March 1st marks nine months to the day since the new Italian “government of change” came to power. Few in Europe would have believed that Italy, one of the EU founding states which had been governed by centrist cabinets for over 30 years, would end up with a coalition of right- and left-wing Eurosceptics, who would be calling for a revision of the fundamental principles of European integration. Even fewer believed that this coalition would hold out for more than six months while continuing to enjoy the support of over 60% of Italians. Today, Paris and Berlin refer to the new Italian government as Europe’s new leprosy, and Brussels is bracing for the European Parliament election this coming May, where the “Third International” represented by Eurosceptics, populists, nationalists, and “sovereigntists” from Poland, Hungary, and France, led by Italian agents provocateur, is expected to stage a European revolution. The Italians are undermining European solidarity from within by questioning the rules of financial discipline, the EU’s ability to tackle migration, and the advisability of sanctions against Russia. They are also damaging the EU’s reputation outside the union’s borders by publicly criticizing Brussels’ helpless policy in Africa and France’s “neo-colonialism”, by openly supporting the protest movement within France, by vetoing the EU’s common stance on Venezuela, and by allowing the so-called Donetsk and Luhansk People’s Republics, which are not recognized elsewhere in the EU, to open representative offices in Italy. Now, nine months on, it appears that the EU has its own enfant terrible…
Nine months in power: migration stemmed but economy in technical recession
The main election slogan of the “government of change” was that Italy should become more independent in resolving its domestic problems and securing its interests in the international arena. The key domestic issues were economic development and migration. The primary foreign issues were ensuring border security and building economic relations with countries outside the EU based on the interests of Italian business. This agenda was largely dictated by actual public demand. According to research, between 2013 and 2017, the share of Italians who view border security and curbing migration as the key national objectives ballooned from 30% to 66%. By the time the new coalition came to power, a majority of Italians disapproved of the migration policy being pursued by the previous center-left government and perceived a direct link between illegal migration and terrorism. The number of persons deported on suspicion of extremism had skyrocketed, from just two in 2002 to 106 in 2018. Polls conducted in 2017 and early 2018 indicated that 82% of the population did not believe that Italy could have any influence whatsoever on the drafting of a common European policy.
Ever since coming to power, the “government of change” has been persistently trying to influence changes to the EU migration policy. On the eve of the June 28–29 EU summit in 2018, Italy stopped allowing ships carrying rescued migrants to enter its ports and issued an ultimatum to Brussels, which included several specific proposals for creating “joint responsibility” for migration within the EU. The demands included a revision of the Dublin agreement; the maximum responsibility of the country of first entry; setting up EU-run migrant reception centers in coastal countries; and revising the rules of migrant resettlement between EU countries, among other things. After the summit, Giuseppe Conte stated: “Italy is no longer alone!” However, after a while it became obvious that the agreements that had been reached were as far from being implemented in practice as they had been in June 2018.
Then, in the autumn of 2018, the new government began to go it alone. Interior Minister Matteo Salvini closed Italian ports to non-governmental organizations, accusing the latter of smuggling people into the country. In addition, the so-called law on security (Decreto Sicurezza) was adopted in October, which revised the rules for granting asylum, the reasons for denying refugee status as well as the rules and terms of detention at refugee reception centers. This independent behavior on the part of the Italian authorities caused outrage not only in Brussels, Paris, and Berlin but also in the UN, as the office of the High Commissioner for Human Rights stated that the Italian security law failed to comply with international law.
Nevertheless, surveys conducted in late 2018 suggested that the new Italian government had achieved its objective: only 16% of the respondents still believed that immigration posed a key threat to the country, even though 43% were still worried about it. Salvini regularly reports decreasing numbers of newly arrived migrants and growing numbers of those deported. The agency Frontex reports that only 150 migrants arrived in Italy in January 2019, down 96% year-on-year, and that the number of persons deported has already exceeded the number of new arrivals.
The Ipsos statistical survey published in January 2019 indicates that one out of every two Italians (51%) supports the government’s hard line on migrants, including the closure of sea ports, and only 19% of the respondents are not opposed to migrants making landfall in Italy. In fact, 60% of those polled believe that the migration policy is the prerogative of the Italian people and not the EU. That said, society remains split as to the safety law, with 43% supporting Salvini and 38% opposing his move. In addition, 55% of the population sees a difference in the approaches to migration of the Five Star Movement and Salvini’s League, with only 25% considering them to be similar. In other words, Italians tend to mainly attribute the resolution of the migration crisis to Salvini, which certainly boosts the popularity of his party. According to surveys published on February 11, 2019, the League’s approval rating stood at 33.8%, whereas the rating of the Five Star Movement was at 23.3% and continuing on a downward trajectory. Salvini has promised to propose a new migration bill this coming spring, this one dealing with migrant labour and seasonal workers.
In the economic sphere, however, the new government cannot yet boast about any breakthroughs. It came to power at a time when the country’s national debt amounted to a record 132% of GDP. The neoliberal course imposed on the country by EU financial institutions, Paris, and Berlin since 2011 had failed to help Italy overcome the 2008 eurozone crisis, which had effectively stripped Greece of its economic sovereignty. The 2016 and 2017 economic indicators are illustrative of why Italians chose a different course in March 2018 by supporting the Five Star Movement and the League. According to ISTAT, 46.1% of Italians could not afford a week’s leave in 2016; 16.5% could not afford heating in their homes; 14.6% could not afford to buy fish or meat every other day; and 32.4% said they were having difficulties making their monthly salary last until the next paycheck. The intra-regional imbalance that is so characteristic of Italy has also refused to go away. In 2007, the difference in per-capita GDP between the southern and northern provinces stood at EUR 14,255; by 2015, it had grown to EUR 14,905. The unemployment disparity also grew, from 20.1 percentage points in 2007 to 22.5 in 2016. In 2015, 42.7% of those residing in the south of the country were living just above the poverty line.
