities, even as a ring of fire starts to surround us – stretching from the Maghreb to the Baltic Sea.
Well before the credit crisis broke out in 2008, Europe’s economy was in an ailing condition. On labour productivity performance in particular, we were weaker than key competitors. Between 1995 and 2007, the growth rate of GDP per hour was more than 2% a year in the United States; in the same period this figure fell to less than 1.8% in the EU-15. Spain and Italy hardly managed to increase their productivity at all (0.46% and 0.64% respectively), despite the 12 years of ICT revolution driving productivity growth around the world.
The gap is widening, because the single market is still far from complete and keeps being fragmented. For years, EU member states have been talking about extending the freedom of providing services, but to little avail. National interests and fears prohibit such an opening of economic borders within the Union. A high-ranking official at the Commission voiced his frustration. “There is hardly any real attention for European competitiveness. Member states insist on being respected as sovereign countries. A complete internal market tarnishes their position.”
Within the EU large national disparities abound. There is a serious competitiveness divide in the EU, with the northern part staying its course, while Europe’s south and east fall behind. Even within member states there are large differences; some areas in Spain are just as competitive as regions in Germany. In 2012 The World Economic Forum warned of the consequences of a diverged rather than a converged Europe: “The weaker performance of others is negatively impacting the bloc as a whole.”
Fixing the national economy is a bit of a standard checklist. Labour laws have to be flexible, governments should invest more in education and innovation, access to finance should made easier and regulatory burdens limited. This does not mean that we should all become Americans; in countries like Sweden and Germany there exist high levels of social policy and taxes, but these northern economies perform well. And in southern Europe companies can focus on high-quality products like fashionable leather bags, instead of racing to the bottom in mass-production competition.
European countries cannot keep their state size and budgets at the current level. On average, government expenditure is half of the GDP of EU member states. In Greece and France this figure is 58%. The latter country hasn’t run a balanced budget since the 1970s. Debt levels are still rising, though the eurocrisis is now formally behind us. In the eurozone government debt is around 94% of GDP, up from around 70% in the 2000s.
Europe is living beyond its means, as we will see in the next paragraph, and a different kind of state is necessary to bring in more dynamics. The economic system is rigid and too much dependent on the state, and this is one reason why Europe’s economy isn’t breathing very easily.
It’s not just the national states who are to blame for the growth engine running out of steam. Europe lacks an entrepreneurial mindset, and the European Union has arguably failed to produce enough growth-friendly policies.
The business culture is anything but great. The last few decades only a handful of big international companies were created on Europe’s soil, while in the United States and in Asia the startup world delivers many more big businesses. Why didn’t Europe bring forth Google, Microsoft or Huawei? Millions of jobs have been lost since the eurocrisis broke out, and existing companies are still shrinking their workforce. The only growth in jobs is coming from the green sector and ICT related industries.
In general Europeans are risk-averse and tend to prefer a fixed job over an insecure existence as a freelancer. Going bankrupt is a shame and will result in your name on the financial blacklist for up to eight years, as is the case in France. Becoming an entrepreneur is only popular amongst Europe’s youth; half of the under-24s say self-employment is desirable. Expanding your business activities to other EU member states will result in an administrative quagmire. Europe is still a myriad of different labour and tax rules, as well as an overbearing protection of intellectual property. Ever tried opening your Spotify or iTunes account in another country?
The EU’s aim to ‘unleash the potential’ of the economy is weak and often focused on the wrong things. The bulk of the European budget goes to agricultural subsidies and regional funds, instead of to research and development or the improvement of the IT infrastructure. Pressured by the sector, the Commission announced a strategy in 2013 to increase the GDP percentage of Europe’s (heavy) industry. That all sounds more like preserving the past instead of investing in the future.
As a result of all these shortcomings, the EU's annual GDP growth will only be around 1.6% until 2020, compared to 2.3% in the first seven years of this century. Most other economies, including the United States will show much higher growth figures. This is even more depressing than at first glance, as it includes the newest members states which are still lagging behind the older member states. Normally we could expect growth between 3-5% from these types of states, yet they are nowhere close to that.
