With specific reference to Brexit – an issue that we have analyzed extensively – we need to define both its effects on Europe’s new geopolitical configuration and those relating to the structure of European and world finance.
In this phase it is highly likely for the central banks to allow markets to have only a limited reaction to Brexit, without favoring the spreading of contagion with excess liquidity for bailouts and with an unreasonable credit squeeze.
The goal of the national central banks, and certainly of the ECB, will be to confirm the level of interest rates reached last February, with some fluctuations which will allow marginal gains for investors and a different distribution of potential risks.
The Bank of England has set aside over 344 billion pounds for “stability measures”. For the time being they are certainly sufficient.
As to the Stock Exchange, bankers will make it fall to minimum levels quickly so as to subsequently bring it back to more reasonable values – namely 50% approximately – reached immediately after the counting of ballots in the British referendum.
There will be no summer collapse of the stock markets, which could certainly be electorally exploited by the US tycoon Donald Trump, and hence no snowball effect on European economies and financial markets.
After Brexit, however, there is Italy around the corner. It is always worth recalling it.
But what is the real geopolitical effect of the undeniable weakening of the European Union after Brexit?
Meanwhile, all global markets have simultaneously fallen after the news coming from Great Britain and the pound has dropped to its lowest level since 1985.
Hence the effects of an EU internal political choice are crucial and decisive for world markets considering that Great Britain is a country sitting in the UN Security Council since its creation, as well as a member of the nuclear club and a leading military power.
Great Britain is also a country having strong economic ties with China, as evidenced by the visit paid by President Xi Jinping to London last September.
The UK government is determined to make British private capital be invested in the Chinese state-owned companies, not to mention the project to build a large nuclear power station in England mostly with Chinese capital.
It is worth recalling that currently China manages over 155,000 state-owned companies with a total amount of over 104 trillion yuan.
If the British economy falls temporarily into a range between 0.6 and 3%, the UK internationalization and the integration of the Chinese economy into the EU framework will be severely damaged – with seriously negative repercussions also for the rest of Europe.
And even without an expansion of the internal market, which will be further hit as a result of the new unfavorable pound-euro exchange rate.
But what is the real strategic framework in which we move after Brexit?
Let us analyze some medium-long term effects:
a) Brexit makes the prospects for creating the Eurasian system recede further. But it could favor both the EU de facto separation from the NATO strategic framework and the complete weakening of the TTIP negotiations with the United States because a less politically credible EU will certainly not be in a position to face them.
b) The new configuration of the Eurasian system is more complex than we could predict even a few months ago.
c)The integration between Russia and China, the transformations of the Chinese finance and the new Russian posture in the Middle East mean only one thing.
d) In other words, the EU expulsion from its Near Abroad and the elimination of its potential of mediation with the OPEC Arab region, as well as its marginal role in the new equilibria with Iran after the nuclear JCPOA, and finally its possible closure to the Chinese project Silk and Road Initiative, at least at maritime network level.
The solution could come from a EU comprehensive agreement with the Russia-China axis, so as to pacify the Maghreb region, on the one hand, and the region stretching from Central Asia to the Horn of Africa, on the other.
Finally if the EU is not able to stabilize Libya, it will show to everyone it has no geopolitical relevance and this factor will be clearly considered by the other global decision-makers.
The Libyan issue is a typical case of European ignorance and foolishness: the fight against ISIS in Derna, and particularly in Sirte, is now led by the forces of the military operation Al Bonyan Al- Marsoos (“The solid structure”), somehow affiliated with Al Farraj’s Government of National Accord (GNA) but not receiving orders from it.
While the only internationally recognized Libyan government has no control over its armed forces at a time of harsh and bitter confrontation, the international community has no leverage over Libya and, hence, over the whole Maghreb region, which is about to be integrated – not in a fully subordinate way – into the EU economic and regulatory framework.
According to the latest data available, trade between the North and the South of the Mediterranean region has grown by 413% and 321% for Turkey and Algeria, respectively.
Israel has recorded a 10% increase and we shall see how the Middle East and the Mediterranean region will change once the strategic and military agreement between Turkey and Israel will inure all its effects. This agreement – albeit with the Russian military protection – will restore the political-military contacts between Turkey and Israel for the passage of gas networks from the Israeli Leviathan gas field to the Turkish and Cyprus market outlets.
While it is worth recalling the agreement between Russia and Israel for military and intelligence coordination, which requires the actual protection of the Golan Heights from the Shiite jihad raids.
Hence a new Mediterranean framework which makes the EU smaller and strategically marginal, while the United States only plan to seal the Russian Federation on its borders into the Eurasian peninsula and to carry out some destabilizing operations towards the Chinese region, by selectively distorting some Chinese autonomous regions and other Central Asian countries, both through the rift created by the crisis in Ukraine and through autonomous actions from Northern India.
