© Agencja Gazeta/Slawomir Kaminski via REUTERS

Mr. Schwarzenberg, how do you see the situation of the countries in Central and Eastern Europe today? Let’s start with the Czech Republic. I’m not very happy with the situation in my country. The economic situation is very good, the country develops very well economically. People are much richer than a few years ago. But the political situation is deplorable.

Is it comparable to the situation in Hungary and Poland? In Hungary, an authoritarian government has successfully eliminated every meaningful opposition, including all opposition media. And, one must admit, the top echelons of the regime have become much richer over the last years. The situation in Poland is different: There’s an active opposition and an active media. Even the worst critics of Jaroslaw Kaczynski [the leader of the Law and Justice party, which has been governing Poland since 2015] don’t suspect him of taking any money; in fact, he lives very modestly in Warsaw with two cats. So, there is a huge difference between Hungary and Poland. Of course, the Germans are not very happy with Mr. Kaczynski, and that’s understandable! He is a traditional Polish nationalist, but he is a decent man.

For these and other states in the region, what have been, and continue to be, the biggest challenges—authoritarianism, weak institutions, and corruption, external actors like Russia or China? There has been corruption in all our countries; it’s been worst in Romania. In fact, the further southeastwards to get, the worse the problem becomes. But in Western Europe, there has been corruption, too. In Central and Eastern Europe, it is slowly getting better.

How persistent are the aftereffects of communist rule? The consequences of the dictatorships are grave, of course–and you have to remember, often there were the Nazis first, then came the communists; taken together that’s up to 60 years of totalitarian rule. In Austria, the Nazis were in power for seven years only, but the country still grappled with the consequences in the 1970s. So of course remnants of that deplorable totalitarian mentality take a long time to disappear.

Do you think EU enlargement was a success? How would you assess the role Germany and the Western Europeans have played? The Western European countries, including Germany, were first of all interested in their own opportunities, and they had enormous economic success. Just look at the export numbers of Germany or Austria! For Western European countries, enlargement was an enormously successful business. The political impact was different, it was somewhat less of a success.

Are the Eastern Europeans being given their fair share of involvement in the European project? Well, if you ask the people, it differs, but basically, they are not that interested in the European project. However, they are interested in the economic success that started with membership of the European Union. They all know very well that they need the EU for their own economic gain and prosperity. But they are not really interested in the project as such. And then there are some demagogues like Viktor Orbán and others, including here in the Czech Republic, who do their utmost to denigrate Europe for their own populist interests.

What was the biggest failure of the German foreign policy in Central and Eastern Europe? German policy has always had this dilemma: the relationship with Russia. The Germans have been prioritizing Russia over its immediate neighbors for over two centuries now. That’s nothing to do with Russian President Vladimir Putin speaking very good German. You can go back as far as the early 19^th century, or just remember the illicit cooperation between the Reichswehr and the Red Army in the 1920s and 1930s. It always leads to disappointment in Central and Eastern Europe.

Current German Foreign Minister Heiko Maas has spoken of redefining the term Ostpolitik as to no longer referring to Russia, but rather to Germany’s eastern neighbors… That would be nice if it would happen. But I’m afraid deeds are stronger than words. And of course, Germany should not abandon Russia in its foreign policy, but rather consider the interests of the other states, too. If you think of Russia’s aggression against Ukraine, where Angela Merkel has been mediating—after five years, some Germans still seem to have difficulties spelling out precisely who the aggressor is and the German industry is arguing for the lifting of sanctions.

How could the present divide between Western and Eastern Europe be overcome? Scrapping that famous project of the second gas pipeline [Nord Stream 2] across the Baltic Sea would be a start. It runs against the interests of Ukraine and other countries. Or speaking clearly about the situation in Hungary. Of course, the votes of Orbán’s Fidesz party were needed to make the European People’s Party the biggest political group in the European Parliament. But my impression is that German conservative politicians simply close their eyes to whatever Orbán does at home.

So we need more honesty? More honesty would be a wonderful idea.

The interview was conducted by Henning Hoff. Assistance: Matthias Hempert.

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© REUTERS/Fabrizio Bensch

When the SPD addresses the big questions in international politics, it doesn’t take long until someone evokes Willy Brandt or Helmut Schmidt—names that stand for two social-democratic eras in German foreign policy. The global impact those two chancellors had rightfully remains a point of reference even today.

Much less present is the period from 1998 to 2005, although the Schroeder years still shape our foreign policy actions today; indeed, the red-green foreign policy compass can still serve as a reliable guide in 2019.

The center-left government led by Gerhard Schroeder, a coalition of Social Democrats (SPD) and Greens, had barely entered office in 1998 when it faced its first test: Would Germany take part in the NATO mission against Serbia? Schroeder and Green Foreign Minister Joschka Fischer demonstrated decisiveness and persuasiveness. After a fierce debate within their parties and society at large, the government supported the Kosovo mission—one still seen as necessary today—in order to prevent a humanitarian catastrophe in Germany’s immediate neighborhood. The government proved here, as it did with the Afghanistan mission after the 9/11 terror attacks, that it can be counted on.

It was as true then as it is today: Germany is a reliable partner to our allies. Because of the changed security situation in Europe—above all Russia’s illegal annexation of Crimea and its war in East Ukraine—it is important that we changed course and began once again to invest more in our defense. But anyone who measures solidarity solely in euros or dollars misjudges our extensive engagement: Germany is not only the second-largest supplier of troops in NATO, but also a partner that its allies can rely on, as we are still proving today in Kosovo and Afghanistan.

The Afghanistan Example

Afghanistan provides a good example of our approach: If a state cannot provide a minimum level of security, administrative presence, social services and education—and combine this with measures to politically involve marginalized population groups—then terrorist groups have it easy, and outside military support can only make a limited impact. The Schroeder government counted from the very beginning on building national and international support for the Afghanistan mission, which culminated at the end of November 2001 in the so- called Petersberg Process. The Federal Foreign Office under Heiko Maas is building on this tradition by promoting intra-Afghan dialogue, most recently at the conference in Doha in July 2019.

However, saying yes to more international responsibility, to solidarity, and alliance loyalty, did not mean that the SPD-Greens government would blindly follow into any foreign-policy adventure. Hence the no to the Iraq War. Chancellor Schroeder resisted US President George W. Bush’s attempts to cajole Germany into participating—a path advocated by then-CDU leader Angela Merkel. Developments after the Iraq intervention showed just how right Schroeder had been. The events of those years are seared into German society’s collective memory. The false statements about Iraqi weapons of mass destruction in particular created a deep sense of mistrust among Germans toward the US government. Having been temporarily forgotten in the euphoria of the Obama years, it is now again widespread because of the behavior of President Donald Trump.

The American saber-rattling towards Iran has massively increased tensions in the Middle East and raised fears of another US military intervention. But even if there is much to remind us of 2002/03, there are also conspicuous differences: Trump entered the political stage with the promise to bring American troops home. It is therefore unlikely that this president would start a new war involving US ground troops in the Middle East. But even with limited military strikes, there is a real danger of escalation of.

This is why we are very clear on this point: As long as we Social Democrats are part of the government, Germany will not take part in another military adventure in the region. It is also, however, clear that Iran must return to compliance with the nuclear agreement or UN sanctions will be reintroduced. The end of the nuclear deal would set off an arms race in the Middle East. Iran cannot have any interest in this—nor in a comprehensive sanctions regime with European participation.