The World Economic Forum said in a critical analysis of Europe’s competitiveness: “It underperforms in every single pillar that builds a smarter, knowledge-intensive society. The gap in creating a knowledge-based economy is evident in building a highly skilful, digital savvy, innovative economy with favourable business conditions for entrepreneurship, where the EU clearly falls short compared with other advanced economies.”
Europe needs growth badly. Not only to compensate for the shrinkage during the crisis years, but also to bring down the shocking unemployment figure of 25 million people, of which 5 million are young Europeans. Growth is a necessary condition to pay off the huge debts (both public and private). It is, most important of all, indispensable to absorb the negative effects of the ageing of the population.
In common with most other prosperous regions, the EU is faced with an ageing population. The topic may have disappeared from the headlines because of the eurozone crisis, but it’s still there. Even though there have been tough budget cuts on welfare, healthcare and in a rise in the pension age in many countries, Europe is anything but ready for a ‘silver future’. To keep levels of welfare entitlements at current levels, we need at least 3-4% of GDP growth annually. After years of decline and stagnation, that goal seems further away than ever.
Back in 2007 – before the crisis – Standard & Poor's warned countries about the increasing debt burden of the welfare state. The rating agency expected that by the mid 2020s, deficits of European countries would rise to more than 4%, with interest costs of additional borrowing exacerbating the pressure to 6% in 2030 and 14% in 2050.
A Japan scenario looms. The country suffered from decades of economic stagnation, while high debts kept squeezing the population and the state. Japan has the added burden of a low labour participation rate of women. In Europe the ‘gender gap’ is around 12%, but in countries like Italy, the Czech Republic and Romania women are structurally excluded from the economy. The gender gap can thwart Europe’s goal of keeping the size of the labour population stable.
While emerging economies like India and Brazil profit from a ‘youth bulge’ – a young and cheap contingent of labour – Europe will struggle to find enough staff to keep its companies, government bodies and schools running. As a result, labour will become more expensive, bringing down competitiveness. In 2050 the EU will have a labour shortage of up to 35 million people. The ratio of retirees to workers will double. If nothing happens to the low labour participation rates of older workers, Europe’s output will plummet in the next four decades. In the US and Australia, immigration is often used to ease the situation.
Almost all European countries are affected by the ageing process, especially big ones like Italy and Germany. In Italy, the government would need to raise its retirement age to 77 or admit 2.2 million immigrants annually to maintain its worker to retiree ratio. “Ageing is one of the greatest social and economic challenges of the 21st century for European societies,” according to the European Commission. By 2025 more than 20% of Europeans will be 65 years or older, with a particularly rapid increase in numbers of over-80s.
It is great that we all get older, but from an economic and social point of view, we are heading for disaster. The shrinking workforce and increasing pressure on state expenditure for things like healthcare and pensions could become millstone for the next generation. If nothing happens Europe will quickly be impoverished. The social consequences can also be enormous. Without raising the retirement age, young people will end up paying much more for services for older generations. And when they grow old, the welfare state will be gone. We have already seen intergenerational conflicts break out in many European countries.
The solution to a greying population is a mixed bag of measures. People have to work longer and more hours to keep productivity and public services level. Europe needs active immigration policies, starting now – in Switzerland more than a third of the healthcare jobs are filled by immigrants – and welfare entitlements must be cut or revolutionised, for instance by introducing e-health solutions.
The Union may be an ‘ever closer’ one, but the continent is becoming more divided. Between north and south, within countries, between age groups. This is not just an economic, but also a social and political challenge, as it may undermine our societies. The rifts also make us less open to the rest of the world, for instance on immigration policies.
