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The geopolitical substance of the fall of the Berlin Wall

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Currently the material break, rather than the real fall, of the Berlin Wall is at the core of many strategic and historical misrepresentations.

 The naive rhetoric of “global democracy” that broke into Potsdam for the will of the conscious people – just to use an old definition of Communist propaganda – or the inevitable victory of the famous Western values over everything else.

Nonsense. The negotiation, which also led President Mitterrand and Prime Minister Thatcher to use the single EU currency, namely the Euro, as strategic blackmail against the unified German Mark, was geopolitical and military strategy.

 Meanwhile, the shrewdest leaders in Western Europe struggled to say they did not want unification – but it was just so.

 Giulio Andreotti’s witty remark is now well-known, “I love Germany so much that I want two of them”, but also Prime Minister Thatcher and President Mitterrand had many doubts, which were never dispelled.

 The French Socialist President was clearly against German unification. Probably his aides were not fully against it. They imagined a united Germany, although without military protection, but President Mitterrand was certainly against it.

 All what I heard from the agents of the French intelligence Services and the many friends I had in France agree on this point.

 For a moment, President Mitterrand’s France even thought of its own geopolitical and military shield for the German Democratic Republic(GDR), and anyway invited Erich Honecker, the GDR leader for a State visit to France, in which he was treated as a Head of State.

 At the time no one treated the GDR leaders like that.

 The French idea was to stop reunification indefinitely and then negotiate . from a position of strength – the ways and timeline of a democratic “federation” between the two Germanies.

 The role of the two Germanies in the EU remained unknown, but it was clear that the future French presence in the German Democratic Republic was France’s decision-making axis, also from an economic viewpoint.

 The German Democratic Republic was by no means a collapsing State. Until July 1, 1990, the day of its dissolution, it had paid all its international debts.

Probably Krenz and Hohnecker’s heirs-politicians of the old world -thought that the USSR would continue to support them and the day before July 1, 1990, it was West Germany that decided a one-to-one exchange rate.

 Beforehand, the exchange rate between the two Germanies was 1 to 4.44, and – as we can easily imagine – it was a real disaster for the German Democratic Republic.

It obviously lost all the Soviet COMECON markets and then – as an Italy ante litteram – it also lost Western markets.

 Production in East Germany collapsed by 30% in a short lapse of time. After the elections in West Germany, East Germany was on its last legs and agreed to reform some laws: unemployment ceased to be unconstitutional, in a country that had the Compass and the Hammer, two Masonic symbols, in its national coat of arms. Later Potsdam’s Germany entered the West as a whole of regions, not as an autonomous State.

 The West Treuhandanstalt privatized companies in a superficial way, but those that had been destroyed by the one-to-one exchange rate – decided overnight – were sold at budget-friendly prices.

With specific reference to private homes, 2.17 million lawsuits were initiated, but it was President Gorbachev himself, with a destroyed State budget, who accepted the economic and political destruction of the old East Germany to get credits from West Germany.

He also accepted reunification within NATO, again to plug the Soviet budget holes, but even gave Chancellor Kohl free rein on the treatment of the old GDR leaders.

 This is how the story went.

However, the French President, who wanted above all a moderate approach to German reunification, was not – in principle – against reunification, but wanted it without destabilizing President Gorbachev, in particular, while Prime Minister Thatcher’s Great Britain was always explicitly opposed to reunification.

  The Iron Lady, in fact, fully supported President Gorbachev’s project in the USSR. She did not want destabilisation in Eastern Europe and finally she did not want the US costly acquisition of the old Soviet Union, with possible unpredictable effects.

The “grocer’s daughter” – as Queen Elizabeth II snobbishly called her -thought that, in a different context, there would also be a fully British part in the sharing of the spoils of the collapsing USSR.

 Acquisition estimated by Jeffrey Sachs at 10,000 billion US dollars in business terms, which then generated all the vouchers distributed to USSR citizens that later Yeltsin’s government probably produced in greater quantities than needed.

 As foreseeable, during the economic and food crisis of 1992-1993 many vouchers got into the wrong hands- those of the future “oligarchs”.

By their very nature, however, the German events happened when someone (possibly the USA or the Soviet Union) strongly stepped up the pace of riots in the GDR streets so as to reach an immediate and irrational reunification.

