Economic governance reforms and Eurozone consolidation has significant institutional and political consequences: a multiple-tier integration is ever more realistic. „Out” countries seek to mitigate the negative impact of these developments. In this respect V4 – Visegrad countries differ a lot: Slovakia, a relative latecomer in economic reforms is part of the currency union. Poland, Hungary and the Czech Republic are not Euro-members.
But even this sub-group is divided: Poland intends to join whenever requirements are fulfilled while the Hungarian and the Czech governments are cool on accession. At the same time, further economic federalisation in the Eurozone is to come. Against this background, the question whether a long-term “great divide” among V4 group countries in relation to their EU policies and consequently their future situation in the rapidly altering EU will be maintained, is of key importance.
European economic integration in political perspective
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 true lesson from the recent malaise is that the institutions and policies behind the common currency need 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 more coherent fiscal union must be created, which will require further measures of economic integration in the long run, such as the creation of a European finance minister, a larger EU budget, and a fully operational banking union. Tax and even social policy coordination will also be on the to do list. Obviously not all members will be able or willing to go that far. EU members states are destined to go at different paces maybe even in different directions. A two-speed Europe has already come into existence in reality which was reinforced with the UK’s decision to stand aside. 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 harmonisation 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. These developments have consequences for the V4 Group as well in the medium term.
One has to be aware of the fact that despite its undoubted successes, modern European integration – in historical terms – is a fragile construct. The main reason for this is the absence of a precise self-definition. Europe seems still to be 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.
The federalist school holds that the time has come to establish a political union, or the alternative is a collapse of the integration project brought about by the euro crisis. Others claim that political union is not only unnecessary but also impossible in Europe. Many member states, much of public opinion and of the European cultural elite reject the idea of a political union. In addition, Europe is not yet prepared mentally for such a union. There are three reasons for this. First, the lack of common European traditions, identity and language. Second, the member states having extremely divergent visions for the European Union and holding a variety of opinions on what is the ideal economic and social model. Third, it is a physical impossibility to create a unified political union out of a Europe that has 28 members and is expected to expand continuously. Consequently, the result is a multi-speed Europe.
The UK is distancing itself from integration, thereby creating a good reason for the German-French duo to press on with moving towards Core Europe while avoiding the EU-28 setup as it is today. 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.
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 the 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 jeopardising 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 globalisation. In the view of many, globalisation – 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.
Crises are inherent to capitalism, but the crisis that began in 2008 has several unique features. The first is its rapid spread in the financial sectors of the developed world, which was due to the unprecedented interconnectedness of the world’s financial markets. Many have drawn comparisons between the current crisis and that of 1929. True, at that time too, an irresponsible deluge of credit had caused economic bubbles, but the crisis was one of over-production. In other words, the problems of the 1930s originated in production, i.e. the real economy. In contrast, the crisis of 2008 originated in the financial sector. There were no problems with the foundations of the real economy until they were rocked by the financial meltdown. But the most important feature of this crisis is that – contrary to previous ones in the second half of the 20th century – it is a crisis of the West.
The scenario is not that of a collapsing emerging economy (Argentina, Mexico, Russia, East Asia) that has proved itself incapable of implementing the operating principles of Western liberal capitalism. On the contrary, the rest of the world remains relatively stable while the economy of the West (USA and EU) seems to be cracking. Ground zero of the financial crisis was in the United States, the key archetypal capitalist actor. However, by 2011, the eurozone had become the real focus of the crisis. China, Japan, and the United States are keeping a watchful eye on the success (or failure) of Europe’s crisis management, while drawing up various strategic scenarios. Thus the crisis has crossed the Atlantic, and made the leap from the financial sector to the real economy, affecting in particular national budgets. Act two of the current crisis centres on unsustainable national budgets. This explains why, in Europe, a rescue is needed not only for the banks but also for the member states.
Clearly, the present crisis is one of the most serious ones in the history of European integration. It is fundamentally a political crisis rather than a purely economic one. It is the consequence of a downward spiral of political and economic problems that mutually reinforce each other. At its centre lies a weakness of political vision in the EU and in the eurozone. In economic terms, Europe is better placed than the USA (when one considers the level of national debt or fiscal deficit); yet it is the eurozone that has become the epicentre of the crisis. History teaches us that monetary unions are unsustainable without political coordination and a fiscal union: a major economic crisis has now made this painfully clear to the eurozone too.
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 (see weak and eventually failed policy visions as the Lisbon programme, diplomatic and geopolitical difficulties due to the lack of a common EU position, years of impasse after the failed European constitutional project, etc.)
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 the medium term, the whole of 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.
In this socio-economic context a lot of discussion is taking place about European 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 organisations 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 Merkel has a point saying that if the present crisis leads to the end of the euro, this would result in the collapse of European integration as a whole, at least in its present form.
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. A radically different European space is appearing before our very 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 clout of countries. Germany may be the greatest beneficiary of the reshuffle with its new-found regional primacy. German political elite supports closer integration, which will help mitigate fears of German hegemony, but the German-French tandem is no longer 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 favoured 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 level coupled with categorical inter-governmentalism – have been sorely wounded.
