The EU and China: Geo-economic Agendas Compared

 November 22, 2015

The wave of blowback terrorism currently sweeping Western European capitals is likely to obscure a major event due to take place on November 24th and 25th in China: I am referring to the annual meeting of the leaders of 16 Central and Eastern European countries (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia) with the Chinese leadership in Suzhou. Following immediately after this weekend’s ASEAN summit in Malaysia, the meeting provides an extremely useful glimpse of China’s geo-economic agenda from the Balkans to Poland and Hungary.

An even more useful exercise, however, would be to compare the EU’s geo-economic agenda, with that of China and Russia in our parts of Europe.

The leading exponent of the West’s geo-economic agenda has to be considered Pascal Lorot, the founder of geo-economics. In the 1990s he published a booklet, suggestively titled “La conquête de l’Est”. The book contains the main tenets of the West’s economic expansion in the ex-Soviet bloc states from Central and Eastern Europe. Although NATO expansion has preceded that of the European Union, the main actors of the West’s geo-economic agenda in the region are the global corporations headquartered in France, the US or other participating Western countries.

While financial transfers from the EU to new member states from Central and Eastern Europe have diminished significantly over the years, having contributed only marginally to upgrading their infrastructure to EU standards, Western global corporations have taken over even the water supply or gas distribution in countries like Romania.

The results of the economic penetration in the area are, in some cases, nothing short of disastrous. Thus, companies like Vivendi or Gaz de France have succeeded in imposing to consumers at least ten tariff increases for water and gas in the last four years alone, contributing heavily to further impoverishing Romania’s population whose income levels, however, were already well below the EU average. To top it all off, Brussels is about to stunt Romania’s economic growth by imposing an EC-backed premier, unelected and undesired by the locals.

Moreover, throughout the region, Western global corporations have systematically deprived all the governments of much needed taxation income via transfer pricing and other accounting gimmicks.

Sure enough, there are a few success stories of Western economic expansion in the region, like that of German, American and French auto-makers in countries like Hungary, Slovakia, the Czech Republic and Romania, but these are the exception rather than the rule.

At the time of their EU accession in 2007, citizens of predominantly Orthodox countries like Romania and Bulgaria were hoping that this would put an end to their countries’ economic plight. The ensuing cultural shock suffered during the latest drive of Western expansionism has instead reopened old wounds. The 1204 ransacking of Constantinople by the crusaders is still alive in the collective memory of the Balkans. On that occasion, Western military “assistance” morphed into full-blown pillage and plunder, followed by the occupation of the Byzantine capital.

By contrast, since 2012 when the first China-CEE meeting took place in Warsaw, China has proven more willing than the EU to invest heavily in these countries’ infrastructure and manufacturing sector. In 2013, the first direct rail link between southwest China and the Polish city of Lodz was inaugurated, greatly facilitating two-way trade between the two countries. Nowadays, it takes only 15 days by rail for Chinese goods to reach Poland, or for Polish agricultural products to reach China. The upgrade of Baltic countries’ ports with Chinese investment is also underway, not to mention the upgrade of the port facilities in Piraeus, Greece by Cosco.

To date, the most ambitious Chinese infrastructure project in the region is the building of a very fast rail link between Piraeus and Hungary, connecting Athens and Skopje with Budapest via Belgrade. Not very far behind are the Russians, who are planning to build a gas pipeline from the Balkans to Central Europe along the same route. The Russians have also agreed to finance, to the tune of a few billion euros, the upgrade and construction of nuclear reactors in Hungary in spite of vehement EU protests.

The leaders of Central and Eastern European countries are now in a position to choose from the two geo-economic agendas the one that best suits the needs of their economies. As matters now stand, it seems that the West has largely exhausted its economic growth potential and is instead trying to exploit – colonial-style – the resources or populations of the new member states accepted after 2004. With its large cash reserves and “win-win” economic philosophy, China looks set to capitalize on local disenchantment with the EU by expanding steadily into this region.

The "New Europe" NATO Summit in Bucharest

November 6, 2015

The fact that the EU is undergoing its most profound existential crisis ever is by now an open secret. The Greek debt crisis had produced a North-South divide in Europe, whereas the migrant crisis has prompted a rebellion against the EU leadership from Eastern bloc members. Nowadays, NATO itself is contributing to the existing divisions by bringing back to life the “Old Europe – New Europe” division of the Bush Jr. era.

Thus, on the 3rd and 4th of November, NATO has organized a “ Presidents’ Summit “ which took place behind closed doors in Bucharest. The meeting was attended by nine presidents of EU member countries from Central and Eastern Europe, and resulted in a declaration which could rightly be called an anti-Juncker document. The final document stressed the need to strengthen ties with the United States and stand united against “Russian aggressiveness”.

