A new political geometry is being established in the European Union which has global geopolitical relevance. The most important features of this development are the following:
– The pressing need to sustain Euro through deep economic reforms and political reforms has been and will play an important part in reshaping the institutional setup and the power distribution system in the EU;
– Germany has emerged as a new and less and less “reluctant” European hegemon;
– The United Kingdom has been and will be distancing itself from the EU. Moreover it will probably be faced with prolonged internal troubles (such as the issue of Scotland). These factors will result in loss of regional and international clout;
– France’s economic and political malaise is set to continue which will risk the country’s long established position as member of the Franco-German tandem without which no important EU-wide political reforms are possible;
– Poland, sensing the weakening of the UK and France has started to implement a new geopolitical agenda by presenting itself as a key European player both internally and externally and as an indispensable partner for Germany;
– In the second half of 2014, a new political cycle with new European Commission and European Parliament starts;
– An important new external factor is the re-emergence of an assertive Russia which will result in significant policy shifts in the EU (foreign and security policy, energy policy, and enlargement policy);
– A more clearly institutionalized two-speed Europe has become a realistic option for the Union, not at all a taboo any longer.
As a result, the EU member states (both the political class and the public) have to be prepared to accept these new political realities and also have to find institutional and political solutions to handle issues such as the future role of the UK in the European construct, the relations with Turkey, Ukraine and Russia, and to guarantee the long-term sustainability of the common European currency.
A radically different European political framework is appearing before our eyes. And in this new space the role of Europe’s major powers will change, and there will also be a shift in the relative weights of countries. Germany will be the greatest beneficiary of the rearrangement: it will clearly be the regional primate. Almost right across the spectrum, the German political elite supports closer integration, which will assist in mitigating fears of German hegemony, but the German-French tandem will no longer be regarded as a partnership of equals. History (and necessity) has made the economy – and the common currency – the driving force of federalism, rather than political institutional development or the construction of a European cultural identity, which would have favored the French.
The French wanted the euro – and the whole process of integration – as a means of keeping the Germans in check, but in reality the opposite happened. The principles of France’s European policy – the multiplication of French power and capacities at the European and global levels and categorical inter-governmentalism – have been sorely wounded. France’s elite must decide what to do with an EU in which Germany is once again powerful and where the supranational principle is coming more and more into view. Without the French, there is no Core Europe, but they too are aware that it will be called “Kerneuropa”.
the German political elite supports closer integration, which will assist in mitigating fears of German hegemony, but the German-French tandem will no longer be regarded as a partnership of equals
Germany (“being too big to hide, too suspicious to lead”) needs to redefine its European and global role. The two are obviously very much interlinked. It seems obvious that the low profile it has been performing in global and especially regional issues is no longer an option. During the Eurocrisis its pivotal role in the EU has become crystal clear. So has the weakness of France, who also needs to redefine its European role, which will probably mean the acceptance of the fact that not even pretending to be equal with Germany is credible. In any case Germany will need partners in the so-called European construction, since no one will tolerate any unilateralism and rightly so.
Germany has made efforts to keep the UK on board but it seems more and more improbable. In the new European space, the United Kingdom will probably be the biggest loser. In late 2011, British politicians accepted the multi-speed model, having excluded themselves from the first time by not signing the Stability Treaty that sets new rules for the economy. True, the British immediately began organizing a bloc of non-euro-zone members around themselves, but this will have no real significance in the future. It suffices to mention the failure of EFTA or to consider Poland’s ambition to join the euro zone. The British loss of weight in Europe will not be counterbalanced by their “special relationship” with the United States – which has anyway become rather empty, particularly under the Obama administration. Indeed, by turning their backs on Europe, they may even be risking an acceleration of Scotland’s journey to independence. The UK legally is inside the EU, but not psychologically. No matter if the vote on its EU-membership takes places or not in 2017, the question of UK’s place in Europe will not go away. Most probably the answer to this question will be a no.
So the UK is distancing itself from integration, thereby creating an environment to press on with establishing Core Europe inside the EU-28. For eurozone key countries surrendering more of their sovereignty will be far less painful than a euro meltdown. Chancellor Merkel seriously believes that the demise of the euro would be the downfall of the EU.
With the UK drifting apart and France being bogged down in its economic malaise that prevents it to focus on long-term European strategy, a new candidate has emerged to come to the rescue, namely: Poland. It is obvious that Poland is no match to the UK or France on any important counts (economy, diplomacy, military) and it is not even inside the elite club of the EU, the Eurozone, nevertheless, sensing the shifts in the political status quo inside the EU, their main thrust is to get as close to the key political decisions and to Germany as possible. This entails that, although Poland does not yet fulfil the Euro-entry criteria it pushes hard with the issue, and primarily not for economic but for political reasons. Not only because more and more issues are decided within the Eurozone leaving the non-euro countries out, but there is a good chance that a more pronounced and politically diverging two-speed system will emerge of which the natural (although not perfect) basis may be the currency union.
One has to be clear: it is extremely difficult to foresee future developments, especially the specific positions of the various member states if, or when, the quantum leap occurs. It is a fact, however, that barely a year ago no one could have imagined the member states taking action so soon to amend the Lisbon Treaty, the adoption of which had been associated with so much grief and pain. Yet this is what has happened. In the long term, however, tiny steps will not be enough to deal adequately with the challenges of an increasingly heterogeneous union operating in an environment of growing uncertainty.
The current 18-member euro zone itself is far from being a certainty in the long term, as economic weakness in Greece and a potential referendum in Ireland (if tax harmonization will be requested to reinforce economic policy co-operation among members of the currency union) will probably lead to the exit of those countries from the zone. For the latter, this will also amount to a failure of its efforts to secure independence from the UK. Other euro zone members (in the south and the east) may well find themselves in a similar situation if they are unable or unwilling to keep pace with what is required of them.