Historically speaking, hostility, rivalries and war are the norm on the European continent; periods of peaceful co-existence are the exception. Or, as prof. Anis Bajrektarevic rightfully questions our deceiving wonderworld: “Was and will our history ever be on holiday? From 9/11 (09th November 1989 in Berlin)… to the Euro-zone drama, MENA or ongoing Ukrainian crisis, Europe didn’t change. It only became more itself – a conglomerate of five different Europes”. 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 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). 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 labour 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 US federal budget is around EUR 3.3 trillion, compared with the EU “federal” budget of roughly 140 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.
This is the economic and political framework in which V4 countries (Hungary, Poland, Slovakia, Czech Republic), deeply integrated in the EU’s internal market and in the case of Slovakia as member of the Eurozone, should navigate.
The case of the V4
The close link between economy and politics has been clearly demonstrated during the years of the euro crisis when the euro was often 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 way V4 countries approach the Euro accession and crisis management is also a mix of economic and political features.
Firstly, a few remarks on the V4 Group itself. The loose alliance of the four central European EU member states, namely Hungary, Poland, Czech Republic, Slovakia until introduction of the “double majority” voting in the EU in late 2014 had equal number of weighted votes with Germany and France put together. If counted as a single nation state, V4 with its sixty four million inhabitants would rank 22nd in the world and 3th in Europe. Moreover it is the seventh largest economy in Europe and the 15th globally. The Group had a significant blocking, therefore policy-shaping power in the EU. The V4 Group functions as a leverage of influence for their members not only in Council voting but also in diplomatic dealings. Chinese, Turkish, or Indian political leaders have been much more open to contact the Group as opposed to deal with members individually. V4 has also gained a certain appeal in the eyes of other countries in the region, but the alliance wanted to keep its doors closed until now.
From November 2014 though, the double majority replaced the current weighted voting system. According to the new rule the support of 55% of the Member States representing 65 % of the overall population of the European Union will be required. The new system significantly modifies the power distribution by strengthening the influence of big Member States – with a population of 60 million; Spain and Poland will lose their big Member State status and medium-sized countries’ – between 2 and 11 million inhabitants – voting power will be reduced dramatically. Germany and France will gain increased blocking capacities but V4 countries will not be able to form any blocking coalition any longer. Even the new Member States joined in 2004 and 2007 will not be able to block decisions under the new system. So with the new voting rules, plus and more importantly the largely diverging visions on decisive European issues, and with some of the states in some out of the Eurozone, and especially with Poland with way more significant geopolitical ambitions and Hungary’s political isolation (more on these issues later) the V4 cooperation will probably get less and less relevant.
As a start it is obvious that these countries are integral part of the European economy with Germany playing a key role as export and import market.
Table 1.: Share of EU in V4 countries’ export and import
The above table clearly shows the deep integration of the V4 countries in the EU market, especially on the export front. As far as import is concerned one has to bear in mind the fact, that these countries are dependent to a great extent on Russian energy sources which shows in the overall geographical distribution of imports
Differences: great divides to stay?
But homogeneity seems to stop here, since the success rate of the V4 countries harnessing the benefits of EU membership differs a lot. Some of the new members were more successful than others in using EU-accession as an economic and modernisation leverage by halving the number of people living in poverty and raising the per capita GDP by almost fifty percent. Bratislava, and Prague is richer than Vienna and Budapest also comes close. This is in itself a spectacular development. At the same closing the wealth gap and decreasing internal territorial wealth gaps in individual V4 countries is much less of a success story in the case of Hungary and to a lesser extent in all the four new member states, although there are major differences in this respect.
Different development paths walk hand in hand with different policies, which indicates that economic success and political decisions are interlinked to a great extent in the region. This linkage seems even more pronounced than in the case of old member states. This stems from the fact that politics in general and the direction in which the political class wants to direct the country is more important in this region in terms of end results both in political and economic terms. A new government in the V4 countries can have dramatic impact on the geopolitical, EU-political and economic policy path the country takes. Long-term political stability is still in nascent form, or in a more pessimistic tone: is a rarity in the region. This is due to lack of self-conscious civil society, stable institutions and as a result: a hyperpuissance of the political classes.
There is obviously a clear difference in the group when euro-status is considered. When it comes to EMU issues, the four countries are in different position and have differing views. But this is only partly justified by economic factors or by the fact that being in or out makes a significant difference. It is also stemming to a great extent from political considerations.
When considering the most important economic trends and features of the first decade of EU-membership of the V4 countries, growth, competitiveness, per capita GDP and obviously the Maastricht-related indicators are worth being analysed. Although one can draw remarkable conclusions from this analysis related to the specificities of the economic development of the four countries in question, the key finding is that Euro-accession is a function of the combination of the existence of the fulfilment of the nominal (Maastricht) criteria, and political determination. They are interlinked and none of the two in itself suffices. Also these two factors will explain the attitude of these countries towards the ongoing and future EU and Eurozone-level EMU reform measures.
In the following section a series of comparative economic data is provided to assess the first ten years of EU membership of the V4 countries.
Table 2.: Growth rate of V4 countries between 2004-2014
To close the development gap vis-à-vis “old member states” a much stronger economic growth performance is needed over the long run in the V4. The above table shows that basically Slovakia and Poland were able to pull out that performance during the first decade of EU-membership.
