by Clara Marina O'Donnell
European countries have long declared their ambition to turn the EU into a global player in security – in order to tackle common threats and strengthen their voice on the global stage. But they still cannot agree on the main threats to their security or the best way to tackle them. Their views are so diverse that it is a wonder EU countries have managed to agree on any common action at all. But member-states need to strengthen their efforts to develop a common approach to security if the EU is to become a serious player.
For the past two decades, the EU has been developing a profile in foreign and security policy. It has agreed common security strategies, deployed over 20 peacekeeping and crisis management missions, led negotiations with Iran on the latter’s nuclear programme and negotiated a ceasefire to the Russia-Georgia war. However, as was brought into focus at a recent EUISS seminar, EU countries do not always share the same threat perceptions, or agree how these should be tackled.
Some European countries, such as Ireland and Austria, do not believe they face any serious ‘hard’ threats. Others fear for their territorial integrity, including the Baltics, Poland and the Czech Republic. Greeks and Cypriots worry mainly about the prospect of renewed military conflict with Turkey. So while Cyprus is still partly militarily occupied and Greek and Turkish military aircraft tail each other on a daily basis, the Viennese worry mainly about the level of burglaries in their city.
While the UK considers the threat of transnational terrorism as the most pressing threat to Europe as a whole, and a key priority to be tackled at home and abroad, most other countries feel largely unaffected. Russia is seen as a close partner to some countries, including Italy and Germany, while the Baltic states see it as an existential threat. Some member-states believe it is important to have a global outlook on security, in particular France and the UK, while others, such as Malta, believe their main security challenge is managing migration flows.
Different views also exist on how to tackle security threats. For many member-states a UN mandate is essential in order to participate in a military mission abroad, while for others, like the UK, it is only desirable. Some believe the US and NATO are cornerstones of their security (in particular the UK and the eastern countries), while others view NATO with suspicion – and resent the UK for having sided with the US during the war in Iraq. Some EU member-states have long traditions of intervention in conflicts across the world and accept the possibility of casualties within their armed forces, in particular France and the UK. Others are averse to the use of military force, most notably Germany.
Various member-states (Sweden, Austria, Finland and Ireland) have a long history of neutrality and are grappling to make their stance compatible with growing EU co-operation in security and defence (Ireland is finding it the hardest to accept EU defence co-operation. Due to public concern, it will have its military neutrality enshrined in an EU treaty for the first time if the Lisbon treaty comes into force). For their part, the UK and France are insistent on the need to develop expeditionary capabilities to allow the EU to fulfil its ambitions abroad. Some member-states, such as Sweden, have transformed their military forces, but many others have so far resisted.
In light of their very different histories, traditions and cultures, it is no mean achievement that EU countries have agreed to work together to provide peacekeeping and crisis management to conflicts zones in need, and to cooperate on wider security issues such as Iran and the Arab-Israeli conflict. In addition, with time the EU is likely to become further involved in security, by tackling ‘soft’ threats (such as protective measures against cyber attacks), or certain aspects of ‘hard’ threats (such as monitoring the cross-border transfer of dangerous products which could be used in chemical or biological attacks).
But member-states’ different interests and approaches limit the EU’s effectiveness as an external actor, as demonstrated by the difficulties in finding helicopters for the EU’s peacekeeping mission to Chad, the UK’s refusal to send a battlegroup to the Democratic Republic of Congo in 2008, or the difficulties the EU has in agreeing a common position on Russia or energy security.
Perhaps the biggest problem for the EU is the division between its western and eastern members. While many member-states feel they cannot trust their partners to guarantee their security (within the EU or NATO), it is difficult to talk of a common security culture. If threat perceptions within eastern European countries worsened, their anxieties could define their foreign policies, hampering the EU’s work at home and abroad (and NATO). For the EU and NATO to remain credible security providers to their members, and for the EU to become a serious player in global security, European countries must overcome the current mistrust and strengthen their efforts to develop a stronger common strategic culture.
Clara Marina O'Donnell is a research fellow at the Centre for European Reform
Monday, July 27, 2009
Tuesday, July 21, 2009
Carl Bildt and the cost of speaking plainly
by Charles Grant
Carl Bildt is better known throughout the world than most of his fellow EU foreign ministers – and many of the prime ministers, too. That is not only because he has held some senior jobs (prime minister of Sweden, and Balkan envoy for both the United Nations and the EU), but also because he is actively engaged in, and knowledgeable about, a wide range of international issues.
Someone with Bildt’s skills and experience should be the front-runner to become the EU’s new High Representative – in effect its foreign policy chief – if, as is likely, the Lisbon treaty is finally implemented at the end of this year. That treaty would merge the roles currently played by Javier Solana, the current High Representative, and Benita Ferrero-Waldner, the commissioner for external relations, into a single post at the head of a new ‘external action service’ – an embryonic EU foreign ministry.
But Bildt’s chances of being appointed High Representative are slim. This is because he tends to say what he thinks and that is not always wise in politics or diplomacy. His frank and trenchant opinions appeal to think-tankers and journalists but not always to other foreign ministers. Some of them find his confidence and cleverness, and the length of his contact book, irritating. And sometimes he conducts his own solo diplomacy, particularly when Balkan problems hot up, which can be frustrating for the country holding the EU presidency.
I must declare an interest. Carl Bildt sat on the advisory board of the Centre for European Reform until he became Swedish foreign minister in October 2006, and still attends many CER conferences. He is very much a ‘think-tankers’ foreign minister’: he likes to argue and ask questions, and he brims with ideas. He also works very hard at his job: most weekends, this youthful-looking 60-year old is at some conference or other, debating the most pressing foreign policy issues of the day. And if he is not at a conference he is on a diplomatic mission or at a summit.
His critics view Bildt as an arrogant Mr Know-it-all. But in many ways he is modest. He takes the time to speak to people who are not ‘important’, like secretaries and conference organisers, and not all politicians do that. Furthermore, most politicians will only attend a conference if they are given a speaking slot. They go to give their speech and are not particularly interested in hearing what others have to say. But Bildt is not like that. Every six months the CER and other think-tanks organise a roundtable that brings together European and American diplomats and thinkers. Bildt always turns up, even though he seldom has a speaking slot. He sits at the back taking notes, because he is genuinely interested to hear what other experts have to say.
If Bildt was serious about running for the job of High Representative he would have manoeuvred to win the support of France and Germany. But he has not done that, with the result that both Berlin and Paris are likely to block his candidacy. Germany takes the view that the EU should maintain friendly relations with Russia. So in August 2008, when Russia invaded Georgia, the Germans disapproved of Bildt’s comparison of the Russian justification for the attack on Georgia to Adolf Hitler's rationale for invading parts of Central Europe – namely the need to protect a minority. Bildt’s comment was indeed over-the-top and unwise. In fact he has a good network of contacts inside Russia, including some of those in positions of power. Nevertheless as far as several EU governments are concerned, Bildt is simply too confrontational towards Russia.
France is an even bigger problem for Bildt. Just before the recent European elections he gave an interview to Le Figaro in which he contradicted the view of President Nicolas Sarkozy that Turkey is not in Europe. “If we judge Cyprus to be in Europe, although it is as in island along Syria's shores, it is hard not to consider that Turkey is in Europe," Bildt said. That interview made Sarkozy angry and he cancelled a visit to Stockholm. To make matters worse, Bildt does not speak French fluently.
Bildt has also been implicitly critical of Sarkozy’s protectionist rhetoric – he is a true believer in free markets, free trade and the ‘Lisbon agenda’ of economic reform. You know where you are with Bildt – he is a strong backer of human rights in authoritarian countries and he believes that the countries of Eastern Europe should be free to choose their own destinies. He is also an unstinting Atlanticist; if the decision was left to him, Sweden would join NATO. Bildt’s experience in Bosnia has made him passionate about the protection of minorities. At the end of the war in Sri Lanka, when government forces were killing many Tamil civilians, he tried to fly to Colombo to make his point to the country’s leaders. But he was refused a visa.
Many EU foreign ministers would probably prefer a High Representative in the mould of Javier Solana, the incumbent. The Spaniard’s style of operating is the opposite of Bildt’s: he avoids direct confrontations with people, preferring to build a consensus through discreet personal diplomacy. The ideal High Representative would be a figure who combined Bildt’s rigorous thinking and grand strategic vision with Solana’s subtle manner and feline operating skills. But there is probably no such person.
Charles Grant is director of the Cente for European Reform
Carl Bildt is better known throughout the world than most of his fellow EU foreign ministers – and many of the prime ministers, too. That is not only because he has held some senior jobs (prime minister of Sweden, and Balkan envoy for both the United Nations and the EU), but also because he is actively engaged in, and knowledgeable about, a wide range of international issues.
Someone with Bildt’s skills and experience should be the front-runner to become the EU’s new High Representative – in effect its foreign policy chief – if, as is likely, the Lisbon treaty is finally implemented at the end of this year. That treaty would merge the roles currently played by Javier Solana, the current High Representative, and Benita Ferrero-Waldner, the commissioner for external relations, into a single post at the head of a new ‘external action service’ – an embryonic EU foreign ministry.
But Bildt’s chances of being appointed High Representative are slim. This is because he tends to say what he thinks and that is not always wise in politics or diplomacy. His frank and trenchant opinions appeal to think-tankers and journalists but not always to other foreign ministers. Some of them find his confidence and cleverness, and the length of his contact book, irritating. And sometimes he conducts his own solo diplomacy, particularly when Balkan problems hot up, which can be frustrating for the country holding the EU presidency.
I must declare an interest. Carl Bildt sat on the advisory board of the Centre for European Reform until he became Swedish foreign minister in October 2006, and still attends many CER conferences. He is very much a ‘think-tankers’ foreign minister’: he likes to argue and ask questions, and he brims with ideas. He also works very hard at his job: most weekends, this youthful-looking 60-year old is at some conference or other, debating the most pressing foreign policy issues of the day. And if he is not at a conference he is on a diplomatic mission or at a summit.
His critics view Bildt as an arrogant Mr Know-it-all. But in many ways he is modest. He takes the time to speak to people who are not ‘important’, like secretaries and conference organisers, and not all politicians do that. Furthermore, most politicians will only attend a conference if they are given a speaking slot. They go to give their speech and are not particularly interested in hearing what others have to say. But Bildt is not like that. Every six months the CER and other think-tanks organise a roundtable that brings together European and American diplomats and thinkers. Bildt always turns up, even though he seldom has a speaking slot. He sits at the back taking notes, because he is genuinely interested to hear what other experts have to say.
If Bildt was serious about running for the job of High Representative he would have manoeuvred to win the support of France and Germany. But he has not done that, with the result that both Berlin and Paris are likely to block his candidacy. Germany takes the view that the EU should maintain friendly relations with Russia. So in August 2008, when Russia invaded Georgia, the Germans disapproved of Bildt’s comparison of the Russian justification for the attack on Georgia to Adolf Hitler's rationale for invading parts of Central Europe – namely the need to protect a minority. Bildt’s comment was indeed over-the-top and unwise. In fact he has a good network of contacts inside Russia, including some of those in positions of power. Nevertheless as far as several EU governments are concerned, Bildt is simply too confrontational towards Russia.
France is an even bigger problem for Bildt. Just before the recent European elections he gave an interview to Le Figaro in which he contradicted the view of President Nicolas Sarkozy that Turkey is not in Europe. “If we judge Cyprus to be in Europe, although it is as in island along Syria's shores, it is hard not to consider that Turkey is in Europe," Bildt said. That interview made Sarkozy angry and he cancelled a visit to Stockholm. To make matters worse, Bildt does not speak French fluently.