Prioritizing Civil Means

Even if the Schroeder government accepted the use of military force as a last resort, it left no doubt that civilians means always had priority. Under Schroeder, the interdepartmental action plan “Civilian Crisis Prevention, Conflict Resolution and Post-Conflict Peace-Building” was adopted, and the Civil Peace Service, the German Foundation for Peace Research and the Center for International Peace Operations were founded. The foreign ministry built on this under Frank-Walter Steinmeier and Sigmar Gabriel to develop its expertise and capabilities in crisis management, conflict management, and peace promotion. Exemplary for these efforts is the establishment of the Directorate-General for Humanitarian Assistance, Crisis Prevention, Stabilization and Post-Conflict Reconstruction at the Federal Foreign Office.

Foreign minister Heiko Maas is determined to push forward with civilian crisis management. He sent an important signal in April 2019 when he dedicated the German Presidency of the UN Security Council to crisis prevention. Germany will also use its EU Council Presidency in 2020 to further expand the area of civil crisis prevention. As an important contribution, the foreign minister is pushing ahead with the establishment of a European Center of Excellence for Civil Crisis Management in Berlin. Particularly in view of budget pressures, we should not forget that investments in crisis prevention pay off financially. Every euro we invest today in prevention will benefit us in the future, since we would otherwise have to spend that money many times over to contain and resolve violent conflicts.

Committed to Multilateralism

Although Schroeder spoke of a “German way” in the 2002 election campaign, foreign policy under the Red-Green coalition was still fundamentally European and committed to multilateralism. Schroeder and Fischer successfully supported the eastward enlargement, thanks to which the European Union won ten new member states in 2004. Fifteen years later, Maas is focusing on strengthening relations with the countries that joined the EU in order to counter the feeling of neglect within the EU that has since arisen. The SPD-Greens government also pressed ahead with bringing Turkey closer to the EU by opening accession negotiations—a political approach to a difficult partner, on which many in Turkey place their hopes, especially after the Turkish government’s backsliding on democracy and human rights. This approach should not be abandoned.

In his increasingly difficult relationship with Russia, Heiko Maas can build on the discussion formats introduced between 1998 and 2005. Schroeder created the position of coordinator for inter-societal cooperation between Germany and Russia and, together with President Vladimir Putin, initiated the annual Petersburg Dialogue. Particularly in these difficult times, it is important to have tried and tested channels at our disposal. We should venture more cooperation with Russia in selected areas of common interest. The EU should strengthen the dialogue with the Eurasian Economic Union at the regulatory and technical level and institutionalize it in the long term. Otherwise others will soon determine the rules of our neighborhood. China in particular is gaining more and more influence. Such cooperation is not incompatible with current sanctions and could help restore lost confidence.

The SPD-Greens government faced unprecedented foreign policy challenges from day one. Those years were not without their missteps, and not everything that looks successful from today’s point of view was the sole achievement of the Social Democrats—no question about it. But to take stock of the years between 1998 and 2005 is to come to the conclusion that the third era of social-democratic foreign policy under Schroeder set us, in many areas, on a course that is still right today—and therefore stands in the tradition of Brandt and Schmidt.

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Artwork © Dominik Herrmann

Christine Lagarde is not making any public statements at the moment. She doesn’t want to risk any controversies in the run up to the EU summit in October, at which she is to be finally appointed president of the European Central Bank. Every word would be scrutinized and also interfere with the work of the current ECB president, Mario Draghi, who remains in office until the end of October.

Lagarde had been expected to attend the largest French economics conference in Aix-en-Provence shortly after the European heads of state and government agreed on nominating her at the beginning of July. She cancelled her conference appearance, though she still went to Aix-en-Provence but only to attend the opera, which she loves. Her younger brother Olivier, who is a well-known baritone, often accompanies her on such visits.

The 63-year-old Frenchwoman did, however, send a message to the disappointed conference organizers—it’s the only statement she has made since her appointment. Referring to the conference topic of “regaining trust,” she wrote: “With trust, the child takes its first steps, the lovers exchange rings, the entrepreneur invests, the banker gives credit, the citizen gets involved. I am convinced that your conference theme is the first condition for the world to meet the challenges it faces.”

At the ECB, too, her first task will be to build trust—in her own leadership and in the ability of the central bank to set the right framework conditions for the economy and thus prepare the European Monetary Union for the future.

Expectations are especially high in Germany, where there is the most hostility to the ECB’ low interest rate policy. The opening of the monetary policy floodgates was met with harsh criticism here because it harms savers, burdens banks, and thus triggers the feeling that Germans are paying for others. Can the former managing director of the International Monetary Fund (IMF) smooth the troubled relationship and successfully guide the ECB through the next eight years, years that may become turbulent?

A Well-Liked Dove

Lagarde is certainly well liked among the main players of the financial markets. Experts like to divide central bankers into “doves,” advocates of a loose monetary policy, and “hawks,” advocates of a restrictive monetary strategy. While Jens Weidmann, for example, the president of the Bundesbank and defeated candidate for the ECB job, is seen as a hawk, Lagarde is regarded as a dove. “She’s probably even more of a dove than Draghi,” bond manager Ben Lord of the British finance company M&G Investments told the Financial Times. While that may not be the consensus view on the financial markets, many do see Lagarde as at least being in line with Draghi.

Lagarde expressly welcomed the ECB president’s announcement in July 2012 that he would defend the euro with “whatever it takes,” thus creating a protective wall around the common currency. As a result of this guarantee, the ECB massively bought up government bonds issued by European governments. Lagarde was even “an early supporter” of this “quantitative easing,” says Andrew Benito of Goldman Sachs.

The ECB hopes that this will bring the stubbornly low inflation rate in Europe closer to the prescribed target of “close to two percent.” The glut of money is therefore likely to continue under Lagarde for some time. She recently warned that the global economy was entering rough waters and recommended that the central banks maintain their loose monetary policy. On the day of her nomination in early July, European government and corporate bond prices jumped. Investors continue to expect high prices for the bonds which implies low interest rates.

A Keynesian Worldview

Lagarde’s time at the helm of the IMF would seem to indicate that she is not an “ultra-liberal,” the derogatory term used in her native France to describe economic liberals. Traditionally, the fund has dealt with topics such as currency issues, imbalances in international trade, and major macroeconomic indicators such as public debt and growth. Lagarde expanded the spectrum to include social inequality, gender discrimination, climate change, energy policy, anti-corruption, and financial stability.

As a result the IMF no longer has shed some of its image as a hard-hearted neo-liberal institution. There has always been a range of thinking among the well over 1,000 IMF economists, but under Lagarde the focus changed: countries with fiscal leeway were advised more strongly than before to increase public investment. Savings programs should not be too harsh, capital market controls, which had previously been taboo, became socially acceptable, while privatization was no longer regarded as a panacea. Under Lagarde, the Keynesian worldview has to some extent become the norm at the IMF.

While the anti-Keynesians at the fund may blame her for this change, overall there is no doubt about her popularity with the staff there. Lagarde is considered capable of compromise and a team player. She includes rather than excludes. “Building consensus is one of her outstanding skills. She listens to the opinions of everyone involved, even a young economist who joined the IMF just six months ago,” Bruno Silvestre, who worked for many years as her spokesman in Paris and Washington, told the Frankfurter Allgemeine Zeitung.

Team Player with Charisma

She gained respect because she increased the fund’s financial resources and thus its firepower. This also reflects her negotiating skills with the 189 governments represented in the IMF. Her charm has also been good for the IMF. Lagarde, who loves jewelry and is always elegantly dressed, has a winning charisma that is effective. The fact that she is also known to be “as tough as nails” doesn’t have to be a contradiction.

The network that she has built up over the years plays a central role here. During the financial crisis, she often exchanged ideas with Henry (“Hank”) Paulson, the then US treasury secretary, whom she knew from their Goldman Sachs days. She was and is personally known to numerous important CEOs because she advised them as a star lawyer. Since her time as French finance minister, she has also got on very well with her former German counterpart Wolfgang Schäuble.

