Don’t believe for one minute that the two most powerful leaders in Europe will not be able to work together.
Of course, Angela Merkel knows she made a big mistake by putting all her eggs in Nicolas Sarkozy’s basket during the French presidential election campaign. I wonder what her advisors were thinking at the time?
Merkel’s decision was also out of character. Throwing caution to the wind is normally not like her.
So when it became clear that Francois Hollande was going to defeat Sarkozy, the Chancellery moved into top gear.
Merkel’s European policy advisor, Nikolaus Meyer-Landrut, a Francophone and staunch supporter of European integration, had little difficulty in reaching out to Hollande’s advisors.
Hollande himself, as early as last February, had dispatched teams to Berlin to obtain some sense of Merkel’s thinking but also to talk to federal lawmakers and foreign ministry officials.
In short, the ground was well prepared for last Tuesday’s meeting. When Hollande arrived in Berlin on Tuesday evening, Merkel was all bonhomie.
No one should underestimate her smiles, her gestures, and her ability to make her guests feel genuinely welcome.
When Hollande, flanked by Merkel, inspected the guard of honor, during a brief respite from the rain which had already drenched him back in Paris during his post-inauguration parade, Merkel chaperoned him very nicely. She guided him, with the slightest of pushes, to turn the corner of the red carpet and continue with the inspection. Then, a few seconds later, she gestured to him that they should bow together. After that, it was marching orders, with some guidance, to end the ceremony.
Then it was down to dinner, and business, in the Chancellery.
Both leaders know exactly how deep their differences over the euro crisis run: Berlin still believes in austerity measures to balance the books. Paris believes a dose of Keynesianism to be a necessary palliative.
But at the short press conference after their dinner both agreed they were looking forward to working with each other anyway.
Actually, the history of Franco-German relations shows that leaders from the opposite political parties get on far better that those of similar ideological inclination.
Helmut Kohl, a conservative, managed to establish a close relationship with Francois Mitterrand, a socialist. It was even closer between Gerhard Schroder, a Social Democrat and Jacques Chirac.
In contrast, Merkel failed to have any empathy with Chirac. And it took her a long time – and all the pressure of the euro crisis – to develop any kind of a relationship with Sarkozy.
But they never seemed to share that sense of historical necessity to use the special Franco-German relationship for European ends.
Hollande, a sober, calm, persistent man whose character suits Merkel far better than his predecessor did, might just produce that spark that is needed to modernize the Franco-German relationship in a way that will strengthen Europe.
The fact that he has chosen Jean-Marc Ayrault, a former German professor and Germanophile as his prime minister seems very promising.
Let’s hope that they will not forget the wider issues of foreign policy.
Of course, both leaders know they have to tackle the euro crisis. Both leaders also have their electorates to satisfy. Don’t forget that Merkel faces re-election in 2013 so she might be a bit preoccupied.
Nevertheless, Hollande and Merkel will have to also find some time to work out the kind of relationship Europe wants with Russia, Ukraine, and Belarus, not to mention Turkey, the Middle East, and China.
These relationships are too important to be kept to the bilateral and national interest level. Europe has to think strategically about them. The future of the continent depends on that.
This means that once Hollande settles into the Elysee, his foreign policy advisors must be given rein to engage Germany and the rest of Europe in drawing up a new Security Strategy. The euro crisis is important, but France and Germany cannot continue to hide behind. It is time to develop a new foreign and security policy.
Every week leading experts answer a new question from Judy Dempsey on the international challenges shaping Europe’s role in the world.
The European Commission is correct to remind us that the Maastricht Treaty does not foresee an exit from the eurozone without exiting the EU, but what is the implication of the admonishment? The straightforward answer —a Greek exit from the euro would mean Greece’s leaving the EU—is as dangerous for the EU as it is politically naïve. It is dangerous because the Europe-wide political and economic effects of Greek currency devaluation (the ostensible purpose for any reintroduction of the Drachma) would need to be carefully managed. So the EU is damned to negotiate with Athens one way or the other. But it is naïve to believe that Greece would be forced to leave the EU. The history of European integration is not one of strict adherence to treaties. Rather, when treaties obstruct political solutions they are either ignored or amended. Thank goodness.
In a formal sense, there is certainly no reason why a eurozone exit should lead to Greece leaving the EU. EU membership entails a commitment of all member states to accede to the euro once the economic convergence criteria have been met. Since the Maastricht Treaty in the early 90’s, however, a number of states have agreed opt-outs from this principle. Assuming that the impetus to leave comes from Berlin and Brussels rather than Athens, one could also imagine an opt-out mechanism for Greece.
The problem from a Greek perspective is that leaving the eurozone would not involve an exit for Greece from many of the seemingly insurmountable obstacles that eurozone membership entails. As an EU member, Greece would still be subject to many of the rules of the strengthened stability and growth pact which strictly limits deficits and public debt. It would also most likely want to remain eligible for further EU bail-outs and hence need to accede to the EU’s fiscal compact (which also demand budget capping measures). As Greek politicians have long realized, exit from the euro is likely to be the “end of the beginning” rather than the “beginning of the end” in Greece’s ongoing economic trauma.