 What, in fact, could be the rationale of an USSR that, at the end of its Communist history, gave up the pearl of the Soviet Empire, namely East Germany?

I remember that when we talked about it, the former Italian President, Francesco Cossiga, was convinced that the Soviet Union had offered to the West that big poisoned chalice, namely reunited Germany, to block it and make it uncontrollable.

The German bite was too big to be swallowed and digested calmly and quietly.

Prime Minister Thatcher knew all too well that united Germany would decide the future of the Eurasian peninsula.

However, Chancellor Kohl, who was very clever, made President Gorbachev understand that Germany would easily bear the costs for the return back home of the Soviet troops stationed in East Germany, while Kohl himself easily won the 1990 German election he would probably lose  without the prospect of reunification.

Despicable – and I say so without pretence – was instead Angela Merkel (who owes his political career to Chancellor Kohl that discovered and sponsored her) who, at the funeral of the great German leader, while Helmut Kohl’s wife tried to hug her, retracted by saying “keep your distance”.

 Without Helmut Kohl, Angela Merkel would have been just an ordinary immigrant from the GDR, with a Protestant theologian father inevitably compromised with the Communist regime, and she herself the youth leader of the Eastern Party, SED. No one has ever fully investigated Merkel’s role in the GDR intelligence services.

As a strategist born, Francesco Cossiga knew what the real stake with reunification was and endeavoured with Kohl to slow it down, but not to avoid it, by promoting a phase of integration between the two Germanies that would be decided – in an ad hoc Conference – by the other European nations, as well as by the USA.

 Margaret Thatcher was firmly opposed to it.

 The real turning point was the end by self-destruction of Gorbachev’s regime in the USSR, which allowed the fast and irrational reunification, seen above all – as Kohl wanted – as an “enlargement” of the Federal Republic of Germany (FRG).

 The USA had no idea on which to work.

There were those who, in the State Department, thought of a more solid Europe, with the old GDR unified with the FRG, against everything was rising in the old USSR. There was also CIA, which rightly saw how useful was, for the United States, a new weak Europe to allow the non-competitive penetration of the US capital into Russia and Central Asia.

One of the most attentive U.S. analysts was John Mearsheimer, according to whom the end of the Cold War had put an end to the great powers that had dominated the Eurasian peninsula until that time, starting from the end of World War II.

 This meant that, from then on, world instability would probably return to the heart of Europe – a strategic dream of which the USA had never ceased to dream.

 The US decision-makers still recalled a classic piece by Walt Whitman, the author of Leaves of Grass, who wrote:

“I see the European headsman;

He stands masked, clothed in red, with huge legs, and strong naked arms, And leans on a ponderous axe.

Whom have you slaughtered lately, European headsman?

Whose is that blood upon you, so wet and sticky?”

Hence to interpret the current US global strategy for Europe, even Walt Whitman would be enough.

Let us analyze the geoeconomic and strategic determinants of German reunification.

Before committing suicide with his family, after having heard of the Morgenthau Plan, which provided for the forced ruralisation of Germany, Goebbels said: “They want to turn my country into a potato field”.

 It was a plan that, inter alia, envisaged peaceful collaboration, not the future Cold War with the USSR.

 The US directive JCS 1067, however, signed on May 10, 1945, provided exactly for the full entry into force of the Morgenthau Plan.

  350 factories, still in perfect working order, which had to be moved to France or the Soviet Union, were dismantled ab ovo and many German patents were also transferred, including that of aspirin.

 The fact underlying the nationalization of the German occupied allied areas was that the cost of maintaining a population impoverished of any factory, technology and productive income was too heavy to bear, precisely by the occupiers themselves.

 The reconstruction business, the esoteric solve et coagula of the U.S. speculative post-conflict strategy, was in crisis, because the surviving Germans could not pay for the goods that the Americans wanted to sell them.

 The speech delivered by General George C. Marshall at Harvard in 1947, before 15,000 students of the prestigious U.S. University, was in fact designed primarily for the USSR. It had been written by Chip Bohlen, an expert on Soviet affairs, and spoke of “millions of European citizens starving and even dying”.

