Page 1

The Giant Fall A deeper analysis of the European crisis

Edited By Marcello Ciola

April 2016

Dossier No.

01 www.mediterraneanaffairs.com


CopyrightŠ 2016 by Mediterranean Affairs This Paper must not be reproduced in any form without permission in writing form the publisher.

Updated at April 4, 2016 All statements of fact, opinion, or analyses expressed are those of the authors and do not reflect the opinion of Mediterranean Affairs

Mediterranean Affairs is a non-profit think tank that covers a variety of international issues of the Mediterranean area. By carrying out extensive researches, the staff studies various issues of international policy focused on defense and security, regional stability, and transnational challenges such as economic integration. The main objective is to provide information to the public on the website drafting detailed and updated analyses, reports and dossiers. Mediterranean Affairs also bases its development on the organization of public events, such as conferences and workshops, as well as on consultancies and interviews with the media.


Summary

Introduction ..................................................................................2 German leadership and European middle powers ...................5 The New German Foreign Policy Outlook ................................5 Economic Virtuosity and the Eurozone’s Drowning .................8 Neighbors and Energy Policy ..................................................17 The Migrant Crisis’ Unilateralism ..........................................22 References ................................................................................30 Recent developments in Greece ................................................37 The Economic Adjustment Plans and their Economic Impact 38 The Rise of Syriza .....................................................................41 The Third Economic Adjustment Plan .....................................43 Sustainability of the Agreement ...............................................48 Conclusion................................................................................51 References ................................................................................52 The Schengen Crisis and future perspectives..........................57 The Schengen zone and its original goals ...............................57 Factors affecting the future of Schengen .................................60


Schengen as a necessary tool to guarantee the European Integration Project ................................................................... 66 How to face Schengen’s crisis ................................................. 69 Future perspectives .................................................................. 73 The Eurosceptic Front ............................................................... 76 The challenges of the Union .................................................... 76 On the borders of Europe ........................................................ 79 The newcomers' suspicions ...................................................... 83 The founders' fears ................................................................... 86 Imagine a different future ........................................................ 88 References ................................................................................ 90 TTIP and Euro-Atlantic Ties: Trans-Atlantic Treaty and European U.S. Relations ........................................................... 92 Introduction .............................................................................. 92 EU – U.S. relations: an economic overview ............................ 93 What is TTIP and what does it aim at?.................................... 96 TTIP: a possible Trojan Horse? ............................................ 102 TTIP (and TPP) in the global context.................................... 107 Conclusions ............................................................................ 110 References .............................................................................. 112 Conclusions ............................................................................... 116 About the Authors.................................................................... 120


The Giant Fall

Introduction Almost a quarter century after the ratification of the Maastricht Treaty, the European Union is going through probably one of its most difficult moments. Hit by the proliferation of terrorist attacks in cities important for its symbolism, like Paris and in the political heart of its institutions such as Brussels, confused to respond with a unique voice to the migrants emergency and to the growing economic difficulties, is reacting so decomposed to the testes which is submitted in this early twenty-first century. Hence the need to analyse and deepen the many challenges and difficulties that the EU will face if it still wants to be called "Union". Not only that: in all probability this crucial step will be a test case, useful to rethink the legal structure and the political balances of the institutions which have hitherto ruled the European government.

This is the goal - however, fully achieved – of this dossier which, from different viewpoints, faces threats to European stability and duly explains the fault lines of possible fractures inside the European Union.

2


April 2016

From the supervisory Unilateralism of German Chancellor Angela Merkel who has extinguished the dream of an European Germany, transforming it into the dream of a Germanic Europe, to the growing consensus of the Eurosceptic parties in many EU states. From the centrifugal impulses determined by the arrival of thousands of migrants from the southern and eastern shore of Europe, to the attempts to tear the historic achievement reached by the Schengen Treaty on the free movement of peoples on European soil. From the obstinate persistence in continuing with the economic austerity policies that have driven many countries into a recession with no end to the hypothesis of a Greek exit from Euro, until arriving at the non European foreign policy still delegated to the needs and national interests of the individual EU states.

The photograph of this Europe is - without question - that of a "failed Continent", bent to the needs and wishes of the "majority shareholders" like France and Germany. A neo-Carolingian Europe that has relegated the countries of its Mediterranean shore to the "Empire outskirts", allowing more space and political weight to some states of East and North. A"Baltic Europe" that ends up betraying the fundamental reasons behind its own constitution. A geopolitical short circuit that imposes sanctions against Russia for the Ukrainian issue and - under the counter – allows to Germany to sign the agreement with Moscow for the construction of the "North Stream 2" energy project and that openly supports the Transatlantic trade agreement

3


The Giant Fall

(TTIP), except for working against it inside the political and European technocratic underworld. Understanding these dynamics is therefore of vital importance to rethink the Europe of the third millennium and showing a way out of the present moment of impasse. The work presented here is a useful tool to plot a course.

Daniele Lazzeri Chairman – Think Tank “Il Nodo di Gordio” @DanieleLazzeri

4


April 2016

German leadership and European middle powers Silvia Nicolardi

In recent years, the German establishment has been able to express a new and more active foreign policy agenda. The first testing ground of this assertion is the European region. Going from the dated sovereign debt crisis, to the European energy policy and to the recent migrant crisis, Germany has often had the last prevailing word on the issue, at times colliding with other European powers’ raison d’états and interests. Since when the Euro crisis broke out, Germany has expressed in a complete and mature way, its leading role in modern European politics.

The New German Foreign Policy Outlook Being the most populous, economically sound and industrially powerful European country makes Germany naturally stand out from the other European partners and empowers it to have a say on any regional matter. What is more, from those years on Germany has been undergoing a deep and final change in its foreign policy outlook. Germany’s President Joachim Gluck at the Munich Security Conference in 2014, clearly and loudly stated this de facto change and the evolution of German foreign policy. Mr. Gauck called for a needed shift in the foreign policy outlook of the nation, being the right moment for Germany to stop acting as “the shirker in the international

5


The Giant Fall

community”, while using “its Nazi past as an excuse to duck out of rough-andtumble diplomacy”1. Right after the Nazis defeat, Germany’s division and actual loss of a genuinely independent foreign policy determined the international behavior of both East and West Germany – and that of the 90s reunited Germany too. The division of Germany right after the second World War indeed, lead to the creation of two States whose sovereign prerogatives were severely limited by

the

Potsdam

Conference terms and the events occurring in its aftermath (i.e. Berlin

Blockade).

Furthermore,

both

Bonn and Berlin had

Willy Brandt (FDR) and Willi Stooh (DDR) Source: Bundesarchiv

to follow the two Cold

War

super-powers’

international

positions.

Hence,

notwithstanding some timid rooms for manoeuvre (for instance, the Ostpolitik years), during the Cold War the two German States were hardly having a say on their foreign policy, as well as on their internal affairs. The only way for West Germany at first, then for the reunited

1

“A Lurch onto The World Stage. Germany is emerging, faster than it wanted, as a global diplomatic force”; 2015 Feb 28th; The Economist; retrieved from http://www.economist.com/news/europe/21645223-germany-emerging-faster-itwanted-global-diplomatic-force-lurch-world

6


April 2016

Germany2, to be accepted again among the sovereign western democracies and to regain sovereign prerogatives in the running of its foreign affairs, was the European reconstruction and integration. This feature of the German foreign policy has been lasting until nowadays, as one of the main pinpoints of Germany’s diplomacy. Along with this main feature, the legacy inherited from the Nazi regime and from the Cold War division, has been weighting on the international behavior of Berlin inducing it to a quiet, mild, non-imposing and noninterventionist foreign policy. A constant endeavor has been oriented toward one major goal: not to be isolated ever again. Today’s Germany still carries the same foreign policy’s features: the avoidance of isolation, hence an ever deeper European integration; the wariness of an autonomous and uncontrolled use of force, hence a close cooperation with NATO; an economic outreach in the global stage, hence the commitment to the economic European integration and to Germany’s intertwining with the most promising world economies. Other than these elements, there is another one left, and namely the one that is currently experiencing a deep change: the reconciling and non-engaged attitude of the German establishment when it comes to world politics and foreign affairs management. Little by little over the past ten years approximately, Germany has been showing an evolution in its diplomacy. It abandoned the mildness and quietness of the early days, to become a more engaged and proactive 2

It was only in the 1990s with the reunification of the two sides of Germany, that the country formally acquired again the full sovereignty over its res publica, both internally and externally speaking.

7


The Giant Fall

actor in the international and regional arenas. Especially in this latter dimension, and more precisely in the European region, the engagement of Germany could be proved better than in any other global stage. Be it the Eurozone economic recovery, or the European energy policy direction, Germany certainly has had the last word either autonomously or with an acquiescent European Commission (EC). The consequences for the European integration are tangible. If some regional partners are following the German Chancellor by setting up an allegiance with Berlin, some other are raising their concerns over an unequal power distribution in the European architecture. Quite often contrasts over a EC biased towards Berlin – that is what rebellious States argue – arise to polarize Europe, thus giving the idea of a compromised Union.

Economic Virtuosity and the Eurozone’s Drowning

Source: Forbes

8


April 2016

First of all, within the European Union (EU), Germany’s increasing political weight has been attributed to the country’s economic strength and to the decisive role held in the Eurozone’s3 sovereign debt crisis. Germany’s role in the Eurozone has been deployed over the past 20 years in two moments: timidly, during the single common currency area creation and openly, during the recent economic downturn’s unwinding – being the largest creditor in Europe. The reactions of the Eurozone’s partners, namely the debtors, have not been missing, without so far materially changing something in the recovery’s handling. When the Economic and Monetary Union (EMU) of the EU was created in 1992, its Member States (MSs) agreed on a common European currency – the Euro – and the monetary system left control of financial, banking and fiscal policies in the hands of national governments. Little by little, in three stages EMU’s Members proceeded with a closer and deeper economic integration, thus creating a European Central Bank (ECB), devolving their sovereignty over the economic policies to the EMU’s institutions and finally adopting the single currency. The Eurozone’s economic structures and economic policy orientations have been then inspired and influenced by the German ones4. Not only was the ECB, like the Deutsche

3

Currently Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Portugal, Slovakia, Slovenia, and Spain. 4 For a historical and economic analysis of the Bundesbank’s influence over the ECB’s creation and the Eurozone framework see Huebner Kurt; 2015 March; “German Economic Governance and the Eurozone: Misguided Leadership?”; Conference Paper for

9


The Giant Fall

Bundesbank, mandated to keep an anti-inflationary behavior, but also the Maastricht criteria for the EU membership were oriented on price stability rather than other economic indicators, being directly derived from the Bundesbank’s economic policy orientation. At the beginning this system worked well, helping the Eurozone to generate significant economic growth for its MSs. Interest rates fell to the German low levels as markets were having low inflation expectations and were perceiving the ECB’s credibility as directly linked to the strong German price stability orientation. But after a while, when the subprime crisis broke out in the United States (US) it turned out that some European banks had bought into the sub-prime loan system in the US. Europe got contagious. The answer to this first hit to the economic stability of the Eurozone had been an individualistic, noncooperative and detached one5. What is more, notwithstanding the generalized involvement in the sub-prime crisis, the so-called periphery countries were treated as if they were solely liable for their misfortunes. Only when the financial crisis became a real economy downturn and lead to a sovereign debt crisis for the weakest EU economies, the Eurozone attempted a group response, by revising (once again) the 1997 Stability and Growth Pact (SGP). This is the moment were Germany openly stepped in and stroke back once again. the European Union Studies Association (EUSA), Boston, Mass; retrieved from https://eustudies.org/conference/papers/download/31 5 Each State identified an autonomous way of approaching the problem and each one proceeded autonomously in facing its national banks’ troubles. For a technical point of view, see Obstfeld Maurice; 2013 April; “European Economy. Finance at Center Stage: Some Lessons of the Euro Crisis”; Economic Papers 493; retrieved from http://ec.europa.eu/economy_finance/publications/economic_paper/2013/ecp493_en .htm

10


April 2016

The SGP indeed, already inspired by the German financial discipline, has been further revised in 2012 (Fiscal Compact) in an even more austere direction, imposing to MSs the so-called Balanced Budget Rule. The strict fiscal monitoring discipline and the complete loss of the state sovereignty over the economic policies was – and still is – the suggested German recipe to the Eurozone’s fiscal consolidation and economy recovery. Other than this, Germany and the other creditor countries did the minimum necessary to preserve the Euro and did nearly nothing to correct the emerging structural defects of the Eurozone6. Rather, they continued to push the EC towards a strict application of the treaties’ provisions, which in the end proved to be flawed, and to impose the abovementioned new rules that prolonged and aggravated the recession. Some economists7 and some Eurozone’s 6

Several economists argue on this point, i.e. on the German lack of the proper commitment to the eurozone’s economic recovery. Among them, George Soros; his opinion explained already in 2013, in “George Soros: How to Save the EU from the Euro Crisis”; 2013 April 9th; The Guardian; retrieved from http://www.theguardian.com/business/2013/apr/09/george-soros-save-eu-from-eurocrisis-speech; and also “Soros: ‘Germany should accept Eurobonds or leave the euro’”; 2013 April 10th; retrieved from http://www.euractiv.com/section/eurofinance/news/soros-germany-should-accept-eurobonds-or-leave-the-euro/; the latest statement from an interview to Soros by the German magazine Wirtshafts Woche: Soros George, Schmitz Gregor Peter; 2016 February 11th; “The EU is on the Verge of Collapse – An Interview”; The New York Review of Books; retrieved from http://www.nybooks.com/articles/2016/02/11/europe-verge-collapse-interview/ 7 As abovementioned, Soros’ position on the austerity method is the following: “Germany’s soft impositions on the eurozone’s MSs have been the wrong policies: shrinking the debt burden could not be done by shrinking the budget deficit. The debt burden is a ratio between the accumulated debt and the GDP, both expressed in nominal terms. And in conditions of inadequate demand, budget cuts cause a more than proportionate reduction in the GDP – in technical terms the so-called fiscal multiplier is greater than one. This means for every that for every million euro reduction in the budget deficit, the country's GDP falls by more than a million euros, leading to a rise in the ration of national debt to GDP.” quoting Soros George; 2013 April 9th; “How to save the European Union”; The Guardian; http://www.theguardian.com/business/2013/apr/09/eurozone-crisis-germany-

11


The Giant Fall

members

see

austerity

inadequate in resolving the Euro

area’s

troubles

and

Germany

as

economic identify the

main

“guilty” party in the failed Angela Merkel and Matteo Renzi Source: governo.it

Eurozone recovery. What they point out is that the Bundesbank helped design

the outline for the euro and the latter’s defects put Germany into the driver's seat; and once the crisis spread out, the first measures adopted to address it, helped the export-oriented Germany to keep the overall price levels low, while letting the bank crisis evolve into a sovereign debt crisis for its EU’s partners. Moreover, being the biggest creditor among the Eurozone, Germany addressed its fellow partners’ troubles, by setting up a creditor-to-debtor relation instead of acting jointly as a monetary and economic union requires to its MSs. Ever since, the Eurozone’s MSs split up into two different categories: on one side, the irreproachable creditor States imposing austerity on the mischievous ones, doing the minimum necessary just to avoid the default of some countries and to keep intact the eurobonds. For further reference, Krugman Paul; 2013 November 3rd; “Those Depressing Germans”; The New York Times; retrieved from http://www.nytimes.com/2013/11/04/opinion/krugman-those-depressinggermans.html and Skidelsky Robert; 2014 July 24th; “Germany’s Current-Account Surplus is partly to blame for Eurozone Stagnation”; The Guardian; retrieved from http://www.theguardian.com/business/2014/jul/24/germany-surplus-part-blameeurozone-stagnation.

12


April 2016

Eurozone; on the other side, the debtors, subjected to policies that deepened their depression and eventually aggravated their debt burden. Germany surely belongs to the first kind of actors: against any demand-side policy and supporting austerity, the German proposal to address the crisis has been the one always endorsed by the EC and the ECB. On the other side, Portugal, Ireland, Italy, Greece, Spain (the socalled PIIGS) and France sometimes, are those States in favor of a less strict application of the EU economic and fiscal discipline. Some of them also tried to openly challenge the German power in the Bundes Bank HQ Source: Eu Observer

EU decision-making system, in this way striking

the

European, at least apparent cohesion. What happened is that, in the recent years Germany showed a fierce opposition to any loosing of the fiscal austerity or easing of the antiinflationary targets. So far, Berlin has won the battle against the debtor’s side. The debtor’s requests for Eurobonds and demand-side policies, as well as for the increasing of the interest rates and the adoption of Fed-like policies, failed against the will of Germany and hence, of the EC and the ECB. Nevertheless, some European States raised some criticism in the past and continue to do so, with the goal

13


The Giant Fall

of downsizing the monopoly of the euro area economic policy’s outline and of catching up with a decent economic growth. Especially Greece, Spain and Italy’s governments have been expressing the rejection of the austere method. They keep pointing out that after almost 10 years of strict fiscal policy and German-backed prescriptions, the Eurozone economy still underperforms8. Going into details, in Greece the 2015’s victory of the aggressively anti-austerity government lead by Syriza, together with the “no” vote in the Greek referendum on bailout terms, posed for a while a challenge to decades of European integration. That big “no” was the first, clearest and most open way to express the voices of those in Europe who fiercely criticize the austerity method and seek a rebalance of power within the EU framework. Moreover, beyond the Greek open rejection of austerity, there had been other forerunners in the opposition to what is perceived as a German overwhelming economic power. For instance, the Spanish antiausterity party Podemos (We Can) lead by Pablo Iglesias: in January 2015, Iglesias urged Spain to take to the streets and demonstrate in order not to become a German colony9. In addition to Spain, Italy since 2014 with its Democratic Party’s government lead by Prime Minister Matteo Renzi, has been challenging the EC’s favoritism for Mrs. Merkel’s team. On each and 8

For instance, the below-zero real interest rates issue and the feeble recovery after the new strategy that couples quantitative easing with negative interests rates; see “Taking Europe’s Pulse. European Economic Guide”; 2016 February 18th; The Economist; retrieved from http://www.economist.com/blogs/graphicdetail/2016/02/takingeurope-s-pulse. 9 “100,000 Flock to Madrid for Podemos Rally against Austerity”; 2015 January 31 st; The Guardian; retrieved from http://www.theguardian.com/world/2015/jan/31/podemosspain-austerity-rally-madrid-syriza.