The EU should have a provision for countries to leave the eurozone without leaving the EU, just as the EU has a provision for countries being members of the EU without being members of the eurozone. A more flexible EU can also be a more resilient EU. The strategy of building firewalls for other eurozone members in trouble, as eurozone leaders and lenders dealt with the Greek crisis, now gives the eurozone more options towards Greece. Nonetheless, a Greek exit would break new ground, unsettle investors, and require deeper integration of remaining eurozone members in response. This would include specific assistance for other eurozone members in trouble, eurobonds, eurozone bank deposit insurance, a tighter link between monetary and fiscal policies, and other mechanisms.
The question whether Greece can leave the eurozone and remain a member of the EU is emblematic of the struggle Europe has with its larger question: why and how Europe needs to renew its mission. The answer requires adapting to new realities.
The story of the evolution of the EU is one about witnessing Europe put itself together after World War Two. The tools with which that was accomplished were formed out of both the lessons of the war as well as the mission to build institutions and policies to prevent such conflicts in the future. While that was being accomplished, there was a gap emerging between the structures and the peoples served by them. While European institutions were being constructed, there remained a need to nurture European stake holders at all levels of society.
That remains work in progress. Greece illustrates that challenge.
The creation of the euro was perceived as a nutrient and catalyst to transform not only policies but also people with a common stake in the future of Europe. While the goal remains, the tools need adjustment. Greece is a part of Europe's present and future, no less than any other current or aspiring member of the EU. The euro is an important dimension of Europe's continuing evolution but when it was created, there was a rush to a "one size fits all" template. Yet the reality of European diversity is stubborn. Just like the evolution of the United States, the great experiment of European integration has always been a product of trials and errors, and lessons learned. Greece can leave the eurozone but it will not leave Europe. The efforts to solve the specific problems in Greece become part of the larger efforts to reset Europe's ability to continue to evolve. This is not a zero-sum process.
Theoretically, Greece could leave the euro without leaving the EU.
Practically, the real question is if the euro can survive Greece leaving.
If Greece were to leave, a precedent would be created. Markets would quickly test if other countries like Spain or Portugal could follow a similar path.
It could open a Pandora's box with the potential for more countries leaving, similar to the break-up of the currency bond in 1992.
Even from the point of view of economics, it makes sense to pay to keep Greece in the eurozone even if Greece doesn't fully comply with the austerity measures.
The risk and contagion effect is too large with letting even one small country leave. Thus, keep Greece in the euro to secure the common currency for all Europeans.
The debate on Greece the day after the euro is inflaming the wrong crowd. Economists, scholars, and Wall Streeters ponder the pros and cons of Greeks again pocketing drachmas. No political leader seems to consider the devastating effect a Greek debacle would have on the whole European soul, or at least what is left of it. Greek anarchy and hubris joined with European loss of vision, leadership, and compassion cornered us. "Euro is a political project" was the famous verdict of Joschka Fischer, German foreign minister from 1998 to 2005. If Greece leaves the euro, it does not much matter if it leaves the EU as well. The real tragedy will be Europe leaving Europe.
Greece seems bent on leaving the eurozone and the key European players, especially Germany, seem to be willing to let them go rather than to continue to put money into a failing project. This may be a separation which is good for both the Greeks and the eurozone and there is no reason to believe that leaving the eurozone means leaving the EU. Only seventeen of the twenty-seven EU member states are in the eurozone and many are doing quite well remaining on the outside. Greece will continue to have a seat in the European Council and to have a commissioner. It will continue to receive regional development funds and will stay in the Schengen regime. In a couple of years, perhaps longer, its economy will reemerge and grow. German tourists will continue to sun themselves on Greek islands. The bigger question is whether after the sorting out process is completed, with possibly Portugal and Spain also leaving the eurozone, will the result will be a two-tier Europe with an inner core of eurozone countries forming the core and the outsiders remaining on the periphery. This will signal the end of any dream of a federal Europe and a permanent Europe of a variety of circles or zones centered around a Franco-German and northern European core. It will also mean the end of the project which aimed at creating a Europe able play to a cohesive and influential global role.
German domestic politics, anyone? With Germany holding the key position in the pan-European struggle for survival in the financial crisis, and with populist movements on the rise in recent elections across Europe, a look at Berlin's political machinations might prove useful. Or, rather, a look at Düsseldorf, for that matter.
On Sunday, voters in Germany's largest and most important federal state, North-Rhine Westphalia (NRW), delivered a crushing blow to Chancellor Angela Merkel's center-right party, the CDU. Despite high hopes for victory just two months ago, the conservative's garnered a meager 26 percent of the vote and will not play a role in forming a government in Düsseldorf, NRW's capital. This defeat is only the latest in a series of weak showings by the CDU in state polls over the last two years.
Normally under such circumstances, Merkel, as the leader of the conservatives, would slowly but surely feel the heat coming from within her own party. Federal elections will be held in late 2013, and naturally the party must ask itself how it can remain in power when the trend looks so sobering. Well, the point is, the situation is not so sobering after all, not even after the NRW elections.