This helped her when in 2010, against German resistance, she called for Greece to be helped out of its existential economic crisis. Later, she advocated a restructuring of Greece’s debt with easier conditions for the government in Athens. The relationship with Schäuble was not damaged. The same applies to her rapport with Angela Merkel. There’s a mutual respect there marked by the fact both have succeeded in what is still a male-dominated world.

The Spiral of Cheap Money

But does the ECB need someone quite so political at its helm at a time when the independence of central banks around the world is threatened? In the United States, President Donald Trump is putting pressure on the Federal Reserve, in Europe the ECB has fallen into a spiral of cheap money, which spares countries with lax financial management like Italy the necessary reforms. So far, the ECB has not been able to escape this spiral, because abandoning this policy could endanger the entire monetary union. The ECB has thus made itself vulnerable to blackmail.

Can Lagarde stand up to governments in this context? Some doubt it. Yet as IMF chief she proved her independence from the German government when she and the IMF withdrew from the third rescue package for Greece in 2017 against Berlin’s wishes. Behind the scenes, she fought fierce battles with Greek Prime Minister Alexis Tsipras over austerity programs and credit conditions. Recently, she also warned of the debt mountains piling up around the world.

Then again, she still has to prove her independence from the French government. Yet she is less embedded in the French establishment than it might first appear. Even as a young woman, Lagarde was more attracted to America. She failed the entrance test to get into the classical elite school, the ENA. Instead, she made her career with the American law firm Baker McKenzie, one of the largest in the world, where she stayed for 25 years.

She later joined the French government, appointed by French President Nicolas Sarkozy as finance minister. However, she has never been a politician who sought a popular mandate from the electorate, being more attracted to the wider world.

An episode as French finance minister also left a bitter aftertaste: an affair involving French entrepreneur Bernard Tapie. On her watch, the French state paid more than €400 million as compensation to Tapie in connection with the opaque sale of Adidas in the 1990s. It’s still not clear exactly who gave the instructions for the payment of such a huge sum; a French court found her guilty of “neglecting” her official duties, but imposed no punishment.

The Eternal First

Throughout her life she’s been something of a pioneer—in terms of her gender, her nationality, and her education. She was the first woman and the first non-American to head Baker McKenzie, as well as the first woman to serve as French finance minister, head of the IMF, and now president of the ECB. All of that demands a lot of assertiveness.

As the eldest of four siblings, she grew up with her three brothers in a middle-class family in the port city of Le Havre. Her father was a professor of English, her mother a teacher. Politics was always present in her family; her parents knew leading politicians like Pierre Mendès France or the later President of the EU Commission, Jacques Delors, who were visitors to the family home.

When she was 12 years old, she took up synchronized swimming. Three years later she was on the national team and a silver medal winner in her age category. She has displayed both discipline and the ability to integrate ever since. But when she was 16, her father suddenly died. The family had less money and Lagarde had to go to work as well as attend school.

When she was 18, she spent a year in the US on a scholarship, attending a high school in Maryland, and she also interned on Capitol Hill as a parliamentary assistant to William S. Cohen, later secretary of defense in the Bill Clinton administration.

Christine Lagarde, the eternal first. She will also be the first ECB president not to have a degree in economics. Her economic background had already been an issue when she was at the IMF. “I can understand what  people talk about,” she told The Guardian in 2012, “I have enough common sense for that, and I’ve studied a bit of economics, but I am not a super-duper economist.” At the ECB, of course, this could become a problem, because the job is more technically challenging than at the IMF.

Fishing in a Larger Pond

In times of crisis, central bankers often have to react quickly. They  need not only the right instinct, but also the technical knowledge. At the same time, Lagarde is not a novice. Anyone who headed the IMF for eight years and was French finance minister for four years has enough knowledge of the economic context. Nevertheless, many observers believe that Lagarde must draw on the ECB’s expertise more than her predecessors. The top expert there will be Philip Lane, the bank’s chief economist, who comes from Ireland.

Decision-making at the ECB should in any case have a broader basis. Draghi took decisions with a small group of his closest confidants or even alone. Lagarde is likely to fish in a larger pond and at the same time change the ECB’s external image. Her proven communication skills, which Draghi lacks, are one of her greatest assets.

After spending the last eight years in Washington, the first lady of the financial world is returning to Europe. When it comes to her private life, the move to Frankfurt will be far more convenient: She can now see her partner, a French entrepreneur from Marseille, and her two adult sons living in France without needing to take a transatlantic flight.  

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© REUTERS/Hannibal Hanschke

Germany’s Green Party has foreign policy built into its DNA. The main impulse that led to its foundation more than 40 years ago was the protection of the environment: the global challenge par excellence. Many core issues of Green politics are global and are treated as such: the pursuit of civil liberties and an open, multicultural society, the struggle for human rights and democracy, which can only succeed if these values are shared by as many people and countries as possible, and, not least, the quest for a more equal distribution of wealth and opportunities on a global scale.

The big question of course is how these goals can be achieved. Countless times the party has discussed the policy consequences of its founding tenets, most ardently how to interpret the principle of nonviolence in the light of international crises and mass atrocities.

An overarching understanding has emerged over the last 20 years: we have defined the European Union as the model and the basis of our foreign policy.  The EU is the most successful attempt yet to move beyond national boundaries, to leave behind years of bitter and often violent enmities, to help create freedom and prosperity, and to forge an albeit imperfect consensus on the shared values of democracy, human rights, and the rule of law. German foreign policy must therefore always be conceived as part of a European foreign policy.

Reforming the UN

We aim to strengthen the rules-based international order under the auspices of the United Nations. With the goal of transforming foreign policy into global domestic policy, we want to reform the workings of the UN. To succeed, the UN and other international organizations must ultimately shed structures that perpetuate power balances dating from the post-World War II era. Yet to achieve this reform we must strengthen the UN—despite its many shortcomings. If we want the power of law instead of the law of the powerful, the UN is the only way to move forward.

For example, the idea of the responsibility to protect is one of the steps on the way to protecting the powerless. It demands that the international community shield those whose own governments cannot or will not defend them from the most egregious forms of violence, first and foremost by political means, but in extreme cases also by military force. Of course, we as Greens have to come to terms with the serious blows this idea has suffered for example in Syria, where the UN Security Council, blocked and unable to act, has once again shirked its responsibility to keep the peace.

Peace and Democracy

Green foreign policy assumes that international peace and the strengthening of democratic values go hand in hand. Today, however, we have to deal with challenges to both peace and democracy. Even in Europe, which we once believed to be a safe haven for democracy and the rule of law, authoritarian movements have been on the rise for the past decade. Paradoxically, these nationalist movements that target the universality of human rights and undermine international rules have quite an outreach. Leaders like Matteo Salvini and Vladimir Putin essentially speak the same language, the one funding the other.

These movements cannot be countered by adopting their language and concerns. A clear commitment to international cooperation, to social and ecological justice, and to the principles of human rights are the only way to win the argument. This includes a clear stance on one of the most contentious issues: migration. In an ever more interconnected world, the idea of closing our borders in order to maintain ethnically homogeneous nation states is clearly absurd. A pragmatic migration policy must take economic, political, and humanitarian aspects into account. It must serve each country’s economic interests, but not exclusively so.

Effective Asylum Systems

Migration policy also has to protect European states from blackmail attempts by authoritarian leaders in Africa and the Middle East who play on the fear of mass migration. They offer to stop migration; in return, Europe is meant to close its eyes to their abusive and authoritarian rule. Their politics, however, are not in our interest. And if we are willing to accept a certain number of migrants from their countries, their threats quickly dissipate. Of course, keeping up the principles of the Geneva Convention is another cornerstone of the values-based approach to foreign policy. The tragedy in the Mediterranean Sea, which we have been witnessing for years now, puts European values to shame. We urgently need a coordinated effort for the rescue and distribution of these migrants and refugees as well as an effective asylum system to decide who can benefit from humanitarian protection.