Hence we are faced with a growing Eurasia, characterized by the ever closer union between the Russian Federation and China, while the EU weakens, shrinks and splits, with the now sickening propaganda against the “bad” and “nationalist” British people and against the most fallacious and imaginative approach of current political science, namely “populism”.
If the EU is able to design a strategic system in relation to Eurasia, enabling Europe to expand its borders and make them safe and if NATO becomes a military tool à la carte for its major countries, the end of Europe – the Europe of Robert Schuman, as well as Thomas Mann’s – will be very near.
Tactical Retreat: Madrid Makes Concessions to Catalonia and the Basque Country
The November 2019 general parliamentary elections in Spain resulted in none of the parties getting an absolute majority needed to form a government. Following two months of negotiations, a left-wing coalition between the PSOE (Spanish Socialist Worker’s Party) and Unidas Podemos (United We Can) was formed in January 2020. Having received the necessary parliamentary support, Pedro Sanchez, the leader of the socialists, assumed the post of the Spanish Prime Minister.
Catalan and Basque parties are now vital for the Spanish government
Since this is the first coalition government in the history of modern Spain that does not rely on a stable parliamentary majority, the role of regional parties has significantly increased. The PSOE-Podemos coalition only has 155 mandates, falling short of the majority (176) by 21 votes. In such a situation, success of any initiative put forward by the left-wing government depends on the support of other parliamentary parties—in particular, the nationalist movements of Catalonia and the Basque Country. The Republican Left of Catalonia (Esquerra Republicana de Catalunya, the ERC) and “Together for Catalonia” account for 13 and 8 seats, whereas the Basque Nationalist Party (BNP) and the EH-Bildu are each represented by 6 and 5 MPs.
Support of the four regional parties facilitated a number of crucial events in the Spanish political process. These include Pedro Sanchez, the PSOE leader, taking the office of Prime Minister in January 2020, a repeated extension of the state of emergency in the country in spring 2020, the adoption of the state budget for 2021 as well as passing the bill on the distribution of money from the EU recovery fund into law.
In this regard, both Catalonia and the Basque Country are now presented with more opportunities to promote their interests in broadening autonomous powers in exchange for their support of the governmental projects. At times of the bipartisan system, when the party to win general elections could independently form a majority government, regional forces had weaker bargaining positions. However, the value of their votes in the Congress of Deputies today has increased drastically. Amid such conditions, P. Sanchez has no other way but intensify interaction with the two autonomies on the issues of interest to them. He is driven by the desire to sustain support of the regional forces, ensuring the viability of his government.
Different aims: Catalonia is seeking referendum while the Basque Country is keen to broaden its autonomy
The coronavirus pandemic, which broke out in 2020, did not allow to launch another stage of negotiations between the Spanish government and the political leadership of Catalonia and the Basque Country. Notably, each autonomy has its own strategy and aims to pursue in their negotiations with Madrid.
The negotiations agenda of the new Catalan government, formed by the ERC and “Together for Catalonia” following the regional elections on February 14, 2021, includes: 1) amnesty for all the prisoners detained after the illegal referendum on October 1, 2017; 2) agreement with the government on holding another, this time official, referendum on the status of the autonomy; 3) revision of the current structure of financial inflows in favor of increasing investments from Madrid in the budget of the autonomy.
At the same time, the Basque government, headed by the BNP, has a different set of objectives: 1) implementation of all the remaining provisions enshrined in the Statute of Autonomy of the region, namely the transfer of some 30 competencies in self-governance to the regional authorities; 2) resuming talks on a new Statute of Autonomy; 3) formation of a broad negotiating platform involving the largest Spanish and Basque political forces.
In 2021, negotiations on these issues were intensified between Madrid and the regions. Each autonomy has managed to achieve certain results in pursuing their interests.
Catalonia: two tactical victories with no prospects for a referendum
Both Catalonia and the Basque Country managed to get a number of significant concessions in the course of June to October 2021. By doing it, P. Sanchez has shown the importance of the two autonomies in maintaining stability in the PSOE-Podemos coalition government.
Catalonia succeeded in achieving two important outcomes. The first victory was a judicial one. On June 23, 2021, amnesty was granted to all 12 prisoners sentenced to terms from 9 to 13 years on the charges related to the illegal referendum on the status of the autonomy that was held on October 1, 2017. This step sparked a severe backlash in the Kingdom, with demonstrations held in many regions. The majority of Spaniards (61%) expressed disagreement with such a move. However, it manifests that P. Sanchez is ready to make controversial compromises to maintain his political allies, despite possible long-term losses of the electorate support.