The below table somewhat in contradiction to the first one indicates that as regards international competitiveness the V4 countries (including Slovakia) except for Poland are true underperformers
Table 3.: Competitiveness ranking 2003-2014.
Table 4.: Employment level 2004-2013
As far as employment level is concerned, where even the EU – including Western European countries – in an underperformer, V4 countries except for the Czech Republic could not even reach the unsatisfactory EU-average.
Table 5.: Inflation 2004-2014
In keeping inflation under control which is one of the Maastricht criteria the Czech Republic’s and especially Hungary’s 10 year performance proved to be especially poor. Hungary’s performance in relation to the long-term interest rate (another Maastricht criteria for euro introduction) was again the most humble (see below). Not surprising that Hungary is the country that spent the longest period (9 years, between 2004 and 2013) under the excessive deficit procedure.
Table 6.: Long-term interest rates
Table 7.: Debt 2004-2014.
The EU as a whole and even more so, the Eurozone was heavily hit by the sovereign debt crisis, which resulted in way above the mark national debt to GDP ratios. In the light of this, V4 countries’ performance in controlling the national debt was a relative success, although in absolute terms all of them experienced a rising debt. Here again, Hungary is a relative underperformer with a debt hovering around 80 percent of GDP (although this is lower than the EU average).
Finally, looking at the most important Maastricht criteria, one sees, that the EU28 average’s and V4 countries’ deficit developed in a correlated way, with a slight disadvantage at the V4 camp. Two outliers stand out: positive balances for Hungary and Poland. But one has to be very cautious with these peaks: they are the results of the nationalisation of the private pension fund assets that later on have been evaporated without either supporting growth or reducing national debt. More importantly the cost of annulling the private pension wealth will be payed dearly by future generation.
Table 8.: Budgetary balance 2004-2014
In contrast to the nineties and early two thousands when Euro-Atlantic accession was the unquestionable central theme of politics, the V4 countries have started to get separated not only in terms of their economic performance but – and mainly – in terms of their overall EU policies.
Poland clearly aims for a regional power status in the EU and in the Eastern Neighbourhood context, wanting to punch over its weight with the help of a historical reconciliation with Germany and in the absence of France as a capable partner for Germany to shape the future of the integration and with the UK withdrawing itself from the European political mainstream. In this light it is not surprising that Poland is doing everything to be in the potential future core, which necessitates a eurozone membership.
By contrast, Hungary that has manoeuvred itself to a quasi pariah status, with its political freedom fight against the EU and with its clumsy geopolitical rapprochement with Russia, clearly turned its back on the EU, shunning eurozone accession for an undefined period. This rather difficult explain from any economic point of view. Hungary is one of the biggest net beneficiaries of the EU budget, although this country has become a clear underperformer in harnessing the economic benefits of membership. Nor is the anti-EU stance explicable from a reasonable geopolitical point of view since it has resulted in international isolation.
Slovakia the only, member of the Eurozone, experienced a major per capita GDP increase, nevertheless still suffering from territorial inequalities, regularly voiced its discontent with EU and Eurozone (see the issue of the contribution to the Greek bailout) policies and measures, but generally follows the political directions coming from Brussels and Berlin.
The Czech Republic is a cautious EU-partner. Like Hungary it is selective in accepting EU reforms and reluctant to join the common currency. Parts of the political elite voice harsh anti-EU and pro-Russian views. Although the mainstream political discourse is not as militant vis-à-vis ”Brussels” as in Hungary.
What seems to be obvious from the comparative economic analysis is that Slovakia as the only eurozone member does not stand out from the general V4 performance level in a striking way )in fact Poland can be singled out as a success story). This reinforces the fact that Eurozone membership is a function of multiple factors, including political decisions and geopolitical benefits.
In 2014 the V4 group is divided not only by its status (Slovakia in, Poland, Hungary, Czech Republic out) but by its political drive as well (Poland: determined to join, Czech Republic being much cooler, Hungary being even hostile to the idea). This situation also determines these countries political stance related to political decisions relevant to EMU reforms. And – as we saw it earlier – EMU reforms will probably have significant impact on the way the European Union is going to develop not only from an economic but also from a political and institutional point of view. With the reinforcement of Eurozone institutions a deeper divide is expected between the EU18 and the rest. This may be an annoyance to Hungary and the Czech Republic but can be a serious geopolitical concern for Poland that wants to get into the inner circle of the EU to enhance its political and geopolitical clout.
The Stability Pact and the Euro-Plus Pact was not signed by the Czech Republic. The Euro Plus Pact which envisages coordination in areas such as taxation was not signed by Hungary either. A clear political divide is visible here. Is the current political situation a long-term “great divide” in the V4 group? As Hungary and the Czech Republic – without a clear indication of an entry date – leaves the timing of Euro membership hovering somewhere around the beginning of the next decade, this divide seems to be stuck and it will probably deepen as the EU18 will push ahead.
