The Sick Man of Europe Is Europe

February 19, 2012

Foreign Policy:

A new study shows Europe’s power waning — and if the continent doesn’t get its act together soon, it could put the global order in serious jeopardy

Until recently, Europeans enjoyed a pretty comfortable position in most international organizations. At the IMF, they had an unquestioned hold on the directorship and could lecture other countries on how to govern themselves and run their economies, while each large European country had its own IMF representative. But all that changed in 2011. Now, Europeans are themselves being lectured by China and Brazil for not solving their financial crisis despite having the resources to do so. Europe managed to hang on to the directorship in June when Christine Lagarde succeeded Dominique Strauss-Kahn, but only because of divisions among emerging economies. If the euro crisis continues, Europeans will likely be forced to give up more of their voting weight — as they started doing in 2010 during a reallocation of IMF board seats – and ultimately lose the directorship

The power realignment at the IMF is just one example of the way the euro crisis has undermined Europe’s geopolitical clout in the past two years, transforming it from a reliable global problem-solver to a problem itself. True, the sky is not falling: Europe has had some remarkable successes in 2011, such as the successful intervention in Libya, the relatively smooth entry of Russia into the World Trade Organization, and the agreement reached at the Durban conference on climate change. But the out-of-control debt crisis has started eroding Europe’s foreign-policy tools and degrading its leverage with other powers like China. The 2012 edition of the European Foreign Policy Scorecard – the result of intensive research by 40 researchers under the auspices of the European Council on Foreign Relations and the Brookings Institution — makes this downward trajectory abundantly clear. If the euro crisis is not solved this year, Europe could experience in the years ahead an even more dramatic loss of power, one that would have negative consequences for world order, multilateral organizations, and the United States.

Washington may be pivoting toward Asia and casting its lot with emerging powers like India and Brazil to maintain its leadership position. But a continued erosion of Europe’s place in the world would bode ill for the Western liberal order Washington seeks to defend. For all their flaws, Europeans are still the largest contributors to international organizations and the largest purveyors of development aid, and they still outspend all the BRIC countries combined in defense expenditures. Additionally, Europe plays an important role in getting the cooperation of other powers for collective solutions favored by the United States…

The European Foreign Policy Scorecard evaluates the collective performance of Europeans — both EU institutions and the 27 member states — in reaching their foreign policy objectives in the world during the course of one year (see 2010 edition here). European performance is assessed on 80 policy issues, gathered in six broad themes: relations with China, Russia, the U.S., Wider Europe (comprised of Eastern Partnership countries, Balkans, and Turkey), Middle East and North Africa, and multilateral institutions). The table above presents the average performance of Europe for 2011.

Consider Europe’s soft power. Some countries are still eager to join the European Union and even adopt the euro, countries such as Iceland, Croatia, Turkey — or Poland and Hungary. But as Europe has drifted toward economic stagnation and political gridlock, the governance model for which the European Union stands — that of an expanding and ever more effective multilateralism as a solution to the problems of a globalized world — has been discredited in the eyes of many others. Advocates of regional integration projects in places such as Latin America and Southeast Asia are now less likely to look to Europe for inspiration. Last year, former Brazilian President Luiz Inacio Lula da Silva sounded this very alarm when he affirmed that “the world does not have the right to allow the EU to end” because “what Europeans achieved after [World War II] are part of the democratic heritage of humanity.” Unfortunately, there’s only so much the world can do. It’s up to Europeans to make the idea of Europe powerful again.

Take for example the remarkable events of the past year. The debt crisis has had a tangible impact on Europe’s ability to react to the Arab Awakening — arguably the most important geopolitical event in its neighborhood since the fall of the Berlin Wall. The revolutions in the Middle East and North Africa initially presented a challenge to European governments that, like the United States, had cozy relationships with autocratic rulers such as Tunisian President Zine el-Abidine Ben Ali and Libyan leader Muammar al-Qaddafi. Europe quickly got on the right side of history, however, and agreed to a common strategy that promised the region “money, markets access, mobility.” But largely because of the financial crisis, member states have so far failed to deliver much: Budget constraints limited the money they were prepared to offer to 5.8 billion euros in direct funding; populist fears about immigration restricted offers of greater mobility for students and workers; and protectionist sentiment, fueled by economic difficulties, precluded any real opening of markets, especially to North African agricultural products. As a result, Europe is not in a position to have as much of an impact on the transformation of its southern neighborhood as it would have had a few years ago. This also means that conditionality (“more for more”) is a less potent tool of influence because the potential gains for Arab Spring countries are limited…

The table above presents the detail of grades given to Europe for its performance in the MENA region in 2011. Grades are awarded based on three criteria. Two of them (unity and resources, each given on a 0 to 5 scale), relate to policies themselves, while the third one (outcome), on a 0 to 10 scale, relate to results. These criteria correspond to simple questions: Were Europeans united around clear objectives? Did they try hard? Did they succeed? The overall result is given as a grade out of 20 and also converted to a letter grade. To learn more on the methodology used in the Scorecard, see here.

Beyond the Arab Awakening, the financial crisis has also undermined Europe’s embryonic attempt to develop so-called “strategic partnerships” with the world’s great powers. Realist powers such as China and Russia have long attempted to play Europeans off against each other. But in the last few years, member states had gradually begun to realize that they have a European interest in agreeing to a common position before negotiating with the Chinese or Russians. In particular, 2011 was supposed to be the year in which the European Union implemented a new approach to China based on unity and reciprocity. Rather than maintaining separate approaches to Beijing, member states were supposed to present a united front in order to increase their leverage. For example, they were aiming at opening Chinese public procurement markets (for projects like road- and dam-building) that are currently closed, while Chinese firms can bid for European markets.

Instead, Europe’s crisis turned into China’s opportunity. Cash-strapped member states sought to secure investment rather than open Chinese markets and, more importantly, independently petitioned Beijing to buy their sovereign bonds. As a result, while the European Commission made valuable efforts to open up China’s public procurement markets and ensure access to rare-earth minerals, Brussels often fought alone on these issues while member states individually sweet-talked Beijing and prioritized their bilateral ties. Europeans did have some collective successes with China — on Libya and climate change, for example — but these pale in comparison with the shift in the balance of power that took place in 2011. In late October, in between a European Council meeting and the G-20 summit he was about to host, French President Nicolas Sarkozy called his Chinese counterpart, Hu Jintao, to see whether China would contribute to an enlarged eurozone bailout fund (the answer was no). It is hard to rebalance a relationship or insist on a revaluation of the yuan when you come begging. It’s no surprise, then, that an EU-China summit and a high-level economic dialogue were canceled in November…

Read it all.

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