14


April 2016

every occasion, be it public or private/bilateral, the Italian government has been fiercely criticizing the excessive power held by Germans when it comes to others’ economic recovery. More precisely, Prime Minister Renzi has had words of criticism against Germany and the Commission: he openly blamed German-led austerity for the weakening of the Eurozone’s economies, as well as for the rise of populist politics across the EU. Mr. Renzi also blamed the EC of being biased toward Berlin, accusing the European system not to apply rules consistently and equally for all its MSs10. What is more, it is almost one year now that the Italian establishment goes beyond the inflamed press releases. Indeed, Italy at times backed by a more timid France11, shows to be committed in the European unity, instead of being destructive in its criticism. There have been attempts to join 10

Mr. Renzi openly declared that Germany is standing in the way of reforms needed to make the EU and the eurozone stronger, and that the proposals of countries such as Italy are being ignored. The reference goes for instance on the proposal to create a common European bank-deposit insurance fund in order to underpin confidence in the eurozone’s banking union. Italy pointed out recently, Brussels’s failure to confront Berlin over its vast current-account surplus, currently 8%, well above the EU’s definition of excessive. It believes that if Germany undertook the kind of structural reforms it has been urging on others, including liberalizing its highly regulated product and services markets and open up its infrastructure markets to private investment, the positive spillovers to the wider European economy could be substantial; from Nixon Simon; 2016 January 18th; “Italy Versus Germany: Europe’s Latest Fault Line”; The Wall Street Journal; retrieved from http://www.wsj.com/articles/italy-versus-germanyeuropes-latest-fault-line-1453062895. 11 For instance: Schlamp Hans-Juergen; 2012 January 1st; “Two versus ‘La Merkel’: Italy and France Team Up against Germany”; Das Spiegel; retrieved from http://www.spiegel.de/international/europe/two-versus-la-merkel-italy-and-franceteam-up-against-germany-a-808443.html and also Barkin Noah; 2014 December 7th; “Italy and France Hit Back at Merkel over Economic Reforms Call”; retrieved from https://www.euractiv.com/section/euro-finance/news/italy-and-france-hit-back-atmerkel-over-economic-reforms-call/, while more recently Wagstyl Stefan; 2015 July 15th; “Merkel’s Tough Tactics Prompt Criticism in Germany and Abroad”; Financial Times; retrieved from http://www.ft.com/intl/cms/s/0/d533aa6e-2afe-11e5-8613e7aedbb7bdb7.html#axzz44rwiSDbK

15


The Giant Fall

forces in order to counterpoise the German-backed austere blindness: indeed, the difference between Italy on one side, and the Greek voters and the Madrid’s protesters on the other side, is that Rome is trying to institutionalize the disorganized debate and the wild criticism. Unlike Syriza and Podemos, the Italian center-leftist government is trying to counterbalance the too assertive center-right Germany – in a centerright Europe12 - with the same orderly language of the EU institutions. The aim is to resolve the rifts and to bring together all the Europeans’ views, inside the institutional framework where the criticized leadership is expressed. Germany has received plenty of critics both from its States and from the civil society. But so far, the only serious and promising attempt in rebalancing the power sharing in the Eurozone without compromising the European integration, has so far been the Italian one. Italy almost succeeded in giving a political shape to the dissatisfaction for the austerity method and to the criticism towards a EU well disposed toward Germany. Italy seems to be able somehow to express a certain leadership and guidance among its debtor counterparts, introducing a political and economic alternative inside the EU politics’ dialectic and defying the Chancellor Angela Merkel’s undisputed power. Having said so, it should be highlighted that Germany certainly still has the final, decisive word on the Eurozone’s economic recovery agenda. But Italy’s standing out from the debtor

12

The reference goes to the current European Commission’s leading party, the centerright European People’s Party, with the EC’s President Jean-Claude Juncker.

16


April 2016

States could be seen as a potential, consistent challenge to Berlin, i.e. as the feasible, European alternative to the German one. Only time will tell if Italy, alone or jointly with those who raised some concerns over the austerity’s remedies (i.e. Greece, Spain, at times France) will be able to exercise a certain counterbalancing power to the so far undisputed weight of Berlin in the EU decision-making process. What seems quite sure is that Germany’s power polarizes Europe, and that the pushback against German power in Europe is likely to grow if the Eurozone crisis worsens – or if Berlin’s policies grow more assertive.

Neighbors and Energy Policy Germany’s influence is not confined to matters related to the economic and monetary union. It also extends to the EU external relations and security policy. Especially in the area of external affairs and

neighborhood

policies,

Germany

has shown a certain weight along with a non-coherent behavior:

the

reference goes to the North Stream II Source: avgi.gr

energy

EU/German policy’s

17


The Giant Fall

choices and hence, to the EU-Russia relations. Focusing on the recent years, an external observer could easily notice that 2014 has inaugurated a rambling German conduct towards Moscow, despite their tight commercial relations and the German well-known hydrocarbons dependency on Russia. Prior to the Ukraine crisis, Germany had been the main European actor pulling Ukraine towards the EU and far from Moscow, thus practically backing the Ukrainians’ European aspirations and the pro-EU political forces. Once the chaos spread within the country and Russia intervened militarily in Ukraine, Berlin was showing a certain zeal in urging the EU in implementing an economic sanctions plan against Moscow and the pro-Russia Ukrainian politicians. But what is odd is that during the Ukraine crisis’s unfolding, Germany was pushing the EU to take action against Russia, yet at the same time preventing the EU from becoming more assertive with Russia under the same circumstances. The Chancellor took constant, direct phone contacts with the Kremlin, in this way becoming the leader and spokesperson of the EU when dealing with the issue13. Lately, the Minsk peace process saw the EU couple, Germany and France, interceding between Ukraine and Russia in order to prevent the spreading of violence and to normalize and stabilize the political relations between the two States, and between Russia and the EU. Behind this twofaced attitude, there probably were – and still are – Berlin’s economic interests: the Russian market and above all, the Russian gas. It is no coincidence that right 13

Pond Elizabeth, Kundnani Hans; March/April 2015; “Germany’s Real Role in the Ukraine Crisis: Caught between East and West”; Foreign Affairs.

18


April 2016

during the Minsk peace deal’s outlining, in September 2015 Germany and the Russian gas export monopoly Gazprom finally signed an agreement for the Nord Stream pipeline enlargement14. In the meantime, the Italo-Russian South Stream was dropped by Moscow under the EC’s strictness over the EU Third Energy Package, inflating criticism and exacerbating the already existing political divisions within the EU. On the energy policy point of view, Germany has been going along with Moscow it is about 10 years now15. During this span time Germany has been politically ambiguous both towards Russia and its European partners, be they involved in other pipelines construction projects, be they against a too close rapprochement to a historically antagonist State. In particular, Germany has been accused by some EU partners involved in other energy routes planning, of practically working against their energy policies. In order to do so, apparently Germany has been pushing the Commission in being very strict when evaluating the construction of new pipelines other than the Nord Stream, and when applying the EU Third Energy Package’s directives and regulations16. The disappointed EU States criticize also the Commission, underlining that it does not seem to have a so firm hand

14

“Germany Seeks to Overcome Opposition to Nord Stream 2”; 2016 February 1 st; retrieved from http://www.euractiv.com/section/energy/news/germany-seeks-toovercome-opposition-to-nord-stream-2/. 15 In 2001 with the first steps taken towards the Nord Stream pipeline planning; in 2011 and 2012 with the ending of the first and second phase of the pipeline’s construction; in this past year with the ongoing Nord Stream enlargement project. 16 For a technical study http://www.acer.europa.eu/en/the_eu_energy_market/Legislation/Pages/default.aspx.

19


The Giant Fall

when it comes to the evaluation of energy projects where Germany is involved. More precisely, these harsh stances on the matter are the ones that have been kept by Italy, during the recent debate over the planned Nord Stream enlargement. Once again, the related discussion saw at loggerheads Germany and Italy. In particular, the latter has been criticizing the easiness of the EC when it comes to the Nord Stream pipeline evaluation and application of the abovementioned Third Package. The indulgent behavior of Brussels is practically opposite to the demeanor held by the Commission when it evaluated and then flunked the South Stream/Blue Stream project proposed by Italy and Russia. Recently, the Italian PM raised this issue at the EU level, contending that Germany is opportunistically breaching the rules of the EU’s Third Energy Package, which maintains that one company – in this case Gazprom – cannot own both the pipeline and the gas being piped through it. He also highlighted that the doubling of Nord Stream would undercut Europe’s quest for energy security and for the diversification of suppliers and routes. Moreover, aside the legal basis of the Nord Stream Two initiative, Renzi also warned that the expansion of Nord Stream contradicts Europe’s current sanctions policy against Russia17. What is more, the Nord Stream enlargement has caused the protests of Central and Eastern European governments 17

Indeed, the EC’s attitude could be even odder if one is aware of the main Russian aim with the Nord Stream construction and enlargement. Moscow’s goal is to energetically isolate Ukraine and let Russia gain preeminence in Central and Eastern European energy markets. The Kremlin has been trying to pursue the goal with the setting up of various understandings, allegiances and pipelines outlines. The South Stream itself but also the Blue Stream pipeline, or the backup option of the Turkish Stream, are all intended to bypass a too-many-times-dissenting and often turbulent Ukraine when transporting to Europe its gas supplies.

20


April 2016

unwilling to see a dreaded historical friendship sprouting again. More precisely, the governments Estonia, Latvia, Lithuania, Poland, Hungary, the Czech Republic, Slovakia, Romania and Croatia have tried to counter the recent developments in the Nord Stream project. Among the various statements, press releases and joint statements, they have recently signed a public letter of protest against the project, addressed to EU President Donald Tusk18. Those mentioned are all different attempts to stop the Germans from achieving the goal of becoming the sole major interlocutor of Moscow in provision of energy supplies to Europe. The achievement would indeed give to Berlin a role of the outmost importance in the EU: Germany would become the main hub for the distribution of gas flows from Russia into the European countries. The two ways of demonstrating against the German domination and a favorably disposed Commission are however underpinned by different reasons. If the group of Eastern countries is first of all historically and politically afraid of the ever-occurring Berlin-Moscow rapprochement, the Italian protests against Nord Stream have first of all economic grounds, then also political ones. And of course these protests are not about Rome’s relations with Moscow: Russia remains an important political and economic partner for the Italian government. Rather, it is all again about the balance of power within the EU, both the economic power and the political one. Mr. Renzi once again defies 18

Blank Stephen; 2016 March 23rd; “A Comeback for South Stream?�; Eurasia Daily Monitor; The Jamestown Foundation; retrieved from http://www.jamestown.org/programs/edm/single/?tx_ttnews%5Btt_news%5D=4522 9&cHash=f5a441468521f55938f6b14244816fcb#.VwKHZDaLQy4.

21


The Giant Fall

Mrs.

Merkel;

and

consequently the EU is defied by Italy’s growing

rift

with

Germany and the EC. On one side, Italy’s allegations

of

Germany’s

self-

Angela Merkel and Vladimir Putin Source: Radio Free Europe/Radio Liberty

interested double standards toward Russia have soured relations between the two European countries. On the other side, the ongoing competition between Italy and Germany in becoming the center of the EU energy supply, results in the mutual obstructing, although with different results, of their respective energy policies. The Italian attempts of downsizing the German weight in determining EU positions (also) on energy issues, underpin the critics towards a doggy EC. An overview of the situation reveals that the EC’s bending towards Germany and the reactions of other EU States are bringing to the European integrity some challenges also in terms of an effective representation of common shared goals and positions.

The Migrant Crisis’ Unilateralism Criticism addressed to Germany and coming from the European bloc could be observed also on the handling of the immigration crisis. And maybe the real threat to the EU unity and preservation could be

22


April 2016

seen in the results that the seesawing Germany has been having since the beginning of migrant arrivals. As usual, the first EU reaction to address the refugee problem and deal with the migrants’ influx has been a disorganized one. And also in this case, as usual the Italian criticism towards the German influence and the EC’s positions has been raised since the beginning of the crisis. Mr. Renzi’s public statements have always expressed a certain dissatisfaction on Germany’s unwillingness to handle the problem and on the EC’s lack of cooperation. He certainly had a point when declaring that such a crisis should be tackled by the whole Europe, rather than autonomously by each and every EU State: given the international turbulence and the geographical proximity of war-like scenarios (like Libya, Syria, Iraq and so on), he pointed out, sooner or later the problem could not be confined in just few European States19. Hence, when Germany and so the EU, abruptly changed the respective positions on the issue and in particular, on migration policy, everybody in the EU was more than surprised. More precisely, Germany in August 2015 unilaterally abandoned the EU’s Dublin Convention, with the Chancellor declaring that the German State would be willing to welcome Syrian refugees and give them asylum independently from the country of first arrival. The catchy slogan was “Wir Shaffen Das”, We Can Manage This. The catchphrase quickly 19

For instance, Renzi Matteo, 2015 June 23rd; “The Mediterranean Migrant Emergency is not only Italy’s. It is Europe’s”; The Guardian; retrieved from http://www.theguardian.com/commentisfree/2015/jun/23/mediterranean-migrantcrisis-not-italy-but-europe.

23


The Giant Fall

spread to Syria and other war-torn neighboring regions, where people were – and still are – eagerly awaiting any opportunity to escape from poverty, political instability and war-like scenarios. Hence, after identifying and treating the migrants’ problem as an internal one to be addressed by each EU’s Mediterranean States alone, Germany changed its position and launched this allegedly comprehensive, group response to the ongoing migrant and humanitarian crisis in the Mediterranean. The Commission followed, by for instance urging States like Italy, Greece and the Central-Eastern countries to do more in welcoming migrants and to perform better when providing them with nutrition, housing and healthcare accession. Most of Germany’s EU neighbors were appalled by the swift change in Merkel’s autonomous group declaration (!). Their astonishment grew bigger soon after the German slogan’s release: indeed, the Balkan Route connecting Greece to Hungary and Austria, started witnessing an unprecedented mass influx of refugees. Merkel’s single-handed declaration resulted in an uncontrolled race towards Europe, quickly causing the breakdown of the borderless Schengen area. The first soft rebellion against the German unilateralism came with the EU States more affected by the migrants’ inflows nowadays, turning their backs on Schengen. An increasing number of EU countries followed Hungary’s criticized reintroduction of national border controls. A historical close ally of Germany, Austria with its democratic Chancellor Werner Faymann who initially strongly supported Merkel’s welcoming approach, has then suspended Schengen, reinstated border controls and strictly enforced daily caps on asylum seekers.

24


April 2016

The

German Chancellor

continued the

with

unilateralist

attitude.

She

proposed

the

introduction

of

binding refugee distribution quotas, to be accepted by each EU State on the basis of a Kantian moral imperative20. The EC followed by also proposing the same solution. The reactions coming from the Eurobloc have been various. First of all the so-called Visegrad 4 Group, composed by the Central-Eastern Countries of Czech Republic, Hungary, Poland and Slovakia, traditionally Germany’s closest allies, firmly got together to oppose the quotas proposal. Following this first countering of the German proposal, France’s Prime Minister Manuel Vallis, warned that the migrant crisis was causing to Europe a destabilization if it was not brought under control through a more efficient control of the EU’s external borders, therefore supporting the British line – also rejecting the binding quotas. Italy, at the frontline of Europe’s refugee crisis, criticized Germany’s unilateralism and has always been asking for a joint EU effort in increasing the external border controls, especially at the sea

20

The statement was made during a conference of the Christian Democratic Union Party (CDU) in Karlsruhe on the 14th December 2015. “Merkel Stands by Refugee Policy at CDU Conference”; 2015 December 14th; Deutsche Welle; retrieved from http://www.dw.com/en/merkel-stands-by-refugee-policy-at-cdu-conference/a18915784.

25


The Giant Fall

borders. Greece as well, has started asking a new EU border force to assume full control of the refugee inflows21. After the menaces to Schengen, the Mediterranean States. i.e. France, Italy and Greece have replied by suggesting a European solution: they have practically proposed to close the European ranks, to keep the free movement area and to increase external controls, rather than geographically divide Europe. When Mrs. Merkel started facing also the fading of internal political consensus22, left alone, the German leader abruptly and again, unilaterally performed a volte-face in September 2015. It turned out that Germany could not manage anymore the influx of asylum seekers and migrants. Germany, the champion of European integration, reimposed temporary controls along the German-Austrian borders, in this way accelerating an already galloping crisis inside the EU. Austria, Slovakia and the Netherlands have followed with further control impositions in order to avoid stranded refugees on their soil and limit the refugees’ influx in the countries. Hungary declared an emergency

21

Sarantis Michalopoulos; December 18th 2015; “Greek Minister: New EU Border Force Should Assume Full Control of Refugees”; retrieved from http://www.euractiv.com/section/justice-home-affairs/interview/greek-minister-neweu-border-force-should-assume-full-control-of-refugees/. 22 The conservative Christian Social Union (CSU) in the Bavarian State, one of those facing the biggest refugee arrivals from the Austrian border, declared itself outraged by Mrs. Merkel’s welcoming stance, calling it a grave mistake. Other regional and municipal governments as well, joined the criticism. Hence, this declared open-door refugee policy exposed deep divide in the Chancellor’s party; “Europe Starts Putting Up Walls”; 2015 September 19th; The Economist.