Bildt has also been implicitly critical of Sarkozy’s protectionist rhetoric – he is a true believer in free markets, free trade and the ‘Lisbon agenda’ of economic reform. You know where you are with Bildt – he is a strong backer of human rights in authoritarian countries and he believes that the countries of Eastern Europe should be free to choose their own destinies. He is also an unstinting Atlanticist; if the decision was left to him, Sweden would join NATO. Bildt’s experience in Bosnia has made him passionate about the protection of minorities. At the end of the war in Sri Lanka, when government forces were killing many Tamil civilians, he tried to fly to Colombo to make his point to the country’s leaders. But he was refused a visa.
Many EU foreign ministers would probably prefer a High Representative in the mould of Javier Solana, the incumbent. The Spaniard’s style of operating is the opposite of Bildt’s: he avoids direct confrontations with people, preferring to build a consensus through discreet personal diplomacy. The ideal High Representative would be a figure who combined Bildt’s rigorous thinking and grand strategic vision with Solana’s subtle manner and feline operating skills. But there is probably no such person.
Charles Grant is director of the Cente for European Reform
Friday, July 10, 2009
Iran, elections, and nuclear weapons
by Tomas Valasek
What the future holds for Iran's theocratic regime is hard to read. True, the government has ensured its own survival by suppressing last month's protests there with brutal force. President Mahmoud Ahmadinejad will remain in power despite a contested election. But the authority of the regime has suffered. The president has lost legitimacy in the eyes of millions of Iranians. The country's supreme leader, Ayatollah Ali Khamenei, who urged force against the protestors, has lost much of his popularity. The events of June 2009 could turn out to be the beginning of a deeper challenge to the Islamic republic: Iran observers point out that the country's 1979 revolution was preceded by a long build up of low-level agitation.
What is clear is that the violence around the presidential election bodes ill for western diplomacy to end Iran's nuclear ambitions, in at least two ways. First, Barack Obama will be under pressure to rethink the offer of 'engagement grounded in mutual respect', which he extended to the government in Iran in April 2009. On the other hand, the US will now find it easier to convince the Europeans to toughen the sanctions regime on Iran, thanks to Tehran's heavy-handiness.
Iran's nuclear programme is run directly by the country's supreme leader, not the president. The recent political turmoil will have had little effect on it. Even if the challenger, Mir Hossein Mousavi had won the presidency, Iran would have almost certainly continued to enrich uranium. Mousavi said during the campaign that he would not abandon "Iran's right to nuclear technology". Some Iran watchers have speculated that Mousavi would build enrichment facilities but not nuclear weapons, lest he put Iran in even deeper isolation. In reality, the president's views have little bearing on the nature of the nuclear project.
The West has long been worried that Iran is building a nuclear bomb, or at least acquiring all the necessary ingredients. However the more immediate concern now is the prospect of an Israeli military strike on Iran. US officials say they fear that Israel may try to destroy Iran's nuclear facilities this autumn, before Russia delivers a batch of modern anti-aircraft missiles recently purchased by the Iranian regime.
To prevent Iran from acquiring nuclear weapons – and to keep Israel from attacking – Barack Obama launched a new diplomatic push in April 2009. He has promised to join the European-led talks with the government in Tehran. US negotiators are rumoured to be considering dropping a key western condition for the talks, namely that Iran shut down its enrichment programme before the negotiations start. Obama also recorded a video statement to the Iranian people, in which he has offered a partnership between the US and Iran. The idea was to win the Iranian regime's goodwill by showing it the respect it craves, and to spur the Iranians into pressuring the leadership to pursue a less confrontational line with the US.
The second pillar of the US strategy has worked very well. While most Iranians support the nuclear programme, many of the young ones are increasingly frustrated with the country's pariah status. Mir Hossein Mousavi, surged ahead in the polls after he accused president Ahmadinejad of leading Iran into the 'indignity' of international isolation.
But Mousavi failed to win – or was prevented from winning – and the post-election protests have undermined the overall strategy. Iran cannot negotiate because the government is 'too busy locking people up', said one EU official working on the Iran dossier. If Ahmadinejad and Khamenei do fully consolidate power, this will create another headache for the West: how can Barack Obama speak to a regime which has likely rigged elections and brutally suppressed democratic protests? Obama is already under fire for being "soft" and "naive" regarding Iran. Admiral Michael Mullen, the chairman of the US Joint Chiefs of Staff, recently urged him to take a harsher line, noting that Iran's nuclear programme was progressing whatever the domestic situation there. Even if Obama starts talks with Tehran, he may feel compelled to satisfy Mullen, and others, by employing tougher rethoric. This would likely cause the talks to collapse prematurely.
If, as is likely, engagement does not generate a generous response from Tehran, the US will want to tighten existing sanctions on Iran. Some governments like the German and Italian ones, have been known to be sceptical about the need for further sanctions; the Italian foreign minister published an article in early June calling for the West to be nice to Iran. But the violence in Tehran has made the doubters more inclined to penalise the Iranian government, EU officials say.
However, fresh UN sanctions may be blocked by Russia, and possibly China. Both are members of the UN Security Council and oppose a harsher line on Iran. If the US and the EU apply unilateral sanctions, these will be less effective. Meanwhile, Israel may decide to attack, or Iran may race to acquire a full nuclear weapon. So the furore over Iran's presidential election – by throwing up new obstacles to diplomacy – has made the job of resolving tensions over its nuclear programme harder. That may prove the deadliest legacy of the events of the last few weeks.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
What the future holds for Iran's theocratic regime is hard to read. True, the government has ensured its own survival by suppressing last month's protests there with brutal force. President Mahmoud Ahmadinejad will remain in power despite a contested election. But the authority of the regime has suffered. The president has lost legitimacy in the eyes of millions of Iranians. The country's supreme leader, Ayatollah Ali Khamenei, who urged force against the protestors, has lost much of his popularity. The events of June 2009 could turn out to be the beginning of a deeper challenge to the Islamic republic: Iran observers point out that the country's 1979 revolution was preceded by a long build up of low-level agitation.
What is clear is that the violence around the presidential election bodes ill for western diplomacy to end Iran's nuclear ambitions, in at least two ways. First, Barack Obama will be under pressure to rethink the offer of 'engagement grounded in mutual respect', which he extended to the government in Iran in April 2009. On the other hand, the US will now find it easier to convince the Europeans to toughen the sanctions regime on Iran, thanks to Tehran's heavy-handiness.
Iran's nuclear programme is run directly by the country's supreme leader, not the president. The recent political turmoil will have had little effect on it. Even if the challenger, Mir Hossein Mousavi had won the presidency, Iran would have almost certainly continued to enrich uranium. Mousavi said during the campaign that he would not abandon "Iran's right to nuclear technology". Some Iran watchers have speculated that Mousavi would build enrichment facilities but not nuclear weapons, lest he put Iran in even deeper isolation. In reality, the president's views have little bearing on the nature of the nuclear project.
The West has long been worried that Iran is building a nuclear bomb, or at least acquiring all the necessary ingredients. However the more immediate concern now is the prospect of an Israeli military strike on Iran. US officials say they fear that Israel may try to destroy Iran's nuclear facilities this autumn, before Russia delivers a batch of modern anti-aircraft missiles recently purchased by the Iranian regime.
To prevent Iran from acquiring nuclear weapons – and to keep Israel from attacking – Barack Obama launched a new diplomatic push in April 2009. He has promised to join the European-led talks with the government in Tehran. US negotiators are rumoured to be considering dropping a key western condition for the talks, namely that Iran shut down its enrichment programme before the negotiations start. Obama also recorded a video statement to the Iranian people, in which he has offered a partnership between the US and Iran. The idea was to win the Iranian regime's goodwill by showing it the respect it craves, and to spur the Iranians into pressuring the leadership to pursue a less confrontational line with the US.
The second pillar of the US strategy has worked very well. While most Iranians support the nuclear programme, many of the young ones are increasingly frustrated with the country's pariah status. Mir Hossein Mousavi, surged ahead in the polls after he accused president Ahmadinejad of leading Iran into the 'indignity' of international isolation.
But Mousavi failed to win – or was prevented from winning – and the post-election protests have undermined the overall strategy. Iran cannot negotiate because the government is 'too busy locking people up', said one EU official working on the Iran dossier. If Ahmadinejad and Khamenei do fully consolidate power, this will create another headache for the West: how can Barack Obama speak to a regime which has likely rigged elections and brutally suppressed democratic protests? Obama is already under fire for being "soft" and "naive" regarding Iran. Admiral Michael Mullen, the chairman of the US Joint Chiefs of Staff, recently urged him to take a harsher line, noting that Iran's nuclear programme was progressing whatever the domestic situation there. Even if Obama starts talks with Tehran, he may feel compelled to satisfy Mullen, and others, by employing tougher rethoric. This would likely cause the talks to collapse prematurely.
If, as is likely, engagement does not generate a generous response from Tehran, the US will want to tighten existing sanctions on Iran. Some governments like the German and Italian ones, have been known to be sceptical about the need for further sanctions; the Italian foreign minister published an article in early June calling for the West to be nice to Iran. But the violence in Tehran has made the doubters more inclined to penalise the Iranian government, EU officials say.
However, fresh UN sanctions may be blocked by Russia, and possibly China. Both are members of the UN Security Council and oppose a harsher line on Iran. If the US and the EU apply unilateral sanctions, these will be less effective. Meanwhile, Israel may decide to attack, or Iran may race to acquire a full nuclear weapon. So the furore over Iran's presidential election – by throwing up new obstacles to diplomacy – has made the job of resolving tensions over its nuclear programme harder. That may prove the deadliest legacy of the events of the last few weeks.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
Friday, July 03, 2009
Russia: A tale of two crises
by Katinka Barysch
Russia’s economy has been hit hard by a triple whammy of capital outflows, collapsing oil prices and falling global demand. In the first three months of the year, output was down by 10 per cent compared with a year earlier. The retail boom that had fuelled growth in recent years has turned into a slump. The output of the manufacturing sector is contracting at a rate of over 20 per cent year on year. Construction is in deep recession. The current-account surplus has melted away.
However, the latest economic indicators suggest that the economic contraction is at least slowing. The oil price has recovered to over $70 a barrel. Surveys show that credit conditions are easing and managers are a bit less gloomy. Capital outflows have slowed. So has inflation, which has allowed the central bank to finally cut rates. International reserves, although down from 2008 peaks, still stand at $410 billion. The government is making plans for recapitalising some of the country’s banks.
Investors still remember the rapid, V-shaped recovery that followed Russia’s last financial crash in 1998. In the following nine years, the Russian economy grew by an average of 7 per cent a year. Will Russia be able to pull out of trouble this quickly again?
On the plus side, Russia’s government finances are in incomparably better shape than they were ten years ago. Back then, it was short-term public borrowing that triggered the crisis, ultimately forcing the government into default. Since then, the budget has shown a healthy surplus, allowing the government to stash away $140 billion in a reserve fund. So although revenue has collapsed (half of it comes from the oil and gas sector), the authorities have room for fiscal manoeuvre. Public spending will also have a bigger impact on the economy, simply because the Russian state is much bigger than it used to be (federal budget revenue was 13 per cent of GDP back in 1998, today it is over 20 per cent, according to Erik Berglőf from the European Bank of Reconstruction and Development).
Also, in 1998 the Russian economy had only just returned to growth, following years of severe post-transition recession. Now, after ten years of uninterrupted expansion, fewer Russians are living hand to mouth and many should be able to draw on savings to tide them over the most difficult period.
