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Merkel and Macron’s concerns over new Europe

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Chancellor of Germany is still thinking of building a new Europe! Angela Merkel and Emmanuel Macron both speak of a Europe which can withstand nationalism and far right movements. But the realization of this common dream seems not so easy! Today extremism have spread all over the European countries, and their power is increasing day by day.

These movements have also attracted the attention of many European citizens, as a result of the weakness of the traditional parties (Conservative and Social-Democratic). In a recent meeting, German Chancellor and President of France had once again stressed on their mutual concerns about new concerns. However, it’s not clear that what Macron and Merkel have in mind about this new Europe.

Emmanuel Macron has recently emphasized the need for building a stronger Europe! The French president insisted that his “historic reconstruction of Europe and the Eurozone”, designed to reconcile the EU with disgruntled citizens after a decade of financial and immigration problems, is urgent, not least to stem rising far-right parties. But he cannot move without Germany’s agreement.

As reported by Time, Macron, who came to Berlin to take part in Germany’s national Remembrance Day for the victims of war and dictatorship, urged European government to seize more responsibility for their own fate, especially regarding defense.

Macron said that the French-German alliance “is invested with this obligation not to allow the world to slide into chaos, and to accompany it on the road of peace.”

It should not be forgotten that the popularity of the French president has drastically fallen in recent days, following the increase in public discontent France. And in Germany, Angela Merkel’s coalition government is not well placed, and its popularity had a remarkable decrease during the recent months. Hence, the German and French authorities do not face stable political conditions inside their own countries. Obviously, this will also dramatically reduce their maneuverability in Europe’s equations.

Undoubtedly, neither Macron nor Merkel possess the ability to guide and manage the new Europe as their presence at the head of their country’s political equations is not guaranteed in the near future. Many analysts believe that Macron will face the same fate as Sarkozy and Hollande, and he isn’t going to win the next elections, which is to be held in 2022. Thus it’s not clear that who will be in power in Paris and Berlin in the coming years.

Finally, recent remarks by the French President and German Chancellor on building the new Europe can’t be realized in near future. And this is what Angela Merkel and Emmanuel Macron are well aware of.

First published in our partner Tehran Times

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Sanctions Policy: The ‘European Paradox’

Ivan Timofeev

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Since the end of the Cold War, economic sanctions have increasingly been used by big players as a tool of foreign policy. The initiators of sanctions use trade and financial restrictions to try to force the target countries to change course politically as well as to influence internal political processes. The United States has positioned itself as the largest sanctions initiator. Over the past hundred years, the US has used them more often than all other nations and the UN combined. The Americans remain second to none in terms of the number of developed state institutions involved in the policy of sanctions. The US sanctions apparatus far exceeds the capabilities of the UN and any other country in terms of financial, human and organisational resources.

The European Union is also showing increasing activity as an initiator of sanctions. There are several conditions for this. First, the EU is a powerful economy with huge human, financial and technological potential. Economic power is the most important condition, without which an effective policy of sanctions is simply impossible. After all, sanctions are effective when the initiator can inflict much greater harm on the target country than vice versa. Second, the European Union has not yet become an independent military-political force. Its foreign policy is based on soft power and economic instruments, so in conflict situations, sanctions are the best option. Third, the EU coordinates its sanctions policy with the actions of the United States, its main ally. The growing number of sanctions on the part of Washington has also led to the growth of sanctions initiated by Brussels.

At the same time, there are a number of distinguished features that define the EU approach. One of the key elements is the commitment of Brussels to multilateral diplomacy. The EU avoids being the sole initiator of sanctions. This is an important difference from the United States. The Americans often impose sanctions without any regard for others. They recognise the importance of coalition pressure on the target countries and strive to involve their allies and a wider range of countries in launching sanctions. However, their support for the United States is more instrumental – the more sizable the coalition, the greater its potential for taking a toll on the economies of sanctioned countries. However, for the EU, the multilateral use of sanctions remains an important normative issue and even means of conveying shared values. The European Union carefully implements UN Security Council resolutions, and EU countries which are members of the UN Security Council have often offered their own draft resolutions on sanctions.

The EU, however, allows sanctions which bypass the decisions of the UN Security Council. Here the policy of Brussels differs from the positions of Moscow and Beijing, which consider the UN Security Council as the only legitimate source of sanctions. These countries also use unilateral measures, but so far they’ve done it much less often in comparison with the EU and especially the USA. However, by bypassing the UN, the EU is trying to combine efforts with the United States and other Western countries, that is, to provide a multilateral format. At the same time, the EU retains its own view on many problems and calibrates a set of restrictive measures at its sole discretion.

