The recent evolutions in Europe are marked by the political crisis generated by the development in Ukraine, and by the economic crisis (itself turned into a political one) that affects most visibly Greece, but also other European states. Analysts see them as indicators of a geopolitical shift generated by what they call “the return of history”. This process is putting face to face a Russia that reverted to its cold-war aggressiveness, and a Europe – that many see as several “Europes” – which struggles, so far with little success, to keep united around Germany’s rather reluctant leadership.
Recent developments
a) The dangers of a collapse in the global order, of its institutions and, most importantly, of the principles on which it has been built since the Second World War was the underlying theme of the 51st Munich Security Conference (MSC, 6-8 February 2015) – an increasingly important forum for debate and exchange of views among the world’s security community.
The agenda was dedicated to the key challenges that lay ahead in 2015, dominated by the crisis in Ukraine and the deteriorating relations between Russia and the West, the rise of violent extremism and the fight against terrorism, the proliferation of nuclear weapons, the refugee crisis around the world, the situation in the Middle East, as well as climate and energy security challenges.
While the conference underlined international security cooperation, divergences over the Ukraine crisis remained, not only between the West and Russia, but also inside the Western camp.
The meeting saw Europe and the United States at odds over whether to offer arms to the Ukrainian government to support its battle against independence-seeking insurgents in the eastern part of the country.
b) In the wake of the European Council summit (19-20 March), the necessity of a stronger European unity face to the Russian threat was stressed by Ukrainian Prime Minister Arseny Yatseniuk, who met the President of the European Council, Donald Tusk, prior to the Council’s summit: “if Putin splits the unity … among the leaders of the EU member countries, this will be the biggest success story of President Putin and this will be a disaster for the free world”.
In fact, although the latest European Council meetings ended with common decisions on the agenda points – notably the Energy Union project, but also on other topics, such as the Eastern Partnership, Russia/Ukraine and Libya – the introduction of the Greek problem and the discussions on Ukraine revealed significant differences.
The new Greek prime minister Alexis Tsipras was granted a special meeting despite the reluctance of other EU leaders to talk about Greece in a summit scheduled to deal with other issues, mainly Ukraine and the Libya crisis. However, he met with German chancellor Angela Merkel as well as Mario Draghi, the president of the European Central Bank; the French president, François Hollande; Donald Tusk of Poland, who chairs the summits; and Jeroen Dijsselbloem, the Dutch finance minister who heads the Eurogroup of finance ministers.
Following three hours of talks that ended after 2am, the German chancellor, Angela Merkel, made it plain that there would be no quick disbursement of emergency aid to Greece unless Tsipras delivered on unfulfilled pledges to supply a full menu of proposed structural reforms to the Greek economy. A rapid breakthrough was not expected, and diplomats and officials have said that if there is to be any breakthrough it is more likely to come after Tsipras’ visit to Berlin.
In the case of the Ukraine crisis, the EU leaders have agreed to keep sanctions on Russia in place until the end of this year at the earliest, the sanctions being now linked to “complete implementation” of a ceasefire deal. A formal, legal decision on whether to extend sanctions on Russia’s financial, defense and energy sectors that expire in July will only be taken at the next EU summit in June.
Pre-summit consultations, however, showed that the European countries have different options on the subject. According to EU sources, one camp wants to send a strong signal to Russia already in March about the need to implement Minsk 2, and the second camp is reluctant to extend the sanctions now, for fear that it might provoke further escalation on the ground.
German chancellor Angela Merkel has aligned herself with the “hawkish” group, which also includes the Baltic states, most Nordic countries, and Poland.
The French position is, for the moment, less clear. But the anti-sanctions camp includes Austria, Cyprus, Greece, Italy, Spain, and Slovakia.
A handful of Europes
The recent events confirmed the reality of the so-called “multi-speed Europe” (also called, in time, “two-speed Europe”, “variable geometry Europe” or “Core Europe”) and the fact that the different parts of the European Union cannot integrate in the same way, but at different levels and pace depending on the political situation in each individual country.
Like other forms of differentiated integration, multi-speed Europe aims to provide a solution to the dilemma between unity and diversity, widening and deepening of the European Union.