However, there are also reasons to expect the current crisis to be more severe and drawn-out. The 1998 crisis mainly affected emerging markets. This time, the recession is global, which means that no country will be able to export its way out of trouble. (Russia exports mainly raw materials, as well as some metals, timber and heavy industrial goods. But it is the collapse in demand for non-oil exports, such as steel products, that is causing the most trouble since these are often produced in isolated one-industry towns.)
Depressed global demand also means that the rally in oil prices is likely to be short-lived. After 1998, the oil price climbed steadily from around $10 a barrel to a peak of $140 last summer. Many forecasters expect oil prices to linger around $50-60 this year and next – not disastrously low but not enough to fuel a strong Russian recovery either. Moreover, Russia’s economy today is much more dependent on oil and gas sales than it was in 1998. Back then, oil and gas sales accounted for 44 per cent of export revenue, now the share is over two-thirds. Many manufacturing and services industries are directly or indirectly linked to the resource sector.
Perhaps the biggest difference lies in the role of banking and borrowing. Although both crises originated in the financial sector, in 1998 this sector was still so small that its collapse barely affected the wider economy. Then, credit to firms and households stood at 9 per cent of GDP; today it is over 40 per cent.
In recent years, much more of that borrowing came from abroad so the drying up of global liquidity in 2008 hit Russia hard. The World Bank estimates that in 1998-99, the reversal in foreign capital flows amounted to less than 2 per cent of Russian GDP. In 2008-09, it was close to 12 per cent of GDP.
Domestic banks cannot take up the slack because a rising share of bad loans will constrain their ability to start lending again. The health of the banking sector is difficult to assess. Official numbers show that the share of non-performing loans has climbed from 1 per cent at the start of the year to 4 per cent today. Given the sorry state of Russian industries, this is still an implausibly low number. Independent assessments put the share of bad loans at anywhere between 10 and 20 per cent.
As a result of these factors, the Russian economy is likely to take longer to come out if its slump than it did ten years ago. The World Bank predicts a contraction of almost 8 per cent this year, but some forecasters thinks even this is too optimistic and they question whether Russia will be able to make even timid recovery in 2010. Most economists agree that Russia stands little or no chance of returning to the 7-8 per cent growth rate that it enjoyed before the crisis struck
The big question is what the changed growth outlook will mean for Russia’s internal stability and the government’s willingness to implement economic reforms. In 1998 Russians expected very little from their leaders in Moscow. They were positively surprised when the Putin administration after 2000 started to implement some useful reforms, such as simplifying the tax system and cleaning up regulations.
Since then, Putin’s muscular rhetoric, combined with Alexei Kudrin’s sound macro-economic management, have raised expectations. The people that took to the streets in Russian cities in recent weeks and months did not so much protest against government policies as demand government help. The government could react either by getting serious about modernising and diversifying the economy. Or it could resort to economic nationalism and populist spending increases. So far, there is more evidence of the latter than the former. Prime Minister Putin has personally instructed companies to clear wage arrears and criticised shops for overcharging struggling families. On June 29th, he told the managers of Russia’s biggest banks that they should not go on summer holiday before they have significantly increased lending to the corporate sector (he even gave them a numerical target of $16 billion). With this kind of crises response, Russia’s growth prospects could end up being lower not only in the short term, but for many years to come.
Katinka Barysch is deputy director of the Centre for European Reform.
Russia’s economy has been hit hard by a triple whammy of capital outflows, collapsing oil prices and falling global demand. In the first three months of the year, output was down by 10 per cent compared with a year earlier. The retail boom that had fuelled growth in recent years has turned into a slump. The output of the manufacturing sector is contracting at a rate of over 20 per cent year on year. Construction is in deep recession. The current-account surplus has melted away.
However, the latest economic indicators suggest that the economic contraction is at least slowing. The oil price has recovered to over $70 a barrel. Surveys show that credit conditions are easing and managers are a bit less gloomy. Capital outflows have slowed. So has inflation, which has allowed the central bank to finally cut rates. International reserves, although down from 2008 peaks, still stand at $410 billion. The government is making plans for recapitalising some of the country’s banks.
Investors still remember the rapid, V-shaped recovery that followed Russia’s last financial crash in 1998. In the following nine years, the Russian economy grew by an average of 7 per cent a year. Will Russia be able to pull out of trouble this quickly again?
On the plus side, Russia’s government finances are in incomparably better shape than they were ten years ago. Back then, it was short-term public borrowing that triggered the crisis, ultimately forcing the government into default. Since then, the budget has shown a healthy surplus, allowing the government to stash away $140 billion in a reserve fund. So although revenue has collapsed (half of it comes from the oil and gas sector), the authorities have room for fiscal manoeuvre. Public spending will also have a bigger impact on the economy, simply because the Russian state is much bigger than it used to be (federal budget revenue was 13 per cent of GDP back in 1998, today it is over 20 per cent, according to Erik Berglőf from the European Bank of Reconstruction and Development).
Also, in 1998 the Russian economy had only just returned to growth, following years of severe post-transition recession. Now, after ten years of uninterrupted expansion, fewer Russians are living hand to mouth and many should be able to draw on savings to tide them over the most difficult period.
However, there are also reasons to expect the current crisis to be more severe and drawn-out. The 1998 crisis mainly affected emerging markets. This time, the recession is global, which means that no country will be able to export its way out of trouble. (Russia exports mainly raw materials, as well as some metals, timber and heavy industrial goods. But it is the collapse in demand for non-oil exports, such as steel products, that is causing the most trouble since these are often produced in isolated one-industry towns.)
Depressed global demand also means that the rally in oil prices is likely to be short-lived. After 1998, the oil price climbed steadily from around $10 a barrel to a peak of $140 last summer. Many forecasters expect oil prices to linger around $50-60 this year and next – not disastrously low but not enough to fuel a strong Russian recovery either. Moreover, Russia’s economy today is much more dependent on oil and gas sales than it was in 1998. Back then, oil and gas sales accounted for 44 per cent of export revenue, now the share is over two-thirds. Many manufacturing and services industries are directly or indirectly linked to the resource sector.
Perhaps the biggest difference lies in the role of banking and borrowing. Although both crises originated in the financial sector, in 1998 this sector was still so small that its collapse barely affected the wider economy. Then, credit to firms and households stood at 9 per cent of GDP; today it is over 40 per cent.
In recent years, much more of that borrowing came from abroad so the drying up of global liquidity in 2008 hit Russia hard. The World Bank estimates that in 1998-99, the reversal in foreign capital flows amounted to less than 2 per cent of Russian GDP. In 2008-09, it was close to 12 per cent of GDP.
Domestic banks cannot take up the slack because a rising share of bad loans will constrain their ability to start lending again. The health of the banking sector is difficult to assess. Official numbers show that the share of non-performing loans has climbed from 1 per cent at the start of the year to 4 per cent today. Given the sorry state of Russian industries, this is still an implausibly low number. Independent assessments put the share of bad loans at anywhere between 10 and 20 per cent.
As a result of these factors, the Russian economy is likely to take longer to come out if its slump than it did ten years ago. The World Bank predicts a contraction of almost 8 per cent this year, but some forecasters thinks even this is too optimistic and they question whether Russia will be able to make even timid recovery in 2010. Most economists agree that Russia stands little or no chance of returning to the 7-8 per cent growth rate that it enjoyed before the crisis struck
The big question is what the changed growth outlook will mean for Russia’s internal stability and the government’s willingness to implement economic reforms. In 1998 Russians expected very little from their leaders in Moscow. They were positively surprised when the Putin administration after 2000 started to implement some useful reforms, such as simplifying the tax system and cleaning up regulations.
Since then, Putin’s muscular rhetoric, combined with Alexei Kudrin’s sound macro-economic management, have raised expectations. The people that took to the streets in Russian cities in recent weeks and months did not so much protest against government policies as demand government help. The government could react either by getting serious about modernising and diversifying the economy. Or it could resort to economic nationalism and populist spending increases. So far, there is more evidence of the latter than the former. Prime Minister Putin has personally instructed companies to clear wage arrears and criticised shops for overcharging struggling families. On June 29th, he told the managers of Russia’s biggest banks that they should not go on summer holiday before they have significantly increased lending to the corporate sector (he even gave them a numerical target of $16 billion). With this kind of crises response, Russia’s growth prospects could end up being lower not only in the short term, but for many years to come.
Katinka Barysch is deputy director of the Centre for European Reform.
Thursday, June 25, 2009
Britain’s eurosceptics need to come clean
by Simon Tilford
Britain’s media and political class have a right to be sceptical about the EU, even hostile to it. But they also have an obligation to be honest about the economic implications of a retreat from full membership of the Union. Their failure to do so is dishonest and poses a serious risk to Britain’s prosperity. A newly ‘emancipated’ Britain would not remain part of the EU’s single market, at least not on the terms the eurosceptics claim. In fact, a retreat would achieve nothing but impotence. It would not reduce the regulatory and compliance costs facing UK business and it would end our ability to shape the EU’s single market.
Those calling for a renegotiation of the EU’s Lisbon treaty, or of the UK’s relationship with the EU more generally, ignore that this would inevitably lead to at best semi-detached membership of the EU, and more probably divorce. Eurosceptics appear to believe that a Britain outside the EU would remain part of the single market, but that it would be freed from the need to abide by EU regulation. In short, Britain could enjoy all the benefits of access to the single market but none of the costs.
This is incoherent. To remain a full member of the single market, British firms would have to abide by all its rules and regulations. A Britain that opted to withdraw from the EU would have no say over the drawing up of those rules and regulations. British interests would not be represented in Brussels and Britain would not be able to stymie regulatory drives that threaten UK prosperity. In short, British business would experience the worst of all worlds.
British manufacturers might not suffer too badly. Britain would have no say over EU product standards, which British firms would nevertheless have to comply with in order to sell their products in the EU. Nor would the costs of producing for the UK market fall – it would make no sense for British firms to make one set of products for the British market and another for the rest of Europe. But merchandise markets are at least already open. The real threat for the UK lies elsewhere.
Britain is by far the biggest exporter of commercial services in the EU. As such, it has a very strong interest in opening markets for those services. But a Britain that has no say over the future of the single market will not be able to use its influence to push for service sector liberalisation. It will not be able to challenge the self-serving idea put forward by other member-states that a single market in merchandise goods is one thing, but open markets in services are somehow beyond the pale. Nor will it be able to ensure that regulation of service industries is not inimical to the interests of British business. This would be a major own-goal.
One only has to look at the financial services industry to see the risks. If British-based providers of financial services wanted to do business in the single market, they would have to abide by whatever regulations the rest of the EU dreamt up. These would certainly be more restrictive in the absence of British involvement. At a time when other EU governments see an opportunity to cut London down to size, would it really make sense to be a bystander? How would Britain thwart the rather heavy-handed attack on the private equity and hedge fund industries operating in the EU if it had no seat at the table?
Britain needs to step up its involvement in the EU, not leave the playing field in a huff. It needs to strive to ensure that EU financial regulation is – as far as possible – proportionate and reconcilable with the UK approach. More generally, it needs to make common cause with other economically liberal member-states to ensure that the EU evolves in a direction that serves British interests.
Britain’s conversation about its relationship with the EU is devoid of the pragmatism and empiricism with which it is traditionally associated. Some British eurosceptics genuinely believe that the UK can have its cake and eat it. That it could reduce the cost of EU membership while retaining all the existing and potential benefits. Others know exactly what they are doing. Their ultimate objective is for Britain to withdraw from the EU. This is a perfectly defensible aim, but those for whom this is the objective need to explain how it would be in the UK’s strategic and commercial interests.
Simon Tilford is chief economist at the Centre for European Reform.
