The Current Situation in Europe

Ding Yuanhong Former Chinese Ambassador to Switzerland, Belgium and the EU
The European political situation is No. 1 on the US Magazine Time’s list of top ten geopolitical risks in 2015.
The three big challenges, i.e. sustained economic slowdown, the worsening Ukraine crisis and rising “Euroskepticism”, had been ripping Europe apart in the past year. At the start of this year, the successive terrorist attacks in France and Denmark laid bare the terrorist threats faced by European countries and wherefore the dilemma of severe religious and civilization conflicts. The war in eastern Ukraine has been eased thanks to the good offices of such countries as Germany and France, but numerous obstacles remain to the peaceful settlement of the Ukrainian crisis. NATO and Russia are showing their muscles in Europe by way of the Ukraine issue and stand in sharp opposition to each other, thus producing an atmosphere of tensions. In Greece, the Coalition of the Radical Left which advocate the end of austerity and the start of debt restructuring negotiations, has won the election, thus once again raising concerns about a “Greek withdrawal from the eurozone”. Such developments have added to the volatility and unpredictability of the already complex European situation.
A closer look behind the phenomenon and into the nature of the situation reveals the following general trends:
First, the economic performance of Europe will be somewhat improved, but the sustained sluggishness is difficult to tackle.
1. In Greece, the Coalition of the Radical Left did not win the election by chance. Although continuous implementation of the austerity policy in exchange for foreign aid has brought about a basic budgetary surplus in 2013 ahead of schedule, the GDP of Greece has shrunken by one quarter. With unemployment rate standing at over 25% and even over 50% for the young, people’s monthly income on average is less than 600 euro, which is much lower than the pre-austerity level. And the debt level has even gone up, accounting for 175% of GDP. Such a severe financial and economic situation is indeed unsustainable, thus calling for adjustment. But that does not really point to a prospect for a “Greek withdrawal from the eurozone”. The reason is that the new Greek government has publicly stated that Greece is not going to leave the eurozone and neither is it going to break the previously negotiated terms and what it wants is just to stop some of the austerity measures to ease pressure from the public. This request is seen by some eurozone countries as reasonable, including Germany which insists on austerity. Even if Germany is opposed to debt restructuring, it does not want to see Greek incompliance or withdrawal from the eurozone, as, in that case, Germany itself will also suffer from losses (over a quarter of Greece’s 240 billion euro in debts are owed to Germany). Moreover, should Greece withdraw from the EU, there would be severe consequences not only for Greece itself but also for the EU as a whole. Greece and the creditors are hugely divided in their negotiations, which are fraught with contention, but the two sides will finally reach compromise for the sake of the overall interests.
2. Greek incompliance may be avoided, but the firm opposition of Greece to austerity policies will influence other debtors, such as Spain and Italy, thus making the conflict between austerity and growth worsen again since the outbreak of the European debt crisis.   
To develop its economy, every country must take monetary and fiscal policies in line with its national conditions. And the policies in the two aspects should be well coordinated rather than being in conflict. The “inherent” problem with the eurozone is that it has a common currency but no common fiscal policy. The common currency is governed by an EU agency, but in terms of fiscal policy, it is up to the independent decision of each member country. The competition between austerity and growth is, in nature, tight fiscal policy versus relaxed monetary policy. The two contradict instead of supporting each other. As a result, it is difficult to achieve the due effect of promoting economic development through monetary and fiscal policies.
3. At the end of last year, the EU Commission announced a 310 billion-euro investment plan and early this year, the European Central Bank decided to implement a European version of the “quantitative easing” policy, with a plan of buying 60 billion euro in bonds every month from various countries until September 2016. That means that during that period, over 1 trillion euro in liquidity will be added to the European market. Both measures are designed to work on the front of monetary policy to jumpstart the European economy. There are still many doubts about how much effect such measures will produce against the backdrop of decreasing market confidence in the euro. In addition, the most financially strong Germany is not very active about the two plans, though it has not clearly expressed objection. Since the outbreak of the European debt crisis, Germany has been firmly against common euro bond issuance, because it does not want to spend more money on rescuing other economies. At a time when countries in Europe are all strained financially and Germany does not offer active support, both fund raising and bond purchasing on the market are difficult. It still remains to be seen whether the above plans will be fully implemented and serve to stimulate the European economy.