The social upheaval is caused by many events and circumstances. Massive unemployment in southern and eastern Europe is probably the biggest worry, especially youth unemployment. Now more than 14 million young Europeans are labelled as NEETs: kids and adolescents who are not in employment, education or training. Their inactivity costs Europe at least €153 billion a year, as well as engendering a depressing disengagement from society. As unemployment figures will only drop slowly in the next few years, this generation will become a lost one.
The crisis has chewed off a part of average household incomes, leading to a divergence between countries in the eurozone instead of convergence, according to research by Friends of Europe. The think-tank has registered an overall reduction of public investment in the EU of 15% in the crisis years, alongside decreasing funds for education, child care and health.
In his latest book, Belgian political scientist Jonathan Holslag, describes the fraying of the welfare state. “Not so much of the institution, of the different benefits and safety nets, but mostly of the welfare state as a system of redistributing economic opportunities. The situation of the bottom 40%, the two lowest income fifths of the European population, is bad. They are really losing out rapidly in terms of purchasing power and employment opportunities.” Holslag also expects the lower middle class to be affected. “We will end up with a structural social and economic problem that affects the majority of Europeans. That will reverse the positive current that we witnessed in the last six decades.”
The inequality may be inside countries, but the geographical split is more visible. Northern Europe has maintained its competitive edge, while countries in the south are lagging behind. More than one in three young Spaniards have no more than lower secondary education. Many of them left school in the 2000s to work in the booming construction sector, and now they are left on the streets, uneducated. In Germany less than one in six has this low level of education.
The American think-tank Brookings sees the emergence of a two-class eurozone. Member states are going in opposite directions. Countries like France, stuck between the successful and failing groups, will try to cling to first-class status. The losers – Spain, Portugal, Italy and Greece – now have a 7% to 23% lower GDP than before the crisis. The richer countries have kept most of their economic power and prosperity, only their debts have risen.
It’s easy to see how this situation could get out of hand, warns Brookings. “The two-class eurozone created by stagnation will dramatically increase political divisions between the member states. The core countries will see little need for major change, given the short-term costs and risks associated with it, and will be relatively desensitised to hardship in the periphery. Meanwhile, governing parties in the periphery will be increasingly desperate. This will cause a widening of the divide between the core and the periphery.”
The rift within the eurozone partly explains the resurgence of nationalism, but also the emergence of regionalism. Why would richer Catalunya bother with the stagnant rest of Spain? What’s to gain for the Flemish people to stay united with the Wallonians? Northern Italy is much richer than the southern part, which separatists from the north call ‘Africa’.
On the nationalist side, things start looking very ugly. The Greek party Syriza wants to kick the EU and IMF people out of the country. Members of the Hungarian party Jobbik are anti-semitic, anti-globalisation and anti-EU. The Dutch PVV party leader Geert Wilders wants to ‘settle’ the decreasing of the Moroccan population in the Netherlands. British independence party UKIP wants to leave the EU and stop immigration to the UK. These parties are not just operating at the fringes, they get a large share of the popular vote: up to 30% in recent elections.
What’s happening here? The best perspective on this challenge was given by an outsider. Getting to meet Claude Grunitzky was quite a challenge. It took months to set a date and a place, but once at Brussels Midi Station we had to move three times – first because filming is not allowed inside the station, then cafe was too noisy and finally construction workers started creating a racket. Luckily, the quiet, shiny lobby of the Pullman hotel beckoned.
He was on the interview list because Grunitzky has a unique point of view on the future of Europe. The media entrepreneur was born in Togo, but raised all over the world – in Washington, France and the UK. He holds three passports and speaks six languages, and, traveling all the time, he devotes his work life to ‘transculturalism’. Not your standard ‘eurobubble’ researcher. In fact he just came back from a trip to Brazil. “In emerging countries I see optimism, youth, new ideas, risk taking. I am very inspired by this. They feel they are creating their new paradigms, without being always informed by the Western or European perspective.”
Grunitzky is chairman and founder of TRUE, a New York, Paris and London-based think-tank and cultural marketing agency. He first gained recognition for setting up TRACE, a magazine with an explicit international approach to popular culture.