Diplomacy, civil crisis prevention, as well as economic development are some of the most important tools of such a foreign policy. If Germany and Europe want to take more responsibility on the international stage, we must strengthen our capacities in these fields. This particularly regards the German Foreign Office, which is notoriously understaffed and underfunded.

A Common European Defense

Yet as we have painfully learned, peaceful means are often not enough to keep violent conflict at bay and prevent mass atrocities. In some cases, a military intervention by the international community or parts thereof is necessary as a means of last resort to create space for diplomacy and other civilian efforts.

This means maintaining a capable and efficient military force. Yet arbitrary spending goals, such as NATO’s much-discussed two-percent goal, do not constitute reliable benchmarks. It is far more important to combine forces with our European partners to make our common defense more effective. A similar argument applies to arms exports. Selling weapons to states involved in armed conflicts or human rights abuses on a massive scale may contribute to lowering the price for armaments needed in Europe. However, apart from the obvious moral fallacy of this argument, the political and economic costs of the conflicts fuelled by these weapons in the long term far outweigh any minor gain in the short term.

Reducing Global Inequality

The challenges that our planet is facing are immense. Climate change is the most existential and pressing. But it cannot be addressed in isolation. The changes it requires to many of our habits can only be achieved politically if we can achieve a more equitable distribution of global wealth. This is an integral part of foreign policy. It includes an overhaul of the policies of institutions such as the IMF and a rethinking of international trade relations. Global trade must be organized in a way that reduces rather than exacerbates inequality. European agricultural subsidies, for example, distort agricultural markets in Africa and the Middle East and keep these countries from opening their markets in a way that would benefit both sides.

Climate change is not the only development that has a profound impact on international relations. The new era of digital communication has also changed the traditional role of states in foreign policy. This gives renewed importance to an approach we Greens have favored for a long time: a deepened engagement with civil societies all over the world, both digitally and physically, and a commitment to their freedom of action. The ties resulting from such policies are essential to overcoming many an impasse encountered on other levels.

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The German question seems to be back yet again. With speculation about the end of the Atlantic alliance and the liberal international order, there are renewed fears of German dominance at the heart of Europe.

German power now takes a different form than in the past. While before 1945, the German question was geopolitical, the current German question is geo-economic, as I outlined in my book The Paradox of German Power. But things have changed since it was published in 2015—in particular with the election of Donald Trump as president of the United States. In a recent thought-provoking essay in Foreign Affairs, Robert Kagan suggests that we should now be less certain that Germany will remain “benign” in geopolitical terms. In other words, for Kagan, the old German question is back.

However, this underestimates the deep cultural change in Germany since World War II. It’s hard to imagine any circumstances that would lead to the country reverting to an old-fashioned kind of German nationalism and militarism. The commitment of ordinary Germans to the idea of peace is simply too strong. For better or worse, this is the lesson that Germans have drawn from their experience in the 20th century.

Moreover, focusing on a remilitarization of Germany actually obscures a more likely—and interesting—possibility. If the United States were to actually withdraw its security guarantee to Europe, or if the liberal international order were to completely collapse, Germany might defy the expectations of realist international relations theorists and simply choose to be insecure rather than abandon its identity as a Friedensmacht, or “force for peace.” In other words, even in this worst-case scenario, Germany might in effect do nothing rather than either develop its own military capabilities, including nuclear weapons, or exchange dependence on the US for its security for a new dependence on France.

How Germany Harms the EU

Meanwhile, those, particularly Americans, who warn about the danger of the return of the old German question underestimate how problematic today’s Germany already is in the European context. Germany’s semi-hegemonic position within Europe is one of the main reasons why the EU has struggled to solve the series of crises that began with the euro crisis in 2010. On the one hand, Germany lacks the resources to solve problems in the way a hegemon would. On the other, it is powerful enough that it no longer feels the need to make concessions to other EU member states, and in particular to France. As a result, the EU has become dysfunctional.

It’s important not to idealize post-war Germany as acting selflessly. German politicians certainly look out for German interests in Europe. In fact, since the beginning of the euro crisis, much of the debate about Germany’s role in Europe has centered on exactly this question of the relationship between Germany’s national interest and the wider European interest. From economic policy and the management of the single currency itself to the refugee crisis and the Nord Stream 2 gas pipeline, Germany has again and again been accused of putting its own national interest ahead of the interests of Europe as a whole.

Nor has Germany exactly rejected nationalism altogether. Although—or perhaps because—Germans rejected militarism, they found new sources of national pride. In particular, a kind of economic nationalism developed in Germany and increasingly focused on Germany’s success as an exporter—what I have called “export nationalism.” During the Obama administration—long before Trump “targeted” Germany, as Kagan puts it, for its huge, persistent current account surplus—the US treasury had already put Germany on a currency-manipulation monitoring list.

Restoring the Franco-German Balance

Today, the dire state of trans-Atlantic relations and the threat of the withdrawal of the US security guarantee have raised concerns about how Germany might respond. Historically, American power has pacified Europe—that is, it “muted old conflicts in Europe and created the conditions for cooperation,” as Josef Joffe wrote in 1984. There are therefore good reasons to worry that a withdrawal of the security guarantee could lead to European disintegration and even the reactivation of security dilemmas. Yet a US withdrawal could also help to resolve the German question in its current, geoeconomic form—without necessarily re-opening the classical, geopolitical German question.

This is because Germany’s semi-hegemonic position in Europe is dependent on the configuration of the US-led liberal international order, and the particular form it took in Europe, that allowed Germany to “free ride.” In particular, the US security guarantee meant that Germany didn’t need France’s military capabilities and therefore had little incentive to make concessions to France on other issues like the euro. Whatever Trump’s intentions, his threat to withdraw the US security guarantee has given France greater leverage over Germany and thus gone some way to restoring what Harvard’s Stanley Hoffman called “the balance of imbalances” between the two countries. If the United States were actually to withdraw its security guarantee, it would further restore this balance and could mean the end of German semi-hegemony.

Power Politics Persists

In particular, increased German dependence on France for security might—and I emphasize might—force Germany to make concessions to France on other issues like economic policy and the euro, which would be good not just for France, but for Europe as a whole. In this way the removal of the US security guarantee could potentially enable Europe to finally deal with the crisis that began in 2010. The crucial question, however, is whether even this dramatic scenario would be enough to force Germany to rethink its approach to economic policy and the euro. It’s also perfectly possible that Germans would still not feel sufficiently threatened to make concessions to France on these issues as a quid pro quo for a more explicit or extensive French commitment to German or European security.

There is a tendency at the moment to view the world in extraordinarily binary terms. But the situation in Europe today is much more complex. While commentators like Kagan worry that a collapse of the current order would lead to a return of power politics within Europe, in reality power politics never really went away, even if it was no longer pursued using military tools. Within the peaceful, institutionalized context of the EU, member states continued to pursue their own national interests. In short, Europe may not have been quite the Kantian paradise that Kagan famously suggested it was in Of Paradise and Power.

Similarly, since the beginning of the euro crisis, it has become apparent that the Atlantic alliance and European integration did not resolve the German question quite as conclusively as was once thought. Given the ongoing reality of power politics within the EU, the unequal distribution of power among member states continued to matter, though that power was largely economic rather than military. After reunification and enlargement increased German power within Europe, a familiar dynamic emerged—though it only really became apparent after the beginning of the euro crisis. In other words, in resolving one version of the German question, the EU and the United States may have simply created another.