Another important distinction of EU policy is its extremely reserved attitude towards extraterritorial sanctions. The European Union authorities may well use secondary sanctions, that is, to punish certain companies or organisations for violating existing restrictions. However, Brussels uses such measures within its jurisdiction. The United States, on the contrary, is increasingly introducing secondary sanctions against foreigners, putting foreign companies on the SDN list or fining violators.

Interestingly, over the past ten years, most of the related fines were levied against European companies. This situation may well be called the “European paradox.” EU authorities support many US sanctions initiatives, but at the same time many Europeans are negatively affected by the secondary sanctions. They pay the most fines. According to the Russian International Affairs Council (RIAC), over the past 10 years, out of 201 US Treasury fines, 40 were levied against EU companies and 133 were paid by US companies. In just 10 years, the US Treasury has collected $ 5.6 billion in fines. Of these, the Europeans paid more than $ 4.6 billion (83%), and the Americans only paid 177.2 million (3%). This distribution resembles the “Pareto law”: most of the revenue is generated by a minority of players. And this minority is concentrated in Europe, whereas the smaller proportion was paid by the US-based majority. Of course, such a distribution can hardly be the result of the deliberate activity of American authorities. But the fact remains: Europeans pay the most.

At least since the 1990s, The European Union has tried to take measures to protect itself from secondary US sanctions. A serious incentive was the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) on the Iranian nuclear programme. Washington unilaterally resumed large-scale financial and sectoral sanctions against Iran. A significant number of companies operating in the Iranian market, including European ones, turned out to be facing the threat of secondary sanctions and subsequent penalties. The EU has resumed the so-called 1996 Blocking Statute, which should shield European companies from secondary sanctions. However, a significant number of big EU companies have already left Iran. Many large European companies which do business in Iran also conduct business in the US, and preferred to maintain their loyalty to American requirements, even though Brussels was critical of the US withdrawal from the JCPOA and introduced protective measures. The threat of having problems with the US authorities in the form of fines and “weaning” from the US market and financial system outweighs possible profits in the Iranian market.

In Europe, some politicians proposed establishing their own payment system, in the interests of European sovereignty and financial independence. In January 2019, INSTEX SAS company was registered in France (with the participation of Germany and the United Kingdom). It was tasked with securing transactions between European companies and Iran, bypassing US sanctions. So far the fate of this initiative remains unclear. The big problem is its approval by other EU members. Also, the real functionality of INSTEX remains unclear. In the end, nothing is preventing the Americans from including INSTEX in their SDN list, making it “toxic”, or fining the company in proportion to the volume of its deals with Iran.

The prospects for INSTEX are becoming even more vague, against the background of diplomatic difficulties. After the US exit from the JCPOA, Washington found itself in diplomatic isolation on the Iran issue. However, this didn’t bother the Americans much. The situation began to heat up after the United States lifted the restriction exceptions on the purchase of Iranian oil, which they made for eight countries, including Italy and Greece. In May 2019, Tehran announced that it would refuse to fulfil certain obligations under the JCPOA. In response, Washington immediately introduced harsh, newer sanctions against Iran. The EU reacted coolly to the actions of Tehran. Now Iran could be considered isolated.

The diplomatic development of the situation around the JCPOA is likely to seriously undermine European ambitions to create an alternative payment system. If Iran once again becomes a pariah state (as the Americans would like to see), then the reason that gave rise to the discussion about it will disappear. As for fines against banks and companies, Brussels is likely to leave these risks to the discretion of the business community itself. Moreover, entrepreneurs haven’t demonstrated any serious, noticeable activity lobbying for alternatives. Apparently, the business sector feels comfortable in the dollar system, and the risks of secondary sanctions do not outweigh the benefits the system presents and the costs of its transformation. Moreover, outside of the Iranian problem, there is not a single issue that the sanctions policy presents that could seriously stimulate discussion about a European financial alternative. The commonality of the political positions of the United States and the EU will ensure the status quo.

First published in our partner RIAC

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How Romania’s battles over corruption hamstrung economic progress

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When Romania took over the rotating presidency of the Council of the European Union in January, news coverage in Western Europe mostly focused on the tensions between Brussels and Bucharest over the latter’s judicial reforms. Jean-Claude Juncker publicly called Romania’s ability to fulfil its presidential duties into question; the European Commission, meanwhile, accused the ruling Social Democrats (PSD) of backsliding on corruption.