4. The root cause of the sustained sluggishness of the European economy and unresolved debt crisis lies in Europe’s weakening international competitiveness, which has led to the shrinking share of European products on the international market. According to statistics, the market share of European products has decreased from about 40% to less than 20% today. Its long-term high-salary, high-welfare system has not only affected its international competitiveness but also increased its fiscal burdens. But change is not easy. What’s more, both the EU and the eurozone are communities of sovereign countries. As such, their decision-making mechanisms are more complicated than those of single sovereign countries like the United States, Canada, Australia and Japan and even the UK which has not joined the eurozone, and therefore they face more constraints in applying economic, fiscal and monetary policies. In the early stage, “integration” was “positive energy” for driving economic growth of member countries,but now it has become “negative energy” making member countries each other’s burdens.
There is a Chinese saying meaning that “the success or failure is due to the very same person”. The predicament the EU finds itself in today all boils down to a rush to integration which has made it increasingly difficult for Europe to adapt to the big trend of ever fiercer international competition brought by accelerating globalization.                              
Second, the Ukrainian crisis continues to worsen, but it will not lead to direct conflicts between Russia and the West.
The Ukraine crisis has lasted for a year, yet there have not been any signs for a fundamental settlement. It was originally an internal struggle between two factions in Ukraine about the future political direction of their own country, but it has rapidly evolved to become a strategic game between the East and the West, or to be more exact, an intense competition of NATO’s eastward expansion versus anti-NATO’s expansion between the United States and Europe on one hand and Russia on the other since the end of the Cold War between the United States and the former Soviet Union. The United States is bent on using NATO’s expansion to squeeze Russia’s strategic space and curb its re-rise. And in this context, Ukraine is of extremely crucial strategic significance, as it bears on Russia’s national security. The bottom line of Russia is that it will not accept Ukraine being dragged into NATO. The parties have serious conflicts of interests and no party is going to give in for the time being. The current situation where no reconciliation will be reached and no big war will be fought either will stay for quite some time to come. In the final analysis, it all depends on whether the United States and Europe on one hand and Russia on the other will reach some kind of understanding on the core issue of ensuring that Ukraine will not join NATO.
At present, the attitudes of the parties are as follows:  
1. The Kiev regime of Ukraine is both the major party concerned and the biggest sufferer in this crisis. It is reluctant to see Crimea being regained by Russia and its eastern region being actually separated from it, but it is not able to change these facts. It badly wants to drag the United States and Europe in. But neither the United States nor Europe has the ability or intention to endorse Ukraine, because Ukraine is not a core interest to the United States and not all EU members consider Ukraine as a place they must have. In addition, Ukraine is in a mess of economic crunch, political corruption and endless internal fighting. That’s why the United States and Europe are doing no more than verbal condemnation and economic sanctions against Russia and they do not want to consider something really serious, and even less, direct military involvement. In the face of worsening economic situation and with its failure to suppress the separatist forces in its eastern region, the Kiev regime of Ukraine cannot gain the support it has expected from the West either through begging or blackmail. That has made the newly established regime increasingly divided, with the president and the prime minister each acting their own way. Therefore the governance is not in good order. Such chaos simply cannot be sustained.
2. Regaining Crimea is the greatest fruit Russia has got unexpectedly from the Ukraine crisis. That is of major far-reaching significance for its national security, and so it will not waver on this issue no matter how big the external pressure is. As for the pro-Russian forces in eastern Ukraine, Russia will never give up support for them as long as the Kiev authorities do not recognize the region as an independent political entity enjoying high-level autonomy. The reason is that eastern Ukraine is a strong bargaining chip for Russia to curb Ukraine’s complete tilt to the West and seek a say in the future political direction of Ukraine. Russia is deeply aware that the West does not dare to use force against it and can only rely on economic sanctions and pressurization. Sanctions will surely cause much damage to Russia, but in the era of economic globalization, sanctions are just limited and cannot last long for a country like Russia, which is big and rich in resources and also a permanent member of the UN Security Council. And recently, some signs towards this end have been shown from the European side. President Putin has made public statement that Russia will definitely tide over the current difficulties and return its economy back to normal by 2017 at the latest. To demonstrate its determination and will to stand up to western pressure, Russia has stressed that its 2020 plan for boosting military capabilities will remain unchanged and at the same time it has been flexing its muscle through frequent military exercises, new weapon display and long-range aircraft patrol flights.