Britain’s media and political class have a right to be sceptical about the EU, even hostile to it. But they also have an obligation to be honest about the economic implications of a retreat from full membership of the Union. Their failure to do so is dishonest and poses a serious risk to Britain’s prosperity. A newly ‘emancipated’ Britain would not remain part of the EU’s single market, at least not on the terms the eurosceptics claim. In fact, a retreat would achieve nothing but impotence. It would not reduce the regulatory and compliance costs facing UK business and it would end our ability to shape the EU’s single market.
Those calling for a renegotiation of the EU’s Lisbon treaty, or of the UK’s relationship with the EU more generally, ignore that this would inevitably lead to at best semi-detached membership of the EU, and more probably divorce. Eurosceptics appear to believe that a Britain outside the EU would remain part of the single market, but that it would be freed from the need to abide by EU regulation. In short, Britain could enjoy all the benefits of access to the single market but none of the costs.
This is incoherent. To remain a full member of the single market, British firms would have to abide by all its rules and regulations. A Britain that opted to withdraw from the EU would have no say over the drawing up of those rules and regulations. British interests would not be represented in Brussels and Britain would not be able to stymie regulatory drives that threaten UK prosperity. In short, British business would experience the worst of all worlds.
British manufacturers might not suffer too badly. Britain would have no say over EU product standards, which British firms would nevertheless have to comply with in order to sell their products in the EU. Nor would the costs of producing for the UK market fall – it would make no sense for British firms to make one set of products for the British market and another for the rest of Europe. But merchandise markets are at least already open. The real threat for the UK lies elsewhere.
Britain is by far the biggest exporter of commercial services in the EU. As such, it has a very strong interest in opening markets for those services. But a Britain that has no say over the future of the single market will not be able to use its influence to push for service sector liberalisation. It will not be able to challenge the self-serving idea put forward by other member-states that a single market in merchandise goods is one thing, but open markets in services are somehow beyond the pale. Nor will it be able to ensure that regulation of service industries is not inimical to the interests of British business. This would be a major own-goal.
One only has to look at the financial services industry to see the risks. If British-based providers of financial services wanted to do business in the single market, they would have to abide by whatever regulations the rest of the EU dreamt up. These would certainly be more restrictive in the absence of British involvement. At a time when other EU governments see an opportunity to cut London down to size, would it really make sense to be a bystander? How would Britain thwart the rather heavy-handed attack on the private equity and hedge fund industries operating in the EU if it had no seat at the table?
Britain needs to step up its involvement in the EU, not leave the playing field in a huff. It needs to strive to ensure that EU financial regulation is – as far as possible – proportionate and reconcilable with the UK approach. More generally, it needs to make common cause with other economically liberal member-states to ensure that the EU evolves in a direction that serves British interests.
Britain’s conversation about its relationship with the EU is devoid of the pragmatism and empiricism with which it is traditionally associated. Some British eurosceptics genuinely believe that the UK can have its cake and eat it. That it could reduce the cost of EU membership while retaining all the existing and potential benefits. Others know exactly what they are doing. Their ultimate objective is for Britain to withdraw from the EU. This is a perfectly defensible aim, but those for whom this is the objective need to explain how it would be in the UK’s strategic and commercial interests.
Simon Tilford is chief economist at the Centre for European Reform.
Wednesday, June 17, 2009
Can Russia contribute to global governance?
by Charles Grant
Like the US, China and India, Russia has never been a big enthusiast for multilateral global governance. When the Russians believe that working through multilateral institutions will suit their interests, they will do so. But Russia’s history, size and traditions make it sceptical of multilateralism. Only with great reluctance did then President Vladimir Putin sign the Kyoto protocol on climate change – when he realised that Russia would benefit financially through the sale of unused carbon allowances.
Russia has never shown a lot of interest in multilateral institutions, other than the privileged clubs it is a member of, such as the G8 and the UN Security Council (UNSC). Presidents Yeltsin and Putin have had similar views on global governance, both preferring to talk of multipolarity rather than multilateralism.
As a G8 member, Russia has not been in favour of broadening the membership to include countries like China. But now that the G20 has become an important group, in some ways replacing the G8, Russia willingly takes part. Russia evidently likes the UNSC, being one of five veto-wielding members. But it has shown less interest in the UN as a whole and stayed on the sidelines during the discussion of UN reform at the end of Kofi Annan’s tenure as UN secretary-general. When Russia does take part in global bodies, it often seems more interested in the status of membership than in active participation.
Russia is ambiguous on whether it wants to join the World Trade Organisation – its membership talks with the WTO have dragged on since 1993. Earlier this month Russian trade officials told EU negotiators that they hoped to join the WTO this year – but then Prime Minister Putin said that Russia would want to join only as part of a grouping with Belarus and Kazakhstan. That is likely to delay membership.
Russia is more comfortable with regional organisations than global bodies, perhaps because it can play a leading role in them. It likes the Collective Security Treaty Organisation, which links a number of former Soviet countries, and the Shanghai Co-operation Organisation, which brings together most of the Central Asian countries and is dominated by Russia and China. There has been talk in the Kremlin of a ‘gas OPEC’, hooking together Russia, Iran and other producers such as Turkmenistan.
Russia strongly dislikes NATO for several reasons: the US leads the alliance, Russia believes the West would not allow it to join, and NATO’s expansion symbolises Russia’s strategic retreat since the Cold War. In recent years Moscow has taken against the Organisation for Security and Co-operation in Europe, whose observers have criticised the conduct of elections in former Soviet states. That is one reason why President Dmitri Medvedev came up with the idea of ‘a new European security architecture’ last year. Medvedev has said this should bring together Russia, the US, European countries and European security organisations. But his government has not yet produced any specific proposals.
The economic crisis is spurring governments around the world to think seriously about reform of global governance. For example the membership of the Financial Stability Forum is being broadened to include the leading developing economies. The IMF and World Bank are preparing for another round of reform. The effort to combat climate change is likely to lead to new global institutions. Yet Russia has been reluctant to put forward its own proposals on global governance. Why?
Russian foreign policy is hyper-realist. Russian diplomats tend to believe that countries are most likely to achieve their objectives through being tough and unyielding rather than by compromising or working things out in international organisations. Their worldview focuses on power rather than rules. It is natural for large and strong countries to be realist; it tends to be smaller and weaker states that see multilateral institutions as a bulwark against bullying by the powerful. And perhaps Russia’s difficult history – it has never had defined frontiers and has usually got on badly with its neighbours – has encouraged the realism.
The fact that Russia is big makes it reluctant to cede much authority to multilateral bodies. For in international organisations small countries can wield disproportionate influence. One thing that Russian diplomats find infuriating about the EU is that small countries can veto its decisions – for a while Lithuania blocked the negotiation of an EU-Russia trade agreement. Tiny Georgia could, if it really insisted, stop Russia joining the WTO. Seeing itself as a great power, Russia has – ever since the Congress of Vienna, almost two hundred years ago – liked the idea of a concert of powers. Thus it enjoys its role in the ‘quartet’ that is supposed to handle the Middle East peace process: Russia sits alongside the US, the UN and the EU.
Russians should rethink their scepticism towards multilateral institutions. The Russian economy is globalising. Sberbank’s recent purchase of a major stake in General Motors Europe is just one indication of this trend. Gazprom is buying energy infrastructure in many EU member-states. Russia’s leading metals companies are building global networks. The long-term prosperity of the top Russian firms depends on their buying companies and raising money in the world’s major financial centres.
Russia is developing global economic interests and will need to defend them. This is best done through strong multilateral institutions. If Russia joined the WTO it would be harder for other countries to impose anti-dumping duties on Russian exports. As a leading exporter of energy, Russia has an interest in joining the International Energy Agency, and helping it to develop into a body that can smooth out volatility in oil and gas prices. Russia should also take more interest in the future of the IMF and the World Bank, and in the emerging institutional framework for regulating global financial markets.
The Europeans – who, unlike the Russians, Indians, Chinese and Americans are instinctively multilateralist – should encourage the Russians to view multilateral institutions as a tool for promoting their national interests. The WTO is the prime example of an organisation that would deliver tangible benefits to Russia, and the EU – as Russia’s biggest trading partner – should urge the Russians to made up their minds to join it.
Charles Grant is director of the Centre for European Reform.
Like the US, China and India, Russia has never been a big enthusiast for multilateral global governance. When the Russians believe that working through multilateral institutions will suit their interests, they will do so. But Russia’s history, size and traditions make it sceptical of multilateralism. Only with great reluctance did then President Vladimir Putin sign the Kyoto protocol on climate change – when he realised that Russia would benefit financially through the sale of unused carbon allowances.
Russia has never shown a lot of interest in multilateral institutions, other than the privileged clubs it is a member of, such as the G8 and the UN Security Council (UNSC). Presidents Yeltsin and Putin have had similar views on global governance, both preferring to talk of multipolarity rather than multilateralism.
As a G8 member, Russia has not been in favour of broadening the membership to include countries like China. But now that the G20 has become an important group, in some ways replacing the G8, Russia willingly takes part. Russia evidently likes the UNSC, being one of five veto-wielding members. But it has shown less interest in the UN as a whole and stayed on the sidelines during the discussion of UN reform at the end of Kofi Annan’s tenure as UN secretary-general. When Russia does take part in global bodies, it often seems more interested in the status of membership than in active participation.
Russia is ambiguous on whether it wants to join the World Trade Organisation – its membership talks with the WTO have dragged on since 1993. Earlier this month Russian trade officials told EU negotiators that they hoped to join the WTO this year – but then Prime Minister Putin said that Russia would want to join only as part of a grouping with Belarus and Kazakhstan. That is likely to delay membership.
Russia is more comfortable with regional organisations than global bodies, perhaps because it can play a leading role in them. It likes the Collective Security Treaty Organisation, which links a number of former Soviet countries, and the Shanghai Co-operation Organisation, which brings together most of the Central Asian countries and is dominated by Russia and China. There has been talk in the Kremlin of a ‘gas OPEC’, hooking together Russia, Iran and other producers such as Turkmenistan.
Russia strongly dislikes NATO for several reasons: the US leads the alliance, Russia believes the West would not allow it to join, and NATO’s expansion symbolises Russia’s strategic retreat since the Cold War. In recent years Moscow has taken against the Organisation for Security and Co-operation in Europe, whose observers have criticised the conduct of elections in former Soviet states. That is one reason why President Dmitri Medvedev came up with the idea of ‘a new European security architecture’ last year. Medvedev has said this should bring together Russia, the US, European countries and European security organisations. But his government has not yet produced any specific proposals.
The economic crisis is spurring governments around the world to think seriously about reform of global governance. For example the membership of the Financial Stability Forum is being broadened to include the leading developing economies. The IMF and World Bank are preparing for another round of reform. The effort to combat climate change is likely to lead to new global institutions. Yet Russia has been reluctant to put forward its own proposals on global governance. Why?
Russian foreign policy is hyper-realist. Russian diplomats tend to believe that countries are most likely to achieve their objectives through being tough and unyielding rather than by compromising or working things out in international organisations. Their worldview focuses on power rather than rules. It is natural for large and strong countries to be realist; it tends to be smaller and weaker states that see multilateral institutions as a bulwark against bullying by the powerful. And perhaps Russia’s difficult history – it has never had defined frontiers and has usually got on badly with its neighbours – has encouraged the realism.
The fact that Russia is big makes it reluctant to cede much authority to multilateral bodies. For in international organisations small countries can wield disproportionate influence. One thing that Russian diplomats find infuriating about the EU is that small countries can veto its decisions – for a while Lithuania blocked the negotiation of an EU-Russia trade agreement. Tiny Georgia could, if it really insisted, stop Russia joining the WTO. Seeing itself as a great power, Russia has – ever since the Congress of Vienna, almost two hundred years ago – liked the idea of a concert of powers. Thus it enjoys its role in the ‘quartet’ that is supposed to handle the Middle East peace process: Russia sits alongside the US, the UN and the EU.