Italy’s national debt dynamics (as a % of GDP)
Italy’s per-capita GDP (in USD)
Budget deficit dynamics
Unemployment in 2018
2017 per-capita GDP by region in current prices (EUR)
2011–17 per-capita GDP dynamics by region (EUR 1,000)
In this situation, the “government of change”, having garnered the support of about 60% of the electorate, began to revise the fiscal austerity measures imposed by Brussels and implement de-facto Keynesian policies primarily focused on social and economic support for the vulnerable strata of the population as well as for small- and medium-sized businesses. It should be noted that their election promises had been much bolder. In particular, while still forming the yellow-green coalition, the proposal for Italy pulling out from the eurozone was taken off the agenda, and Giuseppe Conte has since repeatedly stated that Italy is not considering this move. This is precisely why Paolo Savona, who had described the euro as “a noose around Italy’s neck”, was never appointed economics minister in the new government. Conte has also repeatedly stressed that Italy is not pondering an “Italexit”.
Despite the significant backwards step taken on the euro and Italy’s presence in the EU, the protracted confrontation with Brussels that run from October through December 2018 resulted in the “government of change” adopting a 2019 budget which still fitted the logic of the coalition’s election promises. Even though Brussels did not allow Italy to set the acceptable budget deficit at 2.4% (the EU demanded 2.04%), the government still allocated financial reserves for introducing a guaranteed basic income for citizens, conducting a pension reform (the so-called Quota 100), and revising the taxation system, even in smaller amounts than originally planned.
It is obvious, however, that these measures of economic support for the population will not yield quick results by way of stimulating economic growth. In addition, society is split on whether the steps that have been taken can contribute to economic development. Surveys indicate that only four out of ten Italians are happy with the planned introduction of the basic income, while 55% do not support this measure.
Meanwhile, Italy is now in a technical recession based on the negative GDP dynamics seen for six months in a row (GDP stood at -0.2% for 4Q 2018). EU officials immediately reacted along the lines of “I told you so!”; in February 2019, they issued an even more pessimistic forecast for Italy’s 2019 GDP, predicting growth of no more than 0.2%, the lowest figure among all EU countries. Pierre Moscovici, the EU European Commissioner for Economic and Financial Affairs, Taxation and Customs, promised that Brussels would be closely monitoring Italy’s economic dynamics. He added that the country’s economy was not yet demonstrating any signs of recovery, despite the new government’s measures to support domestic demand. Moscovici also noted that the EU had effectively rescued Italy from an even worse-case scenario by prohibiting it to adopt the original budget, which implied a deficit of 2.4%.
The economic measures introduced by the Italian government at the very end of 2018 were not the main cause of the GDP slowdown in the third and fourth quarters of that year. Rather, it was caused by the economic policies that had been pursued by the previous governments. Nevertheless, the protracted conflict with Brussels over the budget plan and the threat of EU sanctions against Italy for its failure to comply with financial discipline rules certainly played a part in international rating agencies downgrading Italy’s ranking as well as in the increased volatility on financial markets in 2018. One thing is clear: if the economic situation in Italy does not begin to improve soon, this will give Brussels additional leverage in its fight not only against the Italian “sovereighnists” but also against Eurosceptic forces in other countries who are calling for a revision of the EU financial discipline regulations. Within Italy, people are seriously concerned about the economic situation: in late 2018, 55% of the population cited the economic crisis as the main threat to the country. A lack of positive economic changes soon could seriously affect the government coalition’s standing both inside and outside the country.
Whatever the case, the EU will still have to rescue the Italian economy. This is understandable: if the UK leaves, Italy will become the EU’s third largest economy, accounting for 15% of the Union’s total GDP. However, Brussels is growing ever more reluctant to save Rome: the EU has built up too much criticism of Italy over the past nine months: not only over the country’s failure to observe financial discipline and its stern migration policy but also because Italy has been discrediting the EU in the international arena.
Italy in the global arena: massive turmoil
During its first nine months in power, the Italian ‘government of change’ caused Brussels numerous headaches with its ‘sovereign’ foreign policy.
Conte became U.S. President Donald Trump’s greatest supporter in Western Europe. Trump’s first visit to Europe began in Italy. In 2018, Conte and Trump met at the G7 and NATO summits. Trump visited Italy in May, and Conte visited the White House in July. The U.S. president described his Italian counterpart as a “really great guy” who “will do a great job,” adding that “the people of Italy got it right”. It is no secret that the two leaders share a common view on migration: Trump has repeatedly expressed his approval for the border security measures taken by the Italian authorities. Conte supported Trump’s calls in the summer of 2018 for Russia to be accepted back into the G7, although none of the other G7 member states supported the idea. Trump also delegated to Italy the authority to manage the Libyan settlement, which understandably annoyed France, Italy’s long-standing rival in that country. It is no secret that Paris, Berlin, and Brussels view the new Italian government and Trump as the same breed of leprosy, which must be fought at any cost.