Merkel has three strong points that keep her relatively strong in face of all the bad news. The first one is that losses for the CDU at the state level have so far failed to translate into gains for the Social Democrats (SPD) at the national level. In nationwide polls, the SPD remains consistently below 30 percent, which is a result verging on the catastrophic for Germany's center-left mainstay.
The second strong point is that Merkel remains the most popular politician in Germany, a position she has occupied for some time now. Neither the eurocrisis, nor political turn-arounds, nor tactical gaffes have really damaged her so far.
The third point is that the German left is more fragmented than ever before in post-war history, with Social Democrats, Greens, and the emerging Pirates Party all wooing mostly center-left voters. Add to this the far-left "Die Linke", heir to the ideological leftovers from former Communist East Germany, and the fragmentation becomes very apparent. The chances of forming a stable coalition that could reliably run the country out of these four forces are very slim. Despite Merkel's gradual shift to the left, the German conservatives have so far managed to integrate their own right wing, thereby cementing the CDU's status as the strongest party in the German system.
As long as these three strong points remain intact, which I think they will for some time to come, she will not have to face a serious challenge from within her party.
What does this mean for foreign policy? Contrary to some voices from the German commentariat, the defeat of her party in North-Rhine Westphalia will not undermine her relatively strong position in Europe. Her coalition in Berlin stays as it is, for the time being, and with Wolfgang Schäuble earmarked to become the head of the eurozone, Merkel's position as the key player in Europe will be strengthened rather than weakened. The more assertive language coming from Francois Hollande after his election victory will not change that either, as Germany's economic and financial indicators make it untouchable as Europe's most important political force.
Merkel's difficulties lie elsewhere. They lie in the populist temptation the Social Democrats might succumb to. So far, the SPD in the Bundestag has supported her handling of the crisis. They have reliably voted in favor of bail-outs and stabilizing mechanisms. This has been in contradiction to the party's leftist instincts which would feel more comfortable with a more activist Keynesian policy of anti-cyclical spending. Even before the elections in NRW, the Social Democrats felt emboldened in their anti-austerity position by Francois Hollande's victory in the French presidential elections.
As a consequence, the party has now asked for a growth package to be attached to the European fiscal pact negotiated last year. Merkel has recently softened her crisis vocabulary, so such an amendment may or may not become a reality. But in the long run, Merkel must be concerned about the ideological leanings of the SPD, however weak that party may be. Why? As it looks now, her only viable option to stay in power after 2013 is to form a grand coalition with the SPD. Such an alliance would come at a price. Should an emboldened SPD ask for major concessions on the chancellor's crisis strategy, Merkel could be forced to make compromises on issues in which she has invested considerable political capital both at home and at the European level.
At the moment, such developments are mere speculations. Merkel has proven to be amazingly resilient and also flexible enough to react quickly to a changing domestic dynamic. NRW clearly hurts her, but it would be premature to write her off just yet.
Audronius Azubalis is not a happy man. As more and more EU leaders announce that they will boycott the European Football Championship in Ukraine because of the alleged ill treatment of opposition leader Yulia Tymoshenko, Azubalis disagrees. As foreign minister of Lithuania, he took the opportunity of our interview to launch an urgent appeal to the EU to strengthen, not weaken, its ties to its Eastern neighbors.
If you wonder why, just take a look at the map.
Lithuania shares a border with Belarus. It shares a border with Russia, because of the exclave of Kaliningrad. And although it does not have a frontier with Ukraine, the Lithuanian government has over the past several years taken a special interest in Ukraine. Its goal is to find some way to integrate Ukraine into the EU.
DEMPSEY: Minister, will you be joining the boycott of the football games in Ukraine?
AZUBALIS: No. Boycotting events the football cup, or the Yalta meeting (the annual summit of European leaders) just because Ukraine is considered a bad guy is not the right way to go about things. Despite of our misgivings about the present leadership, we must remain engaged. We have to give some kind of perspective to the citizens.
DEMPSEY: What does mean in practical terms?
AZUBALIS: We should work in two ways: encourage the opposition and talk very openly about Tymoshenko’s situation. And we should ratify the Association Treaty.
DEMPSEY: Why?
AZUBALIS: Because it would mean a tangible result for the society. And to be very frank, the Ukrainian side made a lot of compromises in the negotiations with the EU. It wasn’t easy for them. EU association would also give the business community in Ukraine a perspective.
DEMPSEY: You are hoping that the association agreement will give the business community and the middle class such a stake that they will exert pressure on the leadership to return to the reform process.
AZUBALIS: Yes.
DEMPSEY: Most EU governments don’t seem to see it your way. They don’t want to ratify the treaty unless the human rights situation improves dramatically.
AZUBALIS: Cutting off talks about the association agreement would be a big mistake. It would mean leaving Ukraine to Euro Asia. Look, we also strongly disagree with the human situation in Ukraine, too. My President wanted to go to Kharkiv and visit Tymoshenko and then talk to the Ukraine’s leaders. They were our conditions.