Russians should rethink their scepticism towards multilateral institutions. The Russian economy is globalising. Sberbank’s recent purchase of a major stake in General Motors Europe is just one indication of this trend. Gazprom is buying energy infrastructure in many EU member-states. Russia’s leading metals companies are building global networks. The long-term prosperity of the top Russian firms depends on their buying companies and raising money in the world’s major financial centres.
Russia is developing global economic interests and will need to defend them. This is best done through strong multilateral institutions. If Russia joined the WTO it would be harder for other countries to impose anti-dumping duties on Russian exports. As a leading exporter of energy, Russia has an interest in joining the International Energy Agency, and helping it to develop into a body that can smooth out volatility in oil and gas prices. Russia should also take more interest in the future of the IMF and the World Bank, and in the emerging institutional framework for regulating global financial markets.
The Europeans – who, unlike the Russians, Indians, Chinese and Americans are instinctively multilateralist – should encourage the Russians to view multilateral institutions as a tool for promoting their national interests. The WTO is the prime example of an organisation that would deliver tangible benefits to Russia, and the EU – as Russia’s biggest trading partner – should urge the Russians to made up their minds to join it.
Charles Grant is director of the Centre for European Reform.
Wednesday, June 10, 2009
EU politics after the elections
by Hugo Brady
EU policies were not the issue that guided most voters in last week’s elections to the European Parliament. The economic crisis and job safety were uppermost in people’s minds. It is therefore surprising that in the EU’s six largest member-states, socialist parties – whether in government or opposition – either did poorly or were routed. It was the centre-right, liberal and green parties that triumphed, gaining the majority of the assembly’s 736 seats. The far-right picked up a few extra seats as did single-issue, eurosceptic parties.
How to explain the centre-left’s eclipse? To suggest a single, pan-European explanation would be a little dubious. Election campaigns were, almost without exception, based on local and national issues. Nevertheless, European electorates appear to trust conservative or liberal parties to get them out of the current crisis in better shape than the left. In countries like Italy or France, where socialist parties are not in power, the centre-left was too complacent that the crisis would mean an automatic increase in their share of the vote. Also, sterner language by centre-right parties on immigration issues over the last year probably served to shore up their votes in some countries.
For the next five years, the European Parliament will be dominated, but not controlled, by the European People’s Party (EPP, the group of centre-right parties), which won 264 seats. New MEPs are already haggling over which committee chairmanships each political group will get and who will be the parliament’s next president. More importantly, the EPP is attempting to cobble together the majority (369 votes) needed to approve current European Commission president, José Manuel Barroso, for a second term. EU governments are likely to approve Barroso’s reappointment at a summit in Brussels next week. If the EPP’s leader, Joseph Daul, can get the Liberals, the anti-federalist European Conservatives and some independents on board, Barroso, a liberal-leaning conservative, will be re-appointed. That will mean that future EU policies – in critical areas like the environment, financial regulation, migration and energy policy – should continue to be governed by the same centre-right consensus that has prevailed since 2004. However, France’s president, Nicolas Sarkozy, might support Barroso’s reappointment only on the understanding that a major economic portfolio such as trade, internal market or competition will go to a French nominee in the next Commission.
The election results have affected Europe’s political landscape in other ways, too. First, the parliament’s credibility is under threat from an ever-decreasing electoral turnout. At just over 43 per cent, average turnout was higher than expected (some polls predicted participation as low as 35 per cent). But the trend towards voter apathy that has been apparent since direct elections to the assembly began 30 years ago continues. This trend is in stark contrast to the European Parliament’s rising powers and relevance. Almost ten years ago, Oxford academic Larry Siedentop argued that an indirectly elected ‘European senate’ of national parliamentarians would be a better way to give voters a proper say over European integration, an idea revisited in The Economist this week. If turnout in the next two elections falls below 40 per cent, Siedentop’s idea should be dusted off.
Second, Libertas, the group that led the campaign against the Lisbon treaty in last year’s Irish referendum, fielded over 500 candidates in various EU countries. But it failed to make an impact in any, despite spending some €30 million. Declan Ganley, Libertas’ leader, failed to win a seat in Ireland. His retirement from politics makes a Yes vote in Ireland’s second treaty referendum, expected in early October, more likely. He was a key factor in swaying undecided, mildly pro-European voters whose support is critical if the treaty is to pass. However, the amount of media attention heaped on Ganley partially obscured the utter failure of pro-European parties to give voters strong arguments as to why the treaty matters. If this failure is repeated, other member-states can expect a second No, whatever Ireland’s economic circumstances or perceived reliance on the EU.
Third, the elections highlighted that popular anti-EU feeling in Britain is at an all-time high. Well over 50 per cent of the British vote went to eurosceptics of various hues. The Conservative party and UKIP, both staunch opponents of the Lisbon treaty and of further EU integration, gained seats, while the ruling Labour party received an historically low share of the vote. That suggests a future British government will face fresh calls for a referendum on Britain’s place in Europe, whether linked to the Lisbon treaty or not. Conservative leader David Cameron, if and when he becomes prime minister, will be haunted by Britain’s 20-year EU debate as much as his predecessors were. In the end, the Tories might be relaxed about fundamentally re-defining Britain’s relationship with France and Germany. But Britain’s ally, the US, wants it to remain a fully engaged EU member-state. The Obama administration will be dismayed if Britain chooses to relinquish or renegotiate its status.
Lastly, victories for the far-right, including the Dutch Freedom Party, British National Party, Hungarian Jobbik and Greater Romania Party, have caused anguish among Europe’s political mainstream. Although far-right parties gained no more than eight extra seats, they look likely to have enough seats to form a separate group in the next European Parliament. Under new rules, groups can be formed by a minimum of 25 MEPs from seven different countries. Being a member of such a group gives parties access to significant funds and the right to chair or steer committees. Whether such a far-right grouping would have a lot of political influence remains to be seen, however. In the 2004-2009 parliament, the far-right ‘Identity, Tradition, Sovereignty’ group quickly dissolved due to irreconcilable differences between the parties. The Parliament’s new cohort of extreme nationalists and anti-immigration parties may soon realise what those in the political mainstream have long known: working with foreigners can be tough.
Hugo Brady is a research fellow at the Centre for European Reform.
EU policies were not the issue that guided most voters in last week’s elections to the European Parliament. The economic crisis and job safety were uppermost in people’s minds. It is therefore surprising that in the EU’s six largest member-states, socialist parties – whether in government or opposition – either did poorly or were routed. It was the centre-right, liberal and green parties that triumphed, gaining the majority of the assembly’s 736 seats. The far-right picked up a few extra seats as did single-issue, eurosceptic parties.
How to explain the centre-left’s eclipse? To suggest a single, pan-European explanation would be a little dubious. Election campaigns were, almost without exception, based on local and national issues. Nevertheless, European electorates appear to trust conservative or liberal parties to get them out of the current crisis in better shape than the left. In countries like Italy or France, where socialist parties are not in power, the centre-left was too complacent that the crisis would mean an automatic increase in their share of the vote. Also, sterner language by centre-right parties on immigration issues over the last year probably served to shore up their votes in some countries.
For the next five years, the European Parliament will be dominated, but not controlled, by the European People’s Party (EPP, the group of centre-right parties), which won 264 seats. New MEPs are already haggling over which committee chairmanships each political group will get and who will be the parliament’s next president. More importantly, the EPP is attempting to cobble together the majority (369 votes) needed to approve current European Commission president, José Manuel Barroso, for a second term. EU governments are likely to approve Barroso’s reappointment at a summit in Brussels next week. If the EPP’s leader, Joseph Daul, can get the Liberals, the anti-federalist European Conservatives and some independents on board, Barroso, a liberal-leaning conservative, will be re-appointed. That will mean that future EU policies – in critical areas like the environment, financial regulation, migration and energy policy – should continue to be governed by the same centre-right consensus that has prevailed since 2004. However, France’s president, Nicolas Sarkozy, might support Barroso’s reappointment only on the understanding that a major economic portfolio such as trade, internal market or competition will go to a French nominee in the next Commission.
The election results have affected Europe’s political landscape in other ways, too. First, the parliament’s credibility is under threat from an ever-decreasing electoral turnout. At just over 43 per cent, average turnout was higher than expected (some polls predicted participation as low as 35 per cent). But the trend towards voter apathy that has been apparent since direct elections to the assembly began 30 years ago continues. This trend is in stark contrast to the European Parliament’s rising powers and relevance. Almost ten years ago, Oxford academic Larry Siedentop argued that an indirectly elected ‘European senate’ of national parliamentarians would be a better way to give voters a proper say over European integration, an idea revisited in The Economist this week. If turnout in the next two elections falls below 40 per cent, Siedentop’s idea should be dusted off.
Second, Libertas, the group that led the campaign against the Lisbon treaty in last year’s Irish referendum, fielded over 500 candidates in various EU countries. But it failed to make an impact in any, despite spending some €30 million. Declan Ganley, Libertas’ leader, failed to win a seat in Ireland. His retirement from politics makes a Yes vote in Ireland’s second treaty referendum, expected in early October, more likely. He was a key factor in swaying undecided, mildly pro-European voters whose support is critical if the treaty is to pass. However, the amount of media attention heaped on Ganley partially obscured the utter failure of pro-European parties to give voters strong arguments as to why the treaty matters. If this failure is repeated, other member-states can expect a second No, whatever Ireland’s economic circumstances or perceived reliance on the EU.
Third, the elections highlighted that popular anti-EU feeling in Britain is at an all-time high. Well over 50 per cent of the British vote went to eurosceptics of various hues. The Conservative party and UKIP, both staunch opponents of the Lisbon treaty and of further EU integration, gained seats, while the ruling Labour party received an historically low share of the vote. That suggests a future British government will face fresh calls for a referendum on Britain’s place in Europe, whether linked to the Lisbon treaty or not. Conservative leader David Cameron, if and when he becomes prime minister, will be haunted by Britain’s 20-year EU debate as much as his predecessors were. In the end, the Tories might be relaxed about fundamentally re-defining Britain’s relationship with France and Germany. But Britain’s ally, the US, wants it to remain a fully engaged EU member-state. The Obama administration will be dismayed if Britain chooses to relinquish or renegotiate its status.
Lastly, victories for the far-right, including the Dutch Freedom Party, British National Party, Hungarian Jobbik and Greater Romania Party, have caused anguish among Europe’s political mainstream. Although far-right parties gained no more than eight extra seats, they look likely to have enough seats to form a separate group in the next European Parliament. Under new rules, groups can be formed by a minimum of 25 MEPs from seven different countries. Being a member of such a group gives parties access to significant funds and the right to chair or steer committees. Whether such a far-right grouping would have a lot of political influence remains to be seen, however. In the 2004-2009 parliament, the far-right ‘Identity, Tradition, Sovereignty’ group quickly dissolved due to irreconcilable differences between the parties. The Parliament’s new cohort of extreme nationalists and anti-immigration parties may soon realise what those in the political mainstream have long known: working with foreigners can be tough.
Hugo Brady is a research fellow at the Centre for European Reform.
Friday, June 05, 2009
What the economic crisis will mean for European defence
by Tomas Valasek
There are mounting indications that defence budgets across Europe, not very high in the first place, could fall further because of the economic crisis. This will have a three-fold impact on European militaries and missions. Some governments will be tempted to cut operations – but if done haphazardly, this risks leaving parts of the world exposed to insecurity. Multinational weapons programmes may suffer a disproportionate share of the budget cuts. And while all defence ministries will have to rationalise (and most already have) governments will need to decide whether it is worth keeping the rumps of their national militaries. Many should form joint units with neighbours instead.