If economic and political developments in the long term so dictate, in theory, there is a possibility that the EU – having admitted to its inability to operate the monetary union properly and acknowledging the market and political risks – will withdraw the euro from the market intentionally, doing so with a professionalism to match that displayed at the time of the euro’s introduction ten years ago. But this is only a theoretical possibility; in practice, it is almost unimaginable. So the present generation of political leaders of Europe, the generation, which appears to have lost the globalization contest, will have no choice but to act, to escape forward towards a (multi-speed) political union. Of course, all of this is an extremely dubious project plagued by many uncertainties.
Economy and politics walk hand in hand in the process of European integration. This has been clearly seen during the years of the euro crisis. During the worst crisis ever experienced by the EU as from 2008, the euro was not seen as the solution, rather than the source of the problem. But in fact, the lesson from the recent malaise is that the policy system behind the common currency needs significant reinforcement.
The euro is one of the most sophisticated results of the process of modern European integration. It is also a symbol of peaceful collaboration between European countries, which has been accompanied by, or has resulted in, unprecedented levels of peace, stability and prosperity in Europe.
In order to restore confidence in the single currency zone, a high-level fiscal union must be created, which may require further measures of economic integration, such as the creation of a European finance minister, a far bigger EU budget, and an effective bank supervisory authority at euro-zone level. Not all members will be able or willing to go that far in the medium term. A two-speed Europe – as we saw it- has already come into existence in reality with the UK’s decision to stand aside.
The European Union has tried to establish a monetary union without a political union, but it has become increasingly clear that both are needed – or neither
Nevertheless, the dynamics of integration is uncertain. This is partly because the alliance between the 18 current members of the euro zone is not a stable formation per se; for many of them, the bar will be set too high, and they will not be able to accept the degree of harmonization needed. An additional factor is that integration is to proceed on an intergovernmental – rather than supranational – basis, and there will be a need to clarify the roles of the EU bodies, in particular that of the European Commission.
By creating the euro (which was in many – especially in economic – respects either an irresponsible enterprise or a visionary act, depending on one’s perspective), Europe crossed the Rubicon: it pushed integration to a point of no return where it either presses on with a fiscal and economic union or must bear the dire economic and social consequences of a break-up of the common currency. As Ottmar Issing puts it: Der Euro “is still an experiment whose outcome seems likely to remain uncertain for a considerable time to come.”
Euro-related challenges are not only factors: Europe at the beginning of the 21st century is facing not only a financial crisis but also a political crisis (caused in part by the economic crisis). It is a political crisis in the sense that the political institutions established after World War II, including those of the EU, have lost the confidence of the electorate. Society and the economy are undergoing rapid change. For many, such change is an opportunity, but for even more people it is a threat. This undermines society’s confidence and leads to the chronic rejection of political institutions and a widening of the chasm between the elite and the man in the street. The welfare model that was designed to prevent a repetition of the disastrous social problems of the interwar period is now in a crisis, thereby jeopardizing the social peace that was based on keeping the middle-classes satisfied. This in turn has added to economic and social tensions caused by immigration and to a hysterical fear of globalization. In the view of many, globalization – or as the anti-globalists call it: the unbridled competition of dog-eat-dog capitalism – finds embodiment in the European Union. It is therefore not accidental that there is a growing rejection of European integration, accompanied by a general rejection of the political mainstream.
In the history of European integration, crises have acted as the triggers of major political and institutional changes. Europe and the EU face many external and internal challenges, the scale of which has grown in recent decades (greater international competition, a whole series of demographic, social and budgetary problems). Member states have often made feeble and belated responses to such challenges with delayed reforms and poor management of immigration and demographic trends. At the same time the European Union has not been more robust either (weak and eventually failed policy visions as the Lisbon program, diplomatic and geopolitical difficulties due to the lack of a common EU position, years of impasse after the failed European constitutional project, etc.)
Historically speaking, hostility, rivalries and war are the norm on the European continent; periods of peaceful co-existence are the exception. Also, in historical terms, modern European integration (voluntary cooperation between sovereign states, based on the respect for common laws, and which was launched after World War II with a strengthening of economic and commercial relations but with the primary purpose of pacifying Germany) is a vulnerable formation. As a consequence, peace and solidarity on the European continent may soon be replaced by growing hostility – if the economic situation deteriorates and becomes crisis-ridden in a geopolitical milieu that is increasingly unstable. The fate of the boldest achievement and symbol of EU integration – the common currency – is intertwined with the fate of integration as a whole: an anarchic collapse of the euro would be accompanied by the break-up of the EU and political paralysis in Europe.
The euro is fundamentally a political and symbolic creation; in its present form, it does not have firm economic foundations. In light of the above it is in the interest of the EU to save the euro by establishing a strong economic union. With its present architecture, rules and stakeholders (whether they are the EU-28, the EU-26 or the EU-18), the European Union is incapable of moving forward at the right speed and depth. In addition, European public opinion gives a cool reception to any initiative coming from above, from Brussels. The European Union – it seems – faces two possible scenarios in the long term. Under the first scenario, it passively allows the centrifugal forces (markets, member-state sabotage, public disinterest) to break it up or it ceases to exist in its present form, with the unplanned termination of the euro. All of this would be temporarily accompanied by an extremely grave crisis. Under the second scenario, in the extended lands of Charlemagne (Karolus Magnus) a new intergovernmental treaty may be adopted, resulting in strong economic policy integration and preserving the euro.
The second and third groups of countries could join later based on new conditions (which would be far stricter than they are today) if they wish so. The historical and European lesson is that regional integration projects are far from everlasting, and often the temporary break-up of a poorly designed form of integration is the key to a restructured formation that guarantees long-term survival. Historical experience shows that monetary unions are successful when they have among their members at least one economic power-house acting as the engine. Central institutions are also needed to control and enforce the rules.