(Dalia Grybauskaite, the Lithuanian President last Friday visited Tymoshenko at a hospital in Kharkiv)
DEMPSEY: It’s clear that it is not going to be easy to reach consensus among all 27 countries concerning Ukraine and the boycott.
AZUBALIS: We are struggling. It will be quite difficult.
DEMPSEY: Apart from Ukraine, there are five other countries in the Eastern partnership, sandwiched between the EU and Russia. None of them are model democracies. What is your view of their future?
AZUBALIS: First of all, the six countries are very different. Secondly, we don’t have a common view within the EU on how to proceed.
DEMPSEY: What do you suggest?
AZUBALIS: We have two advanced countries - Moldova and Georgia. We should support them on their path to Europeanization by putting them in a position that the benefits they will obtain would serve as a good example to the others.
DEMPSEY: For example?
AZUBALIS: We should open negotiations with these two countries for visa liberalization. Anywhere in the Eastern neighborhood, this is one of the most valued things. We should not be afraid of granting that status to Moldova or Georgia. These are small countries. We did the same for Serbia.
DEMPSEY: Perhaps the most unpleasant country of the six is Belarus. What can be done there?
AZUBALIS: I’m really tired of all the plans for supporting the opposition in Belarus. The opposition is divided. It has no clear stance about how to prepare for the next elections.
DEMPSEY: Two opposition leaders who ran against President Lukashenka and were put in prison after the elections in 2010 were recently released
AZUBALIS: It means nothing. It’s an old game in countries like that. We can’t just proceed to observe the next elections. What will they achieve? Nothing, or some violence, some statements.
DEMPSEY: So what can be done?
AZUBALIS: I see only one, quite drastic way. Together with our American friends, we should start thinking about a transitional council. We should create an alternative power center. This kind of parallel structure could have an echo in the country. It is an idea. But so far, I have received no reactions from Brussels.
DEMPSEY: When you look at this whole part of Europe, what is at stake
AZUBALIS: Democracy. What we need is a belt of democracies around Russia. That would influence Russia faster than we think. We have to show Russia that we can offer these countries something. If we succeeded in Ukraine, and if Moldova and Georgia got visa free travel earlier than Russia, that would have an enormous impact on Russian civil society. The main goal of the Russian leadership is to show that these six countries have failed; that they are not real states.
DEMPSEY: Do we need the United States to help the EU?
AZUBALIS: Yes. America is very pragmatic. Also, democracy runs deep in American society. It is absolutely necessary to have America on board.
Pessimists from around the world were quick to announce the turning of the Arab Spring into a dark winter at the first sign of trouble in the Arab transitions or at the rise of Islamist parties. But a quick review reveals that, one year and a half since Bouazizi’s immolation in Tunisia, the arc of history in the Middle East is still bending toward more constitutional and accountable government. Despite many clouds, there is still a lot of spring in the Arab Spring. Europe should be reassured by this trend and redouble its engagement and investment in helping its southern neighbors transition to democracy.
In terms of general Arab public opinion, an entire generation has been marked by the pro-democracy revolutions that they either participated in or watched unfurl live on their TV screens. The political values of freedom, dignity, empowerment, accountable government, and social justice have been seared into their psyche through the drama of human struggle and martyrdom that played out in Sidi Bouzid, Tahrir Square, Benghazi, Sanaa, Manama, Homs, and many other towns in the Arab world. The transformed values and attitudes of this generation will continue to impact politics for at least a couple of decades to come.
The Islamist political parties that have fared best in post-revolutionary elections have had to accept the new democratic zeitgeist. People rose up for good government and social justice not for religion, and all parties, including the Islamists, recognize that if they do not deliver better governance and more jobs, they will be rejected by the newly empowered populace.
Political Islam recognizes it has to be more ‘political’ and less ‘Islam’ if it hopes to accede to and remain in power. Appeals to God will no longer overawe or intimidate a population that has awakened to its God-given socio-political and citizenship rights and flexed its political muscle. The Muslim Brotherhood has been at pains to show that it is democratic and pragmatic, and even the Salafists have softened their rhetoric to reach out to other groups and to clamor for constitutional and democratic reform.
A year and a half after the outbreak of the Arab Spring, the North African countries that overthrew their dictators are all on the road to transition, and none have fallen back into some dark abyss. Tunisia is the most forward, having organized successful elections and formed a coalition government among Islamist and nationalist parties. Egypt has had a more troubled transition, with the army throwing up hurdles along the way, but parliamentary elections were held successfully and the country will elect its president in the coming weeks for the first time in its long history. The competition between the three main candidates—two Islamists and one secularist—is healthy, and the Egyptian voters will decide the outcome as other voters just did in France, or later this year, in the United States.
Even in Libya—the country which had the most brutal dictatorship and whose revolution left the country without a functioning state and with an armed population—the situation is not bleak. Many of Libya’s towns and cities have successfully organized their own local council elections and preparations are underway to hold national assembly elections in June. Despite regional tensions between East and West, and occasional flare-ups between rival armed brigades, there is general consensus about the need to hold national elections, draft a new democratic constitution, and build a new political post-Qaddafi order. There will be recurring challenges and troubles along the way, but Libya is unlikely to collapse into state failure or civil war, but rather crawl forward toward a very imperfect but loosely democratic and inclusive political order.