26


April 2016

status and completely sealed its border with Serbia23. The EC’s has kept silence over the reintroduction of border controls of course and its answer, so the German answer, has been Turkey24. This further exacerbated tensions. The already mentioned Mediterranean States, and especially Italy and Greece opposed the attempt to give in Turkey’s hands the keys for the Schengen asylum policy25. But the fiercest this time came from Italy, practically blocking the EU/German plan to stem migrants coming to Europe through Turkey. Once again Italy maintained, or at least tried to maintain, its combative position against the German obvious weight on each and every decision taken by the EU, as well as against the doggy behavior of the EC. The reaction could also be observed from the EU cohesion point of view. As already underlined, Italy together with Greece and France, have risen up not only against the EC’s double-standard treatment when it comes to the evaluation of policies’ suggestions from EU MSs; rather they are also opposing the disintegration of the political achievements that EU reached with difficulty over one century of internal feuds and gridlocks. 23

Growing numbers of refugees are still trapped on the Serbian side and have started evading the barriers, via Romania and Croatia. The events occurred – and are still occurring – in cascade 24 It is necessary to add also that some criticism against the EU-Turkey deal and the German behavior has been raised also from European politicians. For instance we might think to Guy Verhofstadt: the Belgian politician, member of the European Parliament and leader of the Alliance of Liberals and Democrats for Europe (ALDE), criticized the deal on a legal basis. Indeed Turkey is not one of the parties of the 1951 refugee convention, this resulting in Turkey’s relieving of the cogent non-refoulement principle. 25 In particular, Germany, hence the EC, proposed a deal that grants to Turkey 3 billion Euros (€) for handling migrants and keeping them on its soil, and offers a package of political goodies, including speeding up visa-free travel for its citizens and restarting the stalled EU accession application of a not-so-democratic Turkey.

27


The Giant Fall

The final balance of the migrant crisis show that this time Germany certainly faced some difficulties in determining its European partners’ choices. Nonetheless, despite the voices raised against its unilateralism, Germany practically won it all. The EU has been following its everchanging positions and the Turkey’s deal. But what is dramatic after almost one year of migrant influxes, are the step backwards made by the highly integrated Shengen area. In this occasion Germany acted not just as the main driving force to give direction and shape to the final EU decisions; but also it directly acted as the main centrifugal force threatening the EU’s integration. Berlin’s ability to utilize its institutional heft within the EU means that unless any European proposal is broadly compatible with the German national interest, it is unlikely to be realized, irrespective of the logic behind it. The three issues described above, well show the EC’s favoritism for any German-backed solution, or flipping the perspectives, the German weight in the EU decision-making system. Either striking the EC’s favoritism or the German weight, fierce criticism has been raised by other EU member States. Especially the Mediterranean governments have been raising their voices and for this reason they have been often accused of causing irreconcilable divisions within the EU. On the contrary, what the three affairs just described, and especially the consequences linked to the migrant crisis show a completely different reality. The rebellious States, among which a constant presence has been the Italian one, try to counter the disparity of treatment that they

28


April 2016

experience, or at least that is how they feel like. In doing so, what emerges is that their endeavors, especially the Italian one, are aimed at rebalancing a sort of German monopoly in the power sharing of the EU. The way preferred to seek this rebalancing, is the institutional and democratic one, seen as the best way to propose a feasible, political alternative to the current status of the EU decision-making system. Hence, far from wishing the dissolution of the Union, the rebellious countries, and especially Italy, are seeking to resolve divisions within the European institutional framework; what they ask is to be heard in Brussels, being themselves Members of a Union so hardly achieved – some of them like Italy, are founding members as well. Inclusiveness, dialogue and unity are far more preferred to partiality, unilateralism and isolation.

29


The Giant Fall

References “100,000 Flock to Madrid for Podemos Rally against Austerity”; 2015

January

31st;

The

Guardian;

retrieved

from

http://www.theguardian.com/world/2015/jan/31/podemos-spainausterity-rally-madrid-syriza “A Lurch onto The World Stage. Germany is emerging, faster than it wanted, as a global diplomatic force”; 2015 Feb 28th; The Economist;

retrieved

from

http://www.economist.com/news/europe/21645223-germanyemerging-faster-it-wanted-global-diplomatic-force-lurch-world “Germany Seeks to Overcome Opposition to Nord Stream 2”; 2016

February

1st;

retrieved

from

http://www.euractiv.com/section/energy/news/germany-seeks-toovercome-opposition-to-nord-stream-2/ “George Soros: How to Save the EU from the Euro Crisis”; 2013 April

9th;

The

Guardian;

retrieved

from

http://www.theguardian.com/business/2013/apr/09/georgesoros-save-eu-from-euro-crisis-speech; “Merkel Stands by Refugee Policy at CDU Conference”; 2015 December

14th;

Deutsche

Welle;

retrieved

from

http://www.dw.com/en/merkel-stands-by-refugee-policy-at-cduconference/a-18915784 “Soros: ‘Germany should accept Eurobonds or leave the euro’”; 2013

April

10th;

retrieved

from

30


April 2016

http://www.euractiv.com/section/euro-finance/news/sorosgermany-should-accept-eurobonds-or-leave-the-euro/ “Taking Europe’s Pulse. European Economic Guide”; 2016 February

18th;

The

Economist;

retrieved

from

http://www.economist.com/blogs/graphicdetail/2016/02/takingeurope-s-pulse

Barkin Noah; 2014 December 7th; “Italy and France Hit Back at Merkel

over

Economic

Reforms

Call”;

retrieved

from

https://www.euractiv.com/section/euro-finance/news/italy-andfrance-hit-back-at-merkel-over-economic-reforms-call/ Blank Stephen; 2016 March 23rd; “A Comeback for South Stream?”; Eurasia Daily Monitor; The Jamestown Foundation; retrieved from http://www.jamestown.org/programs/edm/single/?tx_ttnews%5B tt_news%5D=45229&cHash=f5a441468521f55938f6b14244816fcb #.VwKHZDaLQy4 Day Michael; 2016 January 18th; “Italy 'Preparing to Cause Trouble' for EU as Relations with Germany Sour”; The Independent; retrieved from

http://www.independent.co.uk/news/world/europe/italy-

preparing-to-cause-trouble-for-eu-as-relations-with-germany-soura6818341.html Friedman George; 2012 January 31st; “Germany's Role in Europe and the European Debt Crisis”; Geopolitical Weekly, Stratfor; retrieved

31


The Giant Fall

from

https://www.stratfor.com/weekly/germanys-role-europe-

and-european-debt-crisis Huebner Kurt; 2015 March; “German Economic Governance and the Eurozone: Misguided Leadership?”; Conference Paper for the European Union Studies Association (EUSA), Boston, Mass; retrieved from https://eustudies.org/conference/papers/download/31 Janning Josef; 2015 February 5th; “German Foreign Policy and the EU: Leader by Default?”; European Council on Foreign Relations; retrieved

from

http://www.ecfr.eu/article/commentary_german_foreign_policy_a nd_the_eu_leader_by_default420 Krugman Paul; 2013 November 3rd; “Those Depressing Germans”; The

New

York

Times;

retrieved

from

http://www.nytimes.com/2013/11/04/opinion/krugman-thosedepressing-germans.html Nie Zheng; 2013 January 28th; “Financial Crisis: Germany's Role in the

European

Union”;

retrieved

from

http://globaledge.msu.edu/blog/post/1427/financial-crisis-germany's-role-in-the-european-union Nixon Simon; 2016 January 18th; “Italy Versus Germany: Europe’s Latest Fault Line”; The Wall Street Journal; retrieved from http://www.wsj.com/articles/italy-versus-germany-europes-latestfault-line-1453062895

32


April 2016

Obstfeld Maurice; 2013 April; “European Economy. Finance at Center Stage: Some Lessons of the Euro Crisis”; Economic Papers 493;

retrieved

from

http://ec.europa.eu/economy_finance/publications/economic_pap er/2013/ecp493_en.htm Renzi Matteo, 2015 June 23rd; “The Mediterranean Migrant Emergency is not only Italy’s. It is Europe’s”; The Guardian; retrieved

from

http://www.theguardian.com/commentisfree/2015/jun/23/medite rranean-migrant-crisis-not-italy-but-europe Sarantis Michalopoulos; December 18th 2015; “Greek Minister: New EU Border Force Should Assume Full Control of Refugees”; retrieved

from

http://www.euractiv.com/section/justice-home-

affairs/interview/greek-minister-new-eu-border-force-shouldassume-full-control-of-refugees/ Schlamp Hans-Juergen; 2012 January 1st; “Two versus ‘La Merkel’: Italy and France Team Up against Germany”; Das Spiegel; retrieved from

http://www.spiegel.de/international/europe/two-versus-la-

merkel-italy-and-france-team-up-against-germany-a-808443.html Schwartz Daniel; 2011 September 29th; “Germany Key to Solving European

Debt

Crisis”;

retrieved

from

http://www.cbc.ca/news/world/germany-key-to-solving-europeandebt-crisis-1.1014172

33


The Giant Fall

Scimia Emanuele; 2016 January 11th; “Germany Is Real Target of Italy’s Opposition to Russia’s Planned Nord Stream Two”; Eurasia Daily Monitor Volume: 13 Issue: 11; Jamestown Foundation; retrieved from http://www.jamestown.org/programs/edm/single/?tx_ttnews%5B tt_news%5D=44995&cHash=2fb34596722ee60e3c3e2be7570c057 6#.VuuSesDhAy4 Skidelsky Robert; 2014 July 24th; “Germany’s Current-Account Surplus is partly to blame for Eurozone Stagnation”; The Guardian; retrieved

from

http://www.theguardian.com/business/2014/jul/24/germanysurplus-part-blame-eurozone-stagnation Soros George; 2013 April 9th; “How to save the European Union”; The

Guardian;

http://www.theguardian.com/business/2013/apr/09/eurozonecrisis-germany-eurobonds Soros George, Schmitz Gregor Peter; 2016 February 11th; “The EU is on the Verge of Collapse – An Interview”; The New York Review of Books;

retrieved

from

http://www.nybooks.com/articles/2016/02/11/europe-vergecollapse-interview/ Traynor Ian; 2013 April 28th; “German Role in Steering Euro Crisis Could Lead to Disaster, Warns Expert”; The Guardian; retrieved

34


April 2016

from

http://www.theguardian.com/world/2013/apr/28/german-

role-euro-crisis-disaster Troianovski Anton; 2015 July 6th; “Greek Crisis Shows How Germany’s Power Polarizes Europe”; The Wall Street Journal; retrieved

from

http://www.wsj.com/articles/germanys-power-

polarizes-europe-1436231408 Wagstyl Stefan; 2015 July 15th; “Merkel’s Tough Tactics Prompt Criticism in Germany and Abroad”; Financial Times; retrieved from http://www.ft.com/intl/cms/s/0/d533aa6e-2afe-11e5-8613e7aedbb7bdb7.html#axzz44rwiSDbK

“Anti-Austerity Politics. Fudging the Revolution”; 2016 February 20th; The Economist “Charlemagne. An Ill Wind for Merkel”; 2016 January 23 rd; The Economist “Europe Starts Putting Up Walls”; 2015 September 19th; The Economist “Icy Reception. Refugees in Winter”; 2015 November 28th; The Economist “Los Indignados in Power”; July 4th; The Economist 2015 “Pointing Fingers. Germany, Greece, History”; 2015 March 21st; The Economist

35


The Giant Fall

“Renzi and the EU. Troublemaker”; 2016 January 23rd; The Economist Fattal Alexandra; 2014 November 4th; “Italy Exposed”; The Economist Kluth Andreas; 2014 November 4th; “Power v Piffle”; The Economist Pond Elizabeth, Kundnani Hans; March/April 2015; “Germany’s Real Role in the Ukraine Crisis: Caught between East and West”; Foreign Affairs Studemann Frederick; 2014 November 4th; “Et Tu, Berlin”; The Economist Woods Ngaire; January/February 2016; “The European Disunion. How the Continent Lost Its Way”; Foreign Affairs

Agency for the Cooperation of Energy Regulator, EU Legislation. http://www.acer.europa.eu/en/the_eu_energy_market/Legislation /Pages/default.aspx

36


April 2016

Recent developments in Greece Davide Panadori

The following section will cover the second part “Recent Development in Greece”. Section 2.1 will briefly explain in what consisted the two economic adjustment plans imposed by the institutions on Greece in terms of cuts of the public expenditure. Furthermore, when the term “institutions” is used it refers to the group composed by the European Commission, the ECB ad the IMF, also called “Troika”. It will also analyse, using descriptive data, the impact of those measures on the country’s real economy (real GDP growth and unemployment), showing the negative impact on the Euro convergence criteria such as the public debt-to-GDP ratio. Section 2.2 will cover the victory of Syriza in the general elections in January 2015, showing the rise of euro-sceptic movements in Greece from the extreme right to the extreme left. Section 2.3 will consider in depth the third economic adjustment plan and its negotiations. It will further discuss the incapability for Greece in repaying the IMF instalment, the Greek referendum, the final agreement and the new elections occurred afterwards. Section 2.4 will try to assess the sustainability of the third plan arguing that without growth policies the risk for a fourth economic adjustment plan is not that remote, forcing Greece to find different sources to fulfil its repayments. An interesting example is the agreement with China in implementing the “Silk Road Project” (or One Belt One Road project) involving the Greek coasts. Section 2.5 will summarize and conclude..

37


The Giant Fall

The Economic Adjustment Plans and their Economic Impact 30,0

Figure 2.1 - GDP growth rate and Unemployment rate (%)

25,0 20,0 15,0 10,0 5,0 0,0 1998 -5,0 -10,0

2000

2002

EA Unemployment

2004

2006

Greek Unemployment

2008 EA Growth

2010

2012 Greek Growth

Source: calculations by the author based on “Unemployment rate by sex and age - annual average, % [une_rt_a]” and “GDP and main components - volumes [nama_gdp_k]”, available through Eurostat.

Although Greece represents only 2.13% of the European Union (EU) population and 1.46% of the EU GDP, it has increasingly proved a cardinal middle power to include in any negotiation, thanks to two main features. First, despite its small economic size, many countries invested in its bonds, making Greece a contagious risk also for too-big-to-fail economies. Second, his geographical position makes any attempt at exclusion from the EU a geopolitical faux pas (Alesina and Giavazzi, 2015). In the past Greece faced two bailout programs. In 2010 Greece and the institutions agreed the first plan establishing a 110 billion bailout program in order to bring back the government deficit and debt below

38


April 2016

respectively 3% and 120% of the GDP. With this agreement, they imposed a fiscal effort of 13% of the GDP. In other words, a reduction of the government expenditure in order to make return it at a sustainable level according to Euro convergence criteria. Most of these interventions were planned to be imposed through expenditure cuts and revenue measures. On the one hand, a spending reduction in terms of public wages, public investment and pensions cuts. On the other hand, an increase of public revenue especially through the VAT rates. (European Commission, 2010, pp. 13-15). In a later stage Greece requested for a second bailout program of 164 billion. It was disbursed through the European Financial Stability Facility (EFSF), and planning a 50 billion selloff of state owned companies. The institutions also reconfirmed some cuts present in the first plan, for instance in the public administration, social expenditure and health care. (European Commission, 2012, pp. 31-36). As pointed out by several economists such as Paul Krugman, those austerity policies imposed by the institutions determined a negative correlation between them and the economic performance of different sectors (Krugman, 2015). Here are considered two main effects. The first direct impact was related with the real economy performances due to the cuts on the government expenditure and more specifically on the welfare state. The consequences of those measures on the real economy are represented by the negative trends of the real GDP growth and the unemployment rate, showed by Figure 2.1. It is possible to observe that since 2010 Greece faced different and sharper

39


The Giant Fall

movements on those variables compared to the Euro Area (EA). On the one hand, the real GDP growth entered in recession in 2008 along with the EA. However, while the EA got progressively better, Greece faced a deterioration precisely with the introduction of the first economic adjustment plan in 2010 with a GDP that on average fell by 4.4% since 2008. On the other hand, the effect of the economy slowdown affected the Greek unemployment rate that grew up to 27.5% in 2013; more than doubled compared to the EA. The second indirect impact affected Greek fiscal convergence criteria, such as the government debt-to-GDP and deficit-to-GDP ratio. Paradoxically, what the institutions seemed not to understand is that more austerity measures like government expenditure reduction lead to a fall of the GDP and a deterioration of the overall ratios. For instance, Figure 2.2 shows Greece’s and the EA’s debt-to-GDP ratio. It is possible to observe that from 1995 to 2007 Greece had a debt-toGDP ratio of 102.2%, compared to the EA’s 70%. However, with the beginning of the crisis and the introduction of the economic adjustment plans, Greece moved to a 178% ratio, while the EA raised only up to 92%. In these terms, the EA presented better results thanks to the positive impact on the average of pro-austerity countries such as Germany, Netherlands, Finland and the three Baltic republics that kept under control the government expenditure. The opposite could be said for Greece, that experienced a fall in real GDP, largely determined by austerity policies, triggering an increase of 70 percentage points in the debt-to-GDP ratio.

40


April 2016

200,0

Figure 2.2 Public debt-to-GDP ratio

150,0

100,0

50,0

0,0 1995

1997

1999

2001

2003 Euro area

2005

2007 Greece

2009

2011

2013

Source: calculations by the author based on Government deficit/surplus, debt and associated data [gov_10dd_edpt1], available through Eurostat.