The most successful ones are preceded by a political union, as in the case of the USA, the UK or Germany. Price and wage flexibility is a fundamental criterion, so that wages can be limited in poorly performing regions, just as inter-regional transfers can be useful. Fixing and applying criteria on economic convergence also prove to be necessary. In the Eurozone, we can hardly talk about real flexibility of labor markets, just as we cannot talk about a political union either. The EU budget is not designed for major income transfers either, as it only disposes of 1% of GDP. The Eurozone meets all of the remaining conditions. The US federal budget is around EUR 3.3 trillion, compared with the EU “federal” budget of roughly 120 billion euros, a good part of which is transferred to non-Eurozone countries. The difference between the internal transfer capabilities of the two monetary unions is obvious. In any case, the euro was created by politics. Politics must also help preserve it. As André Sapir and Jean Pisani-Ferry put it: the euro area needs fewer routine procedures and more ability to act in times of real crises.
The question is whether the present crisis, which threatens the existence of the most important achievement of European integration – the common currency – will lead to a “quantum leap” towards closer political integration and a multi-speed Europe. It may indeed result in any of the two.
In any case in the medium term, Europe must prepare itself for a decade of sluggish economic growth. The gap in economic, social and political development within the Eurozone will only widen unless there is a major change of direction in the integration process. In the long term, the European welfare state is unsustainable in its present form (cf. ageing and shrinking populations, budgetary over-extension, an increasing competitive disadvantage vis-à-vis Asia). For this reason alone, it would seem sensible to pool European resources and to aim for a common European political and geopolitical agenda. But that will be the result of economic necessity rather than rationality.
A lot of discussion is taking place about political union. But one thing has to be clear: not any form European political union should or could mean the formation of a regional world government or the elimination of Europe’s nation states. The nation state is a European invention, and Europe’s nations will never be dissolved into an all-embracing pan-European political unity – if for no other reason than because for Europeans a sense of European identity barely exists, and Europe does not have a common language like the United States does. Political union could mean closer political integration, a real common foreign policy, a real European (or Eurozone) president, real European parliamentary elections, a real (perhaps Eurozone) budget, and a truly common economic policy. It could also mean unified European representation (a single seat and a single voice) in international organizations as well as stronger pan-European symbolism in daily life. The euro would still not be backed by a real country, but there would be regional integration with a far stronger political profile.
Currently, the key question concerning the future of European integration is whether or not a currency without a country is viable. The European Union has tried to establish a monetary union without a political union, but it has become increasingly clear that both are needed – or neither. Some thought that this ambiguous situation would lead to a great crisis, forcing the EU to establish closer political integration. That is to say, what cannot be achieved through nice words, will happen under pressure – as has been the case so many times before. Angela Not only is the common currency without a country; it also has no backing in the form of political institutions or even the basic foundations of economic integration. The EU barely has a budget: in a modern market economy, the budget amounts to 40-50 percent of GDP, while the EU budget amounts to just one percent of European GDP. Moreover, money is not spent on things that a “normal” budget would target, but for very different purposes, such as farm subsidies – which still account for almost every second euro spent. These factors add up to a budget ill equipped to make significant transfers between Eurozone members at different levels of development and in different stages of the economic cycle. An even more important deficiency of the Eurozone is its lack of a common economic policy and the cumbersome decision-making with unanimity required, for instance, to adopt common fiscal rules.
A closer union in fiscal and economic policy terms – a European finance minister, Eurobonds, common financial supervision, a closely coordinated economic policy – seems inevitable, as does, in certain respects, a political union. All this will require a new treaty, an amended ECB statute, and above all political will. Closer integration may certainly be envisaged in the form of a multi-speed union.
Despite its undoubted successes, modern European integration is – in historical terms – a fragile construct. The main reason for this is the absence of a precise self-definition. Europe is still a nascent formation, consisting of political compromises, a common system of law, a common economic zone, and a collection of political and institutional responses to crises. Although the peoples of Europe have lived side by side for thousands of years, they do not share traditions, living myths, a common identity or language; nor do they project a single image towards the outside world. The political class and the intellectual elite are just as divided: some want more Europe, while others think that even the present level of cooperation is far greater than desirable. The underlying reason is that no one has a clear picture of the function, goal and future development of the EU; there is no agreed vision. Several political analysts and European politicians themselves are skeptical regarding the need for a declared political vision for the European integration. It seems that this view is less and less sustainable.
Member states and EU institutions will have to agree on how to guarantee the long-term sustainability of the common currency, and how take the European citizens on board for this especially because most of the steps need to be taken will have significant consequences on national sovereignty. This is in itself a colossal task: the result of the 2014 European elections clearly demonstrated the fatigue or even the enmity of the public vis-à-vis the European project. Nevertheless the grand design of an institutionalized two-speed Europe that makes room for the UK, and maybe Turkey and Ukraine will also have to be on the menu. During the political cycle that starts in the second half of 2014 in Brussels, the economic, political and geographical setup of the EU will be looked at and probably will be significantly rearranged.
– Issing, Ottmar: Europe: Common Money – Political Union? European Central Bank, 1999. Frankfurt
– Judt, Tony: Postwar – A History of Europe Since 1945. Pimlico, London, 2007.
– Khanna, Parag: The second world – empires and influence in the new global order. Random House, New York, 2008;
– Marján, Attila: Europe’s Destiny. Johns Hopkins University Press, 2010, USA;
– Marján, Attila: The Middle of the Map. John Harper Publishing, 2011, London
– McCormick, John: The European Superpower. Palgrave Macmillan, 2007.
– Mennon, Anand – Schain, Martin A. (ed.): Comparative Federalism – The European Union and the United States in Comparative Perspective. Oxford University Press, 2006.
– Moisi, Dominique: The Geopolitics of Emotion – How Cultures of Fear, Humiliation and Hope are Reshaping the World. The Bodley Head, London, 2009.