Italy’s relations with France had been steadily deteriorating under the yellow-green coalition. Things hit a diplomatic rock bottom on February 7, 2019, when Paris recalled its ambassador from Rome, citing months of “groundless attacks” by the Italian authorities. The last time such a thing had happened between the two countries was back in 1940, when Fascist Italy entered World War II against France and the UK on the side of Nazi Germany. This time around, the last straw came in the form of Italian Deputy Prime Minister Luigi Di Maio meeting with the leaders of the French yellow vest movement, who continue to protest the national authorities’ policies. France accused Italy of interfering in the country’s domestic affairs, but this came after Rome’s repeated allegations to the effect that France was violating Italy’s own national sovereignty. In March 2018, the actions of French police in an Italian refugee camp in Bardonecchia resulted in a major controversy. The countries continue to attack each other over migration issues. Macron described Italy’s refusal in June 2018 to accept refugees from the vessel Aquarius as “cynical and irresponsible”. Italy, for its part, regularly accuses France of deliberately returning migrants to the border with Italy near the town of Ventimiglia. The ongoing squabbling affects bilateral economic cooperation: for example, Italy has been dragging its feet on a project to build a high-speed motorway between Lyon and Turin. Most importantly, the scandal between the two EU founding states threatens pan-European solidarity on the eve of the European Parliament elections and is damaging the international image of the EU. By publicly accusing France of a “neo-colonial policy” in Africa, and by urging Brussels to intervene, Italy is undermining the EU’s authority as an international actor. Now that even the core EU member states prefer public conflicts to compromises, such behavior may soon catch on elsewhere across the Union, and all the differences that have been resolved quietly up to now may become widely known outside the EU. In addition, with the conflict rhetoric escalating within the EU core, the Paris–Berlin tandem is finding it increasingly difficult to promote its model of European integration as a more appealing option to the existing national-level sovereignty ambitions.
At the February 1, 2019 meeting of the EU foreign ministers, Italy once again demonstrated its special position by refusing to support a proposal to recognize Juan Guaido as the legitimate president of Venezuela. The proposal was also blocked by Austria, Finland, and Greece. For several days preceding the meeting, Italian politicians and Foreign Ministry representatives had been voicing somewhat differing positions on the recognition of the self-proclaimed Venezuelan president, which reflects the historical complexity of the process involved in formulating a common stance in Italian politics. The final verdict stated that Italy could not recognize someone who had not won a legitimate election as president, but that incumbent President Nicolas Maduro has also lost his legitimacy in the eyes of the Venezuelan people. Therefore, Italy called for holding a runoff election in Venezuela as soon as possible. Thus, Rome once again sabotaged European solidarity in front of the international community.
Brussels perceives Italy’s relations with Russia as another sign of the new government’s deviant behaviour. The new Italian authorities had begun calling for the lifting of EU sanctions against Russia even during the election campaign. Then they promised to bring the issue up at the EU summit in June 2018. However, even now, after the December vote to prolong the EU sanctions, Italy has not yet attempted to veto them. This is understandable: both in June and December 2018 Italy had to address much more important issues in terms of the country’s future development than relations with Russia. In the former case it was negotiating with the EU on migration, while in the latter Brussels was deciding on Italy’s 2019 budget. In both instances, Italy could not have possibly used its veto on the sanctions without losing bargaining chips on the other issue. Nevertheless, Conte’s high-profile visit to Moscow on October 24, 2018 resulted in the signing of new agreements on economic cooperation. Prior to Conte’s visit, Salvini had paid a visit to Moscow, where he met with Italian businesspeople operating in Russia. Italy is trying its best to return to the Russian market despite the sanctions, including by actively using the Made with Italy concept, which involves the launching of joint ventures and localization enterprises in Russia. However, these efforts to date have only resulted in mutual trade being restored to half of the pre-sanctions level, and the Italian government is very much annoyed by the fact that France and Germany – consistent supporters of the sanctions – effectively hold a much greater portion of the Russian market. It has been recently reported that Russian President Vladimir Putin will make an official visit to Italy in the first half of 2019 at Conte’s invitation. Should the visit take place prior to the EU parliamentary election, then Russia may well come under criticism for its alleged attempt to once again meddle in the EU’s internal affairs, divide the Union from the inside, and provide support to European pro-sovereignty forces ahead of the polls.
Another topic of extremely high relevance to Rome is energy cooperation with Russia, which supplies 40% of all gas consumed in Italy. Gazprom’s 2018 exports to Italy exceeded the volume supplied to Turkey and ranked only second to deliveries to Germany. The possibility of extending the TurkStream pipeline to Italy via the Balkans will most certainly be discussed in 2019, which could provoke a new confrontation with Brussels, which seeks to reduce dependence on Russian energy while preserving the share of transit via Ukraine.
Italian exports to Russia
Another irritating factor for Brussels is the northern Italian regions’ interaction with the authorities of the so-called Donetsk and Luhansk people’s republics (DNR and LNR) as well as visits by northern regional delegations to Crimea and Russia’s Krasnodar region. Back in May 2016, the council of the Italian region Veneto, whose capital city is Venice, recognized Crimea as part of Russia. The DNR’s second Italian representative office opened in Verona on February 9 this year (the first was had opened in Turin in 2016), and another Italian delegation is expected to visit the Krasnodar Territory in the spring of 2019.
What to expect from the enfant terrible
Political turbulence and frequent government changes have become integral features of the Second Italian Republic, with both Europe and the world now accustomed to these factors. Little wonder, therefore, that even before the new “government of change” actually came to power, people both in Italy and in the EU started wondering how soon the yellow-green coalition would collapse, the assumption being that a political coalition cemented by a common aversion to the EU could not possibly form a reliable foundation for any long-standing cooperation between the right- and left-wing populist forces.