The Rise of Syriza These two main issues (recession and unemployment) brought the Greek people to express their discontent towards the EU through the general elections of January 2015. Syriza, the left party lead by Alexis Tsipras, won and almost obtained the absolute majority of the parliamentary seats: 36.3% in terms of votes and 149 seats out of 300 in the parliament (BBC, 2015). Thus, in order to obtain the absolute majority, Syriza formed a coalition government with the populist rightwing Independent Greeks party lead by Panos Kammenos, that had obtained 13 seats. Surely they did not share the same ideological point of view, but they shared something more relevant for their voters: a firm anti-austerity stance (Smith, 2015). Furthermore, this government brought forward one personality, Yanis Varoufakis, that argued for a completely different economic perspective from the rest of finance ministers in Europe, claiming to be a Marxist (Varoufakis, 2015). For

41


The Giant Fall

the first time people such as Junker, Osborne and Schäuble had to deal with an economist with heterodox ideas, that put them in an uncomfortable situation in which they were not able to deal with. For instance, is memorable the meeting between Schäuble and Varoufakis in Berlin by February 5th, when during the press conference both parties confirmed that “we did not reach an agreement. It was never on the cards that we would. We did not even agree to disagree” (Wagstyl et al, 2015). However, not only the two above-mentioned parties claimed an anti-bailout program, but also the extreme right wing party, Golden Dawn, that obtained 17 seats in the parliament making it the third national party (Hellenic Parliament, 2015). It is remarkable that Eurosceptic sentiments caused a virtually Fascist party to become the third most-voted at national level. Considering the last 10 years, these Greek general elections were the most EU-related for a single country. Politically speaking, they were a democratic call for the Greek people to express their opinion on the EU and its policies: although not officially, it was common knowledge that they were called mostly to decide either to keep the austerity line or to choose an anti-bailout strategy. In the end, what happened in Greece had two main effects. The first one regards what discussed so far: the rise of Greek Eurosceptic movements. The second one is the consequence of the first one: the new Greek approach in negotiating with the institutions. A negotiation came to the fore with the third economic adjustment plan that involved direct democracy.

42


April 2016

The Third Economic Adjustment Plan When Greece had to fulfil its repayment to the IMF the real threat to the EU began. It is with the third economic adjustment plan and its negotiations in 2015 that the EU trembled. Indeed, the Greek government was unable to repay a tranche of 1.6 billion euros scheduled by the end of June (Wishart and Deen, 2015), forcing both Greece on one side and the institutions on the other to start a new bailout program. The official bailout negotiations started on June 8th. The Greek authorities proposed a “Greece prior action” that involved 10 main reforms providing, among others, for a privatization plan to develop alongside the EIB and the EBRD, the establishment of a Fiscal council in order to oversee the state of the deficit reduction and a civil law reform (Varoufakis, 2015). However, the expected reforms in terms of pensions (considered the red line to not across for the Greek government) and in terms of value-added tax (VAT) harmonization were not advanced, two fundamental points for the institutions, necessary in order to fulfil the fiscal requirements (Blanchard, 2015). The institutions argued that what had been proposed was in line with the reform process, but that it could not be considered sufficient to restore fiscal and financial sustainability in Greece. Therefore, on June 26th the institutions proposed the “Reforms for the completion of the current programme and beyond” (European Commission et al, 2015). This document aimed to modify the current proposal by the Greek

43


The Giant Fall

authorities, changing those 10 structural reforms present at the beginning of the negotiation. The most relevant differences were on the VAT and on the pensions reforms. First, in terms of VAT the Greek authorities wanted to maintain the taxation by 13% in the touristic sector, while the institutions proposed a unification by 23%, as for most of economic sectors. Second, in terms of pensions the Greek authorities proposed to set the retirement age at 67 or 62, and 40 years of contribution by 2022. Moreover, although the institutions agreed on these terms, they also claimed that the whole plan of pensions was not sufficient and a further structural reform would soon be necessary. In the end, each single point proposed by the Greek part were adjusted and re-proposed by the institutions. After this new proposal of June Alexis Tsipras Source: WikiCommons

26th, the Greek authorities decided unilaterally

to

conclude

the

negotiations (European Commission, 2015) and to employ an instrument never used during a bailout negotiation: a referendum. Alexis Tsipras called the Greek people to decide in one week the following question: “Should the agreement plan submitted by the European Commission, European Central Bank and the International Monetary Fund to the June 25 Eurogroup and

44


April 2016

consisting of two parts, which form their single proposal, be accepted? The first document is titled “Reforms for the completion of the Current Program and Beyond” and the second “Preliminary Debt Sustainability Analysis”“ (BBC, 2015). In other words, the government asked to the Greek people whether or not accept what the institutions proposed during the negotiations. Moreover, the government claimed to be against the proposal of the institutions and promoted officially the “No” campaign. Furthermore, this decision occurred without giving to the institutions any first notice. Indeed, they did not expect that during the negotiation Tsipras could call for a referendum. This decision was an entirely unprecedented move, possible mostly because of the large support he had obtained in January. In this way, his Eurosceptic approach was used in order to deal with the EU, which determined a great distance from his predecessors’ standing. Eventually the Greek people did not accept that proposal and by July 5th the result of the referendum showed it pretty clearly: 61.31% voted for “No” refusing the 10 prior actions advanced by the institutions (Referendum 2015, 2015). This result brought Tsipras and the Greek government to return to Brussels and to restart the negotiation with the institutions by July 7th. The first choice by the Greek government was to remove, by his own means, the finance minister Yanis Varoufakis, that had since that moment been seen as a major limit to the agreement between the two parties. In his replacement Euclid Tsakalotos was appointed as new finance minister. When the new negotiations started, many analysts

45


The Giant Fall

thought for one week that the possibility to face a Grexit and its consequences were not very remote. Indeed, many member countries in the Eurogroup were favourable to that option, in particular northern countries such as Germany, the Netherlands, Belgium, Finland, Slovenia, Slovakia and the Baltic republics. On the other side, countries such as France, Italy, Spain and Portugal – in other words, the Mediterranean countries – wanted to keep Greece in the Eurozone. By July 9th the Greek authorities had proposed a new “Greece: Prior action” that presented some differences, but that at the same time did not go in the direction the institutions wanted. For instance, the proposed pensions reform was in line with what asked by the institutions. At the same time, the VAT reform did not provide for all the proposals advanced by the institutions, like the VAT discounts on islands. Also in terms of labour market the Greek authorities proposed a very different plan compared to the one advanced by the institutions, for instance by refusing any reform of collective bargaining and industrial action. Despise those difference, by July 13 th an agreement was concluded. In the end, they agreed for an 86 billion loan to allow Greece to pay off its IMF instalment. However, in order to be saved, the institutions forced Greece to implement by July 15th a set of short term prior actions contained in a “Memorandum of Understanding” between the two parties, to be approved by the Greek parliament (EuroSummit, 2015), and providing, for instance, for a reform of the VAT system abolishing the discounts on islands. Another example is related with

46


April 2016

the pensions reform, that imposed the age retirement at 67 or 62 years old with 40 years of contribution. In terms of social effort, they agreed on a “Social Welfare Review” that imposed a reduction of the social expenditure in order to save 0.5% of the GDP per year (European Commission et al, 2015). The Greek Parliament maintained its word approving the prior actions by July 15th with 229 “Yes” and 64 “No”, most of them coming from the left MPs of Syriza (BBC, 2015). Consequently, the European Stability Mechanism provided a first tranche of 13 billion euros by August 20th (ESM, 2015). The internal disagreement mentioned above among Syriza’s MPs moved Greece from an economic turbulence to a political one. Just five days after the first tranche was received, Tsipras resigned and called for a new general election. The main reason was related with the lack of support from within its party. Some of its members from the extreme left seceded and formed a new party named “Popular Unity”, claiming that the bailout plan did not represent what the Greek people expressed during the referendum in July, and proposing to stop the debt repayment and the austerity measures as a whole (Kouvelakis, 2015). In less than one month Greece faced another election and by September 20th Syriza assured another astonishing victory as Popular Unity did not even enter in the Parliament. Indeed, Syriza obtained 35.46% and 145 seats (Hellenic Parliament, 2015) – a little difference compared with the previous election that at the same time showed the large support from the Greek voters to Alexis Tsipras. Although Popular Unity did not enter in the Parliament (it obtained only 2.8%,

47


The Giant Fall

while the minimum requirement is 3%), others Eurosceptic parties did enter, such as Golden Dawn that confirmed its position as the third national party obtaining 7%. In the end the same coalition government formed in January was presented, with the only difference that the anti-bailout wing of Syriza was put aside, guaranteeing more independence to the re-confirmed Prime Minister Alexis Tsipras.

Sustainability of the Agreement A final issue remains. Will more fiscal austerity improve the Greek economic performance? Many authors think that austerity determined Greece’s incapability to repay its instalment due to the limited chances to grow (Jones, 2015). The European Commission also expressed its concern about it. Indeed, it expected a significant reduction in terms public debt over GDP by 125% by 2020 (European Commission, 2015, p.6). As it was previously explained, the very same austerity measures used to remedy the situation can determine a worsening of those criteria that the institutions really care about. Mostly, a fall in the GDP will determine a fall both in the debt-to-GDP and in the deficitto-GDP ratio, as quite intuitively a drop in the denominator (the GDP) will determine a worsening of the whole ratio. With a fall of over 4% in terms of GDP since the beginning of the crisis both the government debt and the government deficit to GDP ratio faced a deterioration.

48


April 2016

2,0

Fugure 2.3 Government deficit/surplus

1995 -3,0

1997

1999

2001

2003

2005

2007

2009

2011

2013

-8,0

-13,0

-18,0 Euro area

Greece

Source: calculations by the author based on Government deficit/surplus, debt and associated data [gov_10dd_edpt1], available through Eurostat

For instance, in terms of the government deficit to GDP Figure 2.3 shows what explained theoretically until now. Greece never reached the main goal to maintain the government deficit under 3% of the GDP due to the worsening levels of the real GDP. At the same time two considerations can be made. First, since the beginning of the crisis Greece reduced the government deficit-to-GDP ratio from 10.2% to 3.6%, and even if this is not in line with the fiscal convergence criteria it still represents a relevant effort. Second, Greece is one of the few countries in Europe that implemented one of the higher fiscal efforts in absolute value decreasing the government deficit from 35,990 million Euro to 6,346 million Euro (Eurostat, 2015). What showed so far represent what was first introduced in section 2.1, the fact that fiscal compact policies (or austerity) are counterproductive, but also that absolute-value data should be considered during the policy making. Furthermore, those austerity policies

49


The Giant Fall

determined a decrease in Greek income, with a consequent fall in terms of tax revenue and a resulting undermining of Greece’s chances to repay the instalments to the institutions. These type of polices were applied in the first two economic adjustment plans and in some way repeated in the third one approved in July 2015. Therefore, it would not be surprising if another Grexit crisis and new economic adjustment plans

would be faced again. One would argue that this

types of results are expected if austerity measures are not accompanied with growth policies. Without them in the future the same crisis might come back again. It is for this reason that in the proximate future Greece will be forced to find alternative sources of income. For sure, one that came to the fore (also in terms of the international relations and the Mediterranean affairs) is the agreement with China in implementing the “Silk Road Project” (or “One Belt One Road” project). It will set an investment of 140 million dollars in developing new infrastructure across China, Central Asia and Middle East in order to boost the international trade between China and the west (Lehmacher and Padilla-Taylor, 2015). The role for Greece in this project is crucial because the port of Piraeus represent today the destination for about 60% of Chinese shipped exports (Lihua and Trigkas, 2015). Furthermore, the Chinese government provided an investment of 258 million dollars to develop the port in 2013, increasing Greek profits by 12% (Atzori, 2015). What is happening between Greece and China could be seen as a paradox. Indeed, Greece could use the privatization

50


April 2016

plan imposed by the institutions in order to develop stronger international relations with China. But this agreement also invites to think that if Greece will not feel guaranteed by the EU, it might well start looking at the East to seek for help in finding a firmer geopolitical strategy in order to force the EU and the institutions to rethink their austerity policies.

Conclusion Three main conclusion could be summarized this final section, and all of them are connected. First, in terms of internal politics, the Greek people voting twice for Syriza and Tsipras sent a clear message: the first time they showed a strong Eurosceptic sentiment, while the second time they demonstrated their willingness to remain in the Euro Area. In other words, they expressed a belief that is spreading across the southern European countries: the Euro as a single currency is not the main problem, rather the rules within the EU that govern the Euro are. Second, in terms of international relations, if those rules will not change to include growth policies, Greece might look at different solutions in order to survive and search for new non-European partners such as China or Russia. Third, in terms of European affairs, this negotiation process showed clearly that every time that direct democracy is involved EU credibility is undermined, and also that a small country such as Greece has the power to shake the European giant.

51


The Giant Fall

References Alesina, A., Giavazzi, A. (2015, July) Crisi della Grecia, ideologie e numeri. Le Menzogne sul debito. Corriere della Sera, pp.1. Atzori, G. (2016, January) Can China’s New Silk Road Save the Greek Economy? Retrieved from http://thediplomat.com/2016/01/canchinas-new-silk-road-save-the-greek-economy/ Blanchard, O. (2015, June) Greece: A Credible Deal Will Require Difficult Decisions By All Sides. Retrieved from https://blogimfdirect.imf.org/2015/06/14/greece-a-credible-deal-will-requiredifficult-decisions-by-all-sides/ BBC (2015, January) Greece anti-bailout leader Tsipras made prime minister. Retrieved from http://www.bbc.com/news/world-europe30981950 BBC (2015, June) Greece debt talks: EU chief feels 'betrayed'. Retrieved from http://www.bbc.com/news/world-europe-33311240 BBC (2015, July) Greece debt crisis: Eurozone deal laws backed by MPs. Retrieved from http://www.bbc.com/news/world-europe-33535205 European Commission – Directorate General for Economic and Financial Affairs (2010) The Economic Adjustment Plan for Greece. European Economy Occasional Papers, 61 – 2010. pp, 1-90. European Commission – Directorate General for Economic and Financial Affairs (2012) The Second Economic Adjustment Plan for Greece. European Economy Occasional Papers, 94 – 2012, pp. 1-185.

52


April 2016

European Commission, European Central Bank, International Monetary Fund (2015) List of prior actions - version of 26 June 20 00. Retrieved

from

http://europa.eu/rapid/press-release_IP-15-

5270_it.htm European Commission (2015, June) Information from the European Commission on the latest draft proposals in the context of negotiations with Greece. Retrieved from http://europa.eu/rapid/press-release_IP-155270_it.htm European Commission, The Hellenic Republic and The Bank of Greece (2015, August) Memorandum of Understanding between the European Commission, the Hellenic Republic and the Bank of Greece. Retrieved

from

http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_lo an_facility/pdf/01_mou_20150811_en.pdf European Stability Mechanism (2015, August) ESM proposal for the terms of the first tranche of â‚Ź26 billion under the Financial Assistance Facility Agreement

for

Greece.

Retrieved

from

http://ec.europa.eu/economy_finance/assistance_eu_ms/greek_lo an_facility/index_en.htm Eurostat (2016) GDP and main components - volumes [nama_gdp_k], Retrieved from http://appsso.eurostat.ec.europa.eu/nui/show.do Eurostat (2016) Government deficit/surplus, debt and associated data [gov_10dd_edpt1],

Retrieved

from

http://ec.europa.eu/eurostat/web/products-datasets/-/tipsgo10

53


The Giant Fall

Eurostat (2016) Unemployment rate by sex and age - annual average, % [une_rt_a],

Retrieved

from

http://appsso.eurostat.ec.europa.eu/nui/show.do Eurosummit (2015, July) Euro Summit Statement. Brussels, 12 July 2015.

SN

4070/15.

Retrieved

from

http://www.ilsole24ore.com/pdf2010/Editrice/ILSOLE24ORE/I LSOLE24ORE/Online/_Oggetti_Correlati/Documenti/Notizie/2 015/07/eurosummit-statement-greece%20(1).pdf Government of the Hellenic Republic (2015, June) Greece: Prior Action.

Retrieved

from

http://blogs.ft.com/brusselsblog/files/2015/06/Prior-Actions_Institutions_modified_4-_1_.pdf Government of the Hellenic Republic (2015, July) Greece: Prior Action. Policy Commitments and Actions to be taken in consultation with EC/ECB/IMF

staff.

Retrieved

from

https://www.docdroid.net/164ll/prior-action-finalversion.doc.html Hellenic Parliament (2015, January) Election Jan. 25, 2015, 16th Parliamentary Term: Feb. 5, 2015 through Aug. 28, 2015. Retrieved from http://www.hellenicparliament.gr/en/Vouli-ton-Ellinon/ToPolitevma/Ekloges/Eklogika-apotelesmata-New/#Per-16 Hellenic Parliament (2015, September) Election Sep. 20, 2015 17th

Parliamentary

Term:

Oct.

3,

2015.

Retrieved

from

54


April 2016

http://www.hellenicparliament.gr/en/Vouli-ton-Ellinon/ToPolitevma/Ekloges/Eklogika-apotelesmata-New/#Per-16 Jones, T. (2016, February) The never-ending austerity story: Why Greece’s third

‘bailout’

solves

nothing.

Retrieved

from

http://jubileedebt.org.uk/reports-briefings/the-never-endingausterity-story-why-greeces-third-bailout-solves-nothing Kouvelakis, S. (2015, August) Introducing Popular Unity. Retrieved from https://www.jacobinmag.com/2015/08/popular-unity-syrizaleft-platform-lafazanis/ Krugman, P. (2015, April) The case for cuts was a lie. Why does Britain still

believe

it?

The

austerity

delusion.

Retrieved

from

http://www.theguardian.com/business/nginteractive/2015/apr/29/the-austerity-delusion Lihua, Z., Trigkas, V. (2015, May) Can China’s New Silk Road End Greece’s

Economic

Tragedy?

Retrieved

from

http://carnegietsinghua.org/2015/05/11/can-china-s-new-silkroad-end-greece-s-economic-tragedy/i8e5 Smith, H (2015, January) Syriza’s Tsipras sworn in after Greek government formed

with

rightwingers.

Retrieved

from

http://www.theguardian.com/world/2015/jan/26/syriza-formsgovernment-rightwing-independent-greeks-party Referendum 2015 (2015, July) Final results of the July 5th, 2015 referendum.