It is an undisputed fact that the EU’s eastern and southern borders are far from secure as a result of the conflicts in Ukraine and the Middle East. Both conflicts were ignited by American covert operations or outright military intervention in those regions, which have very little to do – if at all – with EU foreign or neighbourhood policies’ objectives.

Still, the EU is paying the price for American foreign policy amateurism, which is what has prompted Juncker and Merkel’s recent overtures towards Russia and Turkey. To be sure, Juncker’s declaration concerning Russia and Merkel’s visit to Turkey are by and large part of a PR exercise meant to soothe the leadership in Moscow and Ankara and maybe pave the way for a reset of the EU’s relations with the two countries.

The summit in Bucharest went largely ignored in the international media because of the current street protests in the Romanian capital. By reviving Rumsfeld’s “New Europe” concept, however, and by trying to pitch the leaders of Central and Eastern European countries against the president of the European Commission, the Americans are contributing plenty towards aggravating the rifts that threaten the very existence of the EU. Whilst this might not be their ultimate intention, the outcome of the latest NATO strategy in Europe is going to hurt transatlantic ties more than it would stunt Juncker and Merkel’s efforts to patch up relations with Russia or Turkey.

EU: No Silver Bullet Solution for the Migrant Crisis

 

EU: no silver-bullet solution for the migrant crisis

October 25, 2015

The recent flurry of diplomatic activity by EU leaders who are trying to slow down the migrant influx has not as yet yielded any tangible results. In truth, the situation has become so complicated that there are no good moves left in order to stabilize it.

 

To illustrate this, one should consider the results of German chancellor Angela Merkel’s October 18 visit to Istanbul, during which she offered Turkish authorities a 3 billion-euro contribution and the promise to speed up the country’s accession talks with the EU. (A deal so far refused by Turkey.) If anything, the visit has frightened the Syrian migrants into crossing to Greece in even bigger numbers. From around 5,000 people a day making the perilous trip before the visit, the IOM authorities have announced that the number of migrants increased to around 9,500 a day for the whole week following Merkel’s visit.

 

The Commission also tries to convince transit countries like Macedonia, Serbia, Romania and Bulgaria to help stem the flow of migrants to Germany. So far, the efforts have generated the fear that these countries might be obliged to keep a huge number of refugees on their territory for longer than a few days. Accordingly, the Bulgarian, Serbian and Romanian premiers have announced on Saturday October 24th, in a joint press conference, that if Austria and Germany will close their borders to migrants, they would have no choice but to follow suit. After the mini-summit held in Brussels on Sunday 25th of October, the Bulgarian prime minister Boyko Borissov has complained to the press that the European Commission suggested to governments such as his to take out loans from the EBRD or BEI in order to pay for the upkeep of refugees.

 

Finally, there is a lot of bickering going on between the Commission and a number of Central and Eastern European members which flatly refuse the imposition of migrant quotas. In fact, the leaders of these countries are resisting the very idea of quotas, as they feel that their populations are totally unprepared to accept Arab migrants in their midst and that their economies might be adversely affected by the expenditure necessary for the migrants’ upkeep.

 

The only glimmer of hope to date might come from the ongoing negotiations to reach a political solution in Syria which involves the US, Russia, Saudi Arabia and Turkey. The quartet might be joined next week by Iran and is expected to ultimately reach a deal in order to bring about an end to the bloody civil war that is the root cause of the current refugee crisis.

Turkey Still a Model for Arab Youth

October 12, 2015

Saturday’s horrific terrorist attack in Ankara where more than 100 people lost their lives brings to mind similar gruesome deeds, from New York in 2001 or London in 2007. The similarities between these events, unfortunately, end with the casualties. In Turkey, the opposition -in a rather desperate bid to thwart Erdogan’s party’s re-election chances- took to the streets rallying against the government. This is unfortunate because normally, in times like these, political parties and the population rally behind the government of the day in a show of solidarity.

For democracy to flourish, it is not enough to have free and fair elections and respect for the rule of law. A necessary ingredient of any functional democracy is a measure of respect between the party (or parties) in power and the opposition. Sadly, this basic respect among political leaders and parties competing for power seems to be lacking in Turkey. In the past three years this appears to be the main reason why elections have taken place in a very tense atmosphere, made worse by vicious attacks, slander and unethical political bickering.