The journalist-entrepreneur has seen the tide turn in Europe. He believes the continent is suffering from an identity crisis: “The new nationalism and populism movements are now painting the immigrant as the source of anxiety, economic stress and social disorder. They create a false perception that immigrants are taking all the jobs that were destined for actual natives.”
If you are ‘different’ as an individual, you end up “gravitating towards the few metropolises in Europe because that is where you are accepted,” says Grunitzky. He thinks there are now two Europes: an open Europe of creative hubs, and an isolated one covering the rest of the continent. “If you look what happened in Switzerland, the polls and rise of the National Front in France, a large chunk of the populations want to stay within themselves and be around people who look like them.”
The eurozone crisis is no longer on top of the agenda even though it is still ‘top of mind’ for policy makers, journalists and think-tank people. And rightly so. Fixing the eurozone is Europe’s current biggest challenge by far, and if we don’t handle it soon it will lead to outright chaos.
However, in the long run, the three aforementioned challenges are even bigger and more structural. We can fix the eurozone crisis relatively quickly, but improving economic strength, managing an ageing population, and creating some sort of common Europe? Fixing these problems will take time.
Whole forests have been chopped down to print countless reports on the eurozone, but in a nutshell, the problem is as follows: When the government leaders of the EU member states decided on monetary union in 1992, they thought that the foundations of a single market and a ‘stability and growth pact’ would be sufficient. Keep your state debt low and your budgets balanced, and you’re welcome to join.
Of course, history has shown that this foundation has proven insufficient. Instead of a convergence of the eurozone, in which the economies would slowly grow towards each other and integrate further, creating a strong union, the economies started to diverge. Fiscal risks were ignored and money could flow freely between member states, creating a huge buildup of investments from the richer countries into smaller member states such as Ireland, Greece and Spain. Europe sleep-walked into a crisis, even Council President Herman Van Rompuy has called the euro ‘a sleeping pill’.
When the credit crisis broke out, the weaknesses of the eurozone were exposed heavily and financial institutions became zombie banks, kept alive only by regular injections of taxpayers’ money and guarantees from the European Central Bank. Instead of a drastic debt restructuring and the closing of banks, the eurozone leaders decided to keep them in place and focus on austerity.
Adriaan Schout, head of the European Studies Programme at Clingendael, is very critical of the way the eurocrisis has been handled. “There is an element of stupidity and a gross underestimation of what we are actually doing. It’s like gambling with history,” he said. Many big projects in the EU are sold as a ‘simple plan’ where competition or the market does the rest, argues Schout: “But national policies and the institutions behind them had to change, sometimes 180 degrees.” This happened, not only with the internal market, but also with the euro. “We thought it was simple, but what we see is that all the institutions behind the euro haven’t adapted, and this leads to frustration.”
Of all the people interviewed for this book, French researcher François Heisbourg gave by far the sharpest analysis of the eurocrisis. The ardent European federalist has sparked controversy with his latest book La fin du rêve européen. He claims that to save the European Union, we must dismantle the eurozone and re-introduce national currencies. For someone who is pro-European like Heisbourg, that is a remarkable statement.
His career was all about Europe, strategy, defence and the world. Aged 63, he is one of the élite of the international policy world: special adviser at the Paris-based think-tank La Fondation pour la Recherche Stratégique, chairman for the International Institute for Strategic Studies in London, and of the Geneva Centre for Security Policy. And from this intellectual platform he now proposes to give up the euro for at least two decades.
According to Heisbourg, we missed several opportunities to create a federal Union, as a crucial ‘underpinning’ to the eurozone. The start of the Maastricht Treaty in 1992, was a false one he says. “The Right section of French politics tried to destroy it immediately”. Then came the Constitutional Treaty, which was killed in two referenda in France and the Netherlands in 2005, and again the federal road was shut off.
