H I G H L I G H T S
• Internal Issues in the EU
If the first half of this year brought cheer to the European Union and its key Member-States with a feeling that the gap that had developed in the trans-Atlantic alliance during the Trump years was being bridged, the second half was a reality check with fissures re-emerging in this crucial partnership.
An era in Europe also came to an end with Angela Merkel (from the CDU) choosing not to be in the fray for the German chancellorship. Following the recent elections, she stepped down and the SPD leader, Olaf Scholz, has over the reins of government in Germany.
Merkel held the helm for 16 years leading not only Germany but becoming the principal proponent of the EU. In recent times, she was, perhaps, most prominently in keeping up the European view and perspective under onslaught from President Trump during his time in office. The rise of the nationalist extreme right in Germany, propelled also by Trumpism and even Brexit, cost Merkel electorally in 2016 and her last coalition had to include the rival SPD. This time, in 2021, the extreme right didn’t do as well but their vote share was sufficient to hobble the CDU/CSU out of office. In-fact, the shenanigans of the extreme right has ended up costing the right (the conservative right to be precise) their continue leadership of the German government and huge influence in EU politics.
The new German Chancellor is Olaf Scholz of the SPD, who had been the Vice-Chancellor in the Merkel Government. It is unlikely that he would push for any major change in German policy regarding the EU though his partners in the coalition are the Greens, who over the years may have started taking a more pragmatic view on environmental issues but favour a tougher line on Russia and China on account of human rights excesses in those countries than was the case advocated by Germany under Merkel, whose government saw a certain merit in the economic opportunities in these countries.
The continent continued to feel the heat of the COVID pandemic with numbers, as the year comes to an end and the Omicron variant becomes an issue, starting to rise across the EU. The EU, not having acted with alacrity on vaccines and vaccination drives, has lower vaccination rates, especially in comparison with the UK, and this certainly adds to its COVID problem.
The sudden US pull-out from Afghanistan mid-August left most Europeans, including stakeholders such as the UK and Germans, caught on the wrong foot. For them matters were compounded by being left almost unprepared to pull out their people, whose numbers were not insignificant. The human rights heat of deserting those who had helped them was also felt by the Europeans.
Just a little while later, in September, they were hit by another broadside by the US announcing the formation of AUKUS (Australia, UK, USA), a military alliance in the Indo-Pacific, the major consequence of which was the Australians pulling out of a major submarine purchase deal with France. Obviously, the French were angered, and President Macron pulled out the French Ambassador from Washington DC. President Biden admitted that things should have been handled differently and sought out President Macron during the G-20 Summit in Rome in October, but the damage was done and a certain trust-deficit with the Biden administration is now part of the trans-Atlantic equation for the EU. In recent days (early December), there have been reports that the Australians will opt out of European helicopters for their Air Force and go for US ones. This can only add to the political unease across the Atlantic. UK’s involvement in AUKUS added to its distaste as far as the French and the EU were concerned.
All, of course, is not unwell on the trans-Atlantic alliance with the Europeans and the US showing much resolve on being together during the recent (December) meeting of G-7 Foreign Ministers held in Liverpool on the issue of Russia and its aggressive actions aimed at Ukraine. They have also tried to put up a common front on climate change, witnessed earlier at the G-7 and in October at the G-20 Summit, though the EU, with its apparent championing of climate action, would certainly have noticed the US’s willingness to find common cause with China at the UNFCCC’s COP-26 held in Glasgow in November. Indeed, it would have been noticed by all that even though India found itself in the hot seat after proposing “phase down” instead of “phase out” on fossil fuels for the Glasgow Climate Pact, this was the expression used in the US-China joint statement.
The EU-UK trade deal, which came into force in 2021, was a compromise where issues relating to Northern Ireland and fishing rights were among the most complex to resolve. Sure enough, these flared up soon and the lack of licenses saw some fishing vessels being seized or denied fishing rights, especially around Jersey. Given the sensitivity of the fisheries business in both the countries, matters escalated with leaders at the highest level being involved and refusing to yield and even navies being put on stand-by! For a way out, perhaps, the UK National Federation of Fishermen’s Organisations put it best “done through quiet dialogue and far from excitable politicians”.
The trade deal included a special Northern Ireland protocol. While this keeps Northern Ireland in the EU’s single market for goods, it effectively creates a border in the Irish Sea between the British mainland and Northern Ireland. Obviously, this affects British businesses in trading with Northern Ireland as if it were part of the domestic market in the UK and there is political pressure for London to dump the protocol despite having signed it. The option for Brussels is sanctions but this is hardly the best route for both sides for which the other is the most important trading partner. Complex discussions continue.
