The Perfect Storm

Alexander Privitera

AGI Non-Resident Senior Fellow

Alexander Privitera a Geoeconomics Non-Resident Senior Fellow at AGI. He is a columnist at BRINK news and professor at Marconi University. He was previously Senior Policy Advisor at the European Banking Federation and was the head of European affairs at Commerzbank AG. He focuses primarily on Germany’s European policies and their impact on relations between the United States and Europe. Previously, Mr. Privitera was the Washington-based correspondent for the leading German news channel, N24. As a journalist, over the past two decades he has been posted to Berlin, Bonn, Brussels, and Rome. Mr. Privitera was born in Rome, Italy, and holds a degree in Political Science (International Relations and Economics) from La Sapienza University in Rome.

The ongoing refugee crisis has exposed new cracks in the European Union. While some European leaders, including those in the German government, had been reluctant to define the debt crisis as a threat to the very existence of the monetary union in past years, they seem to be less shy about describing the impact of the growing wave of refugees and migrants on Europe’s cohesion as potentially very damaging.

What is clear is that Europe’s attention has shifted from focusing on a largely “homemade” challenge, i.e., the sovereign debt crisis triggered by Greece, to facing an external catastrophe with huge implications for the political and social stability of the old continent. Once again Germany finds itself at the very center of the storm. Appeals by the government in Berlin to show common solidarity are falling on deaf ears in many member states. To be sure, the proven institutional mechanism of finding common political ground in Brussels, and doing so in a face-saving way for all member states, still exists. Compromises are struck and quotas on the relocation of refugees are agreed upon. But so far, the wave of desperate people escaping from war-torn countries such as Syria, Iraq, or Afghanistan, continues to flow primarily into Germany. If things don’t improve on the ground, common European decisions risk becoming no more that symbolic, hollow gestures.

If common political decisions and agreed-upon rules lack teeth, the very foundations on which the Union rests start to wobble. The President of the European Commission, Jean-Claude Juncker, is aware of the critical phase the EU finds itself in, with many member states exhausted by years of crisis management, and their national governments tempted to feed their public opinion with promises of repatriation of responsibilities from Brussels to member states. A snapshot of the current European political landscape provides ample proof that the EU faces yet another defining year in its recent turbulent history.

• The results of the election in Poland, with traditional conservative nationalism making a powerful comeback, risks feeding the narrative of a Europa a la carte. While it is understandable that those who lived under Soviet rule for decades are very sensitive to matters of national sovereignty, it is also true that the EU is not an empire gobbling up countries that don’t want to join. Allowing for the role of European institutions to be reduced to that of convenient providers of financial support cannot work. Common decisions and rules are there to be enforced. They can be changed, democratically, but not ignored.
• Although the likelihood of a Brexit is still low, the danger needs to be taken seriously, given the less-than-stellar track record of the current government in London to fully comprehend the dynamics in some of the key EU capitals, notably Berlin.
• The danger of a Grexit still exists, given the difficulties the government in Athens will in all likelihood face in enforcing all the terms contained in the Memorandum of Understanding it has agreed upon in exchange for a new €86 billion bailout. Furthermore, Greece is also at the center of the refugee crisis. In the coming months its government could be tempted to mix and match challenges in order to extract further concessions from its creditors. I am not sure what Chancellor Merkel would choose if she were forced to face an eruption of two crises, Greece and refugees, both at the very same time. Past behavior should not be taken as guidance for her future actions. Merkel can be surprisingly bold when the conditions are ripe.
• The situation in the wake of the election in Portugal is not yet clear, as neither the center-right nor the left is able to form a government. The Portuguese have been exemplary in implementing the terms contained in their own bailout. Given its huge debt stock, the country can ill afford to throw things into reverse and test the credibility of the European Central Bank’s program of asset purchases that includes Portuguese bonds.

Against this backdrop and in order to counter a potentially dangerous drift, it seems that the time has come for Germany to define and propose its mid to long-term strategy for the Union. It is time to recognize that years of a cautious step-by-step approach have contributed to creating a thick fog around Germany’s view of the future of the EU. That veil needs to be lifted.

France needs to participate more actively in the debate. There are signs that it is willing to do so, but what is needed is a more determined approach. Even in a Europe of 28, it is only when France and Germany develop a common approach that things can move. This does not mean that Berlin and Paris should thrust decisions down the throat of unwilling partners. It would not work in a Europe of 28 and not even in the monetary union. But providing a credible common basis for a more open debate is key.

Merkel is reacting to the challenges posed by the refugee crisis with the necessary calm and determination. She is looking for and engaging in a direct conversation with her own citizens. That is commendable. The best way to weaken the rising populism in Germany and Europe is to confront it. Merkel is trying to explain why her country and its neighbors can only tackle the refugee crisis together. She wants a more efficient Europe. Perhaps Merkel will also draw the conclusion that she quite simply needs more of it and will soon be able to offer a more detailed view of how the Union could look in the not-too-distant future.