The coalition partners have indeed been manifesting differences since coming to power, and the Italian media have repeatedly highlighted these discords as possible reasons for a split. The first nine months have in fact resulted in the parties swapping places in terms of popular support: the Five Stars Movement’s approval rating stood at 32% in May 2018 versus 24% for the League, whereas the current situation is exactly the opposite. The ongoing series of regional elections could result in another conflict: in the recent gubernatorial polls in the Abruzzo and Sardinia regions, the League candidate won by a landslide, leaving the Five Stars rival far behind. The leaders of the ruling parties have reportedly disagreed on such issues as budget planning, the introduction of a basic income, the Lyon–Turin highway, refugees, and the security law. However, each time the two parties would make statements emphasizing the government’s unity and their readiness to negotiate on all key issues. By all appearances, Salvini, Di Maio, and Conte all understand that if the coalition collapses, they will not be able to stand against Brussels on their own, which would convince the EU leadership of the sovereignty supporters’ inconsistency, egoism, and inability to reach an agreement even amongst themselves. The coalition’s collapse would bury the idea of a broader, pan-European coalition of Eurosceptics, whose positions in the European Parliament would be weakened. In the meantime, a survey published on February 14 clearly indicates that the coalition of the European People’s Party and the Party of European Socialists will not secure a majority in the new European Parliament for the first time in EU history and that the “sovereignists,” or Eurosceptics, stand a good chance of securing a combined total of up to 130 seats. In fact, the Five Stars Movement’s share of the vote could prove decisive in forming the new European People’s Nationalist Party plus “sovereignists.” In this situation, the Italian leaders are much more interested in strengthening their coalition than splitting it. Should they succeed, the yellow-green coalition could truly become a “government of change” for all of Europe…
First published in our partner RIAC
The French Dispatch: The Year 2022 and European Security
2021 has been rich in negative events for European security: the world has witnessed the collapse of the Open Skies Treaty, American-French discord concerning AUKUS, the termination of the official dialogue between Russia and NATO, and the migration crisis on the Polish-Belarusian border.
Over the past year, the Western countries seem to have been searching for new strategies. Since the end of 2019, NATO has been developing a new concept, and in June 2021 at the summit in Brussels, to the displeasure of sceptics, it was possible to agree on its basis—the transatlantic agenda NATO 2030 (# NATO2030) . While the broad formulations and a direct hierarchy of threats still require clarification, new projects in the field of weapons development, combating climate change, and increasing interoperability have already been declared.
In parallel, since the end of 2020, work has continued on the EU European Parliamentary Research Service project—the Strategic Compass. The dialectic between Atlanticism and Europeanism softened after Joe Biden came to power in the United States, but the European interests and red lines retain their significance for transatlantic relations. In 2022, together with the rotating post of the President of the EU Council, the role of a potential newsmaker in this area has been transferred to Emmanuel Macron, who feels very comfortable in it.
On December 9, the provisions of the Paris programme were published under the motto “Recovery, power, belonging” France, as expected, is reiterating its call for strengthening European sovereignty. The rhetoric of the document and its author is genuine textbook-realism. But now for the entire European Union.
Objectives of the French Presidency, are not articulated directly but are quite visible—making the EU more manageable and accountable to its members, with new general rules to strengthen mobilisation potential, and improve the EU’s competitiveness and security in a world of growing challenges.
Paris proposes reforming the Schengen area and tightening immigration legislation—a painful point for the EU since 2015, which has become aggravated again in recent months. This ambitious task has become slightly more realistic since Angela Merkel’s retirement in Germany. At least a new crisis response mechanism on this issue can be successful, even if it is not fully implemented.
In addition, the Élysée Palace calls on colleagues to revise the budget deficit ceilings of the Maastricht era to overcome the consequences of the pandemic and finally introduce a carbon tax at the EU borders. The latter allows for a new source of income and provides additional accountability for the implementation of the “green” goals by member countries.
The planned acceleration of the adoption of the Digital Markets Act (DMA) and Digital Services Act (DSA), developed by the European Commission at the end of 2020, is also aimed at unifying the general legislation and consolidating the European position in the world. In other words, the French Foreign Ministry quite soberly assesses the priority areas and vulnerabilities of the European Union and focuses on them, but with one exception.
A special priority of the French presidency is to strengthen the defence capabilities of the EU. On the sidelines, the French diplomats note that the adoption of the Strategic Compass in the spring of 2022, as originally planned, is a fundamental task, since otherwise the process may be completely buried. With a high degree of probability, this is so: the first phase of the development of the Compass—the general list of threats—lasted a year, and consisted of dozens of sessions, meetings, round tables with the involvement of leading experts, but the document was never published. If Macron won’t do it, then who will?
As the main ideologist and staunchest supporter of the EU’s “strategic autonomy”, the French president has been trying for five years to mobilise others for self-sufficiency in the security sphere. With his direct participation, not only the Mechanism of Permanent Structured Cooperation (PESCO) in the defence area was launched, where France is the leader in a number of projects, but also the so-far failed European Intervention Initiative. Even without focusing on French foreign policy traditions and ambitions, the country remains a major European arms exporter and a nuclear power, where the military-industrial complex is closely affiliated with the state.
Implementing the 2022 agenda is also a matter of immediate political gain as France enters a new electoral cycle. The EU Summit will take place on March 10-11, 2022, in Paris, a month before the elections, and in any case it will become part of the election campaign and a test for the reputation of the current leader. Macron has not yet officially announced his participation in the presidential race, but he is actively engaged in self-promotion, because right-wing politicians espousing different degrees of radicalism are ready to take advantage of his defeats to purchase extra points.
The search for allies seems to be of key importance for victory at the European level, and the French Foreign Ministry has already begun working on this matter. In 2016–2017 the launch of new initiatives was predetermined by the support of Germany and the Central and East European countries. The change of cabinet in Germany will undoubtedly have an impact on the nation’s policy. On the one hand, following the results of the first visit of the new Chancellor Olaf Scholz to Paris on December 10, the parties announced the closeness of their positions and a common desire to strengthen Europe. On the other hand, the coalition of Social Democrats (SDP) was made up with the Greens and Free Democrats (FDP) who are not at all supporters of excessive involvement in security issues. What “strategic autonomy” means for France, constitutes a more restrained “strategic sovereignty” for Germany Therefore, an intensification of dialogue with Italy and Spain, which are both respected and potentially sympathetic, is likely. The military cooperation agreement concluded in the autumn of 2021 with Greece, an active member of PESCO, can also help Paris.