There are two strong reasons to believe that defence budgets will fall dramatically. First, all European governments will see their public debts rise over the next few years. Some – like that of Latvia – are beginning to have serious trouble raising funds. Even the more sturdy economies, like the UK, have been warned by rating agencies to bring their debt under control or risk losing their gold-plated credit rating. Most European governments will have to increase taxes and cut spending in order to rebalance the books. Second, those cuts will hit defence harder than other parts of the budget. This is because many forms of government spending – like the cost of paying interest on public debt – cannot be reduced by decree. Some non-mandatory expenditures like healthcare tend to be politically explosive: no government wants to be seen to be taking risks with people’s health. So defence budgets are an obvious target for ax-wielding finance ministers. George Osborne, the UK shadow chancellor of the exchequer, warned recently that he would cut defence spending if the Conservatives won the election (which they are widely expected to do this year or next).
The looming military budget cuts will have many salutary effects. Defence establishments, with their resistance to civilian oversight and emphasis on continuity, tend to get bloated in times of relative plenty. It often takes a crisis to force meaningful reforms. France – which suffered a defence budget meltdown in 2007, even before the economic crisis unfolded in full – at last shut many of its African bases, a legacy of its colonial years. Slovakia recently cut the number of military commands from eight to three – a long overdue step that will reduce unnecessary overheads. Other European militaries, too, will come out of the crisis with more sensible structures and budgets.
But the economic crisis presents several serious risks to European defences. The easiest portion of the defence budget to cut is the part that pays for operations. Withdrawing soldiers from faraway places plays well at home (it removes young men and women from harm’s way) and is politically easier than restructuring the militaries (no one is laid off). But European governments should resist the urge to pull back their soldiers indiscriminately; this could cause conflicts to re-flare and leave vulnerable people at risk. Instead, they should stop sending overlapping missions to the same trouble spots. Because international institutions compete to fly their flag in missions abroad, it is not unusual for western governments to have multiple operations in the same place. For example, three different forces are currently fighting piracy off the coast of Somalia. That is a wasteful use of taxpayer money. The EU, NATO, and the US should roll their Somalia operations into one or two.
The budgetary crisis will force many defence ministries to cancel planned weapon buys. Their instinct will be to cut multinational programmes and protect those purchases that generate jobs at home. That could be a mistake. While much of the needed equipment can be made nationally, the truly complex systems are so expensive that defence ministries can only afford them if they share the development costs with other countries. As defence budgets shrink, such multinational approaches will only become more important. Granted, many of the collaborative programmes to date have been a disaster. The seven-nation plan to develop a new generation of military transport aircraft, the A400M, is the most glaring example. The airplane cannot fly because the engines, made by a four-nation European consortium, lack the proper certification; the plane is also said to be too heavy.
But the answer lies not in abandoning collaborative programmes. Instead, European governments need to rethink their approach to collaboration. The trouble with the A400M is not that the plane’s manufacture, EADS, lacks technical expertise (it builds one of the finest civilian aircraft in existence, the Airbus) but that participating governments have been more concerned with securing production jobs than with obtaining a good product. In return for investing in the aircraft, they have demanded that a commensurate number of production jobs to go to their country. As a result, bits of the aircraft are being built in different countries, and not necessarily in the ones most qualified to do the job. In case of the A400M, EADS executives say they wanted a US company to build the engine, but were told by participating governments to keep the jobs in Europe. European governments should accept that it makes more sense to order the needed parts from the plant with the most relevant technical expertise, no matter where it is located. The governments also need to be more ready to buy off-the-shelf components, rather than try to generate jobs by manufacturing parts from scratch.
Cuts in personnel and equipment risk turning some European militaries into ‘showcase’ forces: incapable of deploying abroad and thus irrelevant to most EU and NATO operations. It makes little sense, for example, for most European militaries to maintain supersonic air forces without access to air-to-air refueling; or to have infantry without the support units needed to feed and re-supply the soldiers in faraway places. As an excellent new study commissioned by the Nordic governments concluded, “the size of certain units may fall below a critical limit… and small and medium-sized countries [could] lose their ability to maintain a credible defence. The result could be a Europe where only countries like France, Russia, the UK and Germany have their own modern defence forces.”
There are two ways to avoid such outcome while cutting budgets. Some of the key equipment that makes modern warfare possible – like planes providing air-to-ground surveillance or military transport – needs to be jointly owned. NATO owns a common fleet of aircraft that co-ordinate air traffic, and the alliance plans to buy transport airplanes for its members to use. This allows militaries of the smaller and poorer European states that cannot afford such specialist equipment to take part in complex operations in distant places.
But joint ownership of critical resources alone may not save enough money. The time has come for European governments to consider abandoning parts of their national forces and infrastructure, and to form joint units with neighbours. It is becoming increasingly hard to justify why the 25 European members of NATO should maintain 25 separate air forces with own commands and bases, when between them they could only find a handful of much-needed helicopters for Afghanistan (most did not have any, and those who did, did not want to send them). Modern militaries do virtually all their fighting abroad, and in coalition with others. If they lack the money to equip and deploy their soldiers overseas, they need to consider radical cost-saving measures. More governments should do as Belgium, Holland and Luxembourg do (they merged parts of their air forces) or emulate the Nordic countries (which are thinking of forming joint amphibious forces).
Such ‘pooling’ is not a new idea; it has been talked about on and off for nearly a decade, but to little effect. Most European governments have found it too difficult to part with the cherished symbol of national sovereignty that is a proper army or an air force. They have held on to them as symbols even though the practical value of some military services in Europe is negligible. The US has stopped asking Europe for more forces for Afghanistan, partly because politicians do not want to send forces into harm’s way but also because few have any useful forces to deploy. The economic crisis may at last force more countries to pool their militaries. This would enable them to take part in NATO and EU operations whilst saving money. If so, the crisis will have turned out to be a blessing in disguise.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
There are mounting indications that defence budgets across Europe, not very high in the first place, could fall further because of the economic crisis. This will have a three-fold impact on European militaries and missions. Some governments will be tempted to cut operations – but if done haphazardly, this risks leaving parts of the world exposed to insecurity. Multinational weapons programmes may suffer a disproportionate share of the budget cuts. And while all defence ministries will have to rationalise (and most already have) governments will need to decide whether it is worth keeping the rumps of their national militaries. Many should form joint units with neighbours instead.
There are two strong reasons to believe that defence budgets will fall dramatically. First, all European governments will see their public debts rise over the next few years. Some – like that of Latvia – are beginning to have serious trouble raising funds. Even the more sturdy economies, like the UK, have been warned by rating agencies to bring their debt under control or risk losing their gold-plated credit rating. Most European governments will have to increase taxes and cut spending in order to rebalance the books. Second, those cuts will hit defence harder than other parts of the budget. This is because many forms of government spending – like the cost of paying interest on public debt – cannot be reduced by decree. Some non-mandatory expenditures like healthcare tend to be politically explosive: no government wants to be seen to be taking risks with people’s health. So defence budgets are an obvious target for ax-wielding finance ministers. George Osborne, the UK shadow chancellor of the exchequer, warned recently that he would cut defence spending if the Conservatives won the election (which they are widely expected to do this year or next).
The looming military budget cuts will have many salutary effects. Defence establishments, with their resistance to civilian oversight and emphasis on continuity, tend to get bloated in times of relative plenty. It often takes a crisis to force meaningful reforms. France – which suffered a defence budget meltdown in 2007, even before the economic crisis unfolded in full – at last shut many of its African bases, a legacy of its colonial years. Slovakia recently cut the number of military commands from eight to three – a long overdue step that will reduce unnecessary overheads. Other European militaries, too, will come out of the crisis with more sensible structures and budgets.
But the economic crisis presents several serious risks to European defences. The easiest portion of the defence budget to cut is the part that pays for operations. Withdrawing soldiers from faraway places plays well at home (it removes young men and women from harm’s way) and is politically easier than restructuring the militaries (no one is laid off). But European governments should resist the urge to pull back their soldiers indiscriminately; this could cause conflicts to re-flare and leave vulnerable people at risk. Instead, they should stop sending overlapping missions to the same trouble spots. Because international institutions compete to fly their flag in missions abroad, it is not unusual for western governments to have multiple operations in the same place. For example, three different forces are currently fighting piracy off the coast of Somalia. That is a wasteful use of taxpayer money. The EU, NATO, and the US should roll their Somalia operations into one or two.
The budgetary crisis will force many defence ministries to cancel planned weapon buys. Their instinct will be to cut multinational programmes and protect those purchases that generate jobs at home. That could be a mistake. While much of the needed equipment can be made nationally, the truly complex systems are so expensive that defence ministries can only afford them if they share the development costs with other countries. As defence budgets shrink, such multinational approaches will only become more important. Granted, many of the collaborative programmes to date have been a disaster. The seven-nation plan to develop a new generation of military transport aircraft, the A400M, is the most glaring example. The airplane cannot fly because the engines, made by a four-nation European consortium, lack the proper certification; the plane is also said to be too heavy.
But the answer lies not in abandoning collaborative programmes. Instead, European governments need to rethink their approach to collaboration. The trouble with the A400M is not that the plane’s manufacture, EADS, lacks technical expertise (it builds one of the finest civilian aircraft in existence, the Airbus) but that participating governments have been more concerned with securing production jobs than with obtaining a good product. In return for investing in the aircraft, they have demanded that a commensurate number of production jobs to go to their country. As a result, bits of the aircraft are being built in different countries, and not necessarily in the ones most qualified to do the job. In case of the A400M, EADS executives say they wanted a US company to build the engine, but were told by participating governments to keep the jobs in Europe. European governments should accept that it makes more sense to order the needed parts from the plant with the most relevant technical expertise, no matter where it is located. The governments also need to be more ready to buy off-the-shelf components, rather than try to generate jobs by manufacturing parts from scratch.
Cuts in personnel and equipment risk turning some European militaries into ‘showcase’ forces: incapable of deploying abroad and thus irrelevant to most EU and NATO operations. It makes little sense, for example, for most European militaries to maintain supersonic air forces without access to air-to-air refueling; or to have infantry without the support units needed to feed and re-supply the soldiers in faraway places. As an excellent new study commissioned by the Nordic governments concluded, “the size of certain units may fall below a critical limit… and small and medium-sized countries [could] lose their ability to maintain a credible defence. The result could be a Europe where only countries like France, Russia, the UK and Germany have their own modern defence forces.”
There are two ways to avoid such outcome while cutting budgets. Some of the key equipment that makes modern warfare possible – like planes providing air-to-ground surveillance or military transport – needs to be jointly owned. NATO owns a common fleet of aircraft that co-ordinate air traffic, and the alliance plans to buy transport airplanes for its members to use. This allows militaries of the smaller and poorer European states that cannot afford such specialist equipment to take part in complex operations in distant places.
But joint ownership of critical resources alone may not save enough money. The time has come for European governments to consider abandoning parts of their national forces and infrastructure, and to form joint units with neighbours. It is becoming increasingly hard to justify why the 25 European members of NATO should maintain 25 separate air forces with own commands and bases, when between them they could only find a handful of much-needed helicopters for Afghanistan (most did not have any, and those who did, did not want to send them). Modern militaries do virtually all their fighting abroad, and in coalition with others. If they lack the money to equip and deploy their soldiers overseas, they need to consider radical cost-saving measures. More governments should do as Belgium, Holland and Luxembourg do (they merged parts of their air forces) or emulate the Nordic countries (which are thinking of forming joint amphibious forces).