3. With the encouragement and incitement of the United States, Poland and some other EU countries intended to pull Ukraine into the Western camp by way of a “color revolution” to “seize power through violence” in order to further squeeze Russia’s strategic space and curb the momentum of Russia’s revitalization. Quite unexpectedly, however, it turns out to be a mess that is hard to clean up. That has not only disturbed Europe’s peace and tranquility, but also has brought the messy burden of Ukraine to Europe, something quite contrary to what is expected, thus adding to the economic difficulty of the EU itself and making it more difficult to overcome its internal differences. The double impacts of the European debt crisis and the Ukraine crisis have casted a big shadow over the peace and prosperity in which Europe has initially taken much pride. What it has now is stalled integration and falling international reputation and influence. This places the EU in a dilemma, which means that it is unable to force warring parties in Ukraine to reach a ceasefire and work for a negotiated solution and at the same time it cannot allow the situation to go on like this, thus causing the open division within the EU. The leaders of Germany and France have engaged in good offices, thus the consensus reached between Germany, France, Russia and Ukraine on implementing the “Minsk Agreements”. But because it fails to meet the demands of all parties concerned, the implementation is full of difficulty. The current dilemma of the EU has proved the assertion by former German Chancellor Schröder at the beginning of the Ukraine crisis that the EU made a “historic mistake” on the Ukraine issue.
4. The United States has inescapable responsibility for today’s messy situation in Ukraine. It is the United States that has supported pro-Western Ukrainians in launching a “color revolution”, that has incited the far-right Ukrainians to “seize power through violence”, that has encouraged the Kiev regime to suppress the pro-Russian forces in eastern Ukraine with force under the pretext of counter terrorism and that has taken the lead in pressing for one round after another of sanctions against Russia. By intensifying the Ukraine crisis, it has a three-pronged strategic agenda to pursue, namely, fighting Russia to weaken its strength and obstruct its revitalization; undermining Europe-Russia relations to increase internal disputes in Europe and delay European integration; and maintaining and even strengthening its dominance in European affairs after its strategic shift to the Asia Pacific.
On the surface, the United States has achieved its purpose, thus the biggest winner in the Ukraine crisis. But in the long run, there are both gains and losses. First, from the outset, the United States said that military means were not an option. Before the leaders of Germany, France, Russia and Ukraine met in Minsk on 11 February, President Obama called President Putin to express support for a political solution to the Ukraine crisis. After that, US State Department spokesperson said that, to get into a proxy war with Russia doesn’t at all serve the interests of Ukraine or the international community as a whole. For various reasons, the Obama Administration has taken an approach of avoiding getting involved in foreign wars again. In this context, it would be unimaginable for the United States to engage in a direct military confrontation with Russia or even risk a nuclear confrontation. From a strategic perspective, it will not stop at nothing in front of the strong military power of Russia, which has become a “soft spot” in its attempt to maintain hegemony in the world. Second, because of different national conditions, the United States and Europe have different considerations on relations with Russia. And this Ukraine crisis has made the two sides even more divided. Following the European debt crisis, in terms of how to deal with the Ukraine issue, the rifts between “new and old European countries” have become more obvious. The negative impact of that on the Atlantic alliance is not insignificant. A clear example is the open contention between the United States and Germany over the issue of providing lethal weapons to the Kiev regime in Ukraine. Moreover, the United States keeps saying that it has been firmly safeguarding the Kiev regime and the security of NATO countries that are contiguous to Russia, but, as a matter of fact, it cannot give them support and assistance as they expect due to constraints of its relations with Russia and its own financial strength. The allies of the United States all have doubts about whether US support is reliable at crucial moments. Finally, the United States has been countering Russia by way of the Ukraine crisis and at the same time containing China through the strategy of pivoting to the Asia Pacific. As a result, what it has been doing has backfired and prompted its two opponents working together. That is a major strategic mistake, as clearly pointed out by quite a few famous US scholars.