A long-term non-membership has significant economic and political consequences. In exchange of an (often sceptically received) higher level of economic autonomy, out countries lack the firepower of ESM, and ECB in crisis situations. Moreover it is obvious that saving a eurozone country is much higher on the agenda of Brussels and Berlin than otherwise. EMU membership is obviously not only an economic but also a geopolitical or even a security issue especially in Eastern Europe and in the Baltics. Individual countries ponder these factors in a different way. Contrary to the facts that the crisis has tarnished the image of the common currency and that eurozone accession has become a more difficult exercise because of economic tensions and a higher level of suspicion in Brussels and Berlin after Greece had lied itself into the elite club, the eurozone is still desirable place to join. Not only – maybe even not primarily – for economic, but for geopolitical reasons. One of the main drives for EMU membership in the Baltic states is security policy which has gained further relevance since the Russian aggression in Ukraine.
The political manoeuvring of the V4 countries does and will take place in the broader context of how the Europe of 28 will react to the pressing economic and political issues ahead. 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. The grand design of an institutionalized two-speed Europe that makes room for the UK, and maybe Turkey and Ukraine will also be on the menu. All in all the economic, political and geographical setup of the EU will have to be rearranged and the relevance of being a new or old member state will eventually fade away. But at the same time, the differences between individual V4 countries’ EU policies will remain significant, due to mainly national politics and choices of the political class.
From the above analysis it seems obvious that the choices of the political class in some cases – mainly in Hungary – cannot be based either on proper geopolitical, or on economic considerations. Therefore the research analysis of the V4 countries’ economic policies and general EU-policies should have a strong political economy element. A purely economic policy approach in the research of this topic has clearly reached its limits. A political science and political economy approach should follow up.
– European Commission: Five years of an enlarged EU – Economic achievements and challenges. COM(2009) 79/3, Brussels, 2009. http://ec.europa.eu/economy_finance/publications/publication14091_en.pdf
– Marján, Attila: Europe’s Destiny, Johns Hopkins University Press, 2010, USA
– Central Europe fit for the future: 10 years after EU accession – Milan Nic, Pawel Swieboda (ed.). 2014. január 21.CE Policy.org; http://www.cepolicy.org/publications/central-europe-fit-future-10-years-after-eu-accession
– Bajrektarevic, A. (2014), Europe of Sarajevo 100 Years Later, Routledge – London, UK
– Krulis, Krytof: Enlargement Ten Years on: New Europe’s Contribution to Single Market. Association for International Affairs. Research Paper 1/2014. Prague, February 2014.
– Think Visegrad Platform: Between Institutional Engineering and Crisis Management: The Visegrad Voice in the EU Governance Debate;
– Timo Baas and Herbert Brücker: EU Eastern Enlargement: The Benefits from Integration and Free Labour Movement;
 Attila Marján: Europe’s Destiny, Johns Hopkins University Press, 2010, USA
 Ottmar Issing: Europe: Common Money – Political Union? p. 6. European Central Bank, 1999.
Bajrektarevic, A. (2014), Europe of Sarajevo 100 Years Later, Routledge – London, UK (page 143)
Pisani-Ferry, Jean, et al.: Coming of Age: Report on the Euro Area, Bruegel Blueprint 4. p.4. 2008, Brussels
 M. Nic – P. Swieboda (ed): Central Europe fit for the future: 10 years after EU accession 2014. January 21. CE Policy.org; http://www.cepolicy.org/publications/central-europe-fit-future-10-years-after-eu-accession
 Attila Marján: EU rule changes force a Visegrad re-think. Europe’s World No. 26. 2014.
 See more on this in: K. Krulis: Enlargement Ten Years on: New Europe’s Contribution to Single Market. Association for International Affairs. Research Paper 1/2014. February 2014. Prague.
 All data from European Commission, Eurostat
Ммm is a new trend in the interaction between the EU and Turkey:”Silence is golden” or Musical chair?
On April 6, a protocol collapse occurred during a meeting between President of Turkey R. Erdogan, President of the European Council S. Michel and head of the European Commission, Ur. von der Leyen. Let us remind you that during their meeting in the conference room she did not have enough chair, and she was forced to sit on the sofa opposite the Turkish Foreign Minister M. Çavuşoğlu, who, according to the diplomatic protocol, occupies a lower rank. This incident (a video showing the confusion of Ur. von der Leyen and her mmm sound, which was cleverly picked up by the media) quickly spread across the media and social networks. This incident provoked not only a number of high-profile comments, but also political and economic consequences for a number of countries.
This story is a double bottom box. On the one hand, there is a protocol error in the organization of the meeting between the EU and Turkey. On the other hand, there is a sharp statement by the Italian head of state about the Turkish president.
We propose to consider this case from two points of view: violation of the protocol and bilateral interaction between Italy and Turkey.
Let’s start with the protocol. Based on the general rules of the protocol, let’s honestly answer the following questions.
1) is it right for the head of state to give up a seat opposite the national flag (respect for the symbols of the state);
2) what is more important – position, diplomatic rank or gender;
3) Who should take the “EU chair” based on the political hierarchy of the Union – the head of the European Council or the European Commission?
Note that both sides – the EU and Turkey – blame each other’s protocol service. EU protocol chief Dominique Marro responded in a statement on Thursday that diplomats were not given access to the conference room in advance because, as they were told, “it was too close to Erdogan’s office.” Turkish officials have agreed to a separate request to add seating for von der Leyen during the reception, he said.
Turkey was accused of “protocol machism.” However, the officials of the protocol services of Turkey and the EU “met before the official visit of the heads, and their wishes were taken into account,” says Foreign Minister Mevlut Çavuşoğlu.