Gaining support from smaller countries is more challenging. Although the European project is not an alternative to the transatlantic one, the formation of a common list of threats is a primary task and problem for NATO as well. As mentioned above, it is around it that controversy evolves, because the hierarchy determines the distribution of material resources. The countries of Eastern Europe, which assume that it is necessary to confront Russia but lack the resources to do so, will act as natural opponents of the French initiatives in the EU, while Paris, Rome and Madrid will oppose them and the United States in the transatlantic dialogue. The complexity of combining two conversations about the same thing with a slightly different composition of participants raises the bar for Emmanuel Macron. His stakes are high. The mobilisation of the Élysée Palace’s foreign policy is one of the most interesting subjects to watch in the year 2022.
From our partner RIAC
Unilateral vs Bilateral Euroisation: Political, technical and practical issues in the curious case of north Cyprus
The island of Cyprus has been split between a Greek Cypriot south and a Turkish Cypriot north since 1974. The Turkish Cypriot state declared in the north is recognised only by Turkey, while the Republic of Cyprus in the south is recognised internationally and is a European Union (EU) member since 2004. In 2004, 65 percent of Turkish Cypriots voted in favor of the United Nations’ Annan Plan for reunification only for Greek Cypriots to reject it. As a result, Cyprus joined the EU as a de facto divided island. Despite joining the EU as a divided island, the whole of Cyprus is considered an EU territory. However, the EU law is suspended in the north until reunification is achieved.
This resulted in the euro being the legal tender only in the southern part of the island. With the recent and continuous depreciation of the Turkish lira, the long-standing question of whether and how the north could switch to the euro has once again intensified. While a bilateral adoption of the euro is not on the cards until a reunification on the island, north Cyprus could technically unilaterally adopt the euro. However this could cause complications in the future as the EU is adamant that unilateral euroisation cannot be used as a mechanism by Member States to circumvent the stages foreseen by the Maastricht Treaty.
Under normal circumstances, “Member States with a derogation”, i.e. the Member States that have not yet fulfilled the necessary conditions for the adoption of the euro are first required to enter the Exchange Rate Mechanism (ERM II) to achieve eurozone membership. This is a “waiting room” where any country aspiring to adopt the euro is required to stay for at least for two years. It is now a well-known fact that the ECB shares the opinion of the Economic and Financial Affairs Council (ECOFIN), i.e. the meeting of the finance ministers of EU Member States adopted in 2000, that this requirement should not be waived. Assuming the northern part of Cyprus is considered a Member State, the same principle will apply and therefore it would not be welcome to adopt the euro unilaterally, bypassing the convergence process foreseen by the Treaty for the adoption of the euro.
Currently, ERM II comprises the currencies of Bulgaria, Croatia and Denmark. Just like these countries, north Cyprus would be expected to peg its national currency to the euro and, given the consent of the European System of Central Banks, fixe a “central exchange rate” and a “deviation margin” under Exchange Rate Mechanism (ERM II) for a duration of no less than two years. If successful based on its ERM II performance, a final exchange rate would be determined and the redenomination would be done over a transition period.
In the case of north Cyprus, it is understood that the EU might have already agreed to apply a fast track approach where there would be a one-year transition period. However, this has not been confirmed officially by the EU so the EU’s stance in practice is not known. After all, even Denmark, a Member State which has negotiated an opt-out arrangement before the adoption of the Maastricht Treaty has been participating in ERM II although it chose not to adopt the euro. So the EU’s approach in the case of northern Cyprus would not expected to be too lenient. There is no way to find out unless north Cyprus continues the dialogue with the EU.
In the meantime, a more relevant question is whether a unilateral euroisation could be possible. The short answer is yes. For instance the euro was introduced in Kosovo and Montenegro that did not have a status of a sovereign state at the time. In both cases, the decision was made in 1999. Kosovo, defined the Deutsche Mark as the designated currency, which was replaced by the euro in 2002. Similarly, Montenegro introduced a parallel currency system in 1999, in which the Deutsche Mark was allowed to circulate alongside the then legal tender. In 2001, the Deutsche Mark became the only legal tender and was replaced by the euro in June 2002.
In the case of Montenegro, now an official EU candidate, the adoption of the euro without an agreement with the European Central Bank (ECB) was acknowledged by the European Commission as a measure which had to be taken due to “extraordinary circumstances” present in the country at the time. This could be precedent for north Cyprus. However, it is important to note that the ECB still supports the view that unilateral euroisation is not compatible with the Maastricht Treaty and cannot be a way to bypass the convergence process.
The implications of the Treaty framework for in the case of Montenegro currently remain unknown and are expected to be detailed “by the time of possible future negotiations for accession to the EU”. In particular it remains uncertain whether the country would be required to introduce its own currency before it can join ERM II. Should this be the case as Montenegro makes further progress towards EU membership, this would entail substantial operational and changeover costs. Authorities in north Cyprus, should therefore monitor the developments very closely.
Normally, non-euro area Member States are denied the option of unilateral euroization due the principle of equality, i.e. the EU considers bypassing the convergence process incompatible with the EU Treaty and actively discourages it.In particular, the Treaty sets out that there has to be a Community assessment of the fulfilment of these criteria and mutual agreement on the appropriate exchange rates. This means that the ECB does not welcome unilateral euroisation, as such an adoption of the euro outside the Treaty process would run counter to the underlying economic reasoning of European Monetary Union.
However, as north Cyprus is already an EU territory the adoption of the euro could be considered a “common interest of the EU” and therefore an exception could be possible. In fact, the policy of the EU with regard to the Turkish Cypriot community which was set out by the General Affairs Council in 2004 states that “the Council is determined to…facilitate the reunification of Cyprus by encouraging the economic development of the Turkish Cypriot community”. So in the case of north Cyprus, a switch to the euro could be allowed by way of exception although this would obviously imply circumventing the process of multilateral assessment by the EU Member States.