Retrieved

from

55


The Giant Fall

http://www.referendum2015gov.gr/en/news/ellinika-telikaapotelesmata-dimopsifismatos-5is-iouliou-2015/ Varoufakis, Y. (2015, February) Yanis Varoufakis: How I became an erratic

Marxist.

Retrieved

from

http://www.theguardian.com/news/2015/feb/18/yanisvaroufakis-how-i-became-an-erratic-marxist Varoufakis, Y. (2015, June) Greece’s Proposals to End the Crisis: My intervention

at

today’s Eurogroup.

Retrieved

from

http://yanisvaroufakis.eu/2015/06/18/greeces-proposals-to-endthe-crisis-my-intervention-at-todays-eurogroup/ Wagstyl, S., Aglionby, J., Odell, M., Hunter, M. (2015, February) Greece’s

rift

with

Germany

deepens.

Retrieved

from

http://www.ft.com/cms/s/0/fb828c8c-ad11-11e4-a5c100144feab7de.html#slide0 Wishart, I., Deen, M. (2015, May) Greece Creditors at G-7 Say Budget Is Red

Line

as

Payment

Looms.

Retrieved

from

http://www.bloomberg.com/news/articles/2015-05-28/imf-saidto-hold-firm-on-greek-reforms-as-g-7-delegates-meet

56


April 2016

The Schengen Crisis and future perspectives Sergio Castaño Riaño

The crisis caused by the two World Wars in Europe drove some European countries to associate different entities which cooperated together as to address the problems generated by the crisis in various fields. European countries’ alliance was motivated mostly by economic aspects. However, more policies could be established to guarantee such economic growth. In this regard, the free movement of people, goods, capitals, and services was one of the main goals of the European Community since its inception26. Although politicians kept these goals always in mind, external and internal circumstances27 impeded them to put in practice the total freedom of movement act, and the abolition of internal borders within the EU was delayed until the 1980s.

The Schengen zone and its original goals The crisis caused by the two World Wars in Europe drove some European countries to associate different entities which cooperated together as to address the problems generated by the crisis in various fields. European countries’ alliance was motivated mostly by economic aspects. However, more policies could be established to guarantee such economic growth. In this regard, the free movement of people, 26

Dedman, M.J.. (2012). The Origins and Development of the European Union 19452008: A History of European Integration. Abingdon, Routledge. 27 The Schengen area and cooperation. For further information visit: http://eurlex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al33020

57


The Giant Fall

goods, capitals, and services was one of the main goals of the European Community since its inception28. Although politicians kept these goals always in mind, external and internal circumstances29 impeded them to put in practice the total freedom of movement act, and the abolition of internal borders within the EU was delayed until the 1980s. The first agreement aiming to phase out national checkpoints in Europe was signed in Schengen30, a border Source: Nova Republika

city in Luxembourg, on June 15th, 1985. With

the exception of Italy, the other five European Community founding countries agreed to create a passport-free zone, while the remaining four countries (Great Britain, Ireland, Denmark31 and Greece) did not take part in this accord for various reasons. Lacking consensus among all member states, this agreement was signed outside of the EEC framework. The benefits obtained by the Schengen participants led 28

Dedman, M.J.. (2012). The Origins and Development of the European Union 19452008: A History of European Integration. Abingdon, Routledge. 29 The Schengen area and cooperation. For further information visit: http://eurlex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al33020 30 Kabera, S.. (2008). Transparency and Proportionality in the Schengen Information System and Border Control Co-peration. Leiden-Boston, Martinus Nijhoff. 31 Miles, L; Wivel, A.. (2014). Denmark and the European Union. Abingdon, Routledge.

58


April 2016

them to hold a convention in 199032 as to reinforce the accords previously signed. However, only in 1995 other EU countries decided to join the accord. On that year, Spain and Portugal undersigned the agreement and two years later Italy agreed to abolish all internal borders with countries included in the Schengen zone. In 1997, the EU countries choose to incorporate the Schengen accords in the EU legislation as part of the changes introduced by the Amsterdam Treaty33. As a result, the Schengen area was extended to several other EU member states on May 1st, 1999. The new disposition incorporated Nordic countries, which had already arranged a previous passport-free zone with two other non-EU states34, i.e. Norway and Iceland, which were also accepted as Schengen countries in 2001. At this time, the majority of EU member states belonged to the Schengen zone. For a long time, freedom of movement was seen as the consequence of one of the main goals of the European integration project, and the majority of EU countries would see the elimination of internal barriers as a positive change. In this respect, Schengen, the common market, and the Euro must be interpreted as the elements most valued by Europeans35. 32

For further information visit: http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:42000A0922(02):en:HTML 33 Amsterdam Teatry. For further information: http://www.europarl.europa.eu/topics/treaty/pdf/amst-en.pdf 34 Jahan, S.. (2015). Nordic Cooperation: A European Region in Transition. Abingdon, Routlegdge. 35 Gonzรกlez, C..Schengen: a collective asset no one stands up for. Real Instituto Elcano, 23/02/2016. For further information visit: http://www.realinstitutoelcano.org/wps/portal/web/rielcano_es/contenido?WCM_G LOBAL_CONTEXT=/elcano/elcano_in/zonas_in/Commentary-GonzalezEnriquezSchengen-collective-asset-no-one-stands-up-for

59


The Giant Fall

The challenge for the EU began after the incorporation of ten East European countries to the European Union in 200436. The inclusion of these countries meant that all citizens had the same rights within the EU borders. Nevertheless, economic diversities between ancient members and the new ones brought uncertainties on allowing freedom of movement to all these countries. Responding to these suspicions, the incorporation of Cyprus, Bulgaria, Romania, and more recently Croatia to Schengen has been postponed. On the other hand, contrarily to the independent position held by Switzerland regarding the EU, the benefits given by Schengen pushed the Swiss government to accept most of the Schengen clauses, even though Switzerland did not abolish borders controls with the EU. Therefore, both Swiss citizens and EU citizens benefit from the Schengen agreements37.

Factors affecting the future of Schengen While freedom of movement has brought important benefits to EU countries, gaps in Schengen clauses have led some governments to reconsider the convenience of having no border controls. Massive immigration, growing terrorist threat, the effects of the economic crisis along with the current international circumstances have caused a 36

Tatham, A.. (2009). Enlargement of the European Union. Alphen aan den Rijn, Kluwer Law International; Cremona, M.. (2003). The Enlargement of the European Union. Oxford, Oxford University Press. 37 Schwok, R.. (2009). Switzerland--European Union: An Impossible Membership? Brussels, Peter Lang

60


April 2016

serious crisis in the Schengen zone. The economic crisis started in 2008 marked the turning point of the general positive trend towards Schengen and other EU policies. Some European countries began to observe the ongoing arrival of people from other EU member states with suspicion. Generally, these people left their countries as a consequence of high unemployment rates after the crisis. People from Spain, Portugal, Italy, and Greece together with people from recently incorporated Eastern countries began to move to other more stable countries seeking job opportunities. These European citizens benefitted of the same social services as nationals. In this regard, the increased presence of people from other countries was used by eurosceptics to begin a campaign against the EU and its freemovement policies38. Apart from internal movements, external immigration has always been a challenge for the EU. Since the 1960s, immigration from MENA countries has been continuous. In some terms, the EU was able to establish policies addressed to handle the situation. For a long time immigration represent

did a

problem

not in

Source: MMM Global

38

Fundation Robert Schuman. Euroscepticism and Europhobia: the threat of Populism. 14/12/2015. For further information visit: http://www.robertschuman.eu/en/european-issues/0375-euroscepticism-and-europhobia-europe-underthe-test-of-populism

61


The Giant Fall

Europe. In the 1980s, however, the increasing presence of people of Muslim backgrounds in Western European countries such as Great Britain, Belgium, Germany, France, and Holland, generated social tensions that were later used by far-right political groups to gain greater political presence in their respective countries39. Once these parties achieved that greater presence in European parliaments, they began to pursue populist policies addressed at reinforcing their campaigns against immigration and the continuity of the passport-free zone. They blamed the EU for increased immigration fluxes, and rejected EU achievements in various fields. Similarly, the economic crisis in southern Europe caused the emergence of anti-EU leftist parties such as Syriza in Greece and Podemos in Spain, as well as the re-emergence of left-wing parties in Portugal, which have shown reluctance toward EU policies40. Although the EU countries have been destination countries of migrations from Africa and Asia for decades41, recent migration waves caused by wars in MENA countries have given rise to a difficult situation. As a result of these wars, hundreds of thousands of people have decided to flee from conflict areas and move to Europe. The EU’s early response to these facts was at first sympathetic, and

39

Bremer, I.. These 5 Facts Explain the Worrying Rise of Europe’s Far-Right. Time, 15/10/2015. For further information visit: http://time.com/4075396/far-right-politicsrise-europe/ 40 The Rise of the European Left: Syriza and Podemos. Cambridge Globalist. 5/02/2015. For further information visit: http://cambridgeglobalist.org/2015/02/05/rise-european-left-syriza-podemos/ 41 Triandafyllidou, A; Gropas, R.. (2014). European Immigration: A Sourcebook. Farnham, Ashgate.

62


April 2016

European authorities agreed on hosting refugees arriving from Syria and other war-affected zones42. Nevertheless, as of today, after several meetings the EU has not yet been able to provide answers to the permanent massive arrival of refugees and immigrants to EU frontiers. The European Union does not have capacity to accommodate such a large number of refugees. In 2015 alone, after Merkel’s announcement of accepting refugees in Germany, about one million refugees got Europe by seeking asylum in Germany43. One of the first decisions adopted by the EU to manage this situation was aimed to increase border controls in the Mediterranean Sea44. Additionally, the EU sought partners in South Mediterranean countries as to host some of the refugees fled from Syria and Iraq. Moreover, the Netherlands proposed a reduction of the Schengen zone and the creation of a "mini-Schengen" free-travel zone for a smaller number of countries. This proposal was rejected by most of the East EU countries. Another option called Greece to be excluded of the Schengen agreement because of some countries’ criticism of the way the Greek government managed the refugees’ arrivals on its coasts. Once most of the European countries realized the inefficiency of these measures, some of them decided to reintroduce border controls 42

For further information visit: http://europa.eu/rapid/press-release_MEMO-155597_en.htm 43 44

TA safer sea: The impact of increased search and rescue operations in the central Mediterranean. Amnesty International Public Statement. 9/07/2015. For further information: https://www.amnesty.org/en/documents/eur03/2059/2015/en/

63


The Giant Fall

in the most exposed areas. In this regard, and following the exceptional circumstances as described in Articles 23-25 of the Schengen Borders Code45, some countries opted for re-introducing internal border controls because of possible threats to public order or internal security46. Since September 2015, eight EU member states have

restored

national

border

controls47. Germany re-established controls

on

its

borders

with

Austria.

Likewise,

Austria

imposed

Source: Europe 1

new restrictions to cross the frontier with Hungary. And as for Hungary, a country situated at the EU external borders of the Schengen area, showed inclined to build a fence along its border with Serbia. Not only: Hungarian Prime Minister Viktor Orbรกn has proposed the construction of a wall alongside the Macedonian and Bulgarian

45

Schengen Borders Code. For further information visit: http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/european-agendamigration/backgroundinformation/docs/the_schengen_rules_explained_20160210_en.pdf 46 Temporary Reintroduction of Border Control. For further information: http://ec.europa.eu/dgs/home-affairs/what-we-do/policies/borders-andvisas/schengen/reintroduction-border-control/index_en.htm 47 Schengen: Controversial EU free movement deal explained. BBC News, 7/03/2016. For further information: http://www.bbc.com/news/world-europe-13194723

64


April 2016

borders with Greece to restrain the flood of refugees48. Following similar behavior, Sweden has established identity checks on all travelers, and in January 2016, Denmark also established new border controls with Germany. Only few countries had introduced temporary controls before the current crisis, and these controls had always been set up as security measures related to particular events49 such as the visit of international personalities or relevant sporting events. On the other hand, one important factor that has driven some EU countries to restore borders checkpoints is the growing terrorist threat within Europe50. Recent terrorist attacks in Paris, Copenhagen and Brussels have led European governments to increase security measures. In this regard, freedom of movement hampers secret services to follow those who are suspected of collaborating with terrorist networks. At the same time, the lack of border controls facilitates terrorists to operate without restrictions in all EU countries51. Now that we examined all these issues, we can affirm that the Schengen zone has faced various critical elements and situations in recent times that have put into question its very continuity.

48

Kingsley, P.. "Where there's a wal, there's no way: refugee crisis needs a better idea", The Guardian, 25/01/2016 49 Schengen: Controversial EU … cit. 50 Worth, J.. "Cancelling the Schengen agreement won’t make Europe safer", The Guardian, 24/11/2015. 51 Kirkup, J.. "After Paris, Europe’s open borders are dying. That won’t end terrorism, but it will make us poorer", The Telegraph, 15/11/2015.

65


The Giant Fall

Schengen as a necessary tool to guarantee the European Integration Project Along with factors leading to reconsider the advisability of keeping a free movement zone within the EU, there are many reasons for which the Schengen agreements and the common European process should be kept alive. Freedom of movement is one of the pillars of the European integration project. The reestablishment of borders between the EU member states would mean the first step towards the end of the EU, since it wouldn’t make sense to continue working on further integration if one of the fundamental cornerstones was dismantled. Restoring border controls would have a major impact on the European economy52. Firstly, thousands of workers who are currently working in a different country to where they live would be subject to border controls that would jeopardize the continuity of their jobs53. Secondly, new movement restrictions within the EU would make it difficult to transport goods within the European territory. Thirdly, the president of the European Commission, Jean-Claude Juncker, has referred to this issue by stating that “without Schengen and the free movement of workers, of citizens, the euro makes no sense54.” This is a fact; there is no reason to have a common currency if the EU countries are not able to respect the fundamental agreements and 52

European Commission - Press release. For further information visit: http://europa.eu/rapid/press-release_IP-16-585_en.htm 53 Becker, A.. "EU border controls: Controversy over costs." Deutsche Welle, 7/03/2016. For further information visit: http://www.dw.com/en/eu-bordercontrols-controversy-over-costs/a-19099455 54 Pop, V.. " End of Schengen Would Destroy Euro, Warns EU’s Juncker." The Wall Street Journal, 15/01/2016.

66


April 2016

guarantee the integration process. However, the majority of the European leaders are aware of the benefits that the Schengen zone has brought to the EU countries in the past and thus of the necessity of protecting them. Difficulties encountered by the EU authorities to find solutions to current troubles have been used by eurosceptics to reinforce their antiEU theories. Their populist discourse55 has reached to the sectors affected by the consequences of the crisis, who blame the EU for the economic and social instability in their respective countries. This fact has caused the emergence of political opinions criticizing the EU project. What is necessary to analyze at this point is whether the emergence of these political parties responds to the people’s real disaffection towards EU values, or if, on the contrary, these groups have taken advantage of the present context to spread a suitable discourse to attract people affected by unemployment and migration troubles. Would they find similar support in a favorable economic and social context? This is what the EU has to analyze to undermine populist discourses. Many sectors could be seduced by anti-EU proposals and the euroscepticism could increase its followers in the future56. In this regard, the position adopted by some of the EU countries regarding Schengen does not help to avoid the consolidation of anti-EU political parties contraries to the EU. The significance of these groups in national and the EU Parliament would mean a failure 55

Mudde, C.. (2016). "Populist Radical Right Parties in Europe Today", in John Abromeit,York Norman,Gary (eds.), Transformations of Populism in Europe and the Americas: History and Recent Tendencies. London Bloomsbury Academic. 56 Arató,K; Kanio, P.. (2009) Euroscepticism and European Integration. Zagreb, CPI.

67


The Giant Fall

for the EU project. Similarly, although the UK does not part of the Schengen zone, the future referendum to reconsider its belonging to the European Union does not facilitate to raise awareness in the European society to work together to overcome adversities. Although some people tend to endorse anti-EU ideologies, there is a large segment of people who still value the advantages brought by the EU agreements. The benefits of the Schengen area along with the opportunities provided by the common currency have permitted EU citizens to enjoy new options both in private and professional lives57. The European Union needs to adapt its structures to the present circumstances in order to prevent other EU countries to adopt similar negative stances on the EU pillars, but this does not mean ending with the important achievements getting so far. Schengen and other European policies have shown their convenience in the past, and for a long time, they have helped strengthen Europe. The combination of different EU agreements permitted European countries to set themselves as benchmarks of prosperity. Europe has faced challenges along history. In this regard it should be convenient to remember how negative experiences and difficulties in the twentieth century were overcome by acting together. For this purpose the EU must modify some of the present structures. Probably Schengen must be adapted to the contemporary context. However, keeping freedom of movement within the EU must represent a priority for all of the EU member states. 57

Gonzรกlez, C..Schengen: a ...

68


April 2016

How to face Schengen’s crisis Along with economic troubles and terrorism, one of the main threat to Europe, and therefore to the Schengen zone, is the migration crisis. The EU must increase its efforts to mitigate the effects of the massive influx of refugees. This should be the first measure to guarantee

Source: Disclose Tv

Schengen continuity. The policies adopted to control immigrants’ arrivals so far haven’t brought positive results, and new instruments must be put in practice to handle today’s challenges. Contrary to the opinion of EU detractors, restoring EU border controls may not be a solution58. Most people coming to Europe flee a war or escape from inhuman living conditions. Therefore, the solution is in Europe but is also to be found in the countries of origin of these refugees and immigrants.

58

Worth, J.. "Cancelling the Schengen...