Third, “Euroskepticism” is rising while mainstream public opinion still supports integration.
The public and social elites of Europe have originally differed in their perceptions of integration. As countries that are hugely different in national conditions join the EU and the eurozone, their demands and interests vary greatly, which becomes more and more difficult to coordinate. And that also aggravates the internal imbalances and conflicts. Due to the impact of the European debt crisis, the internal rifts have widened and the creditor countries and debtor countries become divided, and moreover, some countries, particularly EU members in South Europe, are troubled by significantly falling living standards and social instability. The outbreak of the Ukraine crisis has made the already bad European economy worse. Because of the double impacts of the EU crisis and the Ukraine crisis, people are increasingly unhappy about those elites and politicians who keep pushing for integration but can do nothing except engaging in endless quarrels in the face of difficulties. Against this backdrop, “Euroskepticism” in various forms are growing in a lot of countries, which can be seen in many aspects:
1. The far-right parties with an anti-integration stance got more seats in European Parliament elections in 2014 than ever before and even in France and the UK they seized more parliamentary seats than other parties.
2. As the pro-integration idea of “the transfer of sovereignty” is gradually replaced by the idea of “the return of sovereignty back to states”, the position of putting national interests above EU interests has gained momentum. Hungary is a prominent example. It has stood up against various pressures from the EU and insisted on pursuing domestic and foreign policies in line with its own national interests. Furthermore, there are more and more countries that publicly express objections to the EU giving in to US pressure to keep sanctions against Russia.
3. In quite a few countries, the rising separatism has become an increasingly important force in political party activities, which cannot be neglected. In Scotland, the independence referendum voted “no” but its impact remains. In the UK, the Cameron government proposed a referendum on Britain’s EU membership. It is meant to increase the UK’s bargaining chip to prompt the EU to make treaty changes that are favorable to the UK, but as things stand, it has boosted the force of Euroskeptics in the UK. In case of a referendum being held, the possibility of a smart plan turning into a negative vote result cannot be ruled out. By then, it would generate a “mega earthquake” in the political landscape of Europe.
4. Anti-immigrant voices and xenophobia flow from Euroskepticism. In recent years, such sentiments are on the rise in many European countries, mainly economically developed countries. The UK wants to renegotiate terms with the EU, one of the major demands being to revise the EU immigration policy and relevant provisions. The terrorist attack in Paris at the beginning of the year has brought about a serious consequence, that is, the further development of xenophobia within the EU. That will create new obstacles to the progress of integration.
However, judging from now, the mainstream public opinion in Europe is still in support of integration. The reasons are as follows:
1. Since the end of World War Two, Europe has been put on the track of revival, prosperity and peace, not least because the European countries have pursued a policy of peace, unity and integration. Despite some public grievance about integration, people are aware of the considerable improvement of living standards since the end of the War. Even if the Coalition of Radical Left won the election in Greece, still over 70% of the people stand for staying in the EU. Actually, what the people want is to make necessary reforms in the current institutions of the EU and the eurozone, not scraping them and starting all over again.
2. The European integration process has been going on for decades, during which member countries are increasingly interconnected in their interests and they have become “part of each other”. It is the EU that truly deserves the title of “a community of shared interests” or “a community of shared destiny”. Europe’s prosperity yesterday and predicament today, however, provide proof to the truth in the saying of “standing or falling together”.
3. The European integration is irreversible. From the outset, there have been no provisions about exit of member countries. All members know that once they leave the EU, the problems will be far more than in the case of staying in the EU. It is self-evident that in the general environment of increasingly intense international competition, the small and medium-sized countries in Europe can only survive and thrive by working together.
In the final analysis, the current tense and volatile European situation is a result of a multitude of internal and external political, economic and social factors, and therefore will be not dissolved within a short period of time. But in the long run, the European integration process will not come to a stop here and the EU and the eurozone will remain active significant players in the international arena.