 The city-country relationship, designed by Marshall in his famous speech, was the design of a correlation with the Europe of cities, namely the European and Western one, which finally reached the eternal Eurasian granaries, since the Journey of the Argonauts on a quest for the “golden fleece”, i.e. the huge expanses of wheat fields of the East.

 Another assessment made by the United States was that widespread anger among Germans, after World War II, would lead to the same political results of the First World War after the unfair Agreements of Versailles, opposed by Keynes in vain.

 Moreover, the planned process of West Germany’s impoverishment would have brought wind also in the USSR sails and, considering its productive dimension, it would also have stopped the relaunch of the rest of Western Europe freed by the Allies.

 It was precisely the fear of the “Communist contagion” that made it possible for the United States to fund the United Nations Relief and Rehabilitation Administration (UNRRA) which,as from 1943 – four years before Marshall’s speech at Harvard – tied the German territories to itself in order to avoid them falling into the coils of the Communist regime, according to the certainly correct US plans.

To some extents, however, this triggered Stalin’s foreseeable reaction. It was exactly the United States that asked Great British and France to unify – under its own protection – all the Western Allies’ control zones in Germany. It should be recalled that the French occupation zone was a source of primary information for the Communist penetration into the rest of the West.

 The deutschemark was in circulation at the time – a currency revalued as against the old mark and printed directly in the United States.

Hence the USSR-controlled zone was flooded by huge requests for goods to be bought with the deutschemark, considering that they were at capped and supervised prices.

At that juncture, Stalin ordered to stop the inflow of food into Germany and into the USSR-controlled area, but it was impossible and hence he tried to make the deutschemark not valid in the USSR-controlled areas.

 The rest is recent history, including the German reunification.

Reverting to Mearsheimer, we can better understand – as the US analyst said – that since then the United States has been “the peacemaker of the European region”.

Going back to our previous considerations, the greatest coldness for German reunification was expressed precisely by Prime Minister Thatcher, who stopped in Moscow after her State visit to Tokyo in September 1989, where she spoke to Gorbachev in private, in the Hall of Saint Catherine at the Kremlin.

 The Iron Lady clearly told Gorbachev that she did not want German unification at all, because she thought that “the post-war equilibria would be undermined by the new territorial changes”.

 She was perfectly right.

Just because of its inevitably pluralistic and equal partnership logic, Europe could not contain a Great and New Germany that, alone, represented all the “European plain” that was the plain where – as Raymond Aron maintained – the final war of the Worlds between East and West would be waged – a war also planned as early as 1995, at least by the heirs of the former USSR.

Regimes disappear, but the objective laws of geopolitics do not.

Hence Prime Minister Thatcher told Gorbachev that “NATO would not endeavour for the end of the Warsaw Pact”.

We must also recall Operation Unthinkable, which envisaged the penetration – from the Balkans – of the Allies and, above all, of Great Britain, to block the direct passage of the Red Army to Germany and to directly control the whole European continent, after the end of the hostilities, with or without the US involvement.

 The plan advocated by Churchill was not implemented.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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What lies ahead for Meloni’s Italy

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Not many would have predicted that 100 years after Benito Mussolini’s Black Shirts marched on Rome, a leader claiming lineage from the same political ideology would ascend to power. Georgia Meloni is on her way to become the first woman Prime Minister of Italy, hailing from a party that emerged out of the neo-fascist Italian Social Movement (MSI). Her rise to power is as dramatic as that of the fascist dictator. Brothers of Italy, which Meloni founded in 2012, recorded a measly 4.3% of vote in the 2018 elections. In the four years since, the party has gained significant ground and is now set to win 26% of the vote in a coalition with Matteo Salvini’s Lega and Silvio Berlusconi’s  Forza Italia. With the right wing coalition coming to power, major shifts in Italy’s domestic and foreign policy are expected. But taking command at such a turbulent time will be a task easier said than done. Hence, it will be interesting to see what course Meloni’s coalition might take.

As things stand, Italy is edging towards a major economic crisis. The continued war in Ukraine has terribly affected Italy’s economic growth in the post-pandemic era. The rising prices of energy resources and supplies have held back household consumption, slowing the rate of recovery. The economic growth projection for 2022 stands at 2.5% while 2023 is estimated to see a further fall to a mere 1.2%. Italy’s debt crisis has also severely worsened with rising interest rates in the post-pandemic years. The national debt currently stands at about $2.9 trillion which is estimated to rise steadily, touching $3 trillion i.e. around 150% of the GDP by the end of 2023.