– Moravcsik, Andrew: Europe: Quietly Rising Superpower in a Bipolar World. Princeton University, 2009. www.princeton.edu/~amoravcs/papers.html
– Pisani-Ferry, Jean – Posen, Adam: The euro at 10: The Next Global Currency? Bruegel/Peterson Institute for International Economics, Brussels, 2009.
– Pisani-Ferry, Jean, et al.: Coming of Age: Report on the Euro Area, Bruegel Blueprint 4. p.4. 2008, Brussels
– Siedentop, Larry: Democracy in Europe. Columbia University Press, New York, 2001.
– Timo Baas and Herbert Brücker: EU Eastern Enlargement: The Benefits from Integration and Free Labour Movement;
Ottmar Issing: Europe: Common Money – Political Union? p. 6. European Central Bank, 1999.
Note that the UK and the Czech Republic has not signed the Stability Treaty
Pisani-Ferry, Jean, et al.: Coming of Age: Report on the Euro Area, Bruegel Blueprint 4. p.4. 2008, Brussels
The French Dispatch: The Year 2022 and European Security
2021 has been rich in negative events for European security: the world has witnessed the collapse of the Open Skies Treaty, American-French discord concerning AUKUS, the termination of the official dialogue between Russia and NATO, and the migration crisis on the Polish-Belarusian border.
Over the past year, the Western countries seem to have been searching for new strategies. Since the end of 2019, NATO has been developing a new concept, and in June 2021 at the summit in Brussels, to the displeasure of sceptics, it was possible to agree on its basis—the transatlantic agenda NATO 2030 (# NATO2030) . While the broad formulations and a direct hierarchy of threats still require clarification, new projects in the field of weapons development, combating climate change, and increasing interoperability have already been declared.
In parallel, since the end of 2020, work has continued on the EU European Parliamentary Research Service project—the Strategic Compass. The dialectic between Atlanticism and Europeanism softened after Joe Biden came to power in the United States, but the European interests and red lines retain their significance for transatlantic relations. In 2022, together with the rotating post of the President of the EU Council, the role of a potential newsmaker in this area has been transferred to Emmanuel Macron, who feels very comfortable in it.
On December 9, the provisions of the Paris programme were published under the motto “Recovery, power, belonging” France, as expected, is reiterating its call for strengthening European sovereignty. The rhetoric of the document and its author is genuine textbook-realism. But now for the entire European Union.
Objectives of the French Presidency, are not articulated directly but are quite visible—making the EU more manageable and accountable to its members, with new general rules to strengthen mobilisation potential, and improve the EU’s competitiveness and security in a world of growing challenges.
Paris proposes reforming the Schengen area and tightening immigration legislation—a painful point for the EU since 2015, which has become aggravated again in recent months. This ambitious task has become slightly more realistic since Angela Merkel’s retirement in Germany. At least a new crisis response mechanism on this issue can be successful, even if it is not fully implemented.
In addition, the Élysée Palace calls on colleagues to revise the budget deficit ceilings of the Maastricht era to overcome the consequences of the pandemic and finally introduce a carbon tax at the EU borders. The latter allows for a new source of income and provides additional accountability for the implementation of the “green” goals by member countries.
The planned acceleration of the adoption of the Digital Markets Act (DMA) and Digital Services Act (DSA), developed by the European Commission at the end of 2020, is also aimed at unifying the general legislation and consolidating the European position in the world. In other words, the French Foreign Ministry quite soberly assesses the priority areas and vulnerabilities of the European Union and focuses on them, but with one exception.
A special priority of the French presidency is to strengthen the defence capabilities of the EU. On the sidelines, the French diplomats note that the adoption of the Strategic Compass in the spring of 2022, as originally planned, is a fundamental task, since otherwise the process may be completely buried. With a high degree of probability, this is so: the first phase of the development of the Compass—the general list of threats—lasted a year, and consisted of dozens of sessions, meetings, round tables with the involvement of leading experts, but the document was never published. If Macron won’t do it, then who will?
As the main ideologist and staunchest supporter of the EU’s “strategic autonomy”, the French president has been trying for five years to mobilise others for self-sufficiency in the security sphere. With his direct participation, not only the Mechanism of Permanent Structured Cooperation (PESCO) in the defence area was launched, where France is the leader in a number of projects, but also the so-far failed European Intervention Initiative. Even without focusing on French foreign policy traditions and ambitions, the country remains a major European arms exporter and a nuclear power, where the military-industrial complex is closely affiliated with the state.
Implementing the 2022 agenda is also a matter of immediate political gain as France enters a new electoral cycle. The EU Summit will take place on March 10-11, 2022, in Paris, a month before the elections, and in any case it will become part of the election campaign and a test for the reputation of the current leader. Macron has not yet officially announced his participation in the presidential race, but he is actively engaged in self-promotion, because right-wing politicians espousing different degrees of radicalism are ready to take advantage of his defeats to purchase extra points.
The search for allies seems to be of key importance for victory at the European level, and the French Foreign Ministry has already begun working on this matter. In 2016–2017 the launch of new initiatives was predetermined by the support of Germany and the Central and East European countries. The change of cabinet in Germany will undoubtedly have an impact on the nation’s policy. On the one hand, following the results of the first visit of the new Chancellor Olaf Scholz to Paris on December 10, the parties announced the closeness of their positions and a common desire to strengthen Europe. On the other hand, the coalition of Social Democrats (SDP) was made up with the Greens and Free Democrats (FDP) who are not at all supporters of excessive involvement in security issues. What “strategic autonomy” means for France, constitutes a more restrained “strategic sovereignty” for Germany Therefore, an intensification of dialogue with Italy and Spain, which are both respected and potentially sympathetic, is likely. The military cooperation agreement concluded in the autumn of 2021 with Greece, an active member of PESCO, can also help Paris.