But the shifting of responsibility continues. Brussels insisted that staff were denied a final check of the press conference room. It was soon revealed that another sensational accident was threatened during the official dinner: the table was laid for 5 people on each side, and in front there were two honorary chairs, one for Michel and the other for Erdogan, while a smaller one was reserved for von der Leyen, to the right of Michel. Two diplomatic advisers accompanied Michel to the table, and von der Leyen was left alone.
Michel was also criticized for not standing up for her. He first wrote an explanation on his Facebook page, in which he did not apologize, but presented his vision of the situation. But as things continued to escalate on Thursday, he went on to say on Belgian TV LN24: “I deeply regret the image created and the impression of a kind of disdain for the President of the European Commission and women in general.” “At that moment I was convinced that any reaction could seem paternalistic. Perhaps it was my mistake, ”he said. “In addition, there was substantial work to be done at the meeting, and I was convinced that the response would lead to a much more serious incident that would affect relations with Turkey.” An interesting commentary by J.K. Juncker, who wrote that he also often found himself on the couch (thereby making it clear that the situation was not critical). This situation could be resolved through diplomatic channels. But, unfortunately, it has received an unusual development.
Now let’s move on to a political analysis.
According to the head of the group of socialists in the European Parliament Garcia Perez Irace, the incident is related to discrimination against women in Turkey. A few weeks ago, on March 20, the president passed a decree authorizing Turkey’s withdrawal from the 2011 Istanbul Convention against Violence against Women, which obliges the governments that have joined it to pass legislation aimed at combating domestic violence. That is, the protocol error received a political color and took on a new light from the perspective of gender politics. However, one should not forget about the cultural and religious differences between the parties to the conflict. It is curious that if Michel gave up the chair to Ursula, he could be criticized from the point of view of gender equality and even, if hypertrophied, accused of sexism. It is also worth paying attention to the absence of harsh statements from the EU, which is interested in Turkey, which restrains the flow of migrants. . Yet the crisis in terms of maritime borders with Greece and Cyprus and the agreement between Israel, Greece, Egypt and Cyprus for the construction of the EastMed gas pipeline have become such important concerns for Turkish interests that in February 2020 Ankara has re-proposed the usual blackmail and once again opening the borders with Greece for Syrian migrants, provoking an immediate European reaction. Since last December, the European Commission has tried relentlessly to mend the tear, unlocking the last tranche of aid to Ankara, equal to 780 million euros of the 6 billion promised, and opening the dialogue for future billion-dollar agreements with Erdoğan in migration theme.
The behavior of M. Draghi seems even more inexplicable. The statement by the head of the Italian government M. Draghi, where he allowed himself to call Erdogan a dictator, cost the country 70 million euros of suspended contracts (the purchase of 10 helicopters from an Italian company Leonardo). In turn, Erdogan is waiting for an official apology from M. Draghi. Whatever the situation, from the point of view of etiquette and protocol, such statements by officials are perceived as inappropriate. There are now 48 large Italian private equity companies in Turkey, such as Unicredit, Generali, Mps, Fiat, Ansaldo Energia and others.On the other hand, according to representatives of Mediobanca Securities, it is unlikely that this diplomatic incident will lead to the cancellation of the contract with Turkey. Moreover, the investment bank added: “This is a relatively small contract for Leonardo: it represents 0.5% of the group’s planned ordering for 2021”, which amounts to approximately 14 billion euros.
This is not the first crisis in Italian-Turkish relations. In ’98 the Ocalan crisis, during the D’Alema government produced violent reactions and a boycott of Italian products in Turkey, however quickly overcome by the subsequent Amato government and even more so by the Berlusconi government starting from 2001. Those were the years of the great contracts for Salini Impregilo’s new bridges over the Bosphorus, for supplies by the Finmeccanica group and the purchase of local banks by Unicredit. But, between ups and downs, the history of economic relations between Rome and Ankara came from afar, from the 1960s when large Italian groups such as Fiat, Pirelli, Cementir had focused heavily on Turkey as the ideal platform to conquer new markets in the eastern Mediterranean.
In fact, the dispute between Turkey and Italy stems from tensions in Libya and the eastern Mediterranean over gas fields. And the European Union could play a key role in supporting Rome, but at the moment none of the EU representatives supported M. Draghi’s words, only Italian populist parties supported the head of state (which had also previously expressed the idea of leaving the EU).
Against the background of all the facts sounded, the behavior of the head of Italy remains the most interesting case. Non-fatal, in its essence, the protocol incident provoked a verbal dive by Draghi and Erdogan, which could cost Rome tens of millions of euros in direct economic losses. But it is not this separate fact that is interesting, but the fact that Italian politicians have recently taken a number of drastic steps and statements that have no reliable explanation. It is appropriate here to recall the spy scandal with Russian diplomats, which could be interpreted as a decrease in the level of interaction between Italy and its longtime trusted partner. Then many assumed that this was a manifestation of the “Atlanticist course” and the rapprochement with the United States of the new cabinet of ministers. But in the situation with the chair, we are talking about a conflict with one of the active members of NATO and a key ally of Washington in the region. And here Draghi’s position evokes the very remark of W. von der Leyen – “ummm” – bewilderment that runs like a red thread through the entire incident and its consequences. What is it? An attempt to show Draghi’s political subjectivity and consistency? A demonstrative rupture of the achievements and economic ties of predecessors in order to prove their independence? Agreements with Washington pending new contracts and cooperation programs and acting in line with these hopes? Or maybe just a misunderstanding of what the Italian people expect from the next prime minister and this is an attempt to find something that will cause an increase in the level of confidence on the part of the Italian political forces? In any case, there is concern that if Draghi continues in this vein, his reign may prove even more inglorious than that of many of his predecessors.