In her election campaign, Meloni has addressed these economic woes with a populist vigour. Meloni advocates for a protectionist stance. Her policies include a business-friendly dispensation, steep tax cuts for all, early retirement and amnesties to settle tax disputes. While the right-wing coalition manifesto pledges ambitious spending plans, Meloni has promised to keep the public finances in check. Key to keeping the economy afloat and achieving these targets will be the new government’s efforts to meet the reforms and targets agreed by the Draghi administration and the European Union to obtain the €750 billion Covid recovery and resilience fund. Meloni has already indicated that she will seek some changes to the agreed plans, making it a priority for her new coalition.

While Meloni will become Italy’s first woman Prime Minister, her case presents an example of weaponising women empowerment to further autocracy. Under her leadership, Brothers of Italy has rolled back women’s rights in the localities it governs. These rollbacks include making abortions harder to access. Her party’s slogan – “God, Fatherland, Family” – is reflective of their intentions of leading a patriarchal setup in the guise of a woman leader. With their coalition coming to power, it is likely that Meloni and her party will continue on the route of further cutting back on women’s rights and freedom.

The right-wing parties have stressed on the importance of Christian conservative familial values in their election campaign. This has resulted in vicious attacks on what Meloni calls “the LGBT lobbies” who have “harmed women and family by destroying gender identity.” Last year, Brothers of Italy and Lega blocked ratification of the Zan bill which sought to categorise violence against the LGBTQ+ community as a hate crime. The two parties opposed the bill, calling it unnecessary and against freedom of expression.

Another part of Meloni’s populist rhetoric are her claims of “ethnic substitution.” She has repeatedly claimed that Italian identity is being erased by the globalists and EU officials, who have “conspired” to unleash “uncontrolled mass immigration.” In the past, she has infamously proposed a naval blockade of the Mediterranean to stop migration to Italy. While the coalition has promised stricter border controls, blocking boat landings and establishing EU centres to evaluate asylum applications; they have also assured to regulate legal migration more smoothly, with initiatives to integrate recent immigrants.

Meloni’s stance on the European Union has been the highlight of her election campaign. While she no longer advocates for a complete withdrawal from the organisation, Meloni is vehemently against its current state of operations. “I want a Europe that does fewer things and does them better, with less centralism, more subsidiarity, less bureaucracy, and more politics,” she said. She has pushed for an ‘Italy first’ approach, countering the regional integration of the EU. Addressing a rally in Milan earlier this month, Meloni said, “In Europe they are a bit worried. The fun is over, Italy will start to defend its national interests, as others do.” Meloni has indicated her support for Poland and Hungary in their current ongoing dispute with the European Commission and the European Court of Justice. She has previously made her admiration of Hungarian Prime Minister Viktor Orban clear, calling him a ‘democratic leader’ in the face of stark EU criticism over authoritarian measures.

While Meloni and her coalition have been critical of the European Union, it is unlikely that it will lead to drastic changes in the Italian policy towards EU integration. The economic challenges that the new government finds itself in will largely affect its decision making. To obtain a much needed relief fund from the organisation, it is important for the coalition to agree to certain terms proposed by the EU. Hence, while they can be a bit more assertive in their approach, complete rejection of the EU is not on the cards.

However, Italy’s foreign policy is set to see new developments. Meloni has previously condemned Russia’s war on Ukraine, supporting sanctions against Russia and supplying weapons to Ukraine. “It is the tip of the iceberg,” she said, calling the conflict’s objective as “revision of world order.” Meloni has also been critical of China, condemning the country’s “economic expansion measures.” In 2019, Italy became the first major nation to participate in the Chinese Belt and Road Initiative (BRI), a programme to expand Beijing’s economic outreach. Meloni has since criticised the pact as a “big mistake,” indicating that Italy will re-evaluate its stance on the pact under her administration. She has also been vocal about the Taiwan issue, calling it an issue of “essential concern for Italy.” She also described Chinese threats against the island “unacceptable,” calling Taiwan and Italy’s relationship a “sincere friendship.”