In general, Brexit is nether hobbling the UK’s economy nor that of the EU and, as of now, there are little signs of London’s primacy as a financial hub being robbed by an EU pull-out. Of course, British markets have seen lessening of availabilities of certain imported products but many link this to COVID and supply chain issues including piling up of containers and not just the lack of European products due to Brexit. There have also been reports of fuel shortages in the UK linked to non-availability of lorry drivers, many of whom used to come to the UK from EU countries, particularly Eastern Europe.
Tensions with Russia continue unabated with sources signaling the distinct possibility of Russia waging a war and attempting to slice Ukraine. Reports suggest the amassing of over 75,000 Russian troops on its border with Ukraine and a virtual Summit on the matter being held between President Biden and President Putin. The EU has also been strong in calling on Russia to desist any attempts at forcibly violating Ukraine’s territorial integrity and making clear the possibility of severe economic sanctions. These could include targeting Russia’s banks and cutting them from SWIFT, the Brussels based international payments system, and hitting its sovereign wealth fund. Furthermore, if the Germans play along, and there are good indications that they may, then the new oil pipeline, Nord Stream 2, may not be allowed to start up in Germany soon even though it is ready. While this would have major economic consequences for Russia which has hugely benefitted from rising oil and gas prices and its position as a major supplier to Europe, it bears noting that the EU would also suffer costs of higher energy prices given the dependence on Russian supplies and the shortages that are being noticed as the economies pull up post COVID.
Belarus is another trigger point for EU-Russia tensions. While things had been problematic for quite some time with Belarus, the crisis has become acute since July 2021 with Belarus threatening to “flood” the EU with migrants. To this end, Belarus started encouraging the influx of Iraqi Kurds and many others to its territory, including by issuing visas and bringing them over in flights, and then attempting to assist them with crossover to the EU, including Poland and the Baltics, including by providing border wire cutting tools etc. Humanitarian aid for those massed on their side of the border, was also refused by Belarus.
Tensions with Russia also give rise to ideas regarding the Europeans stepping up their own investments in a common defence, and not just relying on NATO where, in any case they are under presure from the US to step up to the plate. In the EU, the French have traditionally pushed such ideas which now gain a certain traction both as a result of BREXIT and the realization that the US also needs to pivot towards China and the Indo-Pacific. Obviously, toughened posturing against Russia gladden the hearts of most in East Europe, even while they keep expressing their unhappines at the EU and its meddling ways. A very recent case in point is that of the French President and Hungarians PM Viktor Orban jointly underscoring European determination to keep Russia checked.
COVID has been a major wake-up call for the EU moving it to look at the Chinese as hegemonistic competitors. While an Indo-Pacific strategy had been announced by the EU in April this year, they have now concretized countervailing action through the unveiling of their own global connectivity project called the Global Gateway. Euros 300 billion in investments between 2021 and 2027 are envisaged to boost investments in both hard and soft infrastructure paying special attention to sustainability. The EU is also looking at establishing a European Export Credit Facility to boost export credit for European exporters. Additionally, the much touted EU-China Investment Agreement, agreed at the end of last year, appears now embedded in a cold store.
Internal Issues in the EU
Internal contradictions within the EU continue with the two countries with right wing nationalist Governments, Poland and Hungary, increasing executive influence over the judiciary in their countries. In the opinion of the EU, these measures undermine the independence of their judiciary. It also raises the possibility of EU legislation and even European Court of Justice (ECJ) rulings being overruled by national courts. The EU has, therefore, sought to bring the recalcitrant to heel on its part by seeking to regulate the flow of monies to these two countries. This matter is now being before the ECJ where the advice of the Attorney General is to dismiss the challenges of Poland and Hungary. In so far as Hungary is concerned, there is also the issue of LGBT rights, sacrosanct for the EU, but which are being circumscribed through executive orders and national legislation.
The EU has and will remain mired in internal contradictions given the diversities among its member-states even in terms of level of economic development. In the coming months, these may once again become more visible as France, one of the key EU stakeholders, proceeds for its general elections and nationalists raise their usual bogeys versus Europeanism. Interestingly, the EU’s lead negotiator with Britain on Brexit issues, Michel Barnier, has thrown his hat in the ring for the French Presidential election due in 2022. A Republican, one of his key planks is to limit migration to the EU.
The European Parliament is likely to see a change under a power sharing deal made in 2019 on its Presidency. This should result in the Parliament having a woman President for the first time. Of course, all is not yet clear as the present incumbent is unhappy that his Presidency was wiped out by COVID.
Discussions between India and the EU on the trade and investment agreements have continued but mostly at a deliberate pace. While earlier, most of the EU focus was on an investment agreement, there are now indications of their being interested in an FTA too, underscored by the designation of a Chief Negotiator. On another point of interest in India, Croatia is likely to soon join the Schengen area, i.e. will be part of the Schengen visa.
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(The views expressed are personal)