The Man Who Warned Us First About Climate Change
Among the first to warn us of global warming, he used the term greenhouse gas to describe the increasing levels of CO2 in the atmosphere. That was in the 1960s and it was dismissed as a cranky notion. Where he lived, he had a large study lined with books which he actually read; perhaps one reason for the mushrooming of ideas.
The story begins in Corfu, Greece where he was born. His very prominent family was turfed out of the country and settled in France. After early schooling, he was sent to a private boarding school in the UK.
Founded by German-Jewish educator Kurt Hahn in 1934, Gordonstoun School was new with new ideas when he attended. An equal emphasis on mind and body, it challenged students mentally and physically, the latter far more than at other such private schools. A strapping boy who was also extremely intelligent, he loved the place — later his son was to hate it. Hahn wrote of him that he would do very well any task assigned to him.
He went on to the naval academy and finished at the top of his class, doing the same at later naval exams and becoming the youngest Lieutenant in the navy. Given command of a ship, he ran it like clockwork but a certain lack of sensitivity to others also came through: the crew were driven ragged and hated serving under him. He loved the navy and always loved the sea; indeed it was a sacrifice to give up his naval career when he married but it was incompatible in his new role for his wife was a very important personage.
Studying in England, I could not fail to notice his frequent presence on newspaper front pages, even though my own interests then did not focus on the news of the day. He seemed to set up awards for all kinds of excellence. He wanted British industry to shine, young people to deliver their best and so on. And of course, he was invariably presenting awards to the winners.
A sportsman, he was also out there playing polo with his team, or at equestrian meets or playing cricket at charity events, or sailing which he clearly loved. His uncle saw India through a hurried independence and a bloody partition. Uncle Dickie, as he was called by the royal children, was a valued presence until killed by the IRA (Irish Republican Army) in a senseless bomb attack that lost them public sympathy.
The country’s leaders kept him busy and he was sent to numerous countries representing the queen, most often to former colonies in an era with a rash of newly independent countries. Yes, his name was Philip, titled Prince of Greece and Denmark, and his wife was Queen Elizabeth II.
Prince Philip’s royal bloodline (like the Queen’s) was German — Battenberg the family last name having been changed to Mountbatten during the First World War. His sisters married Germans and remained in Germany during the Second World War. They were not invited to his wedding to a very much in love Princess Elizabeth. He had been the longest serving consort of any British monarch when he died a few days ago.
Prince Philip’s travels were also notorious for gaffes and his eye for attractive females — middle class morality be damned. A definite lacuna in sensitivity was more than evident. Meeting a group of Nigerians resplendent in their long colorful national dress, he remarked, “Ready for bed, are we?” to their embarrassment.
Yet, all in all, a very full life.
Sino-Serbian relations under the “microscope”: China’s footprint In Serbia
Over the years, the Sino-Serbian foreign relations have straightened to a very high level, with China establishing itself as a valuable ally to Serbia. Since the recognition of the People’s Republic of China in 1949 by Yugoslavia and the formal establishment of diplomatic relations between the two states in 1955, both countries have been on warm relations that soon transformed into a strategic alliance. However, this relationship has given an uneasy feeling to the political elite in the West that sees this relationship as China’s efforts to expand its influence into the Balkan region and undermine the efforts of the EU for stabilization. On the other hand, some may argue that this uneasy feeling that the West is experiencing is due to its own failures of constant neglect and poor leadership towards Serbia, which has taken action in its own hands. Can we really say that the situation in Serbia is about Chinese imperialism, or is it a case that the West failed Serbia over and over again and now sees its diplomatic failures backfiring back to them?
Sino-Serbian relations in retrospective
The relationship between both countries has always been on a warm status, but the potential for an even stronger relationship came during the 1990s in the so-called Yugoslavian Wars. The People’s Republic of China was critical against the U.S and NATO forces bombing campaign in Serbia while it supported the decisions of President Milošević, describing them as vital decisions for preserving the territorial integrity of the Federal Socialist Republic of Yugoslavia, against the Albanian separatists and the UCK (Kosovo Liberation Army) terrorists. The opposition against NATO intensified after NATO warplanes bombed the Chinese embassy in Belgrade, killing three Chinese journalists. Although the West saw it as a mistake, this gave a clear signal to Serbia and China that the Western aggression against them could provide them with the potential of rebuilding their relations in the 21st century, in something more than just strong diplomatic ties.