Giorgia Meloni is not so different from the Trumps and Bolsonaros of our world. She gained popular support on the back of economic failure under the previous administrations and emerged as the clear winner once Mario Draghi resigned following the economic and political turmoil. Meloni fills the void that the centre-left parties have failed to address so far. She has presented herself as a new alternative against an opposition that now seems much distant from the needs and aspirations of the people. Her populist rhetoric has only helped to further fuel her rise to power. Facing economic catastrophe for the longest time, the Italians now demand security and stability. However, her anti-immigration and anti-EU policies do not present an answer to the problems Italy faces. Her populist rhetoric is highly unfortunate and raises the threat for hate crimes in the future. Her authoritarian stance coupled with the ‘Italy first’ rhetoric will not fare well in the future. In deep economic stress, Italy needs to welcome immigrants who can actively contribute to their economy and stabilise the turbulent waters.

Furthermore, Meloni’s election presents a threat to the democratic system in Italy. The right-wing coalition is in a position to negotiate a constitutional amendment that approves the President to be elected directly by the people. Currently, the President is elected by an electoral college which was setup in 1948 as a measure to prevent the future possibility of a government takeover by the fascist forces. While the Presidency is a figurehead role in the country, Brothers of Italy have advocated for a more robust head of state with a popular mandate. This advocacy for “Presidentialism” may have grave repercussions for Italy’s democratic setup, making the President a politically motivated role which will severely affect the system of checks and balances in the present system.

It is difficult to say whether Meloni’s coalition will be able to weather the storm in the coming years but one thing that is certain is that this election is one for the history books where victors are set to write the fate of Italy, once again.

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Smile Diplomacy: From Putin to Macron

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Photo:kremlin.ru

In the world of politics, what should be done when things don’t go according to plan? The answer of Talleyrand, the French politician of the 18th and 19th centuries, was simple: organize a conference!

Perhaps it is due to this lesson from the French politician and diplomat that Vladimir Putin held his conference under the title of “Economic Boom of the East” in the port of Vladivostok, and French President Emmanuel Macron is going to start his conference under the title of “Political Council”, Europe” next month in Prague, the capital of the Czech Republic.

Let’s talk about Putin first. No matter how we look at it, the course of things is not as intended. The war in Ukraine is practically frozen in a north-south line. The pitched battles, the use of heavy artillery, the high casualties, and the ever-increasing logistical problems are more reminiscent of the First World War, or even the Crimean War than modern 21st-century war.

Last week, the first sign of Putin’s desperation to fully win this war appeared. In a short televised address, the Russian president claimed that his goal was to preserve the “Russians” of the Donetsk and Luhansk regions. In other words, it has moved away from its initial portent of removing Ukraine from the map as an independent country. Is he now calling for a limited deal that would put parts of eastern Ukraine under Russian control forever, if ever? No one knows the answer to this question, except maybe Putin himself. But, surprisingly, neither Volodymyr Zelensky, the president of Ukraine, nor his American and European supporters have shown any attention to this possible retreat of Putin.

Failure in the war is not Putin’s only concern. Contrary to his claim that Western sanctions have not affected the Russian economy, it can be seen that things are not going as planned on that front either. Of course, Russia has been able to find new customers for its oil—customers like India, China, and Turkey, which have reduced their purchases from Iran and Iraq by receiving significant discounts to take advantage of the Russian auction.

However, double-digit inflation, the closure of hundreds of factories, widespread shortages of many goods, a 25 percent drop in viewership of Putin’s state television, and the flight of tens of thousands of middle-class citizens show that the sanctions are having little effect.

The Vladivostok conference was formed with the slogan “The future is from Asia”. Putin’s message was: “Asia builds the future, while the West falls.”

Of course, we heard this slogan in the 1950s, during the last years of Stalin’s rule over the Soviet Union. Stalin spoke of “Young Asia and the West of Fertut”. Today, Putin plays the same music with notes from the Tsarist Imperial Symphony added.

According to Khmiakov, the Pan-Slavist guru, Russia is a “two-headed eagle”: one head looks to the East and the other to the West.