In the East, the uprisings have met with more difficult circumstances, but they have continued to demand good governance and social justice and have not turned nihilist or dark. In Yemen, a partial transition has been achieved but the country continues to face the challenges of a failing state that does not have the resources to control its territory and borders. The new president and a coalition government are struggling to forge a way forward in very difficult circumstances. In Syria, an uprising that demanded political and social reform was met with ferocious repression, but has persevered. While the regime accuses it of radicalism and al-Qaeda links, the opposition—which includes Islamists, liberals, nationalists, and others—continues to insist on a democratic and pluralist future for Syria. In Bahrain, the uprising was put down, but the opposition continues to demonstrate for political and social reform.
Even countries that avoided full scale uprisings have had to adjust their sails to the winds of the Arab Spring. Morocco’s king issued a new constitution and the country held fresh parliamentary elections that brought an elected Islamist party to head the government. Algerians have just gone to the polls in an attempt by the Bouteflika government to absorb public demands for more participation and better representation. Oman instituted a raft of political and social reforms. Jordan continues to stumble in its attempts to adjust to the new level of socio-political empowerment.
The Arab Spring has not turned into winter. It is still a deeply embedded movement for good governance, jobs, and social justice. It has created democratic transitions in some countries, limited reform in others, and outright battles with repressive regimes in yet other cases. It is a movement with a long arc and considerable staying power. It reflects a long overdue awakening of the Arab citizen to his or her rights and powers, and a new empowerment made available by advances in communication and technology.
Regimes in the Middle East that think this is a passing phase are miscalculating greatly. European governments that presume that Arab societies must inevitably revert to authoritarian or repressive forms of politics are also mistaken. As history moved forward in Europe from fascism and totalitarian communism to democratic politics, so too is history transforming the societies and governments of the Arab world. The Arab Spring is the beginning of a transformative historic process. It has depth and staying power. It deserves all the political and economic support that Europe can offer, despite the difficult times that Europe itself is passing through. Together, Europeans and Arabs can build a better future, built on a wider set of common political and social values. Europe’s breakthroughs occurred in 1945 and 1989; the Arab world’s was late in coming, but it is here.
After last Sunday’s Greek elections, Eurozone governments have begun to very quietly talk about Greece leaving the euro.
The Greeks are not particularly keen to do that.
But neither do they want to live for the next several years with an austerity program that is pushing hundreds of thousands of people into poverty.
With more debts falling due next month, Chancellor Angela Merkel said not another centime of the bailout package will be paid out unless Athens introduces the agreed savings and reforms.
But how realistic is that?
It is becoming clearer by the day that neither the center-right nor the left wing grlupings are able to put together a government. According to the Greek constitution, this means the country will have to hold another election next month.
Yet there is no reason to think that the Greeks will vote differently then. The EU and Eurozone governments realize this.
No wonder then that Eurozone countries are murmuring that Greece’s time is up. Officially, of course, they still insist that sticking to the austerity plan is the only way forward.
It is true that leaving the Euro carries enormous costs and risks. The outflow of capital already crippling this sickly economy, will accelerate to a flood. Greece’s stumbling banks may fail.
The state will almost certainly go bankrupt because it cannot possibly fully service its Euro-denominated debts with the European Central banks and governments anymore. Private creditors have already had to take a cut of up to 80 percent of the worth of their debt.
But there are advantages to returning to the Drachma, too.
Greece could then devalue its currency to regain economic competitivity. If it managed to continue the radical overhaul of the tax collection system and the public sector underway now, it could slowly put its fiscal policy back in order. Most importantly, Greeks would not be forced to lower wages and pensions quite so radically.
In legal terms, however, reintroducing a national currency is not easy. The Maastricht Treaty on Monetary Union never foresaw such an inglorious possibility.
The Lisbon Treaty of 2009 opens a way, but it is a radical one. According to article 50, a country can leave the EU and with it the common currency.
That is a terrible option for Greece, and for any other Eurozone member.
Greece would be deprived of billions and billions of Euros in EU financial assistance, including the structural and development funds which could help build up the Greek economy.
There would also be the immense loss of prestige -- not to speak of further capital outflows and loss of investor confidence.
Greek lawyers expert in EU legislation agree there is no easy way out, which is why Greece doggedly tries to retain the euro.
In the interests of protecting Greek democracy, keeping the country stable and giving its citizens a perspective, it is time for the EU to come up with Plan B.
It could go like this.
If we assume that Greece will have to hold new elections, there is little point in presenting voters with the same party programs as before. The outcome will be the same.
In that case, the EU should offer Greek voters a real alternative: leave the Eurozone, and we will find a way to allow you to remain in the EU.
Devalue the currency, ease a bit on the cuts in social expenditure, but continue to make your economy competitive. Then, we will help you.