Under the presidency of Aleksandar Vučić, Serbia has seen closer cooperation with China, especially at an economic level. For years now, both countries have cooperated in various industries. Since 2012, Serbia has received at least $10bn of Chinese investment in the country, changing rapidly its economic profile. Serbia is also part of China’s Belt and Road Initiative, which allowed Serbia to provide an investment-friendly environment towards China without any EU regulations, making the country the largest economy in the Western Balkans. Also, China has changed the tourism industry in Serbia. Since 2017, Chinese citizens can visit Serbia visa-free. This initiative allowed the country to improve its industry with a rise of at least 36% from Chinese visitors. Also, Serbia as a hub of investments does not only concentrate on tourism. China has invested a tremendous amount of money in its infrastructure and energy sectors and projects such as the Budapest-Belgrade Railway while Chinese firms have acquired various steel plants and coal mines, such as the Smederevo steel plant and a copper mine is in Bor, east of Serbia. These actions by China have kept afloat the Serbian economy while saving more than 10.000 job positions, highlighting the reconstruction of the country and making China the most important trading partner for Serbia in the 21st century.
Politics, the pandemic, and the success of Serbia in the game of geopolitical chess
Apart from close economic ties, both countries share a common interest in the political arena. Since the 1990’s China has been a close political ally of Serbia, supporting its territorial integrity while not recognizing the pseudostate of Kosovo. On the other hand, Serbia has been supportive of China’s decisions to safeguard its interests in Hong Kong, Taiwan, and Xinjiang, agreeing with the One-China policy that the People’s Republic of China has been advocating for years. The relationship between the two countries has been seen negatively by the West, with the EU being skeptical about China’s intentions in the region. A resolution from the EU parliament on the 2019-2020 Commission report on Serbia expressed the concern over the increased economic ties between the two states, and China’s questionable investments that are lacking transparency, while also pointing out that the investors in Serbia have failed to carry out important environmental assessments. “With this behavior, Serbia, a candidate country for EU accession is jeopardizing its progress”, were the statements from the EU side, that sees the growing influence of China in the region, as a threat to its own interests. However, Serbia is not bowing to the threats of the EU, as it sees the European bloc constantly neglecting Serbia’s needs and undermining its national interests.
With the inclusion of China as a major player in the Balkans, some analysts present an interesting argument that China has overthrown the Russian Federation from the position of the most important ally of Serbia. Historically, Russia and Serbia have seen very close ties, and it’s unlikely that the inclusion of China as an ally to Serbia will jeopardize that. However, news organizations and analysts from the West found an opportunity to provide an environment of division within Serbia. Understandably, Serbia seeks to improve its position in the world, and having more than one powerful allies, especially one that has the fastest growing economy in the world, will benefit the rhetoric of Aleksandar Vučić, who has demonstrated to the Serbian public that the country has drastically changed and it has overcome the previous humiliations and mistreatment from the West. It seems that the West is terrified of the potential growth of Serbia, a country that once was brutally bombarded by U.S and NATO forces, and now has the chance to dominate the geopolitical scene in the Balkans without even being part of the EU. The country represents an open door for China in Europe, allowing the country to fully take advantage of the various infrastructure and energy projects that are presented. Serbia is building a new lasting alliance, and as much as the West wants to undermine this relationship by creating political divisions about who is the biggest ally of Serbia, they miss the big point. The country now has more allies and more influence in the Balkans and feels it’s time not to take the West seriously. For years the EU, in particular, has underestimated Serbia while showing full support for the illegitimate state of Kosovo, and portraying the country as this evil entity and abuser of human rights.
Another important parameter in the evaluation of the current situation in the world. When COVID-19 spread all over the world, we witnessed a phenomenal collapse of our daily lives, with many businesses closing and the governments around the world putting an effort to recover from the virus. Serbia, unlike other countries in Europe, had a successful vaccination campaign and managed to win the geopolitical game of chess, simply by not playing the game. For Serbia, vaccination was never a political game and that’s why they managed to deal with it better. As prime minister Ana Brnabic stated: “Whether vaccines come from China, Russia, the EU or the U.S, we don’t care, as long as they’re safe and we get them as soon as possible. For us, vaccination is a healthcare issue, not a geopolitical matter”. Just by this statement, Serbia managed to understand the dangers of politicizing the vaccines and decided to focus on the health of its citizens, effectively overcoming the growing danger of the virus.
The fight is not over yet, but unlike the EU, Serbia set its priorities straight, and in a way, revealed the failed bureaucratic system of the EU, that chooses politics over the health of its citizens. Although Serbia received both the Russian vaccine Sputnik V and the Chinese Sinopharm, analysts have focused on the importance of Chinese help. For the simple reason that the help from Russia was expected, because of the historic, cultural, and religious ties between both states. The help from China was something that shifted the balance in Serbia, and the country managed to be in a better position compared to other countries in the Balkans and the EU. Both China and Serbia made it clear from the beginning that they will support each other in these harsh times. A few months ago, the Serbian Minister of Foreign Affairs, Ivica Dačić, was in Beijing, declaring his support in any way possible to China. In his statement, he said: “You didn’t fear NATO bombs, my visit shows we’re not afraid of the virus”; again pointing out the importance of this alliance that dates years back. The EU might be skeptical about China’s intentions, but one thing is for sure; they did not provide help when needed, proving once again that European solidarity is a fairy tale.