69


The Giant Fall

Since 1972, Europe has tried to reinforce collaboration with southern Mediterranean countries59. However, different projects established to cooperate with southern neighbors have been diluted and have not brought great results. The Arab Spring changed completely the Euro-Med approach. As a result, most of the EuroMed projects were postponed60. In this regard, the first goal for the EU must be to pacify Syria. After five years of war, humanitarian crisis and material destruction represent a difficult work to provide decent living conditions for Syrian people61. Once the war ends, a long term project needs to be launched to rebuild Syria. Peace in Syria represents a priority for the EU. A new peaceful scenario in Syria will stop massive migration and could lead people who are currently struggling to get Europe to come back to their homeland. Nevertheless, present Syrian environment does not make this aim easy, due to the plurality of actors involved in the conflict. On the other hand, the EU must increase cooperation with other African and Asian countries in order to help them to develop their economies. The improvement of general conditions in the area will provide people opportunities to remain in their own countries. Actually, the EU has established programs to foster relations with both regions. In 2007 was issued the “2007 Joint Africa-EU 59

Xenakis,D; Chryssochoou, D.. (2001). The Emerging Euro-Mediterranean System. Manchester, Manchester University Press. 60 Bicchi, F., Gillespie, R.. The Union for the Mediterranean. Abingdon, Routledge. 61 Humanitarian crisis in Syria ‘much greater than previously reported’, Euronews, 11/02/2016. For further information visit: http://www.euronews.com/2016/02/11/fresh-figures-suggest-scale-of-humanitariancrisis-in-syria/

70


April 2016

Strategy”62, in 2014 the 4th EU-Africa Summit held in Brussels confirmed the purposes agreed seven years before on peace, security, democracy, good governance and human rights. On this subject the Pan-African Program was set up in 2013 with € 107 million to invest in migration, education, public finance manage and developing essential statistics between 2014 and 2017. However, these efforts have not been enough to improve standards of living in these countries and to reduce migration to Europe. Therefore a bigger effort should be done in this field. This must be planned as a long term project aimed to restore the balance and to make Asian and African countries attractive to people again. As previously stated, terrorism is another of the factors undermining the Schengen agreements. Since 2001, and especially after terrorist attacks in Madrid and London, the EU member states have committed to fight together against this global menace63. For this purpose the Council adopted the EU counter-terrorism strategy in 2005. The strategy was focused on four pillars: prevent, protect, pursue, and respond. However, as Jean-Claude Juncker claimed after the suicide attacks in Brussels in March 2016, the EU members have not put in practice EU agreements on terrorism64. In this sense, it

62

EU-Africa relations. For further informations visit: http://www.eeas.europa.eu/africa/ 63 Castaño, S.. El Islam en Europa, Madrid, Ebook. For furhter information visit: https://www.amazon.es/Islam-Europa-Sergio-Casta%C3%B1o-Ria%C3%B1oebook/dp/B016S89J18/ref=sr_1_1?ie=UTF8&qid=1459181049&sr=81&keywords=el+islam+en+europa 64 Pérez, C.. " Juncker culpa a los socios de pasividad contra el terrorismo", El País, 24/036/2016.

71


The Giant Fall

should be necessary to improve control systems, share databases, and develop EU counter-terrorism strategy. Likewise, the EU countries must implement tougher laws against jihadists and prevent situations like the one that occurred in Brussels where terrorists who were in the police’s records were not monitored65. Answering to this issue, François Holland along with other European leaders called to approve the Passenger Name Record (PNR)66 as one of the necessaries measures to control terrorist movements inside Europe. Reinforcing

external

borders is an important area where the EU has to work to protect the Schengen zone. Some countries have acted Source: LA Times

independently and in some cases

have

decided

to

establish border controls. Contrary to the position adopted by these EU countries, the EU member states need to cooperate to find common solutions. For this purpose, Frontex was established in 2004 to foster cooperation among European countries in this important issue. The action of Frontex has been focused on preventing illegal immigration. However, current immigration crisis has led the European Commission to create a new agency, European Border and Coast Guard addressed to strengthen cooperation between Frontex 65

Phipps, C.. "Brussels suicide bomber el-Bakraoui 'caught in Turkey last June' – as it happened", The Guardian, 24/03/2016. 66 Foster, P.. "European cross-border security years away, experts warn", The Telegraph, 23/03/2016.

72


April 2016

and national authorities67. The EU has drawn the suitable strategy to protect Schengen frontiers. Present context moves countries to work together. Nevertheless, the ongoing arrival of migrants to Europe will make difficult to carry out these plans.

Future perspectives Recent circumstances have pushed the European Union to give answers to present challenges. What is clear is that the EU needs to adapt its structures and offer solutions to current threats. That does not mean that the EU takes a step back and dismantles all what has been achieved so far. However, the unclear position adopted by some of the EU, especially regarding to guarantee the free passport zone within the EU, gives rise to various possible scenarios. One of the plausible scenarios is the creation of a mini Schengen zone among the more stable EU countries. The majority of the countries belonging to the new "Mini Schengen Zone" would be far from conflicted areas and could control people coming to the reduced free passport zone. At the same time, these countries have important common economic and political interest that could lead them to conserve previous Schengen accords that guarantee internal free movement. This restricted agreement would permit them to establish borders controls with European Mediterranean countries and with 67

European Commission - Press release. A European Border and Coast Guard to protect Europe's External Borders. For further information visit: http://europa.eu/rapid/press-release_IP-15-6327_en.htm

73


The Giant Fall

their East neighbors addressed to avoid non EU immigrants and refugees coming to the protected territory. In any case, this decision would not be accepted by other EU members, since it would mean the confirmation of a two-speed European Union and would be interpreted as the beginning of the end of the European Integration project. Far from this negative scenario, recent episodes, in particular those linked with global terrorism, could move European countries to reinforce their cooperation on different fields and put in practice instruments to reinforce common activities. In this case, Schengen agreement would be reinforced and the EU would seek increasing internal activity to give answers to present menaces. In the case that the EU has not reached to manage current crisis, eurosceptic parties would take more political relevance and some countries could abandon the EU. In this possible scenario, the EU would be obliged to reformulate its objectives. The remaining countries would keep pursuing current EU aims but less ambitiously. The EU will be integrated by the group of countries actually committed with the European project. This new stage would allow the remaining countries to redefine the passport-free area and guarantee the application of new policies aimed to reinforce cooperation. Finally, another possibility is the continuity. Here, each country would protect its own interests. The difficulties found to respond to present challenges would drive countries to establish independent

74


April 2016

policies to handle the situation. This instability would undermine the EU, and therefore the Schengen zone on the mid-term. Beyond the future perspectives, the crisis started in 2008 with the economic troubles in some of the countries, along with the instability caused by massive immigration to Europe, terrorism and the emergence of the eurosceptics have placed the EU in greatest challenge since its inception. Whatever the solution, changes are coming not only in the Schengen area, but also in the whole EU structures.

75


The Giant Fall

The Eurosceptic Front Simone Massi

The so-called eurosceptic front brings together movements and people who oppose further European integration, which implicitly demands a return to a greater autonomy of the single states. It is a cross-party group, without a clear political identity, which is nonetheless rapidly gaining consensus in many European countries, especially those most affected by the economic crisis of 2008. This analysis will take into consideration more than one country, thus showing the diversity that lies within the EU, while also highlighting its complexity. Some important cases are left out (e.g. Greece and the United Kingdom) where problems are tangled with specific economic and social issues. In order to address euroscepticism, States have been divided into three groups: the Outsiders, the Easterns, the Founders. In conclusion, the aim of this work is to offer a summary of the three challenges that the EU will have to face in the short term to continue along the path of integration that has characterized its recent years.

The challenges of the Union Euro-skepticism was born with the Union itself: by definition, each group is at the same time an element of inclusion and exclusion. Indeed, the European history of the early years did not show a spread of this feeling at a general level, at least not until the EU began replacing nation states in the exercise of certain tasks.

76


April 2016

The feeling of skepticism towards Europe, however, includes two major subdivisions. The strongest form skepticism is more antagonistic because it puts into question the very existence of the union policies and demands the return of the full sovereignty of nation states. The strongest critic within the European Parliament has always been the Europe for Freedom and Democracy (EFD) group. However, there are also more moderate Eurosceptics. Although they do not question the existence of a federal supranational organization, they do disagree on institution's operational areas and they prefer to maintain as much as possible an intergovernmental system. These MEPs belong to the conservative group Europe of Freedom and Direct Democracy Group (EFDD) or to the socialist group Confederal Group of the European United Left - Nordic Green Left (EUL-NGL). The formal organization of this movement – which has no specific ideology, seeing that it brings together parties and people with very different political experiences – can date back to 2004, at the beginning of the sixth legislature of the European parliament, when 37 members from ten countries (mainly from Poland and the United Kingdom)

founded

the

group

Independence

Democracy

(IND/DEM). The parliamentary group was not decisive in the political decisions, but it got the attention of the press for its unconditional criticism of the European institutions. In particular, they supported a campaign against the Treaty that would have established a Constitution for Europe, signed on October 29th 2004 in

77


The Giant Fall

Rome in the same room, where the EU treaties were signed in 1957. Upon ratification of eighteen states, the process was interrupted due the rejection enhanced by the French referendum on May 29th 2005. Three days later, a similar referendum in the Netherlands confirmed the rejection, with a significant percentage of the detractors (61,54%). The traumatic arrest of the ratification process put an end to the constitution: two years later, it was rewritten as the Lisbon Treaty which was signed on December 13th 2007. In order to prevent the past to repeat itself, the ratification became an exclusive power of the national assemblies. However, since 1987, the Supreme Court of Ireland has been requesting to organize a referendum on treaties that may conflict with the Irish constitution. Despite the approval of the government and main political parties (except the separatist Sinn FĂŠin movement), on 12 June 2008, the 53.4% of the Irish people rejected the constitutional amendment that would allow Ireland to incorporate the Lisbon Treaty. The economic crisis and the concessions obtained

78


April 2016

during the European Council held on December 11-12th 2008 comforted the Irish public opinion, which expressed itself again by referendum on July 9th 2009, but in which the votes in favor were the majority (67.1%). As we have seen, despite continuous challenges, the EU institutions have been able to adapt to the demands from below, while avoiding relegation in the process of integration. Interestingly, popular demands often become a conflict issue between governments, so much that they had to find a compromise to achieve the desired results on all fronts. The next challenge will be the referendum in Great Britain of June 23rd on the EU permanence. In the previous cases, the EU has shown an unexpected resilience, but its challenges seem to be getting more intense and dangerous.

On the borders of Europe The following paragraph focuses on how to evolve the policy within the European countries that have not yet completed the process of European integration, namely Denmark and Sweden. The history of Denmark's relations with the EU has to The Danish relations with the Great Britain. Denmark historically exported many agricultural products to the British islands. To protect these businesses, in 1961 Denmark applied for the EEC membership, immediately after the British had done the same. De Gaulle prevented the access of Britain until 1973, when also Denmark finally joined the

79


The Giant Fall

organization. In 1972 the referendum approved this choice with 63.3% of the votes, but a large part of the opposition founded the People's Movement against the EU. The movement has been in the European Parliament since 2004, with one representative. Despite not having the voters of the past, the party has gathered for a decade about 8% of Danish electors in the EU parliamentary elections. The quite low numbers of the movement must not mislead: in 1992, the votes against prevailed in the first referendum for the ratification of the Maastricht Treaty (albeit for a very small number, about 1.4%, or less than 50,000 voters). The ratification failure led to signing the Edinburgh Agreement in December, which allowed Denmark to get four exceptions: about citizenship, economic and monetary union, common defense, justice and home affairs (the Amsterdam Treaty of 1997 weakened the first exception). Denmark basically keep its monetary policy and can not adopt the common currency. On 18 May 1993, a second referendum agreed to the Treaty and the agreement, with a margin way too modest. In 2000 another referendum confirmed the people's will not to join the European currency. Actually, the Danish krone belongs to the ERM-II system and maintains a 2.25% fixed exchange rate with euro. At the popular level, in fact, the gap with the EU is represented by two officially Eurosceptic parties in the Folketing, the Danish unicameral parliament: the Red-Green Alliance and the Danish People's Party, which together occupy 51 out of the 179 parliamentary seats. In June 2015, the conservative alliance won the political

80


April 2016

elections and Lars Løkke Rasmussen took over as prime minister, replacing the

previous

Democratic

Social

government.

His liberal party, Venstre, Michael Farage, Ukip

for the first time has been

Source: Environmental Europe

exceeded by the People's Party, which became the

second most voted party in the country. However, the Red-Green Alliance, a far-left party, is the main Danish Eurosceptic movement. In the early 2000, the People's Party supported the Liberal bloc in the government, but during the Social Democratic government of Helle Thorning-Schmidt stood out for its strong anti-European policy. The party opposes the redistribution of migrants according to the EU proposal and in last January it passed a bill to confiscate the assets of more than ten thousand Danish kroner (about 1350 euro) to the migrants, in addition to unilaterally reintroduction of border checks since 2016. The strong popular opposition to further European integration

emerged also in the last referendum held in December

2015. The 53,05% of the voters confirmed the decision to not transpose European legislation within the country, as established in 1992 Edinburgh Agreement. Despite the referendum numbers being always meager, it should be noted that a relative majority is still opposed to greater integration, even after many years. The

81


The Giant Fall

phenomenon of migration, which interests Denmark partially, seems to emphasize this popular sentiment. Sweden is another EU country that has maintained some degree of autonomy, such as the monetary policy. The country joined the organization in 1995 with two other historically neutral countries, Austria and Finland. While these two countries continued along the continental integration process, Sweden maintained its skepticism. The 1994 referendum showed that only over half of the voters (52.3%) was in favor of entry into the European Community. Unlike Denmark, the Corfu Treaty - which accessed these countries to the EU community, transposing the Maastricht Treaty - required the new members to enter the monetary union once the economic constraints are respected. The basic requirement is to join the ERM-II system, which requires a moving window for the local currency. Sweden does not adhere to this system and in 2003, a year after the euro started circulating, a referendum confirmed this political choice. The 55.9% of voters rejected the common currency, despite the moral weight of Anna Lindh's assassination, the pro-euro Minister for Foreign Affairs stabbed to death in Stockholm three days before the consultation. Some parties in power in Sweden, as the Left Party and the Swedish Democrats, are officially Eurosceptics and together now have three representatives in the European Parliament. The ruling parties do not show themselves as opposed to integration, but they do not seem to be pushing for any progress in this regard either. The treaty accession of Sweden requires to adhere to the ERM-II system, and the Swedish

82


April 2016

krona is too appreciated for the Swedish exports. However, there is no date for the Sweden membership of the Eurozone. In fact the major polls show that only a third of Swedish would want to share their monetary policy with other European countries. Again, the incredible increase of asylum seekers in the country resulted in tighter regulation and increased border controls. Sweden has a policy of great openness and acceptance towards international protection, but in 2014 the country reached the highest percentage of asylum applications in the West, that is 76.6% for a total of 30,000 people. The social distress felt by the population, especially in rural areas of the country, has led to an increase of consensus of the extreme right party, the Swedish Democrats. This may be the reason why the government has announced a reduction in the amount of requests accepted at the entrance, although without saying anything in absolute numbers. Basically, recent events are confirming people's idea that preserving their independence in decision-making is equal to be protected against external risks.

The newcomers' suspicions As in other European countries, in Poland there are many minority parties with eurosceptic ideas: Congress of the New Right, National Movement, and the more recent Korwin (Coalition for the Renewal of the Republic – Liberty and Hope). They are mostly conservative political groups. The most important Polish eurosceptic party is Law and Justice, which has been ruling the country since last October. In

83


The Giant Fall

the last election this party obtained its best historical result and confirmed the success of its policies that go against a greater EU integration. The new Blessed Szydło government is the first singleparty government since 1989 and both the President as the Prime Minister belong to this party. Law and Justice supports the strengthening of the national economy and military defenses, expressing itself in a manner contrary to the adoption of the euro in the country. The political history of Law and Justice shows antagonism to the liberal ideology. In particular, it has a very tough attitude towards the Union's migration policy. Despite the current president of the European Council, Donald Tusk, has long been the prime minister of Poland (2007-2014), the country is moving far away from the European integration process of the past, while nearing the authoritarian policies of Hungary. The recent Polish reforms have been challenged hardly both inside and outside the country, in particular within the European institutions. In November 2015, the Polish government had reformed the Constitutional Court, which, however, was declared unconstitutional by the Supreme Court for fear that in this way the government could also control the judiciary. Before the summer, the previous government appointed five new judges of the Constitutional Court, whose appointment was blocked by President Andrzej Duda. After the victory of Law and Justice in the elections, the new government chose five other judges. Finally, the Supreme Court recognized as legitimate only three of the five nominations of the first government,

84


April 2016

but the current government refuses to accept the previous elections. Other measures, such as the reform of the public media and the appointment of the head of intelligence at first instance sentenced for abuse of power. According to the last year surveys, Hungarians seem to be the most Eurosceptic people, almost two thirds of the country. During the last elections of 2014, the nationalist and conservative party Fidesz achieved

a

remarkable

victory by gaining 44.87% of votes, while the Movement for a Better Hungary – the radical right party, better known as Jobbik – is the Viktor Orbán Source: Hungarian Spectrum

third party in the national assembly with 20.22%. The prime minister Viktor Orbán

has been in office since 2010 and has won two consecutive elections, confirming his appreciation, with grapes being the electoral campaign based on opposition critics and especially the EU. However, the clash between the Hungarian government and the European Commission has been going on for years. In 2012 the constitutional reforms wanted by Orbán have been the subject of three infringement procedures by the EU: the organization denies the influence of the government on the Hungarian central bank, on the authority of guarantee privacy and the strong anticipation of the judges' retirement

85


The Giant Fall

age to name others closer to the government. Despite these reservations, Hungary continued its authoritarian reform path. In March 2013, Parliament amended the constitution, implementing some reforms sought by Orbรกn. The new laws provide for the limitation of the Constitutional Court on Parliament's rules, the reduction of political parties in the national media, the redefinition of the family based on marriage heterosexual, and other limitations on civil liberties. The hardness of the Orbรกn rhetoric toward the EU should give pause. Despite his political activity is very orthodox, including from an economic point of view, we must observe that the Hungarian Prime Minister is fueling the anti-EU protest. Not the population has always been consistent with his thinking, think of the 2014 protests in Hungary on increasing Internet taxation. However, the eurosceptic Orbรกn government seems to enjoy a considerable popular support.