While the EU could give the green light to adoption of the euro by north Cyprus without a successful exchange-rate procedure under ERM II, it would not allow this to undermine the process of convergence prior to the adoption of the euro. In other words, the Convergence criteria outlined in the Maastricht Treaty would still remain relevant and important as the Treaty requires Member States to achieve a high degree of sustainable economic convergence before they can join the euro area.
In other words the economies of Member States with a derogation must be able to keep pace with those already using the euro. Exchange rate stability, for instance, is evaluated by assessing whether the exchange rate of the country’s currency has remained within the fluctuation bands provided for by ERM II for at least two years without devaluating against the euro.
Besides exchange rate stability, the convergence criteria also include price stability, sound public finances, and convergence in long-term interest rates. This means, for instance, that a country’s long-term interest rate, measured on the basis of long-term government bonds or comparable securities, should not exceed that of the three best-performing Member States in terms of price stability by more than 2 percentage points during the one-year observation period prior to the assessment.
On the other hand, a country is considered to meet the price stability criterion if its average inflation rate does not exceed the inflation rate of the three best-performing EU Member States by more than 1.5 percentage points during a one-year observation period. These criteria are intended to ensure the sustainability of public finances and that the government is able to manage its debts.
Article 140 (1) of the Treaty on the Functioning of the European Union (TFEU) requires the European Commission (EC) and the European Central Bank (ECB) to report to the Council, at least once every two years, or at the request of a Member State with a derogation on the progress of the country in fulfilling their obligations regarding the achievement of economic and monetary union. In addition to preparing these “Convergence Reports”, both the ECB and the Commission regularly monitor progress throughout the year.
A Convergence Report is normally published at least once every two years or at the request of an EU Member State which would like to join the euro area. Both the ECB and the European Commission issue these reports describing the progress made by non-euro area Member States towards achieving the criteria necessary for a country to adopt the euro. According to the latest report, among countries legally committed to adopting the euro, Croatia and Sweden fulfil the price stability criterion, Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the criterion on public finances, Bulgaria, Czechia, Croatia, Hungary, Poland and Sweden fulfil the long-term interest rate criterion. However none of them meet all the requirements for adoption of the euro. So convergence process is very strict and challenging.
In particular, it should be noted that convergence must be sustainable, meaning that satisfying the economic convergence criteria at one point in time is not enough and they are expected to be met on a lasting basis. A Member State’s general financial position is considered sustainable based on two criteria, namely, the government’s annual fiscal deficit should not exceed 3% of gross domestic product, and overall government should not exceed 60% of gross domestic product. This is very important for northern Cyprus as it will need to ensure that its economy is resilient.
It is known that the Maastricht Treaty provides some flexibility and the final assessment depends on the ECOFIN Council. Whether and how this would apply in the case of northern Cyprus remains a mystery. While details remain unknown to the public, the one-year transition period envisaged in the case of northern Cyprus could be related this. However, it should be noted that the decision on whether north Cyprus can adopt the euro would ultimately be a political one and would lie with the Council of the European Union. This means that representatives from all EU countries would be required to take a decision based on a proposal by the EC and after consulting the European Parliament.
Given that participation in the ERM II is a precondition for as well as fulfilment of the nominal convergence criteria to join the euro, it is binding and is unlikely to be waived for any country regardless of any special circumstances. This is because ERM II provides the framework to manage the exchange rates between EU currencies, which is necessary for exchange rate stability. As such north Cyprus would be expected to participate in the mechanism without devaluing its central rate against the euro before it can qualify to adopt the euro.
While no provision of the EU Treaty states explicitly that Member States with a derogation must have their own currency, the Treaty is by and large based on this assumption. In addition, the entry into ERM II is decided by mutual agreement of all ERM II parties, which consist of the ministers of the euro area Member States, the President of the ECB and the minister and the central bank governor of Denmark, as the only non-euro area Member State currently participating in the mechanism.
So in the case of north Cyprus adoption of the euro could mean that the country should first introduce its own currency. This could be a more viable alternative and north Cyprus could then peg its currency to the euro as a preparation for an eventual switch to the euro. Indeed, some countries joined ERM II with their preexisting currency pegs. To give a recent example, the currencies of Bulgaria and Croatia were already closely tied to the euro at the time of applying to the ERM II. Bulgaria had a currency board, first with the Deutsche Mark, and subsequently with the euro after 1999. Croatia had a peg first with the Deutsche Mark, and from 1999 to the euro, with a narrow band.
During this process, legal requirements should not also been underestimated. Article 140(1) of TFEU requires the convergence reports to assess the compatibility of national legislation, including the statutes of the national central bank and the Statute of the European System of Central Banks and of the ECB. There could also be additional unprecedented requirements and countries may be required to commit to implementing specific policy measures on a variety of topics. For instance, in the case of Bulgaria and Croatia, such requirements range from the anti-money laundering framework, state-owned enterprises and the insolvency framework, to the non-banking financial sector, corruption and even organised crime. It is highly unlikely that the national legislation in north Cyprus is currently compatible with that of the EU as the latest convergence report suggests that the respective national legislations in none of the seven new EU Member States would be deemed “fully compatible” with the exception of Croatia.
In fact, the former north Cyprus President Mustafa Akıncı himself had confessed that “serious work” would needed to ensure the harmonization of the national institutions with the EU acquis. As can be seen in the case of Croatia and Bulgaria, this has now become a prerequisite not only for joining the EU but also in terms of adopting the euro as a new Member State. For instance, this was the main reason behind the delay in Bulgaria’s acceptance to ERM II. Bulgaria was able to get the green light to join ERM II two years after it formally announced its intention to join the mechanism.
The delay was due to the requirement imposed by the Eurozone governments requiring Bulgaria to join ERM II and the Banking Union simultaneously. This prerequisite is known as “the Cooperation Decision” and requires Member States which adopt the euro to also participate in the Banking Union, i.e. the Single Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF). . Therefore, participating in ERM II with a view to later adopting the euro will also involve preparing for joining the Banking Union.