When American banks started falling in 2008, the eurozone appeared to steer through the mess unharmed. But behind the scenes the Commission worked rapidly with national governments to rescue more than 100 banks, and it was already clear to some Commission officials that this was just the tip of the iceberg. Hundreds of billions of euros of bad debt sat below the surface line of these bank rescues, and it would be only a matter of time before further structural problems emerged – ones that national government might not have the money or political capital to solve. Only in 2010 did the true scale of the problems start to become clear to a wider public.
Heisbourg: “Divergence between interest rates began and the crisis became an open one in 2010 in Greece.” The debt situation of that country was far bigger than expected and Greece was on the brink of bankruptcy. This would lead to chaos in Europe, as French and German banks in particular were heavily exposed because of money lent irresponsibly to the Greeks. The end result is that the EU saved the banks, and “Greece has been subjected to the longest and deepest economic depression in modern history”.
Heisbourg thinks we should have put Greece “on holiday” from the euro, for ten or 15 years, and to build the federal institutions necessary to underpin the euro in the meantime. After Greece, the crisis spread out to other eurozone countries, not only in terms of enormous costs to save banks, but also in skyrocketing state debts, high (youth) unemployment and three consecutive recessions. While the US is growing again and unemployment has dropped dramatically across the Atlantic, in the eurozone a ‘Japan scenario’ becomes all the more realistic: decades of zero growth, an ageing population and piles of debt preventing improvement.
Therefore Heisbourg proposes to take the euro back to where it was in the 1990s: a currency union with a bandwidth to allow for devaluations. This way the EU can give oxygen to struggling economies like Spain and Italy, who can get the necessary boost with a quick devaluation.
But for Heisbourg, the solution is in essence about saving the European Union: “The euro had a catastrophic effect on the European project. My expectation was, during my research, that I would find increasing dissatisfaction among Europeans vis-à-vis the euro. But the attitudes towards the euro have hardly varied since the beginning of the crisis. There is no downward trend. People understand the instrumentality of the euro. What you do have is a massive and growing disaffection vis-à-vis the Union! It is the European project that is suffering, as a result of the policies that we are following to keep the euro. This is my basic case.”
Economist Philippe Legrain doesn’t go as far as Heisbourg, but also he is very critical of the choices that have been made in the eurozone crisis. “Citizens have been placed second. That’s obvious in the case of Ireland where the costs of bailing out the banks is equivalent to half of its national government. The ECB threatened to force Ireland out of the euro if the government didn’t guarantee all Irish bank debt.”
Apart from letting citizens down, current conditions are “awful”, claims the researcher. “Eurozone policy-makers including the European Commission have made disastrous policy mistakes in recent years. They have failed to solve the real problems, the banking crisis and excessive private sector debt, and they have created new ones. We have seen financial panic and a headlong rush into austerity, leading to higher rather than lower public debt. The employment crisis shows catastrophic figures. The eurozone is in very deep trouble.”
There always has been talk about a ‘democratic deficit’ when it comes to the relationship between the EU institutions and its 500 million citizens. Because the project is a strange mixture of a kind-of-federal structure as well as a cooperation between kind-of-sovereign states, the democratic aspect has been scarcely developed.
Yes, there is a European Parliament with considerable powers. But no one really knows who is in the EP, what exactly they do all day and how they interact with the Commission and the Council, let alone with the 28 parliaments of the member states. The quality of the members of the European Parliament (MEPs) is also an issue – are they only in Europe because they cannot get a seat in their national parliament? Has low voter turnout undermined their legitimacy? Are they representing a protest vote at home rather than any agenda for Europe? “The European Parliament in its current composition is a disaster,” says Jan Techau. “It is not going to solve the legitimacy issue because it lacks a clear political mandate. The only way out is real participation and political competition. Europe needs to create a political system that will basically expose the political elites a lot more, and will make emotional attachment to politicians real, even if we hate them.”