The founders' fears In Italy, the only officially Eurosceptic party is the Five Star Movement, a populist and anti-establishment party founded by the comedian Beppe Grillo in 2009. The movement bases its ideology on direct democracy, honesty and politics as a vocation. It obtained the 21.2% of votes at the 2014 European elections, coming in second place among the Italian parties. Even without a clear opinion on the decisions to be taken, the movement proposed a referendum to return

86


April 2016

to the national currency, abandoning the euro to which is assigned the primary responsibility of the economic crisis. This comes close to the nationalist right parties, including the Brothers of Italy, The Right and New Force. Another strongly Eurosceptic party, is the North League. It better rooted in northern Italy and it is promoter of a federal Europe. The party in fact claims the strengthening of the autonomy of regions and of local authorities in domestic policy. Despite fierce opposition to the European institutions, the parliamentarians have ratified the Lisbon Treaty in 2008. In recent months, the League leader, MEP Matteo Salvini, became very popular for his criticism of Europe on migrants. Germany was one of the six founding countries well before its own reunification. The main party in the country that promotes some Eurosceptic arguments is Alternative for Germany. Despite being officially favorable to European integration, the party asked to return to a national currency. On 13 March, the party has achieved an important result in the election of three German states (BadenWĂźrttemberg, Rhineland-Palatinate, Saxony-Anhalt), where he passed in some constituencies the CDU, Angela Merkel's party in governing the country. The defeat of the ruling party is interesting because it was the first popular consultation to evaluate the policy of “open doorâ€? Merkel towards migrants. Although not represented in the national parliament, Alliance for Germany occupies seven seats in the EU Parliament, within the Eurosceptic European Conservatives and Reformists group.

87


The Giant Fall

The solution that the European countries have found to the migration crisis does not offer positive prospects. Despite an initial agreement reached in Malta last year, the redistribution of refugees among the States did not work, mainly because of the opposition of the Eastern EU countries. The blocking of borders in the Balkans highlighted the difficulties to find a common solution, which would allow to share the burden of the situation. The European sharing solution failed both because of the Eurosceptic governments both of the moderate governments' fear to be attacked by anti-European internal opposition. The risks of this situation, which could be repeated next summer, are obvious.

Imagine a different future This summary overview on some European countries tried to identify some of the pressing challenges that the EU has in front on his immediate future. The next European elections are still far away, but national governments faced internal strife and continue to loose support in favor of more extreme movements. The first challenge is populism. The populist movements, as in Italy and Germany, do not seem to be a threat to the ruling parties, but certainly erode important percentages of voters. Populism is an ideology without ideas, which still lives as an opposition to the establishment. Rulers need to answer the populist demand, without losing sight of the common European goals. The risk that populist

88


April 2016

parties come to power – as seems to be in Hungary and Poland – is that states prefer

an

autonomous

path

of

European

integration, especially in times of crisis. The second challenge is negative spillover. During

De Gasperi, Adenauer and Shumann Source: Chaiers Libre

the last summer, the border management in the Balkans showed the weakness of European cooperation on this topic. In part a result of the first challenge, the construction of the walls and restoring border controls is not in itself a concern, though temporary. The problem was the domino effect that hit the Balkan countries – which are candidates or potential candidates for EU membership – and its neighbors in Eastern Europe. The EU must show the usefulness of enhanced cooperation. The third challenge is centripetal force. The combination of populism and negative spillovers can stave off EU states from their center, taking them onto a path in order to remove them from the continental cooperation. In this sense the next UK referendum on staying in the organization is an example of such. The very fact that a nation so important and relevant in the mainland ask itself publicly this question appears to be an important signal to be monitored.

89


The Giant Fall

The European institutions do not appear to be distant from these reflections. However, the European Union – even with its supranational bodies – the European Council recognizes its maximum authority, which is composed of the heads of national governments. So the future of the Union is in the hands of its own citizens, who choose their own governments which in turn sit at the board table.

References Boomgaarden, H. Schuck, A. Elenbaas, M. De Vreese, C. (2011). Mapping EU Attitudes: Conceptual and Empirical Dimensions of Euroscepticism and EU support. European Union Politics 12, 241-266. Curtice, J. Evans, G. (2015). Britain and Europe: Are We All Eurosceptics Now?, in Ormston, R. Curtice, J. (eds.). British Social Attitudes. The 32nd Report. London, United Kingdom: NatCen Social Research. Gabel, M. (1998). Public Support for European Integration: An Empirical Test of Five Theories. Journal of Politics 60: 333-354. Garry,

J.

Tilley,

J.

(2009).

The

Macroeconomic

Factors

Conditioning the Impact of Identity on Attitudes towards the EU. European Union Politics 10: 361-379. Hartleb, F. (2015). A Thorn in the Side of European Elites. The New Euroscepticism. Bruxelles, Belgium: Wilfried Martens Centre for European Studies.

90


April 2016

Szczerbiak, A. Taggart, P.A. (2008). Opposing Europe? The Comparative Party Politics of Euroscepticism. Oxford, United Kingdom: Oxford University Press. Sides, J. Citrin, J. (2007). European Opinion about Immigration: The Role of Identities, Interests and Information. British Journal of Political Science 37: 477-504.

91


The Giant Fall

TTIP and Euro-Atlantic Ties Trans-Atlantic Treaty and European U.S. Relations Federico Brembati

“[…] We should remember that today’s world presents not just dangers, not just threats, it presents opportunities. […] To boost American exports, support American jobs, […] tonight I’m announcing that we will launch talks on a comprehensive Transatlantic Trade and Investment Partnership with the European Union, because trade that is fair and free across the Atlantic, supports millions of good-paying American jobs.”68.

Introduction With these words, on February 12, 2013, in Washington DC, President Obama announced to the Congress the beginning of talks on the Transatlantic Trade and Investment Partnership (TTIP). This proposed project, if achieved, would be the biggest “comprehensive”69 bilateral trade agreement ever witnessed. The European Union and the United States do not share just similar geopolitical outlooks. The 68

Remarks by the President in the State of the Union Address. (2013). Retrieved March 12, 2016, from https://www.whitehouse.gov/the-pressoffice/2013/02/12/remarks-president-state-union-address 69 The adjective “comprehensive” indicated that the agreement would include both goods and services.

92


April 2016

economic relationship between the two areas today is, in fact, the largest in the world. TTIP will probably not just affect the two parties, but could potentially have an impact on developing and emerging economies as well. Nonetheless, the devil could be in the details. Supporters of this agreement claim it will actually not just boost the EU - U.S. economies but the entire world’s trade as well whilst opposers denounce it is a threat to democracy and only multinationals will benefit from the accord. TTIP: a still under discussion “comprehensive” (and secret) agreement.

EU – U.S. relations: an economic overview With a total population of around 900 million people and an aggregate GDP of around $35 trillion (nearly half of global GDP),70 the United States and the European Union constitute what today is the biggest existing trading bloc. First, Europe is, cumulatively, the largest regional investor in the United States. Between 2004 and 2012, the European FDI stocks in the U.S. more than doubled. In 2012, EU FDI in the United States amounted to $1.6 trillion, mainly focused on manufacturing, finance/insurance, banking, wholesale trade, and information sectors.

70

2014 data

93


The Giant Fall

On the other side, U.S. FDI in the EU was $2.2 trillion (with a 10.0% increase from 2011), mainly concentrated in the nonbank holding companies, finance/insurance and manufacturing sectors. Second, a relatively high share of the EU-28’s trade in services71 is with the United States. The latest data available related to the European Union, from 2012, report a value of $184 billion for export and $168 billion for imports.72

EU trade in goods and services with the US in 2012 Source: European Parliamentary Research Service Blog

Third, and most importantly, according to the official data published by the U.S. Department of Commerce and Eurostat, in

71

Trade in services refers to main categories such as: transport, travel, communication services, construction services, etc. 72 Conversion from Euro to US Dollar realised according to rate exchange of March the 14th 2016.

94


April 2016

2015 the European Union73 has remained the principal trading partner of the United States, with a total trade value of roughly $700 billion. U.S. exports to the EU accounted for $272 billion while its imports $426 billion. Interestingly, the American trade deficit of $154 billion underlines the high amount of “Made in Europe” imports over its

Trade flows by SITC (Standard International Trade Classification) section 2010 – 2014 Source: Eurostat

“Made in USA” exports. Nevertheless, despite the already excellent trade situation, many investors regard that the enormous potential of the transatlantic commercial relationship is still far from being fully exploited. Given the importance and attractiveness of the North American region for the EU investors and of the European market for the U.S. investors,

in fact, any attempt aiming to remove regulatory barriers to transatlantic investments can be expected to potentially have a very large impact. This is where TTIP comes into play. 73

The top three European partners in 2015 were Germany ($174 bln), United Kingdom ($114 bln), and Netherlands ($57 bln.)

95


The Giant Fall

What is TTIP and what does it aim at? TTIP, as mentioned before, stands for Transatlantic Trade and Investment Partnership: a proposed comprehensive trade deal negotiated between the European Commission and the U.S. government. It all goes back to November 2011 when American and European leaders agreed it was necessary to incentive reciprocal trade to react against the disastrous effects of the financial crisis. TTIP was then officially announced and launched in the U.S., first, in February 2013 and in Europe, afterwards, in June, on the margins of the G8 Summit at Lough Erne, Northern Ireland. In July, the first round of talks took place in Washington DC. Dan Mullaney (U.S.) and Ignacio Garcia Bercero (EU) represent the two parties in the negotiations. The agreement is expected to have 24 chapters covering three main areas:  Part 1 - Market Access: by ratifying TTIP, the already relatively low transatlantic traffic barriers74 would be further reduced, if not removed. The target is to achieve the highest levels of liberalization and investment protection that both

74

5.2% for the EU and 3.5% for the U.S. (WTO estimates)

96


April 2016

the EU and the U.S. have negotiated to date in other trade deals. The four chapters of the first part are: o Trade in Goods and Customs Duties; o Services; o Public Procurement; o Rules of Origin.  Part 2 - Regulatory Co-operation: the real obstacle for EU – U.S. goods are the so-called “behind-the-border” obstacles, and not just the tariffs paid at the customs. Because of the different production standards, in fact, goods belonging to sectors such as transportation, health, ICT, etc. need to be further approved to match the regional markets’ standards. The 12 chapters of the second part are:75 o Regulatory Coherence; o Technical Barriers to Trade (TBTs); o Food Safety and Animal and Plant Health (SPS); o Chemicals; o Cosmetics; o Engineering; 75

Food Safety and Animal and Plant Health (SPS), Chemicals, Cosmetics, Engineering, Medical Devices, Pesticides, Information and Communication Technology (ICT), Pharmaceuticals, Textiles, and Vehicles are classified as “Specific industries”.

97


The Giant Fall

o Medical Devices; o Pesticides; o Information and Communication Technology (ICT); o Pharmaceuticals; o Textiles; o Vehicles.  Part 3 - Broader Rules and Principles and Modes of Cooperation: in the fashion of the impact of such an agreement, both parties will be committed to maintaining and promote a high level of intellectual property protection, by operating in a sustainable way to respect the environment, and in a more and more simplified and transparent system. The eight chapters of the third part are: o Sustainable Development; o Energy and Raw Materials (ERMs); o Customs and Trade Facilitation (CTF); o Small and Medium-Sized Enterprises (SMEs); o Investment; o Competition; o Intellectual Property (IP) and Geographical Indications (GIs);

98


April 2016

o Government-Government

Dispute

Settlement

(GGDS).

The dynamic of the TTIP is relatively simple: boosting both EUU.S. exports by eliminating almost all tariffs and regulatory barriers, allowing companies on both coasts of the Atlantic to easily access each other’s markets. Former President of the European Commission José Barroso, in 2013, stated: “These negotiations can be a game changer.” A research conducted in the same year by the Centre Economic Policy Research (CEPR), a European think-tank, identifies five major points in favor of the agreement. Ratifying the TTIP would hence result such as:  A total gain for the EU as up to €119 billion per year ($132 billion) and €95 billion ($105 billion) for the United States, that would be translated into an extra €545 for a European family (of 4 members) and $729 for US families;76  A trade liberalization between the U.S. and the E.U. with a positive impact on the world’s trade, increasing global income by €100 billion ($111 billion);

76

These forecasts, even if hardly accurate in the long term and extremely optimistic, aim to give an idea of a possible TTIP impact.

99


The Giant Fall

 An increasing in EU exports to the US by 28%, equivalent to an additional €187 billion worth of exports of EU goods and services;

Summary of macroeconomics effects of TTIP (estimates to be interpreted as changes relative to a projected 2027 global economy) Source: Centre for Economic Policy Research

 A reduction of non-tariff barriers (NTB), a pivotal part of the TTIP, resulting in an 80% of overall potential gains coming from cut costs imposed by bureaucracy and regulations, as well as from liberalized trade in services and public procurement;  Benefits for EU and US labor markets, both socially and economically. It would, in fact, increase wages and create new job opportunities.

To better understand the benefit of such an agreement, let us analyze the European automotive industry, a sector that provides jobs for 12 million people and accounting for 4% of the EU’s GDP.

100


April 2016

Countries such as Germany, Italy or France are global leaders in car production; however, European cars cannot be sold in the United States. The reason is because EU – U.S. auto regulations are not harmonized: in other words, cars are not produced with the same components and standards. A study sponsored by the Washingtonbased Alliance of Automobile Manufacturers (AAM), announced in a joint press release with the European car lobby ACEA and the American Automobile Policy Council, was initially commissioned to show that existing EU and U.S. safety standards were quite similar, but turned out to prove the opposite. The outcome, in fact, was that American models are much less safe in case of front-side collisions, a common cause of accidents that often result in serious injuries. Harmonizing both parties’ standards could be worth, considering what is at stake: forecasts provided from the European Automobiles Manufacturers Association (AEMA), as a matter of facts, claim that TTIP would increase EU vehicle and parts exports to the United States by 149% for the period 2017-2027. Seen all these benefits and the economic gains for both EU and U.S., ratifying the accord should only be a matter of time. However, all that glitters is not gold. Talking about TTIP in merely economic terms would be extremely reductive. Furthermore, despite being a trade agreement, there are several elements that somehow make it slightly different from a standard one. In fact, in the past years, more and more anti-TTIP associations have denounced the many controversies of an agreement that has been kept secret from the media.

101


The Giant Fall

TTIP: a possible Trojan Horse? In spite of the many promised economic befits, many criticisms have been expressed against a TTIP. According to many associations and organizations, ratifying the accord would be a real disaster: here are some of the main reasons supporting why the trade agreement should not be signed. Lack of transparency: TTIP talks are confidential. As stated on the EU’s website: “The European Commission is negotiating TTIP as openly as possible.” Concerns about the secret talks have not just been expressed by anti-TTIP associations, accusing the accord of being an assault on democracy, but UN lawyers as well called for the suspension of TTIP talks, fearing major corporations could undermine human rights through a mooted system of secret courts. Similarly to TPP,77 the text of TTIP can only be read in a secure “reading room”. Molly Scott Cato, professor of green economics at Roehampton University and participant to the transatlantic trade’s inner workings, had the access to this room. This is what she reported: “[…] Before I had the right to see such “top secret” documents, which are restricted from the gaze of most EU citizens, I was required to sign a document of some 14 pages, reminding me that “EU institutions are a valuable target” and of the dangers of espionage. 77

TPP stands for Trans-Pacific Partnership. It is another trade agreement similar to TTIP, which includes Singapore, Brunei, Chile, New Zealand, Japan, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, and United States.

102


April 2016

Crucially, I had to agree not to share any of the contents with those I represent.�78 What kind of trade agreement needs to be kept secret? Data show that 92% of those involved in the consultations have been corporate lobbyists. Of the 560 lobby encounters that the commission had, 520 were with business lobbyists and only 26 (4.6%) were with public

interest

groups.

In

other

words,

for

every

meeting with a trade union or consumer

Source: Euractive

group, there were 20 with companies and industrial federations. Furthermore, following several TTIP text leaks, the European Commission has increased security levels.

Standards harmonization: TTIP would harmonies standards between two similar but still very different world regions. A group of 170 European civil society organizations complains that TTIP would result in "downward harmonization". Let us take into account food 78

Cato, M. S. (2015). I've seen the secrets of TTIP, and it is built for corporations not citizens | Molly Scott Cato. Retrieved March 15, 2016, from http://www.theguardian.com/commentisfree/2015/feb/04/secrets-ttip-corporationsnot-citizens-transatlantic-trade-deal

103


The Giant Fall

and environmental safety, a major stumbling block in the talks. The EU and the U.S. both have very different rules, meaning that, again, they cannot freely trade food:  GM crops: In the United States, over 90% of soya, corn and cotton grown is genetically engineered, while the European Union grows virtually none. Furthermore, the European Commission has given States the power to ban GMO cultivations: every government of the Union is, in fact, free to decide whether to use such products or not. Yet, in the EU most animal feed is imported, with soya the main component. In 2013, nearly all of that came from the U.S. and South America, where soya is overwhelmingly GM: the U.S. provided 16% of those imports;  Pesticides: Over 80 kinds of pesticides used in the U.S. are banned in Europe, and the EU generally accepts lower levels of pesticide residue in food. The European Food Safety Authority (EFSA), regulating the usage of pesticides in Europe, might be bypassed by TTIP. In the U.S., however, authorities insist their food is still safe.  American meat: in the specific, beef and chicken. The EU forbids the use of growth-promoting hormones in cattle and pigs, but, in the United States, it is a standard practice. After years of debates, the EU has agreed to import high-quality U.S. beef, supposed not to contain hormones; nonetheless, most of

104


April 2016

U.S. beef can’t still be sold in Europe. In the U.S., chicken is washed with chlorinated water to kill bacteria; yet, in the EU, this practice for poultry is banned. Overall, European food safety lobbyists warn that U.S. animal welfare standards are generally lower than those in Europe.