There is one essential aspect, however, that has escaped the attention of the Turkish opposition, blinded by hate as it is against Erdogan’s AK Party. Arab youth, who are yet to see positive changes in their societies following the Arab revolutions, still regard the Turkish brand of Islamic democracy as a model to be emulated. In a recent book about their aspirations, Ms. Bessma Momani -a renowned Arab-Canadian scholar and political scientist- wrote that

“Some Turks don’t want to hear this but there is a Turkish model in the Arab world. Some countries may find that Turkey’s involvement in the Syrian war has given the model a negative perspective but overall throughout the Arab Spring and even before there was a very positive view. What is the Turkish model? It’s to create a society that is economically growing with lots of opportunities. It’s a place that allows for Islam in daily life. As much as secularists might have a hard time seeing this, they do appreciate the idea that a Muslim party has an opportunity to compete. They view the Turkish model as positive and I think sometimes they are critical of Turkish actions with respect to Syria but I think if you take out the geopolitics, overall, Turkey as an economic model is very high. People still look up to it as an example.” (Source: Hurriyet)

Since 1998, I am one of the few European historians to have supported the idea of an Islamic party in power in Turkey. In doing so, I fully realize that my professional views are at odds with the beliefs of most EU political leaders and mainstream intellectuals, many of whom are blinded by secularism and could not foresee the rise of political Islam. It is not entirely by accident, therefore, that four years after graduating in geopolitics and international relations with excellent results from Sciences po Toulouse, I am still without a suitable job. The truth remains, however, that AKP’s many achievements, especially in the economic sphere, are substantial and its leaders’ performance in office should also be recognized as such by EU leaders and Turkish opposition alike.

The Migrant Crisis and EU Border Fences

 September 25, 2015

A few days ago while seeing the hundreds of refugees from the Middle East flock on Greek ferries, buses, taxis and trains in their drive north to the Macedonian border, I recalled a 20-page seminar paper I was required to write on the question of frontiers at Sciences po Toulouse.

The year was 2010, just one year before the start of the Arab revolutions in Maghreb, Egypt and the Middle East.

After briefly outlining the evolution of the European concept of frontier – the frontier as a zone like in the middle ages, or the frontier as a line like in our times – I dealt, as requested, with the question of human trafficking, illegal immigration and the options available for securing the EU’s external borders.

During the seventies I had completed my military training as a border guard patrolling Romania’s eastern frontier with what was then the Soviet Union. The reserve officers’ school provided me and my colleagues with the essential legal and logistical knowledge employed at the time to secure the country’s borders. That type of specialized knowledge proved of great assistance in 2010 for completing my assignment at Sciences po. The conclusion of my paper would not please many European policymakers, because it stated in no uncertain terms that the European efforts to make the continent’s borders impenetrable were probably doomed to fail and that a host of other solutions had to be considered in order to address the problems of smuggling, trafficking and illegal immigration.

Still, European politicians from Hungary to Ukraine or Estonia wrongly believe that a frontier can be secured by erecting fences and they are even willing to spend large amounts of cash to do so. Unfortunately, as a recent article published by American geographer Reece Jones (“Why Border Walls Fail”, Project Syndicate, September 2015) clearly proves, putting up fences between the US and Mexico, or as now around the European Union, only marginally slows down the influx of illegal immigrants. Moreover, as Reece Jones argues, fences are mainly meant to stop poor people from entering a richer country or region. That’s because people with means will always find alternative ways to reach their desired destination: fake papers and passports, bribes and so on.

At the end of WWII, according to a Canadian specialist, only five border fences or walls existed in the world, the best-known of them all being the Berlin Wall. Today we have no less than sixty-five, with two thirds of them having been built in the last twenty years. Expensive and inefficient, they stand proof however of flawed neoliberal thinking and vain efforts to securitize frontiers sometimes stretching for thousands of kilometres.

By abandoning such misguided efforts and by concentrating instead on slowing down or regularizing the flow of migrants, and by tackling the root problems that had forced them to leave in the first place, we will be in a better position to arrive at a humane solution to the plight of illegal migrants and refugees.

Sure, migrants should not be allowed to make a mockery of the EU’s external borders, even if all the billions spent on securing them were in fact a dodgy investment. Alas, most politicians would prefer to listen to sellers of border surveillance hardware than to finance a comprehensive study provided by geopolitical consultants such as myself, which would probably save their taxpayers large amounts of money. Migrants should be made to understand, as much as possible, that they should wait for their resettlement or asylum papers in the few “hot spots” (in Turkey, Lebanon, Jordan, Greece, Italy, Serbia and possibly Bulgaria) created by the Union and the UN to that end, instead of arriving or stampeding in very large numbers inside the countries of their choice in Europe.

To be an effective deterrent against mass migration, however, such centers should provide decent accommodation and nourishment to refugees – which has not been the case until recently, according to the UNHCR – as well as fair and speedy processing of asylum applications that should become the norm and not the exception.

The EU and the Migrant Crisis

 September 13, 2015

For a continent long renowned for the excellent quality of its primary and secondary education, the beginning of the school year was until recently the season’s most important event. Not anymore. From Budapest to Brussels, government and Union officials have their hands full with the migrants’ crisis, which threatens to get out of control.