Supporters of the current system say there is a large amount of European democracy. Decisions are, in the end – and the beginning – not made by the European Commission, but rather by the member states themselves. Ministers and prime ministers of all member states congregate in Brussels on a regular basis to discuss and fight over high-level political decisions, as well as legislative proposals by the Commission. Many of these ministers get an explicit mandate from their national parliament before they head to the negotiations. The Commission institution itself may be bureaucratic, but it is led by 28 Commissioners, each one coming from a different member state (though not formally representing it).
Furthermore, the EP’s has been strengthened considerably in the most recent treaties. It can now block or influence legislation on most policy fields. Making up a third democratic level are national parliaments. They can send proposals back to the Commission if a third of member states play their ‘yellow card’. Fourthly, the Citizen’s Initiative allows citizens to address issues on a European level – if they gather one million signatures.
Still, the democratic gap is huge – and it is widening. The eurocrisis sparked a speeding up of the economic and financial integration process, leading to a quick transfer of sovereignty to Brussels, in order to stabilise the eurozone and give the Commission powers to intervene in failing member states. Several prime ministers were effectively sacked in recent years, not by their own parliament, but by quite nasty power plays in the EU, especially by the Germans. Reform or leave, do this and that or else… Followed by the instalment of an unelected prime minister: in Greece and Italy this process has happened again, and again.
Another erosion of democracy is caused by the European Semester and the extended role of the European Central Bank (ECB). The European Semester is the first phase of the EU's annual cycle of economic policy guidance and surveillance. Each European Semester, the European Commission analyses the fiscal and structural reform policies of every member state, provides recommendations, and monitors their implementation. Together with the ECB, they nibble at the independence of nation-states, without the compensation of fully-fledged representation of citizens at the European level.
The other big danger for the EU is the trend towards centralisation. According to Schout, European institutions are becoming more French in style rather than German or Nordic. “This is a monolithic, non-transparent and non-accountable way of operating,” he says. The EU is on a path towards stronger centralisation, with the Commission gathering data, analysing them and forming recommendations, followed by monitoring. “In the past, member states built their own structures. Now, the EU, along with institutions like the ECB, is taking over democratic functions of member states. That leads to eroding national institutions and a huge tension between the EU and the member states.”
One member of a Commissioner’s cabinet sees risks in the policies that are being shaped. “The Commission now has the instruments for economic governance, but within the European Council no one really understands the terminology being used. The governance system has become very complex, including detailed regulations and procedures. So group thinking emerges: we are happy to have found solutions, this is the way forward, and you cannot say that choices are wrong or that there are dilemmas on the table,” he says. The outcome is that a ‘blanket of bureaucracy’ lands on the heads of national governments and they don’t know what to do with it, let alone translate it into an aspiring agenda back home.
To make things worse, the fight against the eurocrisis has alienated voters from Brussels more than ever before – just take a look at the appalling trust figures. Philippe Legrain: “We have reached a level of integration where we need a much greater level of democracy, with more openness and greater accountability.” But right now, the opposite is happening. “Decisions that national and European politicians have taken, have created a deep sense of injustice, launching into self-defeating austerity, and a general detachment from the pain and suffering and anxiety that most Europeans feel. For officials here in Brussels unemployment in southern Europe is just numbers on a spreadsheet. This has led to a disenchantment with the EU.” According to the economist, support for the EU is now lower in France than even in Britain.
The problem of democracy isn’t limited to the European level. Government after government is thrown out by angry voters, and if a nation chooses a new government from a different political colour, they still have to execute the same kind of reforms. Legrain: “The first thing that happens is that some Commissioner pops up and says: you have to stick to the same policies! Voters nationally will say, hang on a minute, we have a right to decide our future. Genuine choice is what we need.”
Lack of genuine choice leads to radicalisation. “We see the weakening of pragmatic elites, the central parties in the member states. They used to bear the European project. The electoral shift is really sliding to a critical point.” Jonathan Holslag fears this development, as the political legitimacy for the EU collapses. “I have done an evaluation of the evolving electoral results across all member states over the last 20 years, and we are now approaching a position where the electoral share of the central parties for the first time since the Second World War is smaller than a colourful array of populist, conservative and extremist parties. Also the share of the people that do not vote will be bigger than those of central parties. This is crucial. The political players that spearheaded European integration no longer have the same weight.”