Gaining support from smaller countries is more challenging. Although the European project is not an alternative to the transatlantic one, the formation of a common list of threats is a primary task and problem for NATO as well. As mentioned above, it is around it that controversy evolves, because the hierarchy determines the distribution of material resources. The countries of Eastern Europe, which assume that it is necessary to confront Russia but lack the resources to do so, will act as natural opponents of the French initiatives in the EU, while Paris, Rome and Madrid will oppose them and the United States in the transatlantic dialogue. The complexity of combining two conversations about the same thing with a slightly different composition of participants raises the bar for Emmanuel Macron. His stakes are high. The mobilisation of the Élysée Palace’s foreign policy is one of the most interesting subjects to watch in the year 2022.
From our partner RIAC
Unilateral vs Bilateral Euroisation: Political, technical and practical issues in the curious case of north Cyprus
The island of Cyprus has been split between a Greek Cypriot south and a Turkish Cypriot north since 1974. The Turkish Cypriot state declared in the north is recognised only by Turkey, while the Republic of Cyprus in the south is recognised internationally and is a European Union (EU) member since 2004. In 2004, 65 percent of Turkish Cypriots voted in favor of the United Nations’ Annan Plan for reunification only for Greek Cypriots to reject it. As a result, Cyprus joined the EU as a de facto divided island. Despite joining the EU as a divided island, the whole of Cyprus is considered an EU territory. However, the EU law is suspended in the north until reunification is achieved.
This resulted in the euro being the legal tender only in the southern part of the island. With the recent and continuous depreciation of the Turkish lira, the long-standing question of whether and how the north could switch to the euro has once again intensified. While a bilateral adoption of the euro is not on the cards until a reunification on the island, north Cyprus could technically unilaterally adopt the euro. However this could cause complications in the future as the EU is adamant that unilateral euroisation cannot be used as a mechanism by Member States to circumvent the stages foreseen by the Maastricht Treaty.
Under normal circumstances, “Member States with a derogation”, i.e. the Member States that have not yet fulfilled the necessary conditions for the adoption of the euro are first required to enter the Exchange Rate Mechanism (ERM II) to achieve eurozone membership. This is a “waiting room” where any country aspiring to adopt the euro is required to stay for at least for two years. It is now a well-known fact that the ECB shares the opinion of the Economic and Financial Affairs Council (ECOFIN), i.e. the meeting of the finance ministers of EU Member States adopted in 2000, that this requirement should not be waived. Assuming the northern part of Cyprus is considered a Member State, the same principle will apply and therefore it would not be welcome to adopt the euro unilaterally, bypassing the convergence process foreseen by the Treaty for the adoption of the euro.
Currently, ERM II comprises the currencies of Bulgaria, Croatia and Denmark. Just like these countries, north Cyprus would be expected to peg its national currency to the euro and, given the consent of the European System of Central Banks, fixe a “central exchange rate” and a “deviation margin” under Exchange Rate Mechanism (ERM II) for a duration of no less than two years. If successful based on its ERM II performance, a final exchange rate would be determined and the redenomination would be done over a transition period.
In the case of north Cyprus, it is understood that the EU might have already agreed to apply a fast track approach where there would be a one-year transition period. However, this has not been confirmed officially by the EU so the EU’s stance in practice is not known. After all, even Denmark, a Member State which has negotiated an opt-out arrangement before the adoption of the Maastricht Treaty has been participating in ERM II although it chose not to adopt the euro. So the EU’s approach in the case of northern Cyprus would not expected to be too lenient. There is no way to find out unless north Cyprus continues the dialogue with the EU.
In the meantime, a more relevant question is whether a unilateral euroisation could be possible. The short answer is yes. For instance the euro was introduced in Kosovo and Montenegro that did not have a status of a sovereign state at the time. In both cases, the decision was made in 1999. Kosovo, defined the Deutsche Mark as the designated currency, which was replaced by the euro in 2002. Similarly, Montenegro introduced a parallel currency system in 1999, in which the Deutsche Mark was allowed to circulate alongside the then legal tender. In 2001, the Deutsche Mark became the only legal tender and was replaced by the euro in June 2002.
In the case of Montenegro, now an official EU candidate, the adoption of the euro without an agreement with the European Central Bank (ECB) was acknowledged by the European Commission as a measure which had to be taken due to “extraordinary circumstances” present in the country at the time. This could be precedent for north Cyprus. However, it is important to note that the ECB still supports the view that unilateral euroisation is not compatible with the Maastricht Treaty and cannot be a way to bypass the convergence process.
The implications of the Treaty framework for in the case of Montenegro currently remain unknown and are expected to be detailed “by the time of possible future negotiations for accession to the EU”. In particular it remains uncertain whether the country would be required to introduce its own currency before it can join ERM II. Should this be the case as Montenegro makes further progress towards EU membership, this would entail substantial operational and changeover costs. Authorities in north Cyprus, should therefore monitor the developments very closely.
Normally, non-euro area Member States are denied the option of unilateral euroization due the principle of equality, i.e. the EU considers bypassing the convergence process incompatible with the EU Treaty and actively discourages it.In particular, the Treaty sets out that there has to be a Community assessment of the fulfilment of these criteria and mutual agreement on the appropriate exchange rates. This means that the ECB does not welcome unilateral euroisation, as such an adoption of the euro outside the Treaty process would run counter to the underlying economic reasoning of European Monetary Union.
However, as north Cyprus is already an EU territory the adoption of the euro could be considered a “common interest of the EU” and therefore an exception could be possible. In fact, the policy of the EU with regard to the Turkish Cypriot community which was set out by the General Affairs Council in 2004 states that “the Council is determined to…facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community”. So in the case of north Cyprus, a switch to the euro could be allowed by way of exception although this would obviously imply circumventing the process of multilateral assessment by the EU Member States.
