A Bright Future for Europe is Possible

As a Polish-Canadian who grew up in Montreal, I clearly see benefits for Quebec to be part of the Canadian Confederation and for Poland within a reconciled and vibrant Europe. Today, when America and China compete for influence, it is only through Europe that individual member states can still play a constructive global role.

IMG_1085Speaking in Geneva to an eclectic audience ranging from international diplomats to political affairs students at the Graduate Institute, outgoing European Commission President, José Manuel Barroso, took advantage of his newly found freedom to fire back at his critics (and those of Europe). Europe faced its share of crises over the past decade: constitutional (2005), financial, social and political, and geopolitical with the situation in Ukraine. But in opposition to his naysayers and to the “prophets of pessimism” who continue to announce the downfall of the European project, Barroso predicts that Europe will not only survive, it will grow stronger and play a growing role in global affairs.

Financial Crisis

In July 2012, at the height of the financial crunch, chief economists of European and American banks expected the exit of Greece and were split 50/50 on the survival of the Eurozone. But at the 11th hour, a political solution was found between the richest and most vulnerable members, balancing responsibility and solidarity. The Eurozone stayed united and stable. As French political economist Jean Monnet predicted, Europe will be built by meddling through crises.

lehman-colapse2-630x200To critics that claim Europe is too complacent, self-satisfied and only wants to protect its situation as the world’s premiere “retirement home” Barroso reminds that the Eurozone crisis did not originate in Europe, it was a spillover from the Lehman Brothers collapse: a “made in the USA” crisis. Something many tend to forget… But still no excuse the fragility of European Banks!

Surely, Europe confronts the same challenges as the rest of the world in terms of protectionism, unemployment, anemic growth and inequality. As elsewhere, this is fueling populist extremism and inflaming xenophobic fears. But despite the emergence of inward looking “tea-party” rhetoric in member states, Europe is in good shape. The last 10 years have tested its resilience and it has come out larger (moving from 14 to 28 member states), with better governance, while the Commission has never had so much say in European affairs. Europe also continues to be a major global player. Already much larger economically and population-wise then the United States, it remains an attractive objective for Ukraine and Turkey.

Resilient and Ambitious

By overcoming the various “stress tests” and defying conventional wisdom, Europe has shown a formidable capacity for renewal and strengthening. The Euro is stable and remains one of the two leading global currencies. This extraordinary resilience comes from Europe’s capacity for integration that is stronger then attempts for isolation and fragmentation precisely because, in a globalized world dominated by the American and Chinese heavyweights, not a single European state has the scale to matter. But a united Europe has the power to protect its interests and project its values in the world. Some member states (i.e., Germany) have realized that through Europe they can get obtain global relevance.

British Prime Minister Margaret Thatcher

Unfortunately, not all members understand that on their own they are too small. Americans used to call London, their partner for historical, cultural and language reasons, to find out what is happening in Europe. Now they call Berlin. The real challenge is therefore for states to commit themselves to the European project and protect their own future. Thereby lies the challenge that will decide on the future of Europe.

Continued global relevance

As questions of human survival start to take precedence over business as usual politics, a new approach capable of providing a globally cooperative response is needed. The European adventure, enlightened by two self-destructive attempts at world domination (WWI & II) provides an innovative approach for cooperation across nations and an appealing alternative to the greed of unregulated imperial liberalism.

Connie Hedegaard.And for those inclined to discount Europe as decadent and inward looking, it is worth reminding that it was Europe that convinced George Bush to organize the first G20 meeting, that launched the most ambitious trade liberalization program in history, including the investment agreement with China that is being discussed and that remains the source of 60% of the support for development in the world. In 2007 already, Europe adopted the first international climate package with 20% reductions in greenhouse gases by 2020. Now the target is a 40% reduction by 2030, which puts Europe in the pole position on climate action.

Looking Forward

In contrast to Barroso, his successor, experienced and colorful former Prime-Minister of Luxembourg, Jean-Claude Junker did not wait to speak his mind. Prior to the secret-ballot that elected him, he asked French tea-party leader Marie Le Pen not to vote for him as he does not want the support of those who reject, hate and exclude. Among his first tasks he must deal with a new eurozone crisis in Greece, mounting anti-EU sentiment in member states, create jobs across Europe and resolve the lingering confrontation with Russia (with its influence in Syria, Iran and Libya). An exciting job description indeed…

EU Brokered Russian “Winter-Gas Package” for Ukraine buys time for Europe

With winter at our doorstep and just hours before leaving office, outgoing European Commission President, José Manuel Barroso, announced a last minute deal to keep Ukraine and Europe warm this winter and give assurances to Gazprom that Ukraine will be able to pay its debts of $3.1 billion and make upfront payments for the 4 billion cubic meters of gas ($1.5 billion) to be supplied until March 2015. Ukraine now also feels comfortable that Russia will deliver on its commitments. Financing will come from the current IMF programs and other sources.

PutinGasThe gas supplies to Ukraine had been cut since June, following deteriorating relations between the two countries. Meanwhile the tension between Europe and Russia was increasing and fears that Russia would cut gas supplies like it did in 2006 and 2009 resurfaced. What aggravated Russia most was the re-export of Russian gas from Poland, Hungary and Slovakia to Ukraine. Retaliation through lower supplies to these highly dependent central-European states heightened the crisis.

Russia’s Eroding Negotiation Position

The deal implies a $378 per cubic meter rate price, far below the original Russian asking price of $485. Similarly, Poland managed to renegotiate its rates with Gazprom in 2012 with a 15% reduction on a price of around $550, the second highest in Europe at the time (after Macedonia).

The recent reduction in the price of oil may have played in favor of Ukraine and Europe. While Russia was counting on oil at $100 a barrel for its 2015-2017 budget, the recent drop to $80 and expectations that it may fall to $70 in the coming months has severe implications for Russian finances and economy. The deal with Ukraine and the EU provides much needed stability for the coming months.

A Golden Opportunity for Energy Security through Efficiency

Europe depends on Russia for 30% of its gas supplies. In Ukraine this dependence represents 40% of its entire energy consumption. But Ukraine is one of the least efficient countries in terms of its energy use and it is promoting energy waste through misguided fuel subsidies representing 7.5% of its GDP. With an energy intensity that is twice that of Russia and 10 times the OECD average, the IMF is correct in requiring a major energy reform to reduce energy waste as part of its bailout.

Similarly, the EU is looking at improving energy security by implementing energy efficiency policies that would result in 40% savings by 2030, with equivalent reductions in gas imports. These measures could save Europe up to €549 billion between 2011 and 2030 according to the Commission.