Analysis of the democratic deficit is not new, nor are the many solutions to fix this crucial problem. But with 28 member states heading and thinking in completely different directions, it will be almost impossible to strike a good deal on renovating Europe’s democracy. More importantly, as the eurocrisis has caused a tremendous loss of enthusiasm for – and trust in – Europe, voters will shy away from a federal Union. “Maybe in 20 years we can talk about this,” says Heisbourg. “But right now, any politician who comes up with such a federal plan will certainly end his political career.”
Jan Techau: “We are in a very difficult situation. There is no appetite for treaty change, so how do you create ‘more Europe’ in a meaningful way that doesn’t annoy and alienate people, and then legitimise those steps politically? That is the Harry Potter question for Europe.”
Last, but not least, geopolitics matter. Europe is facing an unstable environment in the world, and especially in its very own backyard. Just look at the last three years: explosive situations have taken place in the Maghreb, in the Middle East (notably Syria as well as Turkey) and of course in Ukraine. We live in a (potential) ring of fire.
“When you look at the global risk map and the hotspots on the planet, about two-thirds are in a semicircle around Europe,” says Techau. “So you could make the case that we are surrounded by conflict.” Though most of the unrest has been in the Middle East with the Arab uprisings and the war in Syria, Techau thinks that Europe’s east will be the ‘hotter part’ of the ring of fire in the future. “We don’t want the Middle East to matter for us. But Eastern Europe will be very difficult to blot out. It is going to be a centre of gravity for some time to come.”
His colleague, Daniel Keohane agrees: “We are bound to see trouble in the future. Europe’s broad neighbourhood is currently very turbulent, from Syria to Ukraine. This instability will last for some time, because in the Levant and in North Africa we are looking at countries with long transition phases. We will see lots of ups-and-downs, not just because of sectarian problems, but also because of longer term demographic trends. These countries have huge socioeconomic challenges due to large population growth and a shortage of resources, particularly fresh water.”
But don’t we have a common foreign and security policy? What about the defence umbrella of NATO? Isn’t the EU building its own diplomatic infrastructure and corps? Both experts are sceptical about the real engagement and commitment of member states to turn the EU into a strong actor in the world. Mainly because this means they will have to give up their sovereignty and flexibility in their own foreign policy. Each time a crisis breaks out, for instance recently in Ukraine, the differing interests of countries like Poland, Germany, France and the UK limit the EU’s ability to act. No wonder an American diplomat exclaimed “Fuck the EU!” just before the Ukraine crisis spiralled out of control, in February 2014.
As the surrounding countries become unstable, unpredictable or conflict-ridden, Europe’s dependencies are painfully revealed. First of all, economically: Russia is the EU’s third trading partner, with Germany alone the trade is €76 billion. And that is, of course, related to the second dependency of energy resources. The EU imports 30% of its gas and oil from Russia. Without policy changes,by 2035, 80% of the needed gas and oil will have to be imported from outside Europe. Even US President Obama has called for a diversification of energy resources by Europeans.
Instead of choosing common policies, countries increasingly act on their own to settle problems in the ring of fire. In 2011, France and Britain ended up acting together through NATO in Libya. In Mali in 2013, France acted nationally, but then gained some European and American support. French fighters stood ready to intervene in Syria after the chemical attacks on civilians in 2013. But British Prime Minister Cameron lost a vote in the House of Commons for military action in the same country. In all of these cases the European Union was basically sidelined.
The failure to really build up European defence policies is caused not only by sovereignty fears, but also by the huge unpopularity of military action. After the costly, and in some ways, disastrous campaigns in Iraq and Afghanistan, Europeans have become wary of putting their soldiers’ boots on foreign ground. Many politicians also consider such action to be useless and, in times of austerity, Europe prefers to make big cuts on defence budgets. Why invest in security when the Cold War is over and deadly conflicts on the continent have become unthinkable?