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© REUTERS/Jason Lee

Artificial intelligence (AI) is turning into an essential enabler for economic and military affairs. It has also become the tool of choice for surveillance activities in certain countries. Against this backdrop, governments, international organizations, and corporations have been drawing up guidelines on the ethical design and usage of AI algorithms and data.

In 2018, major technology companies already drafted related principles, which is hardly surprising as AI innovations nowadays mostly originate from the private sector. Google published AI at Google: Our Principle, while Microsoft wrote Microsoft AI Principles. Yet their data-driven business model and their commercial interest in AI fuel distrust. Critics accuse them of “ethical white-washing.” The reproach is that their published guidelines are nothing more than a marketing gimmick which aim to distract from their abusive and massive application of AI algorithms.

Irrespective of whether these accusations are true or not, there is an urgent need for stakeholders other than “profit-driven players” to become genuinely engaged in the AI ethics debate. In April 2019, the European Commission released its “Ethics Guidelines for Trustworthy Artificial Intelligence.” These guidelines were drafted by the 52-member High-Level Expert Group on Artificial Intelligence (HLEG AI), which consists of representatives from politics, industry, research institutions and civil society. The document encompasses seven guiding principles, among them transparency (the traceability of AI systems should be ensured), privacy and data governance (citizens should have control over their own data) and diversity, non-discrimination and fairness (which tackles the bias problems of AI systems).

In May, the Organization for Economic Co-operation and Development (OECD) released its AI ethics guidelines, the “Recommendation of the Council on Artificial Intelligence.” Even though the document is shorter than the EU one and lighter on detail, its principles are noticeably similar. Later that month, the Beijing AI Principles were announced by the Beijing Academy of Artificial Intelligence (BAAI)—an organization backed by the Chinese Ministry of Science and Technology and the Beijing municipal government—in a joint effort with several Chinese research institutions and industrial groups involving firms like Baidu, Alibaba and Tencent. In comparison with the guidelines provided by the EU, these principles are more descriptive and less comprehensive. However, they cover three crucial clusters: research and development, use, and governance.

Promising Signals

At first sight, it is a welcome development that major international organizations and powerful states are officially looking at ethical concerns about AI. And indeed, it is possible to identify positive aspects for each of the released AI guidelines and their wider significance: the EU document has great scope and is deliberately defined as a living document to be reviewed and updated over time. Given that AI systems are subject to constant changes and need continuous adjustment, such a mechanism is indispensable. The EU also includes a checklist with easy-to-understand questions that companies can used as points of orientation to ensure that ethical concerns are respected.

With regard to the OECD recommendations, it worth noting that—even though it is a non-binding document—it is backed by the United States. This means that the Trump administration is officially voicing ethical concerns about AI at an international level, despite its skepticism toward multilateralism. In addition, these recommendations are not limited to the 36-member states of the OECD—six non-members having already also embraced these principles. As a follow-up measure, an AI Policy Observatory will be established to help implement and monitor adhesion to these principles throughout the world. Based on these recommendations but with a more limited scope, the G20 meeting in Japan this June agreed a set of G20 AI Principles. Both the US and China were signatories.

Last but not least, there the promising sign of the Beijing AI Principles. It was surprising and gratifying to see that China’s government—which is widely criticized for using AI as a tool to monitor and grade citizens—is suddenly interested in ethical concerns and that, for instance, research and development of “AI should serve humanity and conform to human values.” This can be interpreted as a signal that China wishes to become engaged in a dialogue with international partners in spite of the increasingly powerful narrative of an “AI race” with the United States.

Stumbling Blocks Ahead

Nevertheless, it would be premature to speak of a new era of AI multilateralism and an effective AI ethics framework. The recent haste in drafting AI guidelines is partly motivated by the desire not to be left out of the conversation and the “standard setting game.” It marks the start of a likely long-running debate within the international community, with many stumbling blocks ahead. A small sample of these lingering challenges follow:

First, the devil will be in the detail, as the principles presented by all sides are still very vague. Even the most comprehensive and detailed guidelines—the ones drafted by the EU—fail to set non-negotiable ethical principles or so-called “red lines.” This was even criticized by one of the members of the HLEG AI, the philosopher Thomas Metzinger. At present, all of the three principles are more about opening up new thematic areas such as non-discrimination or robustness and safety to international discussion. Taken together with the fact that none of these principles are enforceable by law, it means that countries continue to have a lot of room for maneuver in their application of AI systems.

Second, the application possibilities for AI are too widespread for a one-fits-all approach. Different circumstances require different solutions. More specific application areas like manufacturing, surveillance, and the military need additional guidelines.

Third, ethics is always embedded in a cultural and social context that depends on a system of values shaped by a unique history. Since algorithms will impact many areas of our everyday lives, these cultural differences must be taken into account when drafting AI ethics. For instance, studies show that people in China and in the West have quite different responses to the famous “Trolley Dilemma,” a thought experiment in ethics that forces participants to make a difficult choice between a greater and a lesser evil.

Ultimately, such culture clashes will also be reflected in international politics. It will be a huge challenge to find common ground, especially if the international community seeks to develop more detailed principles and guidelines. Bringing in additional stakeholders and transferring what are ultimately ethical principles into hard law will be just as difficult.

Great Power Rivalry

Finally, and in addition to the challenges related to process, content, and implementation, there is a need to take the geopolitical context into account. This is true for the new technologies in general, but especially for general-purpose tools like AI. The great power rivalry between the US and China has only just begun, and emerging technologies with dual-use nature will be the main driver for economic profitability and military prowess. Hence, it is highly doubtful whether the so-called AI superpowers—first and foremost Beijing with its current demonstration of AI-based surveillance on minorities—will be willing to bind themselves in “ethical chains” through a self-imposed ethics regime. This is made evident by the reluctance of these countries to ban lethal autonomous weapons systems.

That is why it’s imperative that the EU continues to take the lead in the global debate on AI ethics in order to see the emergence of its “third way”—a digital sphere that is human-centered, regulated, and democratic. Yet setting high ethical standards is not enough. The EU and its member states also need to do more to establish a vibrant European AI ecosystem. This means not just encouraging additional investment, but also, among other measures, supporting European companies that develop AI systems. Otherwise, the EU will end up proclaiming and promoting detailed and sophisticated AI ethics guidelines without having any leverage to implement them internationally.

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Artwork © Dominik Herrmann

Just a few years ago, Portugal was mired in its deepest economic recession since 1975. When I moved to Lisbon in 2011, the country was down on its knees, its people drowning in unemployment and suffering tax hikes in exchange for a €78 billion bailout.

But in 2015 an unlikely parliament-only alliance between the Socialist Party (PS) and left wing-parties, referred to as a geringonça (which translates to something like a “contraption”) turned the country into a success story. Socialist Prime Minister António Costa became the poster boy of the European left and opinion polls indicate that it is likely he will be re-elected in October.

While countries like Italy shift toward far-right populism, it doesn’t seem to stand a chance in Portugal. The new Basta! (“Enough!”) party, whose leader once opted to skip a debate with other candidates on national television to comment on football on another channel, has no seats in parliament. A conference of far-right groups held in Lisbon earlier this month saw only 65 people attend and instead sparked a protest that attracted hundreds of people who marched down streets in the city center slamming the government for allowing such an event to take place.

The government has benefitted from improved economic indicators and falling unemployment. Also, the country’s political landscape is different from most of Europe. “Euroskepticism, immigration, and sovereignty are themes that are not present in Portugal,” António Costa Pinto, a political analyst, pointed out to Berlin Policy Journal.

Despite widespread initial skepticism, the Socialist government has been praised by Brussels for turning around the economy, cutting the deficit, halving unemployment to 6.4 percent, reversing cuts to wages, and offering businesses incentives. Portugal’s economic recovery and the rise of the left has been portrayed as a success story, with the Standard & Poor rating agency lifting the country’s status from junk to investment grade.