While the EU could give the green light to adoption of the euro by north Cyprus without a successful exchange-rate procedure under ERM II, it would not allow this to undermine the process of convergence prior to the adoption of the euro. In other words, the Convergence criteria outlined in the Maastricht Treaty would still remain relevant and important as the Treaty requires Member States to achieve a high degree of sustainable economic convergence before they can join the euro area.
In other words the economies of Member States with a derogation must be able to keep pace with those already using the euro. Exchange rate stability, for instance, is evaluated by assessing whether the exchange rate of the country’s currency has remained within the fluctuation bands provided for by ERM II for at least two years without devaluating against the euro.
Besides exchange rate stability, the convergence criteria also include price stability, sound public finances, and convergence in long-term interest rates. This means, for instance, that a country’s long-term interest rate, measured on the basis of long-term government bonds or comparable securities, should not exceed that of the three best-performing Member States in terms of price stability by more than 2 percentage points during the one-year observation period prior to the assessment.
On the other hand, a country is considered to meet the price stability criterion if its average inflation rate does not exceed the inflation rate of the three best-performing EU Member States by more than 1.5 percentage points during a one-year observation period. These criteria are intended to ensure the sustainability of public finances and that the government is able to manage its debts.
Article 140 (1) of the Treaty on the Functioning of the European Union (TFEU) requires the European Commission (EC) and the European Central Bank (ECB) to report to the Council, at least once every two years, or at the request of a Member State with a derogation on the progress of the country in fulfilling their obligations regarding the achievement of economic and monetary union. In addition to preparing these “Convergence Reports”, both the ECB and the Commission regularly monitor progress throughout the year.
A Convergence Report is normally published at least once every two years or at the request of an EU Member State which would like to join the euro area. Both the ECB and the European Commission issue these reports describing the progress made by non-euro area Member States towards achieving the criteria necessary for a country to adopt the euro. According to the latest report, among countries legally committed to adopting the euro, Croatia and Sweden fulfil the price stability criterion, Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the criterion on public finances, Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the long-term interest rate criterion. However none of them meet all the requirements for adoption of the euro. So convergence process is very strict and challenging.
In particular, it should be noted that convergence must be sustainable, meaning that satisfying the economic convergence criteria at one point in time is not enough and they are expected to be met on a lasting basis. A Member State’s general financial position is considered sustainable based on two criteria, namely, the government’s annual fiscal deficit should not exceed 3% of gross domestic product, and overall government should not exceed 60% of gross domestic product. This is very important for northern Cyprus as it will need to ensure that its economy is resilient.
It is known that the Maastricht Treaty provides some flexibility and the final assessment depends on the ECOFIN Council. Whether and how this would apply in the case of northern Cyprus remains a mystery. While details remain unknown to the public, the one-year transition period envisaged in the case of northern Cyprus could be related this. However, it should be noted that the decision on whether north Cyprus can adopt the euro would ultimately be a political one and would lie with the Council of the European Union. This means that representatives from all EU countries would be required to take a decision based on a proposal by the EC and after consulting the European Parliament.
Given that participation in the ERM II is a precondition for as well as fulfilment of the nominal convergence criteria to join the euro, it is binding and is unlikely to be waived for any country regardless of any special circumstances. This is because ERM II provides the framework to manage the exchange rates between EU currencies, which is necessary for exchange rate stability. As such north Cyprus would be expected to participate in the mechanism without devaluing its central rate against the euro before it can qualify to adopt the euro.
While no provision of the EU Treaty states explicitly that Member States with a derogation must have their own currency, the Treaty is by and large based on this assumption. In addition, the entry into ERM II is decided by mutual agreement of all ERM II parties, which consist of the ministers of the euro area Member States, the President of the ECB and the minister and the central bank governor of Denmark, as the only non-euro area Member State currently participating in the mechanism.
So in the case of north Cyprus adoption of the euro could mean that the country should first introduce its own currency. This could be a more viable alternative and north Cyprus could then peg its currency to the euro as a preparation for an eventual switch to the euro. Indeed, some countries joined ERM II with their preexisting currency pegs. To give a recent example, the currencies of Bulgaria and Croatia were already closely tied to the euro at the time of applying to the ERM II. Bulgaria had a currency board, first with the Deutsche Mark, and subsequently with the euro after 1999. Croatia had a peg first with the Deutsche Mark, and from 1999 to the euro, with a narrow band.
During this process, legal requirements should not also been underestimated. Article 140(1) of TFEU requires the convergence reports to assess the compatibility of national legislation, including the statutes of the national central bank and the Statute of the European System of Central Banks and of the ECB. There could also be additional unprecedented requirements and countries may be required to commit to implementing specific policy measures on a variety of topics. For instance, in the case of Bulgaria and Croatia, such requirements range from the anti-money laundering framework, state-owned enterprises and the insolvency framework, to the non-banking financial sector, corruption and even organised crime. It is highly unlikely that the national legislation in north Cyprus is currently compatible with that of the EU as the latest convergence report suggests that the respective national legislations in none of the seven new EU Member States would be deemed “fully compatible” with the exception of Croatia.
In fact, the former north Cyprus President Mustafa Akıncı himself had confessed that “serious work” would needed to ensure the harmonization of the national institutions with the EU acquis. As can be seen in the case of Croatia and Bulgaria, this has now become a prerequisite not only for joining the EU but also in terms of adopting the euro as a new Member State. For instance, this was the main reason behind the delay in Bulgaria’s acceptance to ERM II. Bulgaria was able to get the green light to join ERM II two years after it formally announced its intention to join the mechanism.
The delay was due to the requirement imposed by the Eurozone governments requiring Bulgaria to join ERM II and the Banking Union simultaneously. This prerequisite is known as “the Cooperation Decision” and requires Member States which adopt the euro to also participate in the Banking Union, i.e. the Single Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF). . Therefore, participating in ERM II with a view to later adopting the euro will also involve preparing for joining the Banking Union.