In the beginning, the double-headed eagle was the symbol of the kings of Hayatele in Asia Minor; But after a few centuries, the Byzantine emperors usurped it. In 1471, Ivan III, Tsar of Russia, married Princess Sophia, the daughter of the Byzantine Emperor, and the symbol of the double-headed eagle was assigned to Russia. Today, Putin is bringing this symbol, which was abandoned during the Soviet Union, back to the scene.

However, an eagle facing east is nearsighted. Out of 49 Asian countries, only 17 countries appeared seriously in this game. None of the heads of Asian countries were present at Putin’s show. The highest-ranking foreign personalities were the Prime Ministers of Armenia and Mongolia. General Ming Aung Heliang, the leader of the Myanmar (Burma) coup plotters, was also present. But China was represented by Li Zhangsu, the third leader of the Communist Party. Even the leader of North Korea, Kim Jong Un, did not accept the suffering of a trip to Vladivostok. Major Asian economic powers such as Japan and South Korea, or even Taiwan, were not present.

Putin’s hope is to develop the “Eurasian” bloc, which was formed years ago to compete with the European Union, but it never got anywhere. However, even if the participants in the Vladivostok conference were to join the bloc, they would collectively account for nearly 20 percent of global GDP. Currently, almost all of them are closer to the European Union and the United States than to Russia in terms of foreign trade. Russia’s own share of trade with bloc countries does not exceed 12%.

From any angle, the Vladivostok gathering is one of those shows that are referred to as “posturing” in the diplomatic dictionary. In this show, the host appears as the leader of a large group, but in reality, there is no group. The choice of Vladivostok, which means “ruler or emir of the east”, maybe a coincidental sign of Putin’s illusions to lead Asia.

It is interesting that in Vladivostok there was no mention of the war in Ukraine. None of Putin’s entourage was wearing a T-shirt with the letter Z, and his bulletproof car did not have a Z mark.

The participants of this show undoubtedly know that Moscow is closer to Berlin than Vladivostok and whatever the underbelly of history, Russia’s national and cultural orientation is to the West, not to the East. Alexander Herzen, a 19th-century Russian writer, wrote: “Russia looks to the East to remember what dangers threaten its existence, and looks to the West to find out how to neutralize those dangers.”

Currently, Putin is not the only leader who is trying to polish his political image by playing the conference game. French President Emmanuel Macron is also busy organizing Smile Diplomacy. The Prague conference for the formation of the “Political Council of Europe” is a platform for introducing Macron as a strong European leader. With Britain mired in crisis, Germany governed by a floundering coalition government, and Italy on the brink of an election with uncertain results, Macron hopes to present France as the anchor of Europe’s stormy ship.

Macron’s failure to win an overwhelming majority in the parliamentary elections has limited his possibilities to exert power in the domestic political scene. Therefore, like many politicians in a similar situation, he turns to show his power in the foreign policy scene.

But Macron’s show, many analysts believe, will not have a better result than what Putin achieved in Vladivostok. In a sense, Macron’s show may even be harmful. Trying to prevent Turkey’s participation, under the pretext that a large part of Turkey is located in Asia, can deepen the gap between Western powers and Turkey.

Turkey’s exclusion from the Prague show could help re-elect Recep Tayyip Erdogan as president. Using an anti-Western discourse and being closer to Russia along with claiming to be the leader of the Islamic world, Erdogan is trying to distract Turkey’s public opinion from its failure in economic and social fields. In the last two decades, this is the first time that Erdogan is on the verge of an electoral defeat. Macron’s anti-Turkish stance could be a bitter irony that guarantees Erdogan’s victory.

Macron’s proposal has other disadvantages as well. First, one should ask what is the need for another “conference” in Europe. Aren’t the “European Security and Cooperation Organization” and “Council of Europe” which include all countries of the continent enough? After all, didn’t Britain leave the European Union under the pretext that it does not want Europe to participate in the regulation of London’s policies? Is the “Brexit” government willing to participate in a new grouping, with unknown goals and criteria, after leaving an established union with clear goals?

Currently, a growing trend across Europe, from Poland to France, is to move away from continental groupings. Even the European Union has lost some of its legitimacy and popularity at this time. The growing trend in most European countries is towards limited nationalism within the borders of each country, emphasis on national sovereignty, and striving for self-sufficiency. In other words, the globalism of the past two or three decades is receding and bilateral relations are becoming more acceptable.