Too Little to Live On

But might Portugal’s success story be overrated? The International Labor Organization said in a recent report that while Portugal had “demonstrated that taking steps to foster employment-oriented policies and safeguard social cohesion helped to speed up its recovery, it was too soon for it to ‘rest on its laurels.’” The report went on: “There are still a significantly higher number of precarious workers than prior to the crisis, and the young and the long-term unemployed continue to face particular challenges in their integration into the labor market. The country’s external debt remains high.”

Costa’s Socialist Party had come to power in November 2015 after an inconclusive general election, by forging an unexpected “anti-austerity alliance” with the far-left Left Bloc and Communist Party. They ousted the center-right bloc led by Passos Coelho, which had been in power since 2011 and had imposed harsh austerity in exchange for a three-year €78 billion bailout program. The geringonça operated by vowing to overturn austerity, which Costa referred to as “tearing down the last remains of a Berlin Wall,” while promising to comply with EU rules.

After seeing her salary frozen over several years, Paula Fernandes, 50, initially had high hopes in the new government. She was among state workers demanding a retroactive salary hike to recover the income she had lost. Today, her living standards have improved, but not as much as she had hoped. “My salary has increased a little bit, but so have my taxes and the cost of living,” Fernandes explained.

Portugal’s minimum wage currently is €600 per month, up from €530 euros in 2016. According to a study by Lisbon’s ISEG university, €1,000 a month is the minimum amount one needs to pay for housing, food, and other basic living expenses.

“Propagandistic Vision”

“That idea [that the economy is growing] is a propagandistic vision of the government,” Raquel Varela, a historian, researcher, and university professor at Nova University Lisbon, said. “There was a drop in the real value of wages and an increase in taxes. There is less unemployment, but the number of people earning the national minimum wage tripled,” Varela added.

Fuel-tanker drivers are among workers fighting to have their salaries raised, from €650 per month to €1,000 by 2025. They recently held a strike that led the government to declare a state of crisis and to issue a decree ensuring they would deliver enough fuel during the peak of its tourism season. This followed the country’s worst labor unrest in years in April when 40 percent of petrol stations were left without fuel.

“A responsible government has to be ready for the worst,” Prime Minister Costa said at the end of an emergency meeting over the strike, which took place just two months before the general elections on October 6. The government’s move to issue a civil order divided the government’s parliamentary base, with Left Bloc leader Catarina Martins complaining that “issuing a civil requisition at the request of employers is a mistake and a restriction of the right to strike.”

Portugal has undoubtedly made headway since having to seek the bailout back in 2011, when it was forced to commit to a set of measures. Yet some of those measures are contributing to the rise in inequality. One of those was a new rental law that liberalized the housing market and led to a rapid escalation of house prices, which soared by 18 percent in 2017 alone. Now previous residents are being evicted in droves.

Lisbon’s Alfama neighborhood, where I live, and which is featured in Wim Wenders’ movie Lisbon Story is bustling with tuk-tuks, and the nearby new port terminal is bringing in a record number of tourists. It has gone from being a “slum by the sea,” or a “ghetto with a view” as it was described by the New York Times in 1988, to a tourism hot spot. My next door neighbor recently mentioned that there were just a handful of long-term residents still living on our street.

The geringonça is now taking steps to curb social inequality and discontent, with a new law aiming to treat housing as a citizen’s right amid complaints that tourism has become unsustainable. So not all is rosy in Portugal, despite Lisbon’s gleaming, newly renovated historical buildings and a city center, once abandoned, now bustling with life. And not everyone is benefiting from the country’s newfound success.  •

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Although it was largely absent from the European election campaign, the negotiations over the next so-called Multiannual Financial Framework (MFF)— the EU’s budget—will take up a prominent place on the European agenda in the coming months. The European Council and the European Parliament have just 18 months to reach an agreement on the next seven-year MFF, and this has to be done in parallel with the finalization of 45 regulations that provide the legal basis for the various EU spending programs.

Agreeing on the EU’s budget has always been difficult, but the current MFF negotiations are particularly tough. The post-2020 budget has to make up for the Brexit gap caused by the United Kingdom’s departure, a financial shortfall estimated at €84-98 billion over seven years. It can do this either by making unpopular cuts to cherished programs (agriculture, cohesion policies, etc.), getting larger contributions from the member states, or both.

On top of that, the EU is confronted with new spending needs in areas such as migration and border control, external security, and digital transformation, which require anything between €91 and €390 billion of additional resources between 2021-2027, according to the commission.

Member States Are Digging In

The outgoing commission led by Jean-Claude Juncker did a good job in trying to “square the circle.” The original MFF proposal, presented in May 2018, offered an intelligent political compromise to member states. Richer countries would agree to moderately increase their contributions to the EU budget to keep EU spending for the remaining 27 member states roughly at the same level (in real terms) after Brexit.

Poorer countries, in exchange, would consent to a certain degree of spending re-allocation, with significant increases in new spending priority areas (an 80 percent increase for security and defense, a 160 percent increase for migration and border control, a 60 percent increase in research, innovation, and digital), and moderate increases or reductions in cohesion and agriculture (+6 percent and -4 percent respectively).

Finally, new sources of revenue, such as a small levy on corporate profits and a share of the proceeds from the EU Emissions Trading System, would be introduced to make the numbers work and partially offset the impact of Brext on member states’ net contributions.

The commission’s balanced proposal, however, has failed to change the dynamics of MFF negotiations in the European Council. After roughly one year of discussions, various net-payer member states made clear their opposition to any increase in net contributions. Meanwhile, the countries that benefit most from agriculture and cohesion funds have built up coalitions to preserve the existing envelopes in these two areas, and a majority of member states continue to reject any reform of the system of EU own resources. There is thus a strong risk of ending with a European Council compromise on an EU budget close to 1 percent of EU GDP, with no increases in new spending areas and agriculture largely preserved from cuts.

One crucial factor is the new European Parliament’s reaction to the council proposal. An absolute majority of elected MEPs must approve the MFF. In a more fragmented parliament, obtaining this majority could be difficult, particularly if the council comes up with a not-so-ambitious proposal.

An Opportunity

This leads us to another, related factor. A particularity of the current MFF negotiations is that they coincide with a change in the EU executive. This is in fact the first time this has happened since the creation of EU multi-annual financial frameworks in 1988—and it offers an opportunity for the new EU commission to try to align EU spending with its political agenda.

The Juncker commission did not get this opportunity. It took office in November 2014, less than a year after the adoption of an EU multi-annual budget covering its entire executive term (2014-2020). As a result, it had very little capacity to influence EU spending choices and had to struggle to finance one of its main flagship priorities, the “Juncker investment plan.”

While the Von der Leyen Commission cannot remake the MFF proposal from scratch, it will have some leverage on MFF negotiations if it allies with the parliament. The commission and MEPs can also work to introduce some modifications to the 45 legal regulations that are the basis of the various EU spending programs. For some of these programs (for instance, the new EU research program Horizon Europe) there is already a partial agreement between the council and the parliament, but as long as the regulation has not been formally adopted, the new parliament is not legally bound on issues agreed by the previous parliament and can always re-open the agreement. In other cases (for instance, the Common Agriculture Policy) neither the parliament nor the council has taken a position, and thus it is easier for the parliament and the new commission to introduce changes to the original proposal.

The question is how much appetite Ursula von der Leyen’s commission will have to modify the MFF proposals tabled by its predecessor. Von der Leyen has taken various positions in her wide-ranging candidature speech to the European Parliament. Some of them have no budgetary implications—for instance, completing the Capital Market Union or relaunching the Dublin asylum rules reform. Others do not imply a major break with the budgetary proposals tabled by the previous commission, like the creation of a Budgetary Instrument for Convergence and Competitiveness for the eurozone.