Were that to happen, it would mean Greece would have the same status as other non-Eurozone countries, such as Sweden, the UK and Poland.
It would mean too that Greece would continue to have access to funds, to the internal market, to the free flow of labor, capital and goods. Above all, it would remain anchored to the EU institutions which are crucial for Greece’s stability and democracy.
Of course, leaving the euro would be a costly affair.
But the growing consensus is that because Greece is so uncompetitive and will not make the turnaround for many years, it is preferable to stop pouring bailout billions into a bottomless pit. Better to cut one’s losses now.
A well thought-out exit scenario for Greece might even calm market apprehensions that Spain, Italy or Portugal might go the same way.
Of course, opponents of such a plan would inevitably argue that because a precedent has been established, other countries that refuse to adhere to the strict rules of the euro club could simply walk away.
I am not so sure. The price of leaving the Euro is still very steep. Also, every EU government has now seen that those economies that have undergone painful reforms are more competitive in the long run. They set a good example.
Moreover, being in the Eurozone means being part of the inner core of what is clearly a two-speed Europe. But then, Europe already consists of opt-outs: defense and Schengen for example.
So if a way can be found for Greece to leave the Euro but remain inside the EU, it should be taken. Politically and economically, it just might allow the EU break the vicious circle of this euro crisis.
Heads of state and government have already agreed to meet for an extra EU summit on May 23. That would be a good time to discuss such a solution and even think strategically.
Every week leading experts answer a new question from Judy Dempsey on the international challenges shaping Europe’s role in the world.
François Hollande’s electoral victory will lead to a novel and healthy debate over the best approaches to deal with the crisis. Most importantly, it will end the tyranny of austerity as the only recipe to save the European economy. The dearth of ideas and alternatives to austerity, an ideology disguised with a technocratic veil, has been the most singular feature of the debate over the crisis of the past few years. This has impoverished traditional politics and mobilized disenchanted citizens against old parties. Far from the scaremongering of some press and the markets, the fact that a moderate socialist wins the French presidency after fifteen years should be seen as a ‘normal’ event in democratic politics. Whether it will usher in a ‘leftwing’ solution to the crisis is another matter. Mario Monti and Mariano Rajoy Brey are no left-wingers, but are sure potential allies to push for the growth Hollande strives for.
The specter of a resurgent European left, now personified by François Hollande, is certainly a healthy corrective to the mantra of austerity promulgated for three years by Berlin. Whereas Madame Merkel and her economic advisors have been impervious to the barrage of data at odds with their ideology, their political instincts are quite attune to the apparent shift in public attitudes regarding the long-run virtues of medicinal misery. Hence, Merkel’s sudden support for a “growth agenda,” albeit one that does not cost anything. But does the left have anything new to offer? Although he campaigned on a platform of class warfare, Hollande’s statements abroad have been outright business friendly. In an interview with the Guardian, he is quoted as saying, “You could say Obama and I have the same advisors....[T]he left was in government for 15 years in which we liberalized the economy and opened up the markets to finance and privatizations. There is no big fear.” Really?
In 2009, in the midst of the crisis, conservative parties gained most of the votes at the European Parliament elections. The positive results for incumbent center right forces, like the success of Nicolas Sarkozy’s UMP in France, resulted in analysts arguing that citizens had more trust in the right than in the left during a critical period of the capitalist order.
This common wisdom might have been superficial, but the shift in the French presidential election in favor of the socialist candidate does not necessarily mean that “people” prefer leftist approach to the symptoms of economic policy failures today. The real challenge is not a traditional move of the pendulum in party competition to one direction or the other.
But the result of the Greek elections raises the threat of spreading economic populism and fiscal alcoholism under the rhetoric of national independence. Whatever unorthodox methods might be implemented as the consequence of the political turmoil, these answers would contradict the economic paradigm of our era: growth and austerity. Better to say that rational economic behavior can only go hand in hand.
The European left, and particularly François Hollande’s focus on growth is a welcome antidote to pure austerity medicine. Still, the European left has to stay on the reform path as well. There is no single option alone that can solve the crisis. Stimulus-driven growth can't solve everything just like how austerity couldn't—especially at a time when Europe is heavily indebted as well. The European left should partake in the responsibility for getting Europe's house in order, including supporting austerity programs. In return, the EU should establish growth options in research and education and renewable energy and infrastructure in order to future-proof Europe's states for a return to growth after the crisis.
Nope. François Hollande will balance the stout Teutonic austerity giving Mr. Draghi some room to maneuver. He may try to restart a project for Eurobonds. After all, his mentor Jacques Delors coined the idea, later adopted by conservative or Christian Democratic leaders like Giulio Tremonti or Jean-Claude Juncker. However there will not be a Mitterrand II in France or Europe. The money is not there anymore and too many older Europeans will have to be provided by fewer and fewer young workers. Traditional companies and traditional unions are fading fast. Jobs will be created only in areas—high tech, tourism, services—where the left lags in consensus. Europe will still be looking for a new left for a while. Keep an eye on the populists Syriza, Jean-Luc Melenchon, Beppe Grillo, Marine Le Pen, and Golden Dawn. Colorful or dangerous, they are all on the rise.