You might say that Smile Diplomacy in Vladivostok or Prague wouldn’t hurt anyway. Unfortunately, this assessment of yours is not correct. Smile Diplomacy masks the fact that Russia and Western Europe do not currently have the ability or will to emerge from the crisis caused by war, economic stagnation, inflation, and environmental threats. Smile Diplomacy offers sideshows instead of serious policies.

Dramatic games allow Putin to mask his failure on the battlefield. On the other hand, Macron and other European leaders hide their inability to stop the war in Ukraine with the Prague show. Both sides are still dreaming of “victory”. Unaware that war never has a winner, because in every war both the victor and the vanquished will be losers in the end. Zelensky seems to think that defeat is better than surrender because it at least offers the badge of hero and martyr. On the other hand, Liz Truss, the new British Prime Minister, speaks of “victory”. The demonstrations in Vladivostok and Prague prevent these irresponsible positions from being seriously discussed.

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In a Crisis-Laden World, Serbia Should Think Green

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Countries around the globe are facing persistent economic headwinds. Trade and supply chain disruptions resulting from the Covid-19 pandemic, the war in Ukraine and extreme weather, have led to surging food and energy prices. Inflation is increasing at an alarming rate in many countries and economic growth is slowing. Policy makers around the world face difficult challenges and complex trade-offs. They need to maintain fiscal sustainability and rebuild economic buffers depleted during the pandemic; but also cater for the needs of the most vulnerable, who feel the impact of higher food and energy prices. As winter is approaching, countries in Europe are scrambling to secure sufficient energy supplies to keep homes warm and factories running. In this challenging context, the urgency of actively expanding renewable sources of energy, pursuing greater resource efficiency, and transitioning away from energy and emission-intensive industries is greater than ever.

Growth outlook

The World Bank expects global economic growth to slow in 2022 to 2.9 percent, from 5.7 percent in 2021. A small and open economy like Serbia will feel the impact of the global slowdown. For Serbia, in 2022, we project an economic growth rate of 3.2 percent, following a 7.4 percent expansion in 2021. Serbia is equally feeling the impact of rising inflation: the NBS expects an inflation of nearly 14 percent in the third quarter of this year.

Higher energy prices have put pressure on current account balances for energy importers around the world. Serbia has also been affected. Its utilities have incurred exceptionally high costs of importing electricity and natural gas on the wholesale markets. While the government has financially supported these companies, it has so far only partially passed these additional costs on to consumers.

Mitigating the impacts of the energy crisis remains the biggest challenge for the new government. Serbia entered the current crisis in a strong macro-fiscal position, but fiscal space is limited. Short-term measures to support households and small and medium enterprises will need to be targeted, time-bound, fully budgeted, and transparent.

Despite the pressures, it is essential that policymakers do not lose sight of structural reforms that would boost Serbia’s potential rate of economic growth over the medium-term, including steps to increase market competition, reform state owned enterprises, raise human capital and productivity, and improve the efficiency of public spending.

Green Serbia

Sustaining long-term growth and resilience also requires putting the ‘green agenda’ at the center of policymaking. The country can do more to increase energy efficiency and lessen the impact of pollution on the health of people and the environment. Staying ‘brown’ runs the risk of slowing down Serbia’s accession to the EU, compromising access to finance, creating trade barriers, limiting the take up of modern technology, and failing to boost productivity. Going ‘green’ would be beneficial on all these fronts. It would also facilitate the structural transformation of the economy through the adoption of new technologies and knowledge. All this will require measures to facilitate a ‘just transition’ for workers and communities who depend on polluting industries for their livelihoods.

Serbia is a signatory to the Paris Agreement under the United Nations Framework Convention on Climate Change, aiming for a climate neutral world by mid-century. The Government recently published its updated Nationally Determined Contribution under the Paris Agreement, pledging to cut greenhouse gas emissions by 2030 by 33.3 percent compared to 1990.  Accompanying plans and strategies are under preparation, but the direction of travel is clear: Serbia urgently needs to boost domestic renewable energy production, increase energy efficiency, and gradually lower dependency on fossil fuels, especially coal and oil, for power generation, heating, and transport.

The World Bank is supporting Serbia’s progress on all these fronts both through financial and technical assistance.

Op-ed originally published in Kurir daily via World Bank

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