Such ‘pooling’ is not a new idea; it has been talked about on and off for nearly a decade, but to little effect. Most European governments have found it too difficult to part with the cherished symbol of national sovereignty that is a proper army or an air force. They have held on to them as symbols even though the practical value of some military services in Europe is negligible. The US has stopped asking Europe for more forces for Afghanistan, partly because politicians do not want to send forces into harm’s way but also because few have any useful forces to deploy. The economic crisis may at last force more countries to pool their militaries. This would enable them to take part in NATO and EU operations whilst saving money. If so, the crisis will have turned out to be a blessing in disguise.
Tomas Valasek is director of foreign policy and defence at the Centre for European Reform.
Friday, May 29, 2009
Why the European elections matter
by Hugo Brady
Between June 4th and June 7th, Europeans will cast their votes to elect a new European Parliament (EP). Recent opinion polls indicate that they will do so without much enthusiasm. Indeed, there is every chance that the average turnout will be the lowest ever – it has fallen at every election since the first time that Europeans directly elected their MEPs in 1979, and sank to 45.6 per cent in 2004. But despite the prevailing apathy, this election matters. During its next five-year term, the EP will influence what the EU decides in areas as diverse as financial services, trade, climate change, energy security and immigration.
Why do European elections so often struggle to capture the public imagination? Evidently, voters think the stakes are lower than in national elections – or at any rate less clear. Unlike legislative elections in a member-state, European elections do not, strictly speaking, lead to the formation of a new government. Moreover, the EP can often seem distant because few voters know what it actually does. And even if they do, the areas where the EP exercises most influence seem technical and dull. Voters tend to be less interested in arguments such as home versus host regulation of service companies, or the pros and cons of ‘unbundling’ vertically-integrated energy companies, than in the subjects which dominate domestic elections – tax and spending, health and education policy, foreign and defence policy and so on. And on those issues the EP has no say.
MEPs are remote from most voters. The party list system used in most countries means that few electors know the names of their MEPs. European constituencies are huge, making it difficult for any voter to meet an MEP; in national politics members of parliament can more easily hold ‘surgeries’ to meet constituents. Furthermore, the process-heavy, non-adversarial way in which the Parliament operates attracts little media, and voter, attention. Political groups in the EP stand out less clearly than in most national assemblies. Although they are organised on a conventional left-right spectrum, they are composed of MEPs from very different national traditions, which makes them less monolithic. And there is not a great difference between the policies proposed by the three biggest groups, the centre-right European People’s Party (EPP), the centre-left Party of European Socialists (PES) and the Alliance of Liberals and Democrats for Europe (ALDE). Finally, the parliament lacks political theatre. Many of its proceedings revolve around consensus-building and horse-trading in specialist committees.
Eurosceptics sometimes argue that these flaws weaken the legitimacy of the EP as a representative institution. That argument is unfair for two reasons. The first is that the EP’s job is not to replace national assemblies but to complement them, by providing an additional layer of democratic representation in EU policy. The second is that the EP has become a serious actor. During its 2004-2009 term, it influenced EU policy in areas as diverse as climate change, energy, the cross-border provision of services, telecoms regulation and the authorisation of chemicals. This trend is set to continue, especially if – depending on Ireland’s autumn referendum – the Lisbon treaty enters into force. The EP would then have the power of ‘co-decision’ – an equal say to the Council of Ministers – over virtually all legislation, instead of around 70 per cent as is now the case. In particular, the Lisbon treaty would give the EP much more legislative power on justice and home affairs.
The future political balance of the EP will be largely determined by the outcome of voting in the big six member-states: Britain, France, Germany, Italy, Poland and Spain. The EPP seems likely to remain the largest political group in the Parliament, albeit with a reduced majority, despite the fact that Britain’s Conservatives are due to leave it. The Party of European Socialists (PES), for its part, should increase its representation, but only a little. When other groupings are taken into account – including the new group that the British Conservatives plan to lead – the centre-right is likely to dominate the EP.
If current opinion polls are to be believed, the mainstream centre-left will fail to draw much advantage from the current ‘crisis of capitalism’. In the largest member-states, centre-left parties are either unpopular incumbents (as in Britain, Germany and Spain), or in opposition and disarray (as in France, Italy and Poland). The great unknown is how well populist fringe groups of the left and right – those who are really opposed to the current political and economic system – will perform. It would still be a major surprise if fringe parties won much more than 50 seats in the 736-seat EP.
The balance of the parties matters for the leadership of the European Commission. In June the European Council is due to nominate the Commission’s next president. EU leaders are likely to offer José Manuel Barroso, who is affiliated with the EPP, a second five-year term. But if the PES becomes the largest group in the EP, they will try and insist on one of their own. The newly elected Parliament is due to approve the European Council’s nominee for Commission president in July. Assuming that the centre-right dominates the Parliament, Barroso will be voted in.
In the autumn the EP will hold hearings on the individual commissioners proposed by governments. These hearings matter. Five years ago, the EP did not like the look of Silvio Berlusconi’s nominee, Rocco Buttiglione, on account of his views on gays and women – and it forced Berlusconi to withdraw him. In January the Parliament will vote to invest the entire team of commissioners. If it is implemented, the Lisbon treaty will make more explicit the need for the appointment of the Commission president to ‘take into account’ the results of the European elections. In the long run, whatever happens to that treaty, the Commission is likely to become more directly accountable to the Parliament. But whether that makes Europeans any more willing to vote for MEPs is another matter.
Hugo Brady is a research fellow at the Centre for European Reform.
Between June 4th and June 7th, Europeans will cast their votes to elect a new European Parliament (EP). Recent opinion polls indicate that they will do so without much enthusiasm. Indeed, there is every chance that the average turnout will be the lowest ever – it has fallen at every election since the first time that Europeans directly elected their MEPs in 1979, and sank to 45.6 per cent in 2004. But despite the prevailing apathy, this election matters. During its next five-year term, the EP will influence what the EU decides in areas as diverse as financial services, trade, climate change, energy security and immigration.
Why do European elections so often struggle to capture the public imagination? Evidently, voters think the stakes are lower than in national elections – or at any rate less clear. Unlike legislative elections in a member-state, European elections do not, strictly speaking, lead to the formation of a new government. Moreover, the EP can often seem distant because few voters know what it actually does. And even if they do, the areas where the EP exercises most influence seem technical and dull. Voters tend to be less interested in arguments such as home versus host regulation of service companies, or the pros and cons of ‘unbundling’ vertically-integrated energy companies, than in the subjects which dominate domestic elections – tax and spending, health and education policy, foreign and defence policy and so on. And on those issues the EP has no say.
MEPs are remote from most voters. The party list system used in most countries means that few electors know the names of their MEPs. European constituencies are huge, making it difficult for any voter to meet an MEP; in national politics members of parliament can more easily hold ‘surgeries’ to meet constituents. Furthermore, the process-heavy, non-adversarial way in which the Parliament operates attracts little media, and voter, attention. Political groups in the EP stand out less clearly than in most national assemblies. Although they are organised on a conventional left-right spectrum, they are composed of MEPs from very different national traditions, which makes them less monolithic. And there is not a great difference between the policies proposed by the three biggest groups, the centre-right European People’s Party (EPP), the centre-left Party of European Socialists (PES) and the Alliance of Liberals and Democrats for Europe (ALDE). Finally, the parliament lacks political theatre. Many of its proceedings revolve around consensus-building and horse-trading in specialist committees.
Eurosceptics sometimes argue that these flaws weaken the legitimacy of the EP as a representative institution. That argument is unfair for two reasons. The first is that the EP’s job is not to replace national assemblies but to complement them, by providing an additional layer of democratic representation in EU policy. The second is that the EP has become a serious actor. During its 2004-2009 term, it influenced EU policy in areas as diverse as climate change, energy, the cross-border provision of services, telecoms regulation and the authorisation of chemicals. This trend is set to continue, especially if – depending on Ireland’s autumn referendum – the Lisbon treaty enters into force. The EP would then have the power of ‘co-decision’ – an equal say to the Council of Ministers – over virtually all legislation, instead of around 70 per cent as is now the case. In particular, the Lisbon treaty would give the EP much more legislative power on justice and home affairs.
The future political balance of the EP will be largely determined by the outcome of voting in the big six member-states: Britain, France, Germany, Italy, Poland and Spain. The EPP seems likely to remain the largest political group in the Parliament, albeit with a reduced majority, despite the fact that Britain’s Conservatives are due to leave it. The Party of European Socialists (PES), for its part, should increase its representation, but only a little. When other groupings are taken into account – including the new group that the British Conservatives plan to lead – the centre-right is likely to dominate the EP.
If current opinion polls are to be believed, the mainstream centre-left will fail to draw much advantage from the current ‘crisis of capitalism’. In the largest member-states, centre-left parties are either unpopular incumbents (as in Britain, Germany and Spain), or in opposition and disarray (as in France, Italy and Poland). The great unknown is how well populist fringe groups of the left and right – those who are really opposed to the current political and economic system – will perform. It would still be a major surprise if fringe parties won much more than 50 seats in the 736-seat EP.
The balance of the parties matters for the leadership of the European Commission. In June the European Council is due to nominate the Commission’s next president. EU leaders are likely to offer José Manuel Barroso, who is affiliated with the EPP, a second five-year term. But if the PES becomes the largest group in the EP, they will try and insist on one of their own. The newly elected Parliament is due to approve the European Council’s nominee for Commission president in July. Assuming that the centre-right dominates the Parliament, Barroso will be voted in.
In the autumn the EP will hold hearings on the individual commissioners proposed by governments. These hearings matter. Five years ago, the EP did not like the look of Silvio Berlusconi’s nominee, Rocco Buttiglione, on account of his views on gays and women – and it forced Berlusconi to withdraw him. In January the Parliament will vote to invest the entire team of commissioners. If it is implemented, the Lisbon treaty will make more explicit the need for the appointment of the Commission president to ‘take into account’ the results of the European elections. In the long run, whatever happens to that treaty, the Commission is likely to become more directly accountable to the Parliament. But whether that makes Europeans any more willing to vote for MEPs is another matter.
Hugo Brady is a research fellow at the Centre for European Reform.
Thursday, May 21, 2009
Making a success of the EAS
by Charles Grant
If the Irish people vote yes to the Lisbon treaty at the second attempt, and the Czechs, Germans and Poles also ratify, the EU will set up an ‘external action service’ or EAS. This new institution promises to make the Union’s common foreign and security policy more effective. But of course an EAS will not mean that the EU suddenly develops a single foreign policy on every issue. The EU’s inability to develop a coherent approach to Russia, for example, would probably not be very different if an EAS was in place. Different member-states believe that they have different interests in Russia and so disagree on how to handle it.
That said, some of the EU’s incoherence in foreign policy can be put down to its often dysfunctional institutions, notably the rotating presidency; the split between both the High Representative (currently Javier Solana) and the external relations commissioner (currently Benita Ferrero-Waldner), and their respective bureaucracies; and the fact that the current institutions do not provide EU foreign ministers with high quality analysis on a number of important subjects.
The EAS should solve some of those problems. It will be a single bureaucracy made up of the merged foreign desks of the Commission and the Council of Ministers secretariat, as well as secondees from member-states. It will be led by the new High Representative or HR, fusing the Solana and Ferrero-Waldner jobs. That individual plus the EAS will take on the tasks currently performed by the rotating presidency, in terms of external representation and foreign policy.
If the member-states get the design of the EAS right – and give it the budget it needs – it should improve EU foreign policy in four ways.