The second success of Catalonia was in the political domain. Due to a flexibility of the central government, the first talks in a year and a half that took place between Prime Minister Pedro Sanchez and Pere Aragones, the head of the Catalan government, became possible. While the sides only exchanged views on topical bilateral issues at their first face-to-face meeting on June 27, 2021, the parties could hold a substantive discussion of a plan to normalize interaction during the second round on September 15.
In the meantime, it was the Catalan side that set the agenda. This emphasizes the increasing role of the autonomy in bilateral relations, while indicating that Madrid is keen to garner support among the Catalan deputies. This is the why the central government is ready to offer some concessions.
Following the talks, the Prime Minister stated that the sides managed to agree on 44 out of 45 points of the document presented by P. Aragones. However, the only stumbling block remaining is a new referendum in Catalonia. On this issue, P. Sanchez is not going to make any concessions.
The Basque Country: higher flexibility and new competencies for the autonomy
Madrid has also stepped up negotiations with the Basque Country. However, it should be added here that the region has managed to achieve more tangible results in terms of expanding its autonomous powers in judicial and financial matters.
First, as the agreement signed in April 2021 suggests, three penitentiary centers with 1,378 prisoners were handed over to the Basque Government from October 1, namely the Department for Equality, Justice and Social Policy.
Second, the talks on July 28 between Pedro Sanchez, Spanish Prime Minister, and Inigo Urkullo, head of the Basque government, within the framework of the Joint Economic Commission resulted in new tax competencies handed over to the Basque Country. Local authorities are now in charge of collecting taxes from e-commerce, financial transactions and digital services. This may lead to an inflow of additional 220 ml euros to the Basque budget.
In response to such steps of the Spanish government, I. Urkullo made an eleventh-hour decision to attend the Conference of regional leaders on July 29, 2021. This event is of political importance as it unites the heads of all Spain’s 17 autonomies. At the same time, the Catalan Pere Aragones did not participate in the meeting. Had both Catalonia and the Basque Country been absent, this would have come as a real blow to P. Sanchez. Therefore, it was of utmost importance for the Prime Minister to persuade at least the Basque leader to attend the meeting. Urkullo’s presence partly contributed to the image of Sanchez as a politician who can reach agreement with the regions.
Key differences between the Catalan and the Basque government that influence relations with Madrid
In Catalonia, the coalition government is dominated by the ERC, which is more moderate and ready to move away from harsh rhetoric in favor of discussing common problems with Madrid. At the same time, its partner, “Together for Catalonia” that lost the February 2021 regional elections to ERC by only a narrow margin, stands for more straightforward actions.
Such a configuration within the coalition restricts Catalonia’s flexibility. The main goal of the radical wing is a new referendum. The ERC’s moderate approach is counterbalanced by “Together for Catalonia”. It does not support excessive rapprochement with Madrid or any deviation from that idea.
At the same time, the situation is different in the Basque Country. The moderate BNP enjoys leading positions in the government coalition while the EH-Bildu has a much lower weight in strategy setting. It allows the autonomy to be flexible, interacting with Madrid in a more successful manner.
Moreover, the talks between Catalonia and Madrid are still held in a narrow format of face-to-face meetings between the Prime Minister of Spain and the head of the autonomy. At the same time, the Basque Country has already resumed dialogue within the Joint Economic Commission. This is a more inclusive format that enables the sides to cover a wider range of topics.
Currently, the Basque Country’s give-and-take strategy results in smaller but more meaningful concessions, bringing about a broadening of its autonomous powers in exchange for political support of the central government. Meanwhile, Catalonia’s attempts to achieve more significant results, which may affect the image of P. Sanchez, bump up against Madrid’s reluctance to cross the red line. The Prime Minister is ready to make some tactical concessions to the autonomies in order to garner political support for his initiatives. Despite certain criticism from the right wing, such steps confirm the effectiveness of the PSOE-Podemos coalition, demonstrating the viability of the incumbent government to the electorate.
Talks have future as long as the left-wing coalition remains in power
The future of the negotiations between the center and the autonomies heavily depends on the 2023 Spanish general elections. Right-wing parties like the People’s Party, VOX and “Citizens” are not inclined to broad negotiations with Catalan and Basque nationalists. If these parties form the next government just in two years, the entire process of normalizing relations with the regions may be put on hold.
P. Sanchez’s excessive flexibility in negotiations with Catalonia and the Basque Country may lead to a higher popularity of the right-wing VOX party. Those among voters, who are dissatisfied with the policy of offering concessions to nationalists, may switch to the forces that safeguard the Spanish constitutional order. Another problem for the PSOE-Podemos government is the socio-economic recovery of Spain from COVID-19.