The Chinese impact on Serbia: Voices from within the country
Although the government of Aleksandar Vučić has made it very clear to the Serbian public that foreign investments from China are a positive step towards the socio-economic transformation of the country, some people within Serbia have shared their thoughts about whether this can bring a positive or a negative impact for Serbia. Dragan Djilas, the former mayor of Belgrade and president of the Freedom & Justice Party in Serbia, expresses his criticism of the political decisions of Aleksandar Vučić. In his view, democracy in Serbia does not exist anymore, and there is only one man to blame, Aleksandar Vučić. Djilas also points out that the growing relationship with China has been transformed into a dependent, one-way relationship, where China acts as a colonizer. “China operates in Serbia, the same way it does in the continent of Africa. It seems that now we have a new Big Brother”, referring to the new status quo, where Russia is not seen as the only powerful ally that Serbia can rely on. For Mr. Djilas, this dependency on China will only jeopardize any potential ascension in the European Union. His point is shared by many within Serbia that see this dichotomy in society that wants to move more on the West yet again it makes agreements and treaties with a non-democratic and autocratic government, and it seems that Aleksandar Vučić follows the same path. “Our struggle is focused on Europe, which should finally realize that we want to establish a free and democratic society and end the denigrating process in Serbia established by Aleksandar Vučić”, were the words of Dragan Djilas, who sees China slowly overtaking his country.
On the other hand, Djordje Terek, an analyst at the Center for International Public Policy in Belgrade, does not see the involvement of China in the Western Balkans, especially in Serbia, as a new phenomenon. “China, similarly to Russia, Germany or the U.S., has its own interest in the Western Balkans region and it has been present there for a while”. If we view this statement from a realistic point of view, we can make sense of China’s intentions in Serbia being no different than the intentions of any other country that revolves around the philosophy of realpolitik. Also, there is an interesting mention of Serbia’s new role in the region, especially after the Belgrade Summit. As Terek points out: “Serbia, as a potential EU member state, was given a prominent role within China’s BRI initiative as it was demonstrated at the summit in Belgrade. It is the strategy based on the penetration into the EU market that China centralized around Belgrade. With that being said, Serbia is one of the compelling China’s attributes in the Western Balkans and Europe as well. In 2009, Serbia and China signed a strategic partnership agreement and in 2013, Serbia hosted a 16+1 summit in Belgrade where $900 billion infrastructure projects were promised to the region”.
However, although the government of Aleksandar Vučić is keen to demonstrate how China’s investments have been crucial for Serbia, the European Union is still by far the most crucial contributor in foreign direct investments, comprising at least 70% of FDI in the country. With this remark, some may argue that indeed China is an important ally to Serbia, but the EU is still around, reminding the country that it is still a pending member for EU accession. It seems that the presence of China in Serbia will only be positive if Aleksandar Vučić manages to balance both of his commitments to the EU and China. After all, Serbia still wants to be part of the European Union and not merge with the People’s Republic of China. In some final remarks, Djordje Terek thinks that if the government of Serbia wants any success to come out of this situation it needs to evaluate the situation delicately. “While Serbia has been actively pursuing EU membership, the current state of affairs tells us that Vučić uses the geopolitical window to further deviate from EU integrations, while continuously sitting on two chairs, and only time will show if that will be beneficial for Serbia”.
One other aspect of China’s involvement in Serbia, that has troubled the citizens of the country, are the environmental issues that have emerged since China’s increased investment in the steel factories and the mines in the east of the country. In the area of Bor, where a Chinese company has recently acquired the ownership of a mining facility, there have been reports of increased pollution in the area, with environmental agencies being concerned about the high levels of sulfur dioxide and arsenic in the air. Besides the air pollution issue, concerns have been raised about the water pollution of the area. Near the mining facility, in the village of Metovnica, locals have seen the impact of the mine activities, in shortage of water and water pollution. For analyst Djordje Terek, this increased pollution in the area rapidly plummeted in the last seven years, potentially making Serbia the global leader in air pollution. “The Chinese investments in the steel factory in Smederevo and the copper mine in Bor, have made the people in the area wear face masks even before the beginning of the pandemic. It seems that the ties of the Serbian government with China is on higher priority rather than the environmental damage”. The mayor of Bor, Aleksandar Milikic, quickly dismissed the allegations of environmental damage and characterized any kind of protest in the area regarding this subject as the work of political actors wishing to benefit from it. As for the people in Bor, they can see the damage to the environment, but many of them point out the positive aspect of the Chinese investments, where people can find a good-paying job at the mines. Given the absence of work in the area in recent years, these investments have more positives than negatives for them.
Whether we would look at the Chinese involvement in Serbia as a positive or a negative thing, one thing is for sure. The geopolitical profile of the country is changing, and Serbia can benefit from the increased investments in its country. However, Aleksandar Vučić must be careful how he handles the situation inside Serbia. The increased protests and the uneasy feeling of its citizens regarding the environment, should not be aspects that are overlooked by the government, Nevertheless, with the global pandemic devastating many countries in Europe and around the world, Serbia has demonstrated its will to improve the healthcare situation in the country by not focusing on the vaccine politics and as a result winning, one might say the political chess game that the West found itself playing. Only time will show if Aleksandar Vučić manages to hold on, on both the West and the East, in a rare situation where Serbia seems to have the upper hand as to how the country must advance now, trying to reshape the international image about Serbia.
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