The concept entered political discourse after the end of the Cold War, when an eastward enlargement of the European Union began to materialize and the question arose how the “widening” could be made compatible with “deepening” i.e., how the imminent enlargement process could be prevented from diluting the idea of an “ever closer union among the peoples of Europe”, as mentioned in the Treaty establishing the European Economic Community of 1957.
In 1994, still at a time of the EU12, the German Christian Democrats Wolfgang Schäuble and Karl Lamers called for a Kerneuropa (Core Europe) that would have a “centripetal effect” of attraction for the rest of Europe. A precursor to that concept had been a proposal by two advisors to German Chancellor Helmut Kohl, Michael Mertes and Norbert J. Prill, published in July 1989, calling for a concentric circles Europe, built around a federal core consisting of the EU6 and like-minded EU member states. In 1994 they partly revoked their original idea, arguing that the post-Cold War EU would rather look like a “Europe of Olympic rings” than a “Europe of concentric circles”.
The multi-speed Europe concept has been debated for years in European political circles, as a way to solve some institutional issues. The concept is that the more members there are in the Union, the more difficult it becomes to reach consensus on various topics, and the less likely it is that all would advance at the same pace in various fields. Intermediate forms could be limited to some areas of close cooperation. It is also possible now for a minimum of nine EU member states to use enhanced co-operation, but this new framework has been used only once.
The idea of a multi-speed Europe may be seen in several EU projects, such as the Euro, the Schengen area and the European Defense initiative.
However, the economic crisis and the political-strategic developments in Europe are pushing to the limits the initial concept of the “multi-speed Europe”. In 2014, former French leader Nicolas Sarkozy argued for a profound overhaul of EU institutions and called the idea of all eurozone nations being of equal weight a “myth”. He proposed the creation of a large Franco-German economic zone at the heart of the euro area to reflect what he called a “two-speed Europe.”
Sarkozy also called for an end to Europe’s current visa-free Schengen area, in which there are no passport or border controls in a zone comprising 26 nations.
He warned European migration policy had failed, adding that without a quick fix in coming years, France’s social system could break up.
Economic differences turning political: North vs. South
The economic crisis has established a clear division between Europe’s south and north, which fared much better during the crisis. In consequence, debate points increasingly in the direction of more centralization and more top-down federalism, putting Germany even more firmly in the driver’s seat of institutional change in the Union. The European Commission has agreed to give France and Portugal more time to put their finances in order, but the fact that there is any regional growth at all is already seen as a result of Chancellor Merkel’s insistence on austerity policies, which is likely to put Berlin on an even firmer path to lead Europe.
The surge of German power and influence has put to rest the traditional concepts of Europe’s west and east, and replaced them with a stronger north and south orientation. The eurozone crisis and the breakdown of the south, in particular the debt gripping the Greek, Portuguese, Spanish and Italian economies, contrasted starkly with growth in the north, especially the strong performance of Germany and Poland in Central Europe, Norway and Sweden in Scandinavia, and Latvia and Estonia in the Baltics. The growing role of Poland’s connection with Germany and Sweden has strengthened its position in the Visegrad Four (Poland, Hungary, Slovakia and the Czech Republic) and the Weimar Triangle[1].
This process has been accelerated by changes within the “old EU”, especially changes in the Franco-German link, as Germany’s influence continues to grow. It is very unlikely that the Franco-German relationship, which had defined the European project before German reunification, will return to anything like its earlier shape. It has been altered mainly because Germany’s ad hoc approach to the eurozone crisis has prevailed as policy even as the French economy appears rather too southern. Some EU members, like Spain and Belgium, are still instinctively attached to the old pattern of intra-EU relations, but there is a growing realization in Europe that this will not be possible much longer.
The distinct slow-down of the economy, politically aggravated by austerity policies, is seen as risking to generate an intensification of the debt crisis. In the foreseeable future, Greece, Ireland and Portugal might not be able to return to the capital market. Italy and Spain may even loose access to the market and would have to be supported by massive interventions by the European Central Bank (ECB).