Occupation: The EU has admitted that the trade agreement will result in increasing unemployment. This, as employment will move to the U.S., where trade unions and labor standards are lower. Nonetheless, States might need to draw on the Union’s funds to compensate the losses. The world is not new to this kind of agreements. Actually, an infamous similar situation happened in the years after 1994, when the North American Free Trade Agreement (NAFTA)79 was established. According to the poverty statistics of the UN Economic Commission on Latin America (ECLAC), the drop in poverty in Latin America went from 46% to 20% (20 percentage points) whereas in Mexico went from 45.1% to 37.1% (8 percentage points): more than two and a half times. In addition, the U.S. economy lost nearly 700000 jobs. Public Services: TTIP aims to open up the EU’s public health, water and education services to American enterprises. As the U.S. health system is globally known for being private, this could mean the privatization of the European national healthcare 79

The NAFTA was established between Canada, Mexico, and the United States.

105


The Giant Fall

system (NHS). Despite the European Commission’s declaration of having excluded public services from TTIP, the former UK Trade Minister Lord Livingston admitted that it was false information. Democracy: By ratifying the accord, Investor-State Dispute Settlements (ISDS) will be introduced. ISDS is an instrument of public international law, that grants an investor the right to use dispute settlement proceedings against a foreign government in case of loss of profits. It would indeed give more power to transnational corporations. ISDS are composed of three arbitrators (lawyers) and are already in place in other bilateral trade agreements around the world. After Japan’s Fukushima in 2011, Germany decided to shut the oldest power plants down. Two of these power plants belong to the

Know ISDS cases, annual and cumulative (between 1987 and 2014) Source: UNCTAD, ISDS database

106


April 2016

Swedish State-owned energy colossus Vattenfall, operating power plants in other European countries. Following the German decision, the Swedish company denounced having suffered substantial financial damage and sued Germany for $6 billion. Around the world, there are around 600 similar cases of enterprises versus nations going on. Banks and businesses: TTIP will weaken financial regulation for the benefit of financial institutions. According to Corporate Europe Observatory (CEO) and The Centre for Research on Multinational Corporations (SOMO), which analyzed some leaked documents, the EU would be prioritizing the protection of the EU’s banking sector over strictly financial regulations and supervisions. These

so-called

“regulatory

cooperation”

proposals

would

guarantee that measures taken by regulators pose no harm to the financial sector, it would allow EU banks to operate in the U.S. on the EU's (generally laxer) rules and in general that financial corporations on one side of the Atlantic do not have to abide by host country’s laws but only by home country laws on the other side of the Atlantic.

TTIP (and TPP) in the global context Since the launch of the talks for both TTIP and TPP, all the major global economic actors have been observing the U.S.’s economic strategy: the first of which, probably, China, busy accomplishing its “One Belt, One Road” project. The reason is quite simple: none of the two agreements includes the Asian colossus; on the contrary, they

107


The Giant Fall

could be seen as an attempt to reduce China’s impact on the world’s trade. Both the Transatlantic actors are, in fact, major players for the Chinese import/export.

Dan Mullaney (U.S.) and Ignacio Garcia Bercero (UE) Source: EU bulletin

According to others, the two accords are aiming at something even bigger. They would be trying to have a long-term impact on the global multilateral trading system, centred on the World Trade Organization (WTO). If both ratified, TTIP and TPP would likely shape the WTO’s future. Once established, TTIP could be enlarged to include Canada, Mexico and Turkey, as well as the European Free Trade Area (EFTA) nations (Switzerland, Lichtenstein, Norway, and Iceland).80 TTIP and 80

Canada and Turkey both already enjoy trade benefits from commercial agreements with the EU. Canada has recently created the Canada’s Comprehensive Economic and Trade Agreement (CETA) in 2014, while Turkey, in 1996, established the Association Agreement with the European Economic Community and a Customs Union agreement. Similarly, Mexico signed, in 1997, the Free Trade Agreement between Mexico and the European Union (FTA EU-MX). In addition, States member of the EFTA already have numerous treaties and executive agreements with the EU. Therefore, in such scenario, it should not be too difficult to expand the TTIP to include these potential actors.

108


April 2016

TPP members together would account for 61% of the global GDP. Exports between the respective group members will amount to 19% of World exports, while direct investment between the members will amount to 25% of world outward investment. Even developing countries could be affected. The European Union, just like the United States, massively imports from developing countries. On the one hand, higher incomes in the EU and the U.S. will increase demand for goods and services (raw materials, semi-finished products, services, tourism) in third countries, which should benefit from the new prosperous market conditions. Additional export could mean higher incomes for the third world countries in question. On the other hand, the accord could cause trade diversion. Suppliers

from

TTIP

countries

benefit

from

better

price

competitiveness as their internal trade costs in the Partnership countries are lower. This may be to the detriment of suppliers from third countries, which may lose shares in the European and American market. Many developing countries export goods (such as textiles, shoes, and processed foods) that are subject to high tariffs in the TTIP countries. Thanks to unilateral trade facilitation measures between the EU and the U.S., these countries are eligible for tariff-free access. Yet, these preferences might be eroded by the elimination of trade tariffs.

109


The Giant Fall

Conclusions The slow rhythm of the talks, retarded by blockages on several issues, has caused the official establishment of TTIP to be constantly postponed. What is certain is that it will have to be approved by the European Parliament and European Trade Ministers. Ministers usually vote on trade by what is called qualified majority, though unanimity might be required. Depending on the legal nature of the final agreement, it might also need to be approved by all the EU member States. From the American side, it will need approval by the Congress. President Obama is struggling - unsuccessfully so far - to get Congress to give him the so-called Trade Promotion Authority,81 which would make US ratification less difficult. From what it has emerged so far, it might appear that TTIP is an unfair trade agreement; nevertheless, it is undeniable that its secrecy increases the public degree of suspiciousness and skepticism. The path to the establishment is still long, however, at the same time, the ratification is likely inevitable. The chapter has analyzed the potential economic advantages of an extremely delicate agreement, taking into account all the denunciations issued by anti-TTIP groups. It sure is that its effect will change the lifestyle of American and European citizens, first, then would probably have an effect on other countries. Transparency could be the first step towards a democratic way of managing the talks. Media 81

It refers to the authority of the President of the US to negotiate international agreements that Congress can approve or deny but cannot amend or filibuster.

110


April 2016

should then give more attention to the matter. It is not acceptable that most of Europeans and Americans ignore what is being discussed in these years. Free market could definitely bring opportunities and advantages, improve our economies ad generate more jobs. The question, however, remains the same: “At what costs?�

111


The Giant Fall

References ACEA. (2015, July 17). USA. Retrieved March 17, 2016, from http://www.acea.be/industry-topics/tag/category/usa Aichele, R., Felbermayr, G. J., & Heiland, I. (2014). Going deep: The trade and welfare effects of TTIP. Beeton, D. (2014, February 12). Veinte años después del TLCAN, México ha tenido un crecimiento rezagado, pobreza persistente y mayor desempleo. Retrieved March 17, 2016, from http://cepr.net/enespanol/spanish-press-releases/veinte-anos-despues-del-tlcanmexico-ha-tenido-un-crecimiento-rezagado-pobreza-persistente-ymayor-desempleo Bennett, A. (2014, September 1). Ministers admit NHS not safe from private firms in secret trade talks. Retrieved March 17, 2016, from Huffington

Post,

http://www.huffingtonpost.co.uk/2014/09/01/ttip-eu-us-tradedeal_n_5747088.html Cato, M. S. (2015, February 4). I’ve seen the secrets of TTIP, and it is built for corporations not citizens. The Guardian. Retrieved from http://www.theguardian.com/commentisfree/2015/feb/04/secret s-ttip-corporations-not-citizens-transatlantic-trade-deal Clarke, K. (2015, December 31). This EU-US trade deal is no ‘assault

on

democracy’.

The

Guardian.

Retrieved

from

http://www.theguardian.com/commentisfree/2013/nov/11/eu-

112


April 2016

us-trade-deal-transatlantic-trade-and-investment-partnershipdemocracy Francois, J., Manchin, M., Norberg, H., Pindyuk, O., & Tomberger, P. (2013). Reducing transatlantic barriers to trade and investment: An economic assessment (No. 20130401). Institue for International and Development Economics. Hamilton, M. (2015, September 25). Fearing loss of TTIP deal, car industry buried U.S. Safety report. Retrieved March 17, 2016, from http://www.digitaljournal.com/life/driving/fearing-loss-of-ttipdeal-car-industry-buried-us-safety-report/article/444820 Hufbauer, G. C., & Cimino-Isaacs, C. (2015). How will TPP and TTIP change the WTO system?. Journal of International Economic Law, 18(3), 679–696. doi:10.1093/jiel/jgv036 Inman, P. (2015, May 5). UN calls for suspension of TTIP talks over fears of human rights abuses. The Guardian. Retrieved from http://www.theguardian.com/global/2015/may/04/ttip-unitednations-human-right-secret-courts-multinationals Inman, P. (2016, January 2). TTIP: The key to freer trade, or corporate

greed?

The

Guardian.

Retrieved

from

http://www.theguardian.com/business/2016/jan/02/ttip-termsgrowth-markets-worker-protection Jacobsen, H. (2015, March 23). TTIP’s healthcare chapter to focus on medicines

approval.

Retrieved

March

17,

2016,

from

113


The Giant Fall

http://www.euractiv.com/section/trade-society/news/ttip-shealthcare-chapter-to-focus-on-medicines-approval Moody, G. (2015, August 14). EU doubles down on TTIP secrecy as

public

resistance

grows.

.

Retrieved

from

http://arstechnica.co.uk/tech-policy/2015/08/eu-doubles-downon-ttip-secrecy-as-public-resistance-grows/ Padmanabhan, L. (2014, December 18). TTIP: The EU-US trade deal

explained.

BBC

UK

Politics.

Retrieved

from

http://www.bbc.com/news/uk-politics-30493297 Peter, L. (2015, June 10). TTIP talks: Food fights block EU–US trade

deal.

BBC

Europe.

Retrieved

from

http://www.bbc.com/news/world-europe-33055665 Strachan, M. (2011, May 12). NAFTA cost U.S. 700k jobs, report says.

Huffington

Post.

Retrieved

from

http://www.huffingtonpost.com/2011/05/12/nafta-job-loss-tradedeficit-epi_n_859983.html Tentori, D. (2013, July 9). La Ttip tra Usa e Ue: Un’opportunità per tutti. Retrieved March 17, 2016, from http://www.limesonline.com/lattip-tra-usa-e-ue-unopportunita-per-tutti/49720 Walker, A. (2015, May 13). TTIP: Why the EU-US trade deal matters.

BBC

Business.

Retrieved

from

http://www.bbc.com/news/business-32691589

114


April 2016

Williams, L. (2015, October 6). What is TTIP? And six reasons why the answer should scare you. The Independent - Comment. Retrieved from

http://www.independent.co.uk/voices/comment/what-is-

ttip-and-six-reasons-why-the-answer-should-scare-you9779688.html

115


The Giant Fall

Conclusions The economic crisis is the root cause of the European Union’s political decay. It deeply and further jeopardized policy coherence in home affairs and foreign policy, especially in those crises occurring just outside the EU borders, which keep on being managed by traditional actors, i.e. the states, with the USA playing a crucial role in spite of the apparent and progressive disengagement. Since 2008, EU member states have gradually found themselves on different playing fields, far away from the ideal of European integration. The intergovernmentalists on the one hand and the sovereignty claimers on the other. Domestic issues have never been so closely linked to the main foreign policy matters to the extent that they are today. This is especially true in the case of Germany. The consequences of civil and proxy wars elsewhere have had an impact on the German political system in terms of policy response to the refugee influx. Facing a shrinking of the internal and external political space, German government failed to assess the increasing pressure of domestic politics on what had been regarded as an opportunity to show to the key global political actors the German leadership in the EU. The events in Cologne changed the public opinion’s perception of the newcomers in the EU’s wealthiest countries, and along with the terrorist attacks in Paris have shouldered nationalist and demagogic political positions. Actually, during the last months of 2015, Germany was already losing its grip when it failed to secure the implementation

116


April 2016

of the EU political decisions. Apart from EU Institutions, at that time Germany could count on the cooperation of Austria and Sweden. These countries eventually withdrew their support, announcing tough measures to deter asylum seekers in a sharp reversal of the open-door policy towards people fleeing war and persecution. The lack of leverage power of the EU has severely affected German leadership as well. The EU has always been seen by German government as the best venue where to exert influence and drive German foreign policy interests. The weak position of the EU in the Middle Eastern checkboard has been read as the flagging of German leadership. This instability is reflected in domestic politics as Merkel’s CDU begins to feel threatened by the anti-refugee party, Alternative für Deutschland (AfD), which entered state parliament for the first time in three regions in the last elections, and by more left-leaning parties which took over Baden-Württemberg, a Land dominated by the CDU since the end of the second world war. Historically, the European Union crises have always been an important driver for change. The refugee crisis has turned political priorities upside down, as the phenomenon has concurred with a deep sovereign debt crisis which brought with it financial instability and high unemployment rates, especially for some EU member states. As a result, national interests are very high on the political agenda of most European leaders and have consistently trumped a common European answer to the crisis. The long negotiations of the planned TTIP and the debates in many European societies on the growth of free trade

117


The Giant Fall

set a huge challenge for EU politics. Since the early days of European integration the competence to define a common external trade policy has been a keystone of the European bodies. Many critics refer to the procedures adopted to conclude the negotiation as a watershed for the European project itself. TTIP is considered by many as a manna, a necessary instrument to drag the EU out of the consequences of the economic crisis. What if not? And, what would a breakdown of the negotiations mean for European integration? It is a critical moment for the EU. What happened in Cologne, in Paris, in Brussels has sped up an inescapable process. The EU has to get the refugee crisis under control, as not only the Schengen system is put into question, but the European Union project as a whole. Social and political side effects of the migratory inflows, beyond the economic ones, are contributing to shape what has already been labelled as the failure of the EU to help people turning up on its countries’ doors after fleeing violence, conflicts, and persecutions. Southern and Eastern EU member states have been left bearing the brunt of the influx, notwithstanding the pledge for a fairer distribution of refugees and asylum seekers. Greece, in particular, has become an obligatory passage point to reach Europe for many migrants coming from the Middle East. Greeks have legitimately showed harsh feelings against EU policy-makers over the year. The deep economic crisis they fell in, after that the so-called troika offered them “nothing but blood, toil, tears and sweat” in order to receive bailout loans, resulted in the far-left Syriza party winning the most votes and parliamentary

118


April 2016

seats at the parliamentary elections and in the willingness to remain in the Euro-zone. To ease the pressure on the Greek government on the issue of migration flows, the EU brokered a deal with the Turkish government. The deal between EU and Turkey at the recent summit caused doubts about its legality and morality. The agreement foresees that all migrants arriving in Greece being sent back to Turkey. The EU in turn will resettle thousands of Syrian asylum seekers directly from Turkey. In return, Turkey might have the chance speeding up the negotiations on EU membership. By the way, the implementation of the plan will not be easy, and some setback is expected. Now that terrorism, fanaticism, fear seem to threaten the European most relevant achievement, i.e. the Schengen agreement, the Union is at a crossroads. The issue at stake is not the very existence of the EU but the essence of the EU as it has been dreamt over 60 years.

Gabriele Quattrocchi Vice Director of Mediterranean Affairs

119


Escape From Syria

About the Authors Silvia Nicolardi, graduated with honors in International Relations at Sapienza University of Rome, with a research on the Iranian power projection in the Middle East, taking as an allegedly turning point the nuclear affair. Silvia specialized in Diplomacy Studies at the Italian Society for International Organization (SIOI - UNA Italy). Her main research topics are: Middle Eastern Affairs, World Economy, Global Security, European Affairs. Davide Panadori Cino, Master 2 student of “Economic policies” at Sorbonne Paris Cité, profile of International Macroeconomics and Financial Policies, and a former master student of Kingston University in Political Economy. He previously studied as undergraduate student in Economics at the University of Verona. He collaborated with Kingston University as Research Assistant on the Debt-led growth regimes in Europe (2014-2015). Sergio Castaño Riaño, Ph.D. European Studies. Along his career he has worked in different fields. At present he works as a lecturer at UNADE and ISG. He also works as an analyst at the international geostrategic consultant Wikistrat while he collaborates with different media. His area of research is focused on the Euro-Mediterranean relations and immigration in Europe. Simone Massi, graduated in Middle East Archeology at Sapienza, University of Rome and in International Relations at University of

120


April 2016

Turin. Expert in political movements and political economy of Middle East. Previously, He studied at the Pace University in New York and at the Bilgi University in Istanbul, Turkey. He also worked as an advisor for the Italian Trade Agency in Cairo, Egypt. He is attending a second level master about "Economics and Institutions of Islamic Countries" at LUISS School of Government. Federico Brembati. LSE-PKU Double MSc Degree Candidate in International Affairs. Federico got his Bachelor’s Degree in Languages for the International Relations with Honours at Università Cattolica, Italy, in 2013. In 2014, he established himself in Beijing. He is now attending a double degree Master program in International Affairs at Peking University and London School of Economics. Since 2015, he works as Research Analyst for Geopoliticalatlas.org

121


Escape From Syria

Ed. Mediterranean AffairsŠ www.mediterraneanaffairs.com Cover image source: CIMSS

122


April 2016

123

Profile for Mediterranean Affairs

Dossier No. 1 (2016) - The Giant Fall. A deeper analysis of the European Crisis  

[...] Today the European Union (EU) is most probably going through its darkest hours. The Union is inconsistently reacting to the challenges...

Dossier No. 1 (2016) - The Giant Fall. A deeper analysis of the European Crisis  

[...] Today the European Union (EU) is most probably going through its darkest hours. The Union is inconsistently reacting to the challenges...

Advertisement