Since then, however, Romania has executed its presidential duties without a hitch, hosting European leaders for a major EU summit in Sibiu on May 10th that earned plaudits from top EU officials like Donald Tusk. In hindsight, has the overarching media narrative ignored important developments inside Romania? Does the Sibiu summit demonstrate that Romania has regained its footing as one of Europe’s most dynamic economies?

Economic growth no longer extraordinary

Romania’s economy, while still growing at an impressive rate, has slowed down from the remarkable rates the country was registering as recently as 2017— when its 7% expansion outpaced nearly all European peers. 2018 saw growth rates of 4%, while estimates point to 3.5% for 2019.

Since it joined the European Union in 2007, Romania’s per capita national output doubled to roughly 60 percent of the Eurozone average. Record lows in unemployment led to double-digit average wage growth over the last four years. But the recent downwards trend has left many wondering whether the Romanian economy will ever resume its previous rate of development.

Is the DNA’s aggressive prosecution scaring off foreign investors?

Bucharest’s economic slowdown is due to a variety of factors, from tightened global financial conditions to falling birth rates. Foreign investors, however, may also be skittish thanks to the long-running battle between Romania’s political establishment and its controversial anti-corruption agency, the National Anticorruption Directorate (DNA). Under the leadership of agency head Laura Kövesi, the DNA undertook (by its own count) 2,396 investigations targeting Romanian magistrates between 2014 and 2018. Kövesi’s tenure saw over 1,000 figures from the country’s political and business circles convicted for corruption.

The DNA’s swathes of indictments targeting Romania’s leading political figures, with charges ranging from forgery to money laundering, have certainly played into the country’s reputation for corruption. That image has hamstrung Romania’s ability to attract foreign capital and investment, from Europe and beyond.

EU leaders, meanwhile, have heaped praise on the DNA’s stack of convictions, holding the anti-corruption agency up as a model for other European countries to emulate. Concerns have mounted, however, that the DNA is abusing its power and reverting to communist-era investigative practice.

Long lists of convictions—but at what cost?

Hiding behind the DNA’s unusually-high conviction rates were potential due process violations, including lengthy pre-trial detainment periods equivalent to imprisonment before having been sentenced by a court of law, or otherwise threatening suspects that a lack of cooperation could see their family members prosecuted. Increased scrutiny of these violations may help explain why the number of cases resulting in acquittals rose markedly, from 12.2% in 2017 to 36.3% in 2018.

Some of the DNA’s most prominent targets have drawn parallels between its behaviour and that of Romania’s Communist-era security services. Alina Bica, who formerly served as chief prosecutor for organised crime and was arrested in 2014, described her experience with the DNA as “like in the 1950s when the communists came. You get called an enemy of the state, you get put in the truck…they damage your family.” Kövesi reportedly made a personal visit to the Supreme Council of Magistrates to persuade them to sign off on Bica’s arrest, while Bica’s husband was targeted with charges of tax evasion and her lawyer was also detained.

Many of those singled out by the DNA accuse the body of pursuing political or personal vendettas. Bica, for example, claimed the charges against her stemmed from her 2012 investigation into Transgaz, where Kövesi’s brother served as a director. PSD spokespeople have suggested treasurer Mircea Drăghici, currently under investigation for embezzling party funds, is being targeted as part of the lead-up to this month’s European elections.

Troubling collaboration with the intelligence services

Recent revelations about the DNA’s investigative tactics have given new life to comparisons between today’s anti-corruption czars and the communist-era Securitate secret police. Earlier this year, Romania’s Constitutional Court ruled secret protocols between DNA prosecutors and the country’s domestic intelligence agency, the SRI, were unconstitutional. The Constitutional Court concluded that the SRI, successor to the Securitate, had signed agreements allowing the intelligence agency to circumvent the authority of prosecutors in criminal investigations, while simultaneously conducting over 20,000 wiretaps a year on behalf of the DNA—an excessive violation of privacy.