Despite the repeatedly declared resistance of the German government to intensified and unlimited interventions by the central bank, more and more observers see a strengthening of Germany’s leading role as the only way out. A collapse of the Euro and the reintroduction of national currencies is said to be a threat to Europe. The prevailing diagnosis of the crisis is: Europe’s states have too much debt, of which too much is in the books of banks which are in principle insolvent; moreover, there are enormous trade imbalances between peripheral and central Euro-countries. All these problems have to be solved; otherwise the Eurozone will implode in a deflationary spiral. However, austerity is no solution, since it is impossible for one country to correct the deficits of the government and of the private sector while a trade deficit exists.
“Grexit” and “Brexit”, more than frightful scenarios
The Greece crisis has moved beyond an economic poker game with billions at stake, to the political question of who holds power in Brussels. This is reflected by the fact that the negotiations with Greece are led by the Commission president and the Euro Group leader, but in the end, German Chancellor Angela Merkel will have a decisive word to say, since Germany is Greece’s largest creditor.
So far, both the European Commission president Jean-Claude Juncker and Merkel would like to prevent Greece from leaving the euro zone, since a “Grexit” would also mean that Germany would have to write down the billions it has loaned Athens for good. However, Merkel sees Juncker’s promises to Greece that a “Grexit” is out of question as undermining the efforts to force the Greek government to see reason. Merkel’s team also suspects that Juncker also may be trying to protect his own reputation: Should Greece ultimately be forced out of the euro zone, it would be clear to all that Merkel, rather than Juncker, is to blame.
Both Merkel and Juncker know that Greece’s fate is in their hands. At first glance, everything seems to currently depend on the European Central Bank and its head Mario Draghi. But both Merkel and Juncker are certain that Draghi will shy away from pushing Greece out of the common currency area. Several months ago, Draghi declared that such a decision had to be made by politicians and not by a central banker.
For many euro-zone governments, the conflict with Greece is also a question of survival. If Tsipras is able to get what he wants, Spain’s conservative government is concerned it might lose to the left-wing protest party Podemos in elections at the end of this year. The Finnish governing coalition, meanwhile, faces elections in April and must defend itself against the anti-EU party True Finns. The right-wing populists believe that the euro-zone is already being too understanding of Greece. On the other hand, Merkel has on her side the member states who guarantee the money made available to Greece and who do not want to see the Commission deciding over the fate of their taxpayers’ money.
Another possibility that may further complicate Europe’s evolution is the so-called “Brexit”, a possible splitting of Great Britain from the Union.
According to Romano Prodi, the former Italian premier and ex-president of the European Commission, Great Britain’s self-isolation in the European Union’s structures has upset the European balance of power in profound ways, leading ineluctably to German hegemony and a unipolar system centered on Berlin. It is made worse by the diminishing influence of France under François Hollande.
Smaller states no longer form clusters of alliances around a three-legged diplomatic edifice made up of Germany, France, and Britain. They are instead trying to adapt to a new European order where only one state now counts. The same applies to the EU’s permanent civil service and the institutional machinery in Brussels and Luxembourg.
The countries that previously maintained the equilibrium between Germany, France, and Britain (from Poland, to the Baltic States, passing through Sweden and Portugal) are regrouping under the German umbrella. The new presidents of the Commission and the Council are men who rotate around Germany’s orbit, and there is a very strong German presence among the Brussels officials.
A British withdrawal from the EU will accelerate an unstable chain reaction and ultimately cause the whole project to unravel.
Others warn of a “two-speed Europe”, in which states like the 17 Euro-members work more closely together and all other partners sink into the role of outsiders.
A new Hanseatic League?
In the northern part of the continent, the similarity of interests and strategic positions of some countries led to more and more frequent evocations of the Hanseatic League that sometimes is seen as a precursor of the European Union.
The Hanseatic League was a commercial and defensive confederation of merchant guilds and their cities that dominated trade along the coast of Northern Europe. It stretched from the Baltic to the North Sea and inland from the 13th to the 17th century. It was created to protect economic interests and diplomatic privileges in the cities and countries and along the trade routes the merchants visited.
The League never became a closely managed formal organization. Assemblies of the Hanseatic towns met irregularly in Lübeck for a Hansetag (Hanseatic Diet), from 1356 onwards, but many towns did not send representatives and decisions were not binding on individual cities. Over time, the network of alliances grew to include a flexible roster of 70 to 170 cities on the coasts of what is today Latvia, Estonia, Poland, Sweden and the Netherlands, but also Russia (Novgorod). The discovery of the New World and the resulting