This requirement will now apply to all future candidates including north Cyprus. However, it should also be noted that the procedure for entering the Banking Union is separate from the assessment of the convergence criteria. Joining the Banking Union is irreversible and involves direct powers of the SSM and the SRM over its banking system. This has important implications for the banking sector as banks that will come under the direct supervision of the ECB will also be subject to the direct supervision of the Single Resolution Board (SRB).
To be more specific, this means that, the ECB will become responsible for the direct supervision of the significant credit institutions following the “significance assessment process”. This applies to banks considered to meet the “materiality criteria” as set out in the SSM Regulation (Regulation 1024/2013) and the SSM Framework Regulation (Regulation 468/2014). The criteria include “economic importance for the country” so could technically apply to banks in north Cyprus despite their insignificant sizes in comparison to the EU economy. Therefore, for new joiners like north Cyprus the accession process would involve not only the harmonization with the aquis but also the strengthening of their institutions and administrative capacity that will enable them to implement and monitor the enforcement of the harmonized legislation.
Therefore, adoption of the euro by north Cyprus, bilaterally or unilaterally, would not be as easy as it may look. More than anything else, this would require political will, courage and determination. The former President Mustafa Akıncı, a devoted supporter of a federal solution and the EU, had set an ambitious target of the euro going into circulation “from the first day” in the case of a reunification. However with the failure of the last reunification talks in 2017 in Crans Montana, Switzerland, political conditions have changed dramatically. The current President Ersin Tatar who is a very passionate proponent of the two-state solution is wholeheartedly against the EU and the euro. Therefore, the general stance towards the adoption of the euro in the northern part of the island remains fragmented. Given these circumstances, adoption of the euro in north Cyprus seems a distant prospect.
How Red Are the EU’s ‘Greens’?
Blood-red. But that’s a banned fact. (It will be documented in what follows.)
Here are the announced values (the “Guiding Principles”) of the European Green Party:
“Freedom through Self-Determination”
“Diversity, an Indispensable Condition”
“To sum it up, Sustainable Development”
This “Charter of the European Greens” fills-in those blanks by stringing together clichés, which 90% of the pubic will like, because they’re written so as to avoid (as much as possible) saying anything that’s broadly controversial. For example, “Our answer is sustainable development, which integrates environmental, social and economic objectives for the benefit of all.” (Oh? And how is that pap to be realized in actual policies? What are the measures, and the precise priority-rankings, when any of those values conflict with one-another, which is often?) The Green Party is simply conning liberals, but what is their reality? What are they actually doing, when in power? Inside their own country, and in the EU? Let’s take a very concrete (but broadly representative) case:
Germany, as I recently pointed out, is so corrupt that it has virtually no bans on who or what may donate to politicians. Foreign interests can donate, corporations can donate, even corporations that have government contracts (sell to the government) can donate, donations needn’t go through the banking system, donations may be accepted in any amount, anonymous donations are acceptable, etc. It’s super-libertarian. It is open-sesame to billionaires and centi-millionaires (the few people who have the most money) to control the Government by means of their ‘news’-media persuading the voters, and by means of political campaign donations to present the billionaires’ favored candidates’ viewpoints in the most favorable way — and their least-favored candidates in the least favorable way. It’s control by dollars, instead of control by voters. That’s libertarianism.
A March 2015 academic study showed that, of all 28 EU member-nations, the only five that were more corrupt than Germany were Malta, Austria, Denmark, Ireland, and Netherlands. Then, on 10 June 2015, a Pew survey in Germany, Poland, Spain, France, Italy, UK, U.S., and Canada, showed that, among those 8 countries, ONLY Germany (and by a big margin: 57% to 36%) opposed Ukraine joining NATO. However, when German and foreign billionaires s‘elected’ the new German Government that became installed on 8 December 2021, it appointed as the Germany’s new Foreign Minister the Green Party’s losing candidate for Chancellor, Annalena Baerbock, whose entire career as a candidate and as an official was the most notable for her strident advocacy for hostility toward Russia, and for Ukraine to be admitted into NATO (the anti-Russian U.S. military alliance). She thus became — though she lost her campaign for the Chancellorship — the most powerful Green Party politician in Europe or anywhere.
Immediately, she reversed Angela Merkel’s policies which had allowed the Russian-Swiss-German natural gas pipeline from Russia to Germany, Nord Stream 2, to be constructed to bring into the EU the least expensive of all gas to Germany, which is Russia’s pipelined gas. Gas-prices in Germany are now already soaring, and Germans will increasingly freeze, as a result of this ‘German democracy’ and its obedience to its billionaire masters in America.
However, many European billionaires are also being served by this ‘Green’ Party. Much like America’s Democratic Party (or liberal) billionaires, Europe’s liberal billionaires have been investing heavily in ‘green’ technologies, and are betting against their opposition, conservative billionaires, who are still committed to fossil fuels. So: the ‘Green’ Party represents liberal billionaires, against conservative billionaires.
On 8 September 2021, “Capital Radar” newsletter bannered “‘Most important choice for the next 100 years’: 1.25 million euros from the Netherlands for the Greens” (“„Wichtigste Wahl der nächsten 100 Jahre”: 1,25 Millionen Euro aus den Niederlanden für die Grünen”) and reported that:
• A Dutch tech billionaire donates 1.25 million euros to the German Greens.
• It is the largest donation in the party’s history.
• In an interview with RND, the major donor explains why Annalena Baerbock should steer the ship of state and why the federal election is so important.
Amsterdam. The Dutch entrepreneur and philanthropist Steven Schuurman [archive.md/ZjwWW] donated 1.25 million euros to the German Greens. It is the largest donation in the party’s history. Billionaire Schuurman, born in 1975, is co-founder and ex-head of the data search and analysis company Elastic and co-founder of Atlantis Entertainment. He has already donated millions in the Dutch election campaign.