This requirement will now apply to all future candidates including north Cyprus. However, it should also be noted that the procedure for entering the Banking Union is separate from the assessment of the convergence criteria. Joining the Banking Union is irreversible and involves direct powers of the SSM and the SRM over its banking system. This has important implications for the banking sector as banks that will come under the direct supervision of the ECB will also be subject to the direct supervision of the Single Resolution Board (SRB).
To be more specific, this means that, the ECB will become responsible for the direct supervision of the significant credit institutions following the “significance assessment process”. This applies to banks considered to meet the “materiality criteria” as set out in the SSM Regulation (Regulation 1024/2013) and the SSM Framework Regulation (Regulation 468/2014). The criteria include “economic importance for the country” so could technically apply to banks in north Cyprus despite their insignificant sizes in comparison to the EU economy. Therefore, for new joiners like north Cyprus the accession process would involve not only the harmonization with the aquis but also the strengthening of their institutions and administrative capacity that will enable them to implement and monitor the enforcement of the harmonized legislation.
Therefore, adoption of the euro by north Cyprus, bilaterally or unilaterally, would not be as easy as it may look. More than anything else, this would require political will, courage and determination. The former President Mustafa Akıncı, a devoted supporter of a federal solution and the EU, had set an ambitious target of the euro going into circulation “from the first day” in the case of a reunification. However with the failure of the last reunification talks in 2017 in Crans Montana, Switzerland, political conditions have changed dramatically. The current President Ersin Tatar who is a very passionate proponent of the two-state solution is wholeheartedly against the EU and the euro. Therefore, the general stance towards the adoption of the euro in the northern part of the island remains fragmented. Given these circumstances, adoption of the euro in north Cyprus seems a distant prospect.
How Red Are the EU’s ‘Greens’?
Blood-red. But that’s a banned fact. (It will be documented in what follows.)
Here are the announced values (the “Guiding Principles”) of the European Green Party:
“Freedom through Self-Determination”
“Diversity, an Indispensable Condition”
“To sum it up, Sustainable Development”
This “Charter of the European Greens” fills-in those blanks by stringing together clichés, which 90% of the pubic will like, because they’re written so as to avoid (as much as possible) saying anything that’s broadly controversial. For example, “Our answer is sustainable development, which integrates environmental, social and economic objectives for the benefit of all.” (Oh? And how is that pap to be realized in actual policies? What are the measures, and the precise priority-rankings, when any of those values conflict with one-another, which is often?) The Green Party is simply conning liberals, but what is their reality? What are they actually doing, when in power? Inside their own country, and in the EU? Let’s take a very concrete (but broadly representative) case:
Germany, as I recently pointed out, is so corrupt that it has virtually no bans on who or what may donate to politicians. Foreign interests can donate, corporations can donate, even corporations that have government contracts (sell to the government) can donate, donations needn’t go through the banking system, donations may be accepted in any amount, anonymous donations are acceptable, etc. It’s super-libertarian. It is open-sesame to billionaires and centi-millionaires (the few people who have the most money) to control the Government by means of their ‘news’-media persuading the voters, and by means of political campaign donations to present the billionaires’ favored candidates’ viewpoints in the most favorable way — and their least-favored candidates in the least favorable way. It’s control by dollars, instead of control by voters. That’s libertarianism.
A March 2015 academic study showed that, of all 28 EU member-nations, the only five that were more corrupt than Germany were Malta, Austria, Denmark, Ireland, and Netherlands. Then, on 10 June 2015, a Pew survey in Germany, Poland, Spain, France, Italy, UK, U.S., and Canada, showed that, among those 8 countries, ONLY Germany (and by a big margin: 57% to 36%) opposed Ukraine joining NATO. However, when German and foreign billionaires s‘elected’ the new German Government that became installed on 8 December 2021, it appointed as the Germany’s new Foreign Minister the Green Party’s losing candidate for Chancellor, Annalena Baerbock, whose entire career as a candidate and as an official was the most notable for her strident advocacy for hostility toward Russia, and for Ukraine to be admitted into NATO (the anti-Russian U.S. military alliance). She thus became — though she lost her campaign for the Chancellorship — the most powerful Green Party politician in Europe or anywhere.
Immediately, she reversed Angela Merkel’s policies which had allowed the Russian-Swiss-German natural gas pipeline from Russia to Germany, Nord Stream 2, to be constructed to bring into the EU the least expensive of all gas to Germany, which is Russia’s pipelined gas. Gas-prices in Germany are now already soaring, and Germans will increasingly freeze, as a result of this ‘German democracy’ and its obedience to its billionaire masters in America.
However, many European billionaires are also being served by this ‘Green’ Party. Much like America’s Democratic Party (or liberal) billionaires, Europe’s liberal billionaires have been investing heavily in ‘green’ technologies, and are betting against their opposition, conservative billionaires, who are still committed to fossil fuels. So: the ‘Green’ Party represents liberal billionaires, against conservative billionaires.
On 8 September 2021, “Capital Radar” newsletter bannered “‘Most important choice for the next 100 years’: 1.25 million euros from the Netherlands for the Greens” (“„Wichtigste Wahl der nächsten 100 Jahre”: 1,25 Millionen Euro aus den Niederlanden für die Grünen”) and reported that:
• A Dutch tech billionaire donates 1.25 million euros to the German Greens.
• It is the largest donation in the party’s history.
• In an interview with RND, the major donor explains why Annalena Baerbock should steer the ship of state and why the federal election is so important.
Amsterdam. The Dutch entrepreneur and philanthropist Steven Schuurman [archive.md/ZjwWW] donated 1.25 million euros to the German Greens. It is the largest donation in the party’s history. Billionaire Schuurman, born in 1975, is co-founder and ex-head of the data search and analysis company Elastic and co-founder of Atlantis Entertainment. He has already donated millions in the Dutch election campaign.