The investigation by the Constitutional Court culminated in Kövesi’s removal from her position in 2018. Kövesi herself has been indicted on charges of corruption and abuse of office, relating to allegations by Romanian businessman Sebastian Ghita that Kövesi strongarmed him into paying for the repatriation of a fugitive from Indonesia. Romanian police claim they footed the bill, but criminal proceedings are ongoing. The former prosecutor nevertheless retains many fans in Brussels. Allies in the European Parliament want to name her to the new position of EU Chief Prosecutor despite the ongoing investigation in Romania.

Increased transparency

With the steady release of DNA documents to the newly formed Special Section for the Investigation of Crimes Committed by Magistrates and the National Union of Judges in Romania, which both operate independently of the DNA, efforts to increase transparency in Romanian governance may soon move beyond the bitter political rivalries that undermined Romania’s political stability and global reputation.

While the Sibiu summit was a political success, the economy is also regaining its footing. Consumer confidence is recovering, with better prospects for future savings. Wage growth remains impressive while lending activity continues to expand. And CFA Romania, an association of investment professionals, released a report predicting Romanian economic activity will improve over the next 12 months. It seems that, despite the corruption battles of the past several years, both Romanian businesses and consumers remain optimistic about their future prospects.

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Any signs of a chill between France and Germany?

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The past few months have seen many signs of growing friction and divisions between the two European superpowers, Germany and France. Before the February vote on changes to the EU Third Energy Package, meant to expand the European Commission’s power to regulate Europe’s electricity and natural gas market, France opposed, until the very last moment, Germany’s position on the issue. In April, Paris and Berlin failed to agree on how much more time Britain should be given to decide on its withdrawal from the EU. During the recent presidential elections in Ukraine, France and Germany supported various candidates. Moreover, they are equally divided on who will be the new head of the European Commission. What is happening in relations between members of the “European tandem”?

During the latter half of 2018, it looked as if relations between the EU’s two powerhouses were reaching a new strategic level. In a joint statement made in Meseberg in June, Berlin and Paris outlined their shared vision of the European Union’s future development. In late August, French President Emmanuel Macron and German Foreign Minister Heiko Maas simultaneously spoke out about a new role for Europe to make it “sovereign and strong.” During their informal meeting in Marseille in September, Emmanuel Macron and Angela Merkel agreed on a coordinated response to the main challenges facing Europe and on concerted work on shaping the “agenda for Europe.”

In November, the two leaders spoke in favor of creating a “European army,” “real Pan-European armed forces” capable of defending Europe. And in January of this year, they inked a broader cooperation accord in Aachen, which commentators described as a “new big step” in bringing the two countries closer together. The Treaty of Aachen covers new areas of political cooperation, including common projects and commitments in the fields of defense and international relations.

Just a month later, however, the Franco-German rapprochement hit a snag over two strategic projects worth billions of euros, namely the Nord Stream 2 gas pipeline and trade relations with the United States. Here the interests of Paris and Berlin differ the most. Underscoring the seriousness of the rift, Emmanuel Macron canceled a planned trip to a security conference in Munich in what many commentators described as a “demonstrative” move. As for the issue of completing the construction of the Nord Stream 2 gas pipeline, the compromise reached by France and Germany and approved by the European Parliament, imposed on Berlin “a formula that the German government wanted to avoid.”

Regarding the issue of trade relations with the United States, it wasn’t until mid-April that Brussels collectively managed to prevail over France, which had been blocking the start of pertinent negotiations with Washington.  Any delay may cost the German automakers multi-billion dollar fines from the United States. If the French succeed in delaying the start of negotiations, Germany, which is already experiencing a sharp slowdown in economic growth, may end up the loser again.

France’s sudden move left the German media guessing whether Macron’s actions were dictated by his displeasure about Berlin’s “slow response” to his initiatives, or by Donald Trump’s threat to sanction companies involved in the construction of the Nord Stream 2 pipeline, including the French concern Engie. Or maybe Macron had resorted to this “show of force” in a bid to strengthen his hand amid the conflict with the “yellow jackets” and growing tensions with Italy?

Indeed, the statement made in Meseberg and the treaty signed in Aachen could have proved too much of a compromise for Macron, if not a serious blow to his ambitions. According to critics, “the Treaty of Aachen dodges the most sensitive topics characteristic of modern Europe.” Including migration and political unification of Europe – something Macron is so eager to accomplish. The treaty makes no mention of a common EU tax and financial policy, while the issue of creating a single economic space is spelled out declaratively at best. Angela Merkel essentially emasculated virtually all of Macron’s initiatives pertaining to the financial and economic reform of the EU and the Eurozone. Emmanuel Macron has been out to become one of the EU’s leaders, or even its sole leader, ever since he became president in 2017. All the more so following Britain’s exit from the bloc and amid the ebbing political authority and the planned resignation by 2021 of German Chancellor Angela Merkel, once the informal leader of a united Europe.