The Greens have already received large sums of money this year: the pharmaceutical heir Antonis Schwarz [archive.md/COcng] bequeathed them 500,000 euros; the Greifswald Moritz Schmidt, who got rich through Bitcoin deals, one million euros; and Sebastian Schel’s net heir, 250,000 euros. The election program for the federal election states: “Party donations should be capped at an annual maximum amount of 100,000 euros per donor.” [But Germany has separate laws for candidates, and no limits are placed on donations to them.]
Schuurman was quoted as saying that, of the three candidates for Chancellor, only Baerbock took global warming seriously. He ignored the more pressing and sooner danger of avoiding a nuclear war, on which Baerbock’s policy-commitments are rabidly anti-Russian. No U.S.-and-allied billionaires — either liberal or conservative — are opposed to that. But those policies are blood-red, and now.
At the level of the EU itself, the most powerful person over the entire European Union has been a lifelong hater of Russia, the American billionaire George Soros, who controls the Open Society Foundation and other ’non-profits’ that have poured billions of dollars over decades (starting in 1993, just two years after his self-declared war against communism in Russia had become no longer an excuse when Russia abandoned communism in 1991) into color-revolutions targeted against Russia. On 5 November 2017, Alex Gorka at Strategic Culture, headlined “The Myth of European Democracy: A Shocking Revelation”, and opened:
It’s an open secret that the “Soros network” has an extensive sphere of influence in the European Parliament and in other European Union institutions. The list of Soros has been made public recently. The document lists 226 MEPs from all sides of political spectrum, including former President of the European Parliament Martin Schulz, former Belgian PM Guy Verhofstadt, seven vice-presidents, and a number of committee heads, coordinators, and quaestors. These people promote the ideas of Soros, such as bringing in more migrants, same-sex marriages, integration of Ukraine into the EU, and countering Russia. There are 751 members of the European Parliament. It means that the Soros friends have more than one third of seats.
George Soros, a Hungarian-American investor and the founder and owner of Open Society Foundations NGO, was able to meet with President of the European Commission Jean-Claude Juncker with “no transparent agenda for their closed-door meeting.”
Many but not all of his agents at the European Parliament are Greens. U.S.-and-allied billionaires donate to all politicians that are ready, willing, and able, to advance the U.S. empire to encompass the entire world, and don’t donate to just to one Party.
Soros was a major funder of the coup-operation that started in the Obama Administration (led by Victoria Nuland under Hillary Clinton) by no later than June 2011 to overthrow Ukraine’s democratically elected President, Yanukovych, and replace him by a racist-fascist (or nazi) anti-Russian regime and to seize Russia’s largest naval base, which was and is in Crimea, to turn it into a U.S. naval base. (Putin was able to block the latter attempt.) Hillary and Obama had first met with Yanukovych in 2010 and failed to persuade him to push for Ukraine’s NATO membership in NATO, but he said no — NATO then was very unpopular among Ukrainians. During 2003-2009, only around 20% of Ukranians wanted NATO membership, while around 55% opposed it. In 2010, Gallup found that whereas 17% of Ukrainians considered NATO to mean “protection of your country,” 40% said it’s “a threat to your country.” Ukrainians predominantly saw NATO as an enemy, not a friend. But after Obama’s February 2014 Ukrainian coup, “Ukraine’s NATO membership would get 53.4% of the votes, one third of Ukrainians (33.6%) would oppose it.” Obama turned Ukraine around — from being a neutral country on Russia’s border, to being a nazi anti-Russian country. And Annalena Baerbock is a strong backer of today’s nazi Ukraine.
However, the ‘Green’ Party is green in one way: it follows the dollars, not the voters. Other than that way of being green, it’s really only blood-red. Even the ‘Green’ Party’s proposed policies against global warming are futile to prevent global burnout, and they ignore the only policy that, even conceivably, might halt global warming: to outlaw the purchase of stocks and bonds of fossil-fuel-extraction companies. So: they are total fakes. The response of billionaires is to bet either for crackpot business-ventures to halt global warming, or else for extending yet further into the future the use of mainly fossil fuels and ignore even the pretense of caring about the welfare of the generations yet to come. In other words, all billionaires, both liberal and conservative, are really only blood-red, for expanding yet further their empire, in the final analysis.
This doesn’t come from what the voters want; it reflects ONLY what the billionaires want. Here are some data showing that despite all the billionaires’ propaganda for expanding yet further the U.S.-and-allied empire, a majority in some countries — including Germany — don’t want it:
Only Germans “oppose Ukraine joining NATO”: 57% to 36%
“Ukraine Joining EU” opposed by Germans 54% to 41%, opposed by French 53% to 46%
“Oppose Supplyiing Ukraine with Arms Against Russia: Germans 77% to 19%, French 59% to 40%, Italians 65% to 22%.
In 2013, the median favorability of Russia in the EU was 37%; by the time of 2015 it had become 26% — 26/37 or 30% less than only two years earlier, which is to say prior to
Obama’s having grabbed Ukraine in a very bloody U.S. coup. (Obama was the most successful heir to Hitler since WW II, and was especially successful in jeopardizing the national security of the Russians by grabbing Ukraine on Russia’s border and intensifying the anti-Russian military alliance, NATO, whereas Hitler’s attempt to conquer Russia had turned out to be an colossal failure.)
So, Baerbock — the most powerful ‘Green’ politician in Europe, and even anywhere, though she had failed at the ballot-box — gets here hate (against Russia), her warmongering, not from the voters, but from the sheer cravings of U.S.-and-allied billionaires, to expand their U.S.-and-allied empire, to encompass the entire world. That’s what she (and many Green Party politicians) push for the most.
The ‘Greens” are actually blood-red, for war.
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