TV screens and the printed European media are full of images of tens of thousands of Syrian refugees heading for Germany as if they were heading for a second Mecca. Why Germany ? Syrians know fully well that the southern members of the Union have had their economies devastated by years of austerity and therefore could not provide the social benefits that Germany alone seems able to afford. Sure, a few hundred migrants have trickled into Denmark, Sweden or the Netherlands, but the governments and population of these countries are far less willing to accept their asylum demands.

Then there are Angela Merkel’s statements to the effect that all migrants who can reach Germany will be accepted, which have aggravated the latest exodus from Turkey. The reason why she has made such an uninspired statement – when it was already clear that the Syrians do not need additional encouragement – will remain a mystery to me. As a consequence of it, the EU is experiencing another serious split between its Western European states and the newer, ex-Soviet EU members. Hungary and the Visegrad countries have flatly refused the idea of compulsory quotas of migrants to be accommodated in their countries, while their leaders are doing their darnedest to stem the flow of Syrians towards Germany.

After the euro crisis which has provoked a split between the North and the South of the continent, a second split between West and East could further endanger the very existence of the EU. Already, opinion leaders and politicians from the Visegrad countries and even Romania have accused the EU Commission of adopting the behaviour they used to know during Soviet times. If this is not ominous for the future of the EU, I don’t know what is…

Why the Berlin Consensus is Toxic for the EU

 August 31, 2015

Over the past fifteen years, quite a lot of criticism has been levelled by the “MIT gang”° against what has become known as the Washington consensus. Very little or no public discussion, however, has taken place about its close European offshoot, the Berlin consensus.

Sure, there are some differences between the neoliberal economic thinking underpinning the Washington consensus concept and the Berlin consensus. For better or for worse, the pitfalls in promoting mass privatizations, currency and capital markets liberalization around the globe are too well-known to all to insist upon here. What the Washington and the Berlin consensus have in common, on the other hand, is the “one-size-fits-all” approach to solving economic problems.

The policies shaping today’s Berlin consensus have appeared during the nineties in connection with the introduction of the common currency. The main tenets of the Berlin consensus are derived from the German economic doctrine of ordoliberalism and the project of Walther Funk, Hitler’s minister of the economy.

Alas, what works for Germany does not work for the rest of the eurozone. The Maastricht Treaty, the budgetary and public debt rules and limitations, as well as the accompanying austerity measures have been enshrined, following the sovereign debt and euro crises, into the constitutions of most eurozone member countries. The six-pack and the two-pack compacts have also become part of the financial legislation of the eurozone.

And here lies the problem. The rigidity or inflexibility of the rules and principles on which the Berlin consensus is based, whilst it might favour an export economy like Germany’s, is playing havoc with economies like France’s and Italy’s, to mention but a few. The German obsession with very low inflation, low wages and zero budget deficit targets has provoked the stagnation of most eurozone economies. In the normal order of things there are surplus countries and deficit countries, since it is not possible to transform the whole continent into a global exporting powerhouse. This is the main reason why imposing the Berlin consensus on all of the eurozone’s member states is proving not only wrong, but downright catastrophic.

Still, compliant governments from France to Greece have made huge efforts to cut government expenditure, freeze or diminish wages and transform their consumer-led economies into export champions. Some, like Portugal and Spain have temporarily succeeded in doing so, but only by repressing internal demand, cutting wages and tolerating high unemployment rates.

The German way, unfortunately, is that of adapting the economy to the needs of price stability, and not the currency to the needs of the economy. For German policymakers, the flexibility has to come from the workers, not from the rules governing the economy. The fact that the eurozone has ceased to work – following the imposition of the Berlin consensus – is by now clear for all to see.

As it always happens when the groupthink phenomenon manifests itself, however, EU leaders prefer to justify the unjustifiable and to delay needed changes in policy until it will be too late to save not only the common currency area, but the EU as a political union as well. (The Eurogroup is a textbook example of groupthink.)

Accordingly, it is time for knowledgeable insiders – such as Yanis Varoufakis, for example – to clearly and concisely explain to the European layman why the Berlin consensus is toxic for the eurozone and what can be done about it. Surely, one cannot expect such a demanding intellectual effort to be undertaken by the likes of Wolfgang Schaeuble, Jeroen Dijsselbloem or say… the German Council of Economists. And, who knows? A timely and well-written book on this subject might even become a best-seller here in Europe.

°Note: The “MIT gang” is a group of leading American and French economists, such as Paul Krugman, Ben Bernanke, Olivier Blanchard, Maurice Obstfeld, who have studied economics at MIT at about the same time and have continued to promote Keynesian macro-economic remedies, as opposed to supply-side economic remedies, in addressing economic downturns.