European defence budgets are going down faster than elsewhere. In 2001, 63% of NATO’s budget came from the Americans; now the US accounts for almost 75%. Only two European countries meet the NATO target to spend 2% of their GDP on defence – the United Kingdom and Greece.
Cooperation in these cuts is limited. “Countries are reducing their defence budgets and seldom inform their partners what they will cut. They are very protective of their prerogatives in security and defence,” writes Vivien Pertusot of think-tank IFRI (the French Institute of International Relations). This leads to a shortage of military capabilities when troubles emerge. “Some of the capabilities are simply too expensive for a single European country. They need to pool resources. But EU-wide or NATO-wide defence cooperation is unlikely in the near term.”
On the political side, hard power is also far from developed. “What is missing is an institution in Brussels, a group of officials, that is able to turn the natural differences of political orientations into a sort of consensus,” says Jonathan Holslag. “In the US, and in India and China, different parts of the country have different geopolitical concerns. It is the same in Europe. The External Action Service should really do less external action and more internal action. It must invest in brokering consensus. It has to explain why it is in the interest of Swedes to care about instability in North Africa, why it is in the interest of Italians to worry about Russian power play in the Arctic, and so on.”
The lack of this ‘internal action’ leads to an ever more fractious Europe. Holslag: “The situation today bears a lot of resemblance to Italy in the 15th and 16th centuries, the time of Machiavelli and the Lilliputter states in Italy. They believed they could use the great powers around them – the Austrians, the French, the Turks – to maintain their position. In time, the opposite happened. These powers trampled the Italians because they couldn’t agree and form partnerships or cooperation that was solid enough to deflect the ambitions of the others.”
These deep divisions explain why European politicians put soft power to the fore in the EU’s dealings with the wider world. We have values, ways to cooperate and a rule of law that many countries don’t have, goes the thinking, and Europe doesn’t need guns to promote these assets. That human rights and lives matter less outside the old continent, is a given. But is the EU actually capable of improving the world, for instance with its huge development aid programme?
But aid policies have limited influence, points out Techau: “The billions of euros spent by the EU on development aid in the Palestinian territories over the last 15 years has not increased its influence on the Arab-Israeli conflict. Rather, the real weight is strongly tied to the legacy of empire and the deployment of its militaries.” But the importance of hard power is ‘frequently denigrated’ in EU circles, says Techau. He proposes a closer relationship with NATO, located just minutes away from the EU headquarters in Brussels.
Looking at all these challenges, it is not easy to remain optimistic about the future of Europe. Our economic strength was already weakening before the credit crisis broke out. Tens of millions of Europeans will remain unemployed for the years to come, including a lost generation. It seems unfeasible that our economy will suddenly revitalise and that a culture of entrepreneurial behaviour will break through. Nor will the single market be completed soon, or the house of the eurozone fixed properly.
Ageing will hit us hard, especially after 2030. The greying population puts a huge strain on public finances. Tensions between generations will increase, which is dangerous because our continent already has a lot of rifts. In fact, two Europes seem to be emerging: one of the internationally focused, hard-working and prospering cities, and another one of the fearful periphery that puts its hopes on the nation-state and aims it arrows at Brussels as well as foreigners. This split happens primarily in richer member states that have a lot to lose and whose solidarity to the poorer member states has proved to be limited.
The eurozone crisis has laid bare a growing tension between the EU and the member states. The division of power between the two governance layers has become unclear and sovereignty as well as democratic principles are at stake. With consent and support for the European integration project waning, the trend to centralise policies and turn Europe into one big Germany is extremely dangerous.
Moreover, the crisis has prevented us from looking outwards. Europe is now surrounded by a ring of fire and instability. Budgets for defence have plummeted. The EU’s external policies lack a clear, common European interest as a mandate to act on. Outsiders regard us as a continent of boastful arrogance, self-pity and denial of a changing world. They may well be right.