This should be the moment for a revived left, given the general feeling in Europe of a financial system out of control which favors the top one percent and is creating a growing chasm of inequality. François Hollande has in fact labeled the financial markets as his enemy and has promised to emphasize equality and opportunity for the young. This appeal should have a wider political constituency than that of the austerity-fixated right. Yet, the European left faces the growth of right wing xenophobic parties which now can claim up to a fifth of the electorate (including some of its own working class voters). It is constrained not only by the financial markets, but by the broader European construction which limits the autonomy of national policy makers without providing a democratically controlled alternative. Still it is the left which offers the best chance of taming finance and the broader markets, challenging the orthodoxy of free trade and dealing with the inequality gap without succumbing to xenophobic policies. The future of a left alternative will ultimately lie with Germany. If a grand coalition returns in Berlin next year, then the left agenda will have a chance to reshape the political landscape in Europe.
Traveling to Washington for briefings with policy makers and pundits is almost always an exciting affair. In an election year, however, the experience can border on the surreal. The most power-infused place on the planet is naturally also the most opinion-soaked, gossipy place, and everybody is only too willing to talk, speculate, and anticipate. Foreign policy often takes a back seat in all this, but when listening closely, the outside visitor can identify some of the undercurrents standing out in the discussion. Very clearly, the Iranian nuclear standoff, North Korea’s desperation, and AfPak after the troop withdrawal dominate the agenda at the moment. But here are three recurrent issues that are not in the limelight as much, but which struck me as being of equal, if not higher importance during my meetings last week. They make for a sobering read.
What can be concluded from these observations? Much of what is sold as strategy is not the real thing. And much of what needs a strategic approach is neglected. Both are done at the expense of strategic interests abroad and at home, in the U.S. and in Europe. And while the campaign machinery in Washington is humming in heavy rotation, with TV shows, papers and the web spitting out ever more babble on ever less politics, the tiredness of the political spectacle is graspable. The more that is at stake, the less serious is the debate, the more obvious becomes the strategic exhaustion. In this respect, America and Europe are very much alike. And that is an altogether frightening perspective.
That was some Sunday.
In Greece, extremist parties garnered so many votes that it will be difficult to form a stable government committed to following the EU’s rescue plan for the Euro.
In France, Socialist candidate Francois Hollande won, a man who made raising the income tax to 75 percent for the rich a central part of his platform. With that promise, he may even have won some of many votes that went to the extreme rightwing party of Marine Le Pen in the first round.
Populism seems to be on the rise everywhere. And support for these parties, the majority of which are right-wing, will continue to grow unless Europe’s leaders start practicing democracy in a radically new way.
The prevailing view is that the populist parties have gained such ground because of the euro crisis and the austerity measures that have been introduced in Greece and Spain, Italy, Portugal and Ireland.
But actually populist parties were on the advance – in Belgium, the Netherlands and France – long before the global financial crisis of 2008-2009 hit the continent.
Populists blamed EU enlargement, claiming that people from Eastern and Central Europe were ‘stealing’ jobs because of their low wages.
Then they jumped on the band-wagon of Islamophobia, warning of dire consequences to Europe’s identity and culture if Turkey was admitted to the EU.
More recently, they have intensified their calls for tighter immigration rules for people from North Africa and the Middle East.
The anti-foreigner sentiments are running so high now in several EU countries that respectable parties have begun to talk about rebuilding borders, too. Outgoing French president Nicolas Sarkozy even found support in Berlin for his proposal to reintroduce national border controls at will.
This powerful populism, it is to be assumed, will not disappear quickly, even if and when Europe emerges from the euro crisis.
Responsible politicians need to address the fears behind the populists’ rise – the fear of losing your job, the fear of being overwhelmed by other religions and cultures, the fear of becoming a victim to crime – head-on.
But they can’t pander to the populists. The more someone like Sarkozy sounds like a right-wing demagogue himself, the more he legitimizes the extreme right-wing.
But there is something else, too. Populists can only thrive in a climate of political discontent. They live on people’s disappointment with those in power, on their sense of powerlessness and alienation.
And if populism in Europe nearly always seems to have an anti-European thrust, it is because the European Union and its complicated institutions and decision making procedures are particularly distant from most people.
Is there any way this could be fixed?
EU experts and those who are the most passionate about European integration, suggest grand institutional reforms. The Commission, for starters, should be directly elected.
Others suggest that the European Parliament should be invested with more powers.
But would such reforms – even if they were politically feasible – really help to bring the Commission or the European Parliament lawmakers closer to the citizens? I’m not sure.
Instead, Brussels might find it worth trying for a different kind of communication with the people out there.
Jose Manuel Barroso and his commissioners should seriously consider road-shows and town hall meetings.
I am not talking about having a staged event where Barroso, surrounded by a phalanx of security guards, would address a select group of people behind closed doors.
No.
It is time that the EU’s leading representatives reach out to ordinary people.
The turgid press handouts and long-winded speeches that usually accompany EU events should be thrown away.