1) The EAS should help the EU to join up its foreign policies. The EU has the potential to play a powerful international role because it has such a broad range of instruments at its disposal, such as aid, trade, soldiers, policemen, humanitarian aid, rules on asylum and visas, and so on. Neither NATO nor the UN can draw on such wide-ranging capacities. But in practice the EU rarely joins up its external policies. Within the Commission there is seldom much co-operation between the various directorates-general, let alone between those directorates and the Council of Ministers. By merging parts of the Commission and the Council into a single institution, the EAS should help to join up EU foreign policy. But it will still be a challenge to ensure that other parts of those bodies – such as the trade, enlargement, justice and energy directorates of the Commission – work in harmony with the EAS.
2) The EAS should be able to provide more high quality and common analysis to EU ministers. If the 27 governments view a problem in a similar way, they are more likely to be able to hammer out a common approach to it. The current institutions sometimes succeed in encouraging common thinking. For example the EU has taken a single line on Iran’s nuclear programme in recent years, partly because of the quality of the analysis provided by the Situation Centre (which gathers intelligence from the member-states) in the Council of Ministers. The EAS will have more resources and expertise than the current array of Brussels institutions. National diplomats seconded to it should help to feed in the best analysis from national capitals.
3) The integration of the Commission’s 120-odd overseas representations into the EAS should increase the EU’s clout. At the moment they focus (naturally) on the Commission’s priorities and are of little help to Solana and his team in Brussels, or to EU foreign ministers. In order to improve their performance and enhance their expertise in areas like political reporting and hard security, senior figures from national governments should be given prominent roles in some missions. These offices will need to have positions to represent in their part of the world, which will probably encourage the EAS to develop common policies. They will play a role in co-ordinating (though not managing) the work of member-state embassies. They will represent the smaller member-states that have no embassy in the country concerned. Even large member-states such as Britain or Germany do not have embassies everywhere and may find EU missions useful. In the longer run, small and large member-states may start to rely on missions as a way of saving money: if and when a government trusts the quality of the EAS’s work, it may decide to close embassies in countries that it considers relatively unimportant.
4) The EAS will eliminate the problem that a weak presidency can undermine EU foreign policy. The Czech presidency has, by general consent, been one of the worst in memory, and not only because the government collapsed half way through. When the EU is represented by the High Representative and the EAS it will, one may hope, be spared the embarrassments it has faced in the first half of 2009.
It is inevitable that the creation of the EAS will be a bureaucratic nightmare. Each of the existing bureaucracies, as well as the member-states, will fight to protect its specific interests. The EAS will need to be shaped by men and women of vision who can look beyond those interests. Whether or not the EAS is a success will depend, in part, on how well it meets four challenges.
1) Will the EAS attract very good people to work for it? National governments must send their best and brightest. It is not self evident that they will: the UK, for example, has not always sent its top diplomats to work in the Council of Ministers secretariat. The High Representative must be the kind of politician who inspires and whom bright young people will want to work for. And he or she will need to get on well with the president of the European Council (a new post) and the Commission president. The effectiveness of both the Commission and the Council of Ministers is marred by national flags being imposed on particular jobs. The High Representative must have the freedom to appoint the best people to the key jobs (of course, every member-state must have people in the EAS). He or she will also need deputies. Solana works about 100 hours a week, but the new HR will have extra responsibilities in the Commission and in chairing the meetings of EU foreign ministers. The HR will need at least five senior deputies: for traditional diplomacy, managing military missions, generating civilian capabilities, working with the various Commission directorates, and ensuring that justice and home affairs (JHA) is integrated into external policies. Other deputies may be needed to focus on specific regions.
2) Will the EAS succeed in stitching together policy on JHA with the EU’s foreign policies? A lot of the things the EU does that matter to the rest of the world are in areas like visas, asylum, illegal immigration, organised crime, counter-terrorism, police and judicial co-operation and border controls. At the moment the EU seldom joins up policies in these areas with other external policies. For example, when the JHA directorate general negotiates an agreement on the repatriation of illegal immigrants with a third country, it can offer to discuss visa rules, but not trade, aid or non-proliferation, which are handled by other parts of the EU. The EAS needs to find a way of integrating the EU’s work on JHA with other external policies.
3) When several parts of the EU are operating in the same problem country, will the EAS manage to co-ordinate their work? When there are several EU missions in the same country they tend not to work together. For example, when the EU peacekeeping mission arrived in Bosnia it found that the EU police mission, the Commission office and the EU special representative’s office had different objectives and did not want to work with it. There was little co-ordination from Brussels. There have been similar problems in Congo and Afghanistan. In order to ensure that the various EU agencies work together in such important places, the EAS should deploy a special representative to each of them. He or she should have the authority to co-ordinate the work of the various missions on the ground.
4) Will the 27 member-states identify with the EAS and trust it to promote their interests? Most small countries will see the value of a body that can represent them in places where they lack embassies. But there is a real danger that the foreign ministries of Britain, France or Germany could see the EAS as a rival source of power and as a competitor for money and the best people. They would then work round or against the EAS. The High Representative should therefore ensure that the big countries are given the chance to send good people to fill some of the top posts in the EAS. If the HR can establish an efficient bureaucracy that produces high-quality analysis, national foreign ministries will, hopefully, learn to respect it.
Charles Grant is director of the Centre for European Reform.
If the Irish people vote yes to the Lisbon treaty at the second attempt, and the Czechs, Germans and Poles also ratify, the EU will set up an ‘external action service’ or EAS. This new institution promises to make the Union’s common foreign and security policy more effective. But of course an EAS will not mean that the EU suddenly develops a single foreign policy on every issue. The EU’s inability to develop a coherent approach to Russia, for example, would probably not be very different if an EAS was in place. Different member-states believe that they have different interests in Russia and so disagree on how to handle it.
That said, some of the EU’s incoherence in foreign policy can be put down to its often dysfunctional institutions, notably the rotating presidency; the split between both the High Representative (currently Javier Solana) and the external relations commissioner (currently Benita Ferrero-Waldner), and their respective bureaucracies; and the fact that the current institutions do not provide EU foreign ministers with high quality analysis on a number of important subjects.
The EAS should solve some of those problems. It will be a single bureaucracy made up of the merged foreign desks of the Commission and the Council of Ministers secretariat, as well as secondees from member-states. It will be led by the new High Representative or HR, fusing the Solana and Ferrero-Waldner jobs. That individual plus the EAS will take on the tasks currently performed by the rotating presidency, in terms of external representation and foreign policy.
If the member-states get the design of the EAS right – and give it the budget it needs – it should improve EU foreign policy in four ways.
1) The EAS should help the EU to join up its foreign policies. The EU has the potential to play a powerful international role because it has such a broad range of instruments at its disposal, such as aid, trade, soldiers, policemen, humanitarian aid, rules on asylum and visas, and so on. Neither NATO nor the UN can draw on such wide-ranging capacities. But in practice the EU rarely joins up its external policies. Within the Commission there is seldom much co-operation between the various directorates-general, let alone between those directorates and the Council of Ministers. By merging parts of the Commission and the Council into a single institution, the EAS should help to join up EU foreign policy. But it will still be a challenge to ensure that other parts of those bodies – such as the trade, enlargement, justice and energy directorates of the Commission – work in harmony with the EAS.
2) The EAS should be able to provide more high quality and common analysis to EU ministers. If the 27 governments view a problem in a similar way, they are more likely to be able to hammer out a common approach to it. The current institutions sometimes succeed in encouraging common thinking. For example the EU has taken a single line on Iran’s nuclear programme in recent years, partly because of the quality of the analysis provided by the Situation Centre (which gathers intelligence from the member-states) in the Council of Ministers. The EAS will have more resources and expertise than the current array of Brussels institutions. National diplomats seconded to it should help to feed in the best analysis from national capitals.
3) The integration of the Commission’s 120-odd overseas representations into the EAS should increase the EU’s clout. At the moment they focus (naturally) on the Commission’s priorities and are of little help to Solana and his team in Brussels, or to EU foreign ministers. In order to improve their performance and enhance their expertise in areas like political reporting and hard security, senior figures from national governments should be given prominent roles in some missions. These offices will need to have positions to represent in their part of the world, which will probably encourage the EAS to develop common policies. They will play a role in co-ordinating (though not managing) the work of member-state embassies. They will represent the smaller member-states that have no embassy in the country concerned. Even large member-states such as Britain or Germany do not have embassies everywhere and may find EU missions useful. In the longer run, small and large member-states may start to rely on missions as a way of saving money: if and when a government trusts the quality of the EAS’s work, it may decide to close embassies in countries that it considers relatively unimportant.
4) The EAS will eliminate the problem that a weak presidency can undermine EU foreign policy. The Czech presidency has, by general consent, been one of the worst in memory, and not only because the government collapsed half way through. When the EU is represented by the High Representative and the EAS it will, one may hope, be spared the embarrassments it has faced in the first half of 2009.
It is inevitable that the creation of the EAS will be a bureaucratic nightmare. Each of the existing bureaucracies, as well as the member-states, will fight to protect its specific interests. The EAS will need to be shaped by men and women of vision who can look beyond those interests. Whether or not the EAS is a success will depend, in part, on how well it meets four challenges.
1) Will the EAS attract very good people to work for it? National governments must send their best and brightest. It is not self evident that they will: the UK, for example, has not always sent its top diplomats to work in the Council of Ministers secretariat. The High Representative must be the kind of politician who inspires and whom bright young people will want to work for. And he or she will need to get on well with the president of the European Council (a new post) and the Commission president. The effectiveness of both the Commission and the Council of Ministers is marred by national flags being imposed on particular jobs. The High Representative must have the freedom to appoint the best people to the key jobs (of course, every member-state must have people in the EAS). He or she will also need deputies. Solana works about 100 hours a week, but the new HR will have extra responsibilities in the Commission and in chairing the meetings of EU foreign ministers. The HR will need at least five senior deputies: for traditional diplomacy, managing military missions, generating civilian capabilities, working with the various Commission directorates, and ensuring that justice and home affairs (JHA) is integrated into external policies. Other deputies may be needed to focus on specific regions.
2) Will the EAS succeed in stitching together policy on JHA with the EU’s foreign policies? A lot of the things the EU does that matter to the rest of the world are in areas like visas, asylum, illegal immigration, organised crime, counter-terrorism, police and judicial co-operation and border controls. At the moment the EU seldom joins up policies in these areas with other external policies. For example, when the JHA directorate general negotiates an agreement on the repatriation of illegal immigrants with a third country, it can offer to discuss visa rules, but not trade, aid or non-proliferation, which are handled by other parts of the EU. The EAS needs to find a way of integrating the EU’s work on JHA with other external policies.
3) When several parts of the EU are operating in the same problem country, will the EAS manage to co-ordinate their work? When there are several EU missions in the same country they tend not to work together. For example, when the EU peacekeeping mission arrived in Bosnia it found that the EU police mission, the Commission office and the EU special representative’s office had different objectives and did not want to work with it. There was little co-ordination from Brussels. There have been similar problems in Congo and Afghanistan. In order to ensure that the various EU agencies work together in such important places, the EAS should deploy a special representative to each of them. He or she should have the authority to co-ordinate the work of the various missions on the ground.
4) Will the 27 member-states identify with the EAS and trust it to promote their interests? Most small countries will see the value of a body that can represent them in places where they lack embassies. But there is a real danger that the foreign ministries of Britain, France or Germany could see the EAS as a rival source of power and as a competitor for money and the best people. They would then work round or against the EAS. The High Representative should therefore ensure that the big countries are given the chance to send good people to fill some of the top posts in the EAS. If the HR can establish an efficient bureaucracy that produces high-quality analysis, national foreign ministries will, hopefully, learn to respect it.
Charles Grant is director of the Centre for European Reform.
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