The Greens have already received large sums of money this year: the pharmaceutical heir Antonis Schwarz [archive.md/COcng] bequeathed them 500,000 euros; the Greifswald Moritz Schmidt, who got rich through Bitcoin deals, one million euros; and Sebastian Schel’s net heir, 250,000 euros. The election program for the federal election states: “Party donations should be capped at an annual maximum amount of 100,000 euros per donor.” [But Germany has separate laws for candidates, and no limits are placed on donations to them.]
Schuurman was quoted as saying that, of the three candidates for Chancellor, only Baerbock took global warming seriously. He ignored the more pressing and sooner danger of avoiding a nuclear war, on which Baerbock’s policy-commitments are rabidly anti-Russian. No U.S.-and-allied billionaires — either liberal or conservative — are opposed to that. But those policies are blood-red, and now.
At the level of the EU itself, the most powerful person over the entire European Union has been a lifelong hater of Russia, the American billionaire George Soros, who controls the Open Society Foundation and other ’non-profits’ that have poured billions of dollars over decades (starting in 1993, just two years after his self-declared war against communism in Russia had become no longer an excuse when Russia abandoned communism in 1991) into color-revolutions targeted against Russia. On 5 November 2017, Alex Gorka at Strategic Culture, headlined “The Myth of European Democracy: A Shocking Revelation”, and opened:
It’s an open secret that the “Soros network” has an extensive sphere of influence in the European Parliament and in other European Union institutions. The list of Soros has been made public recently. The document lists 226 MEPs from all sides of political spectrum, including former President of the European Parliament Martin Schulz, former Belgian PM Guy Verhofstadt, seven vice-presidents, and a number of committee heads, coordinators, and quaestors. These people promote the ideas of Soros, such as bringing in more migrants, same-sex marriages, integration of Ukraine into the EU, and countering Russia. There are 751 members of the European Parliament. It means that the Soros friends have more than one third of seats.
George Soros, a Hungarian-American investor and the founder and owner of Open Society Foundations NGO, was able to meet with President of the European Commission Jean-Claude Juncker with “no transparent agenda for their closed-door meeting.”
Many but not all of his agents at the European Parliament are Greens. U.S.-and-allied billionaires donate to all politicians that are ready, willing, and able, to advance the U.S. empire to encompass the entire world, and don’t donate to just to one Party.
Soros was a major funder of the coup-operation that started in the Obama Administration (led by Victoria Nuland under Hillary Clinton) by no later than June 2011 to overthrow Ukraine’s democratically elected President, Yanukovych, and replace him by a racist-fascist (or nazi) anti-Russian regime and to seize Russia’s largest naval base, which was and is in Crimea, to turn it into a U.S. naval base. (Putin was able to block the latter attempt.) Hillary and Obama had first met with Yanukovych in 2010 and failed to persuade him to push for Ukraine’s NATO membership in NATO, but he said no — NATO then was very unpopular among Ukrainians. During 2003-2009, only around 20% of Ukranians wanted NATO membership, while around 55% opposed it. In 2010, Gallup found that whereas 17% of Ukrainians considered NATO to mean “protection of your country,” 40% said it’s “a threat to your country.” Ukrainians predominantly saw NATO as an enemy, not a friend. But after Obama’s February 2014 Ukrainian coup, “Ukraine’s NATO membership would get 53.4% of the votes, one third of Ukrainians (33.6%) would oppose it.” Obama turned Ukraine around — from being a neutral country on Russia’s border, to being a nazi anti-Russian country. And Annalena Baerbock is a strong backer of today’s nazi Ukraine.
However, the ‘Green’ Party is green in one way: it follows the dollars, not the voters. Other than that way of being green, it’s really only blood-red. Even the ‘Green’ Party’s proposed policies against global warming are futile to prevent global burnout, and they ignore the only policy that, even conceivably, might halt global warming: to outlaw the purchase of stocks and bonds of fossil-fuel-extraction companies. So: they are total fakes. The response of billionaires is to bet either for crackpot business-ventures to halt global warming, or else for extending yet further into the future the use of mainly fossil fuels and ignore even the pretense of caring about the welfare of the generations yet to come. In other words, all billionaires, both liberal and conservative, are really only blood-red, for expanding yet further their empire, in the final analysis.
This doesn’t come from what the voters want; it reflects ONLY what the billionaires want. Here are some data showing that despite all the billionaires’ propaganda for expanding yet further the U.S.-and-allied empire, a majority in some countries — including Germany — don’t want it:
Only Germans “oppose Ukraine joining NATO”: 57% to 36%
“Ukraine Joining EU” opposed by Germans 54% to 41%, opposed by French 53% to 46%
“Oppose Supplyiing Ukraine with Arms Against Russia: Germans 77% to 19%, French 59% to 40%, Italians 65% to 22%.
In 2013, the median favorability of Russia in the EU was 37%; by the time of 2015 it had become 26% — 26/37 or 30% less than only two years earlier, which is to say prior to
Obama’s having grabbed Ukraine in a very bloody U.S. coup. (Obama was the most successful heir to Hitler since WW II, and was especially successful in jeopardizing the national security of the Russians by grabbing Ukraine on Russia’s border and intensifying the anti-Russian military alliance, NATO, whereas Hitler’s attempt to conquer Russia had turned out to be an colossal failure.)
So, Baerbock — the most powerful ‘Green’ politician in Europe, and even anywhere, though she had failed at the ballot-box — gets here hate (against Russia), her warmongering, not from the voters, but from the sheer cravings of U.S.-and-allied billionaires, to expand their U.S.-and-allied empire, to encompass the entire world. That’s what she (and many Green Party politicians) push for the most.
The ‘Greens” are actually blood-red, for war.
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