Barroso, the commissioners and the EU’s foreign policy chief, Catherine Ashton, need to take buses around Europe and stop in towns and cities to talk to audiences who have not been hand-picked. They need to really listen to what people want and think about Europe.
That means taking questions and risks. That means having a debate about what is it about Europe that drives populists to question the very existence of the EU. That means getting passionate about defending the greatest economic and political construction in Europe since 1945.
I mentioned this idea to a few EU civil servants and European parliamentarians.
Not one of them was enthusiastic.
Indeed, one German parliamentarian had the arrogance to suggest that there was little point in explaining how the EU worked and what it stood for because most Germans didn’t even know how the Bundesrat, (Germany’s upper house) worked! The view was that “we here in Brussels know what is best for Europe.”
Those who hold such views also have contempt for putting important issues directly to the vote by referendum.
When the Greek government last year suggested calling a referendum over the austerity package, there was an outcry from officials in Brussels and Berlin who saw their Euro rescue plan endangered. Under massive pressure, Greece abandoned the vote.
In Brussels, there was also scorn for Ireland’s decision to call a referendum over the EU’s fiscal pact. EU officials muttered that the issue was too complicated for citizens to decide. Besides, populists would hijack the agenda.
Yet surely that would be all the more reason for EU and national leaders to set the agenda and defend it.
We are living in an extraordinary era where the public has a wider access to information than ever before. This should work as a boon to democracy. It should strengthen transparency and accountability. It should allow citizens to have more of a say over important decisions.
After all, we are living in times when more and more countries in the world are embracing democracy, however difficult the transitions may be.
Surely it is incumbent on national and EU leaders to reach out to the citizens so as not to leave the field to populists.
The Chicago NATO Summit will be taking place against the backdrop of an almost irresistible tendency of U.S. retrenchment from Europe and the wider Middle East. The United States has already pulled back its troops from Iraq. The engagement in Afghanistan is slated to come to an end in 2014. Washington seems to have found the formula for limiting the scope of its engagement even under crisis conditions. As the Libya operation has demonstrated, “Leading from behind” seems to have caught the attention and support of many in the U.S. administration. For many, the Chicago summit will signal the end of the transatlantic dominion and usher in the much heralded “Pacific Century”.
As America’s attention drifts westward, European attention is turning inwards. The eurocrisis is sapping many EU leaders’ political capital. There is very little talk about the security partnership with the United States. On the contrary, in Europe, the focus is on assessing the impact of current and future austerity measures on regional and global security.
Against this backdrop, the success of the Chicago Summit is likely to be determined by its ability to cement the transatlantic partnership. The Chicago Summit has to address the consequences of this unfavorable environment. It should conclude with a stronger than expected commitment to the transatlantic partnership.
The second measure of success for Chicago can be whether the Allies will achieve unity of vision for the future of the Alliance.
Since the end of the Cold War, NATO has been able to take advantage of two fundamental dynamics: enlargement and large scale operations. This era has now ended. There is no enlargement on NATO’s near term agenda. The few aspirant countries will not fundamentally alter this reality. Also large scale operations—Kosovo, Afghanistan—are likely to be absent from NATO’s playbook in the foreseeable future. As a result, the Alliance needs to find a new dynamic to maintain its cohesion.
The answer was tentatively given in Lisbon. The new Strategic Concept in effect maps the future of the Alliance. But the task in Lisbon was relatively easy. It involved long term objectives around which a consensus among the Allies was created. The task awaiting the Alliance leaders in Chicago will be different and possibly more challenging. They will have to devise the means for implementing the Lisbon vision. In other words, Chicago will have to be about how the Alliance can become what it decided to be in Lisbon.
It is from this perspective that key issues, such as smart defense, acquire significant relevance. Smart defense, as championed by Secretary General Rasmussen, is set to represent one of the most visible yardsticks for Chicago’s success. Smart defense is presented by the NATO leadership as the way forward for NATO. It is seen as the answer to many old and new problems that have and continue to bedevil the Alliance. Burden sharing between America and Europe can possibly be redressed by smart defense. The impact of the austerity measures can arguably be managed by smart defense. The generation of new and complementary capabilities can also be addressed by smart defense. It is no coincidence therefore that the concept of smart defense has figured prominently in the public speeches of NATO’s leadership. So it will be interesting to see to what extent NATO leaders will be able to commit themselves to a secure future for smart defense.
As armed clashes last weekend show, north Lebanon is becoming a growing support base for the Syrian revolution. Sunni mobilization in support of the uprising in Syria is mounting and the Lebanese government is losing its ability to maintain its policy of neutrality.
The Strategic and Economic Dialogue, scheduled to be held in May 2012, will mark the first formal U.S.-China bilateral dialogue since the United States announced its strategic pivot to the Asia-Pacific region last year.
Using car ownership as a proxy for purchasing power indicates that the global middle class is about 50 percent larger than typically assumed, with important implications for geopolitics and economics.
Putin has returned to the Kremlin, but he faces a significantly different Russia, because the country's situation has changed drastically. The previous Putin’s consensus between those in power and society has fallen apart.
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