Little progress in these two directions is likely to result in the loss of public support. The influence of Catalonia and the Basque Country will not see a decline in the coming years. It is therefore essential for Madrid to make new concessions similar to those made to the Basque Country. But they should be gradual to provoke less publicity.
From our partner RIAC
Is British Democracy in Danger?
On Sunday 12th of December 2021 Boris Johnson went on national television to warn about a tidal wave that would threaten Britain. He was back then referring to the Omicron Covid-19 variant, little did he know back then that he could have been referring to his own political future. Johnson is facing increasing demands from his own party to step down after having admitted to attending a party in Downing Street on May 20th, 2020, during the UK’s first national lockdown.
Johnson has been facing increasing risks for quite a long time by now: from collapsing poll ratings, to violation of lockdown rules and an ill-managed pandemic that has continued to strain the National Health Service; among many others. These crises have compromised his moral authority both with the citizenry and with his own frontbenchers. Although in the UK confidence votes can happen relatively quick: the no confidence vote on Theresa May’s government was held on December 12th, 2018, just a day after she was informed that the minimum threshold had been reached, this is still not on the horizon for the current Prime Minister.
To trigger a leadership contest 15% of the Tory MPs need to submit a letter to the chair of the 1922 Committee. There are currently 360 Tory MPs, 54 of them are needed to spark a confidence vote. As up to now, very few have publicly confirmed to either have submitted or to have the intention to submit a letter. If such threshold is reached, this would open the debate as to whether there is someone suitable enough to replace him. The frontrunners are Chancellor Rishi Sunak and Foreign Secretary Liz Truss; neither have the proven record of vote-winning Boris Johnson has had ever since he was the Mayor of London. Such vote of confidence is also unlikely to happen as majority of the crises the government has faced are of their own making. Johnson is not the cause; it is the symptom of a deeper decay of the British State and their politicians.
While the Conservatives will not be able to escape the cumulative effects of current and past scandals, this latest turmoil us unlikely to trigger the collapse of Boris Johnson. The next British election is scheduled to happen in May 2024, giving both Johnson and the Tories enough time to move on from this crisis and work on rebuilding electoral support. Boris Johnson has long defied political gravity and has survived a long history of scandals and mismanagements that may have destroyed the electoral chances of many other politicians and their political parties. It is highly likely that in the coming local elections in May 2022 the Conservatives will suffer electoral defeats, this is still preferable than what the political and electoral consequences for the Conservatives would be if they were to get rid of Johnson. Sacking him now would be accepting losing the war rather than losing a battle in the coming local elections. The long-term aim of the Tories is to hold on power for as long as they can, and at least ensure their electoral base is secure coming the 2024 general elections. For this, Boris Johnson still may come in handy.
Although Boris Johnson’s record has been shockingly poor; the Tories will not give Labour a chance for a general election before the scheduled for 2024, especially not now that they are leading the polls on the question as to who would make a better prime minister. The reality is that although his ratings have plummeted dramatically over recent years, there is no real threat of a general election for at least 2 years if one considers the larger political landscape.
One of the major threats British democracy does not come from Boris Johnson but rather from a deterioration of what sustains democracy as a healthy system of government. The UK electorate is highly volatile. Unlike countries like the US whose electorate has become highly polarised, the British electorate has shown less party loyalty, and voters have switched more and more between political parties in each election. However, this volatility will not get Johnson out of office, that is something only the Conservatives can do. This is closely linked to trust in politicians and the government. Lack of trust in both is one of the major issues of contemporary democracies around the world. Trust, is, after all, the basic condition for a legitimate government. Lack of trust in politicians, institutions, political parties, and the government in general enables populist tendencies, polarisation, political extremism and impacts the voting preference of citizens. It also favours the support of more stringent stances towards minorities, opposition, immigration, and human rights violations. A second threat that should not be disregarded is the attitude towards democratic institutions and bodies that sustain the British political system. While it is true that Johnson’s behaviour does not push to extremes such as Donal Trump did, or many other highly divisive politicians around the world, he is drawn to the same unconventional styles to deal with political challenges.
Democracy around the world is facing a backlash that is organised and coming from within, from elected officials. Our democratic rights can either be taken away suddenly as a result of a revolution or a coup d’état, or gradually through the election of leaders who slowly erode rules, standards and institutions that help sustain democracy. This is potentially more dangerous for the overall prospects of democracy because gradual erosion of democratic values is harder to perceive. The state, under this progressive attack, becomes prone to the systematic corruption of interest groups that take over the processes and institutions in charge of making public policy. It is during this gradual democratic backsliding that elected officials disregard norms and institutions while, at the same time, trying to redesign the structure of the state. An informed and active citizenry is crucial to prevent further erosion of democracy. We need to be aware that it is not only democratic rules and institutions that are in danger, but also the respect of our fundamental civil, political, social and human rights.
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
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