Testing Times

In some areas, however, von der Leyen has called for budgetary changes that would require amendments to the existing MFF proposals. An example is the promise to triple the Erasmus+ budget, as requested by the parliament (going beyond the Juncker Commission’s proposal to almost double it), or to create a European Child Guarantee to combat child poverty.

Another area in which the new commission’s ambitions may require new or different funding is on climate. Achieving climate neutrality by 2050, a goal endorsed by the von der Leyen, will not be possible without significant additional investments in energy and transport, a major disinvestment in fossil-fuel energy and high-carbon infrastructure, and a serious commitment to support territories and individuals most affected by the transition.

No-one knows yet what will be included in the “sustainable Europe investment plan” announced by von der Leyen, but she has already committed to set up a “Just Transition Fund” to support people and regions most affected by the energy transition, an idea which is cherished by the parliament but not included in the Juncker Commission’s MFF proposal. It is also possible that the new commission backs the parliament’s demand to increase the percentage of EU budget funds dedicated to climate action from 20 to 30 percent (instead of the 25 percent proposed by the Juncker Commission). This would require, in turn, re-adjusting the specific climate engagements set for the different programs and funds.

MFF negotiations may well be the first “litmus test” for Commission President von der Leyen. If she is capable of partnering with the new parliament and delivering on her budgetary promises, she will demonstrate to her critics that she has the necessary skills to head the commission—of which only a small majority of MEPs were convinced back in July.

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© REUTERS/Radovan Stoklasa

The year 2019 marks a double-anniversary of two interconnected historic events: 30 years since the fall of the Iron Curtain, and 15 years of EU eastern enlargement.

In 1989, democratic revolutions from East Berlin to Bucharest toppled local communist regimes and buried the Cold War international order. For the societies in Central and Eastern Europe, the annus mirabilis, the miraculous year of 1989, generated many hopes and expectation; it also led to many disappointments and brought a lot of pain.

Fifteen years later came the accession to the EU. It gave the Central and Eastern European countries a special boost, including financial support in the form of Cohesion Fund inflows, as well as a political anchor. The economic development that followed is remarkable. It’s worth recalling that with the exception of the Czech Republic and Slovenia as well as the western parts of Poland, Hungary, and Slovakia, the region used to be long-term economic underachievers. Disadvantaged by frequent political disruptions, border changes, and social upheavals, they were stacked at Europe’s periphery. Poland’s per capita GDP, for instance, from the 17th century until recently was almost always below 50 percent of Western Europe’s average level. Now it’s only 25 percent below the EU average, and the gap keeps narrowing.

Former World Bank economist Marcin Piatkowski in his ground-breaking book Poland’s New Golden Age showed that after 1995, the country became the fastest growing economy in the world among larger countries at similar levels of development, beating even South Korea and Taiwan. Next to South-East Asia, there is hardly any other region that has benefited so much from globalization as the new EU members in Central and Eastern Europe, at least in statistical terms.

Of course, this development also greatly benefited Germany, and Europe as a whole. Incorporating new markets of more than 100 million people and their fast-growing open economies into international value chains helped Western European companies to expand, reduce costs, and stay competitive globally.

Can this continue?

Root Causes and Limits

Even if the pace of catching-up with Western Europe has slowed down since the financial crisis of 2008, some basic factors of the economic success will not change, such as geographic proximity. The combined trade volume of the four Visegrád countries (Poland, the Czech Republic, Slovakia, and Hungary) with Germany last year was €290 billion, far ahead of China (€199 billion) or the Netherlands (€189 billion). Poland alone is set to overtake the United Kingdom and Italy and will likely become one of Germany’s top trading partners this year or next. The volume of German-Hungarian trade is larger than German-Russian trade, and German trade with Slovakia, the smallest of the Visegrád countries (and a member of the eurozone) is twice as large as what Germany trades with G7 member Canada.

The German automobile industry, in particular, has turned the country’s eastern neighbors into a manufacturing hub. The knock-on effect was felt in December 2018 when a strike in an engine factory in Györ, Hungary (supported, by the way, by the German trade union IG Metall) forced Audi to shut down production at its headquarters in Ingolstadt, Bavaria, for several days. Interestingly, Audi’s Hungarian employees demanded a wage raise to put them on a par with workers at other Volkswagen/Audi facilities in Central Europe, not with what their German colleagues earn.

This illustrates several things: There is successful economic convergence, but the benefits may not be evenly distributed. Wage convergence in particular has not been as strong as that of GDP per capita levels, reflecting that much of the profits generated in CEE markets are taken out by foreign companies.

Yet political convergence, or that of democratic institutions, has been much slower. In some parts of the region, notably in Hungary, it has even gone into reverse. The EU institutions have proved ill-equipped for combatting such backsliding. Furthermore, they haven’t managed to limit creeping state capture or corruption. Political tensions between EU institutions or Western EU members and the newer eastern members will therefore remain high, but this is unlikely to harm their economic development.

At the same time, given the level of interconnectedness, isolationist policies in Central and Eastern Europe will not work anymore.  Hungary’s leader Viktor Orbán always knew this; his Polish counter-part Jarosław Kaczynski in recent years had to learn it the hard way. What is missing, however, is greater interest and a willingness to engage by the other side: with the exception of those two trouble-makers, Poland and Hungary, the rest of the countries are still largely taken for granted by Germany’s political class.

What Next?

Looking ahead, as the saying goes, the future is no longer what it used to be. There are six key determinants in particular that will likely shape Central and Eastern Europe’s future course.

First, there is the future of globalization. After 1989, the region greatly benefited from the liberal world order and the expansion of free trade. Current winds are blowing in the opposite direction. Conflicts over trade and technology between the United States and China fuel a broader process of de-globalization. Europe is caught in the middle, defending multilateralism and depending on both giants. The small, export-oriented economies of Central and Eastern Europe with their heavy reliance on manufacturing are especially vulnerable to a recession in Germany or a global slowdown. So far, the countries have not been tested by a prolonged downturn.

Second, there is the question of whether the countries are capable of upgrading their business model, as the old one is coming under huge pressure. Instead of high unemployment and cheap labor in abundance, there are now acute labor shortages. At the same time, as research by the Vienna Institute for International Economy (WIIW) shows, a large part of production ranges at the bottom of the value and supply chain, and this is limiting the region’s potential to further catch up with Western Europe. Morphing into a more automated and digital economy will likely add to the problem, unless it is offset by more diverse growth and higher levels of public investment in research and education.

Third, and related, the impact of technological transformation on key industrial sectors, including the switch to electric cars and artificial intelligence, will be huge. There is also the transition to cleaner, low carbon energy. German industry and energy companies have already started this process, and it is not clear what consequences it will have for their suppliers and partners in Central and Eastern Europe.

Fourth, the countries have to manage demographic decline. EU accession has opened the doors to a dramatic emigration from the region. Many countries have already lost a large share of their population of productive age to Western Europe. Many Central and Eastern European societies are aging rapidly, while the workforce is shrinking, as young and skilled people continue to leave. Last year, Germany’s population reached a record high of more than 83 million people, with net immigration of some 400,000; more than half of the new arrivals came from Central and Eastern Europe (Romania, Croatia, Bulgaria, Hungary, and Poland topping the list of countries of origin). As a consequence, the countries themselves will need to become more open for migration. In spite of the current government’s anti-migration rhetoric, Poland has quietly become a global leader in accepting seasonal workers (some two million from Ukraine, and also an increasing number of Asians). However, there is little policy planning for those who decide to stay after their permit expires, while Poland’s labor market is projected to be short of an additional 1.5 million people by 2030.