The current political situation in France is also calling for more decisive actions by President Macron. To ensure at least a relative success in the upcoming European elections, he needs to enlist the support not only of the traditional left-and right-centrists, but possibly of some representatives of the new European right too. Whether or not Angela Merkel stands down in 2021, or after the elections to the European Parliament (as has been rumored since April), Emmanuel Macron essentially remains the only top-level proponent of greater European integration. (Unless Merkel ultimately moves to the head of the European Commission, of course). With Macron eyeing a second presidential term in 2022, the advancement of the modernization model for France depends directly on the success of the European project. And here any significant changes in the European Union “mainly depend on the position of France’s privileged partner – Germany.”

All this means that Macron needs a breakthrough now that Berlin is going through a “complicated power transit” with Merkel having resigned as the head of the CDU and preparing to hand her post as Federal Chancellor over to a successor. Therefore, she is now taking her time and, according to her successor as CDU leader, Annegret Kramp-Karrenbauer, is holding out for a new vector in the development of the European project as “the common denominator of the distribution of political forces after the elections.” Does this mean that Berlin’s is staking on the success of its candidate in the ongoing struggle for the next president of the European Commission? For the first time ever, the CDU and the CSU have managed to nominate a common candidate who has “good chances” of heading the EU’s executive body.

Meanwhile, Berlin is facing an intractable dilemma. Since 1949, “avoiding by all means situations necessitating a hard choice between France and the United States has been a key principle of German foreign policy.” This approach “survived all governments and coalitions, and was maintained after the reunification of Germany.” Under the present circumstances, however, remaining firmly committed to the transatlantic relationship threatens to further destabilize the European integration project, which is now seen as being key to Germany’s future. Simultaneously, a course aimed at minimizing damage from the policy of external powers that threatens the fundamental German interests might necessitate radical and ambitious geopolitical maneuvers that would almost inevitably revive the Europeans’ and Americans’ historical fears of “German instincts.”

US and British analysts already worry that “the

[geopolitical]

shackles that are voluntarily accepted [by Germany] can be thrown off.” They also wonder how long it will take before new generations of Germans want to restore their country’ full state sovereignty.

In Germany itself, promotion of such slogans have already given the Alternative for Germany party (AfD) the third largest fraction in the Bundestag. A major paradox of the current European and German policy is that Berlin’s activity or passivity is equally detrimental to the Pan-European project and could eventually lead to the EU’s fragmentation and even disintegration.

However, the Franco-German “tandem” is already being dogged with contradictions and compromises, which are highly unpopular among many in the German establishment. The cautious response by many EU members to the latest joint geopolitical initiatives of Berlin and Paris, gave Germany more reasons to fear that Macron’s global ambitions could exacerbate the differences that already exist in the EU. Many in Germany have long suspected Macron of wishing to make the EU instrumental in his foreign policy aspirations.

Some experts still believe that at the end of the day the current chill between Germany and France may turn out to be just a sign of the traditional “propensity for taking independent political decisions.” The sides are sizing each other up to see “who will be setting the rules of the roadmap in the future.”  Also, Paris’s tougher stance towards Berlin may be a tactical ploy, a pre-election maneuver to “hijack” part of the agenda from the “national populists” of Central, Eastern and Southern Europe where many people are not happy about the German “diktat.”

Emmanuel Macron has proved once and again his ability to ride the wave of public discontent with certain issues. His Plan for Europe, published in early March, carefully avoids any mention of France’ and Germany’s leading role in advancing EU reforms.

On the other hand, the foreign policy of the leading European powers has a long history, and long-term geopolitical considerations continue to play a significant role. Germany, for one, has traditionally been looking for a counterweight to the Anglo-Saxons, while France – to German dominance in Europe. As a result, the search by Paris and Berlin for common points of political contact is now turning into intense efforts to find the “lowest common denominator.” The overall impression is that we will only be able to see a greater deal of certainty in relations between the two countries after the results of elections to the European Parliament have been summed up.  The distribution of roles both within the “European tandem” and in the EU as a whole depends on which political forces – pro-Macron or pro-Merkel, the Europeans will vote for.

 First published in our partner International Affairs

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