A Call for Good Governance

Fifth, the countries need to keep their societies inclusive. A large part of Central and Eastern Europeans are living in the countryside. Fewer than 60 percent of Poles, Croats, Romanians, Slovaks and Slovenes are citydwellers (the EU average is around 75 percent), which gives political strength to rural voters. In the post-1989 period, large cities were usually the breeding grounds of economic development, while the countryside felt more disconnected and abandoned. The urban-rural divide deepened after the financial crisis of 2008, as rural areas became strongholds of populist leaders. Government policies and public investment into infrastructure and social policy programs will determine to what extent these aging and changing societies can be kept open and inclusive. This applies also to ethnic minorities and the Roma population, which is projected to rise to 20 percent of the populations of Hungary, Slovakia, and Bulgaria by 2050.

The sixth and crucial factor is quality of governance and the future behavior of political elites. As the challenges become more complex and multifaceted, policy responses formulated in capitals from Prague to Sofia will require more engagement on all levels of the state administration, economy, and society. The alternative model is the top-down approach pushed by authoritarian leaders in Budapest and Warsaw. However, quality, transparency, and inclusiveness of policy-making are likely to improve with younger generations. Over the next decade, we are likely to witness a more diverse region emerging.

Time to Reengage

A new generation is now coming to power in Central and Eastern Europe. Many of them are too young to remember 1989, but they will nevertheless reconnect with the ideas and political legacy of its proponents. They lack experience and EU networks, but are largely guided by a strong sense of EU togetherness and co-ownership.

This is also a chance for Berlin to reengage with this neighboring region. What is still lacking 30 years after is a stronger political partnership, based on permanent dialogue platforms between Berlin and Central and Eastern European capitals (preferably outside of closed diplomatic channels) that would structurally connect political and economic aspects of their bilateral relationship. It would be a great achievement if the upcoming celebrations of these anniversaries would generate a new purpose of working together for a more cohesive EU.

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© REUTERS/Dylan Martinez

When he became prime minister in late July, Boris Johnson reassured anxious Britons that leaving the European Union without an exit agreement was “a million-to-one shot.” An divorce deal, which would be the preface to negotiations on the future relationship between the United Kingdom and the EU, could be reached easily. Yet at the G7 summit in Biarritz in late August, Johnson declared that although the prospects for reaching such a deal were improving, it remained “touch and go” as to whether or not such an agreement could be reached.

What had been a million-to-one shot is now the short-priced favorite. Like life, politics comes at you fast.

If Britain crashes out of the EU without an agreement, Johnson is clear where the blame for this must lie: with the EU itself. Britain, he says, is willing to start afresh, and it is only the EU’s intransigence that stands in the way of a successful, mutually satisfactory deal.

This plainly is a message aimed at Johnson’s domestic audience rather than his counterparts in Berlin, Paris, and elsewhere. The UK, he claims, can easily cope with a no-deal Brexit. This despite the fact that the British government’s own forecasts (“Operation Yellowhammer”) anticipate significant difficulties in the short to medium term if Britain simply walks away from the Withdrawal Agreement negotiated by Johnson’s predecessor Theresa May.

Wishful Thinking

These difficulties include, but are not limited to, large-scale disruption to food supplies, a possible shortage of vital medicines, and a reduction of trade flows at major ports such as Dover that may, at least in the short-term, reduce traffic flows by more than 50 percent. If the government’s own private appraisal is correct, Britain is not ready for a no-deal Brexit even if the government, in public, declares it is.

After Johnson visited Berlin last month, pro-Brexit parts of the British press leapt upon German Chancellor Angela Merkel’s suggestion the UK had 30 days to come up with alternatives to the current agreement as though this proved Johnson’s strategy of defiance was already paying dividends.

This seems a hopeful analysis based more on wishful thinking than anything of true substance. French President Emmanuel Macron made this very clear. Yes, the agreement could be reopened and yes, the UK could propose workable alternatives to the problem of the Irish backstop that has become the totemic issue of contention but, be in no doubt about this, any new agreement would look very much like the agreement that has three times been rejected by the House of Commons. If there is wiggle room here, it is only very limited wiggle room.

Johnson may demand changes but the most likely one remains shifting the de facto UK-EU border from the frontier with the Republic of Ireland to the Irish sea, leaving Northern Ireland in close alignment with the EU while permitting the rest of the UK to go its own way. A Northern Ireland-only backstop, however, was previously rejected by the British government as an intolerable infringement upon UK sovereignty.

“Do or Die”

One thing is clear, however, and that is that one way or another, things can’t carry on like this indefinitely. As matters stand, Britain will leave the EU on October 31. It is, as Johnson says, a “do or die” matter for his government.

However, the prospect of a no-deal Brexit, complete with all its risks and unknown consequences, horrifies many British parliamentarians. Since Johnson’s government enjoys the slenderest of majorities, its long-term survival is very much in doubt. For all his bluster, the new prime minister leads a very weak government.

Johnson’s most senior aide, Dominic Cummings, who masterminded the successful Leave campaign in 2016, says Brexit will be achieved by any means necessary. If that requires parliamentary maneuvers that would, in more ordinary times, be considered a sensational and provocative misuse of power, then so be it. To that end, the possibility of forcing a so-called “people vs. parliament” election has been mooted.

That would allow Johnson to present himself as a kind of people’s champion whose determination to deliver Brexit—as mandated by the people themselves three long years ago—was being thwarted by an alliance of anti-democratic politicians in Westminster, hellbent on frustrating the people’s will. In this scenario, Johnson could, indeed would, present himself as a populist hero taking the fight to an out-of-touch and unaccountable elite who dare to think they know better than the people themselves.

Fear of Farage

If Johnson, a scion of Eton and Oxford, seems an unlikely populist, he remains all too aware that he must defend his right flank first before turning his attention to the center-ground. The threat of the Brexit Party founded by the veteran euroskeptic, Nigel Farage, cannot be ignored. At the European Parliament elections earlier this summer Johnson’s Conservative Party was beaten into fourth place. Estimates suggest more Tory members voted for the Brexit Party than for their own party.

Farage argues that Johnson cannot be trusted to deliver Brexit. He fears a sell-out. Even cast-iron commitments to leave on October 31 are, to switch metallurgical metaphors, fool’s gold. Fear of Farage, more than anything else, helped persuade Tory MPs and members to put aside their reservations about Johnson and elect him leader. Of the available candidates, he was both best-placed to ensure Brexit happened and to then win an election.

Forcing an election, however, is less easy than it used to be. British prime ministers can no longer call a poll whenever they choose. The Fixed-Term Parliaments Act, passed in 2011, means an election cannot be called without the agreement of two thirds of MPs. The only exception to this is if a government loses a vote of confidence. In those circumstances, there are 14 days in which to cobble together a new government under a prime minister who can command the support of a majority of MPs. Only then, if no such government can be found, would a new election be called.

No Easy Way Out

Some MPs cling to the idea that a so-called “Government of National Unity” could be formed in the event of the House of Commons toppling Johnson. This seems optimistic, to put it mildly, not least since Jeremy Corbyn, the leader of the opposition Labour Party, has little to no interest in such a maneuver.

A no confidence vote this month, then, is a high-risk strategy. Even if the votes can be found to sink Johnson, it is not clear an alternative government could be found. That would mean an election that would probably not be held until early November during which time Britain would gently slide out of the EU, deal or no deal.

That latter scenario looks increasingly likely, not least since any agreed exit in the present climate would look less like compromise than capitulation. Britain finds itself in a corner of its own construction and from which there are no attractive exits.

If this is the beginning of the end of this phase of the Brexit process, it is far from the end of this drama, as shown by the government’s progrurement of parliament —effectively cutting short MPs’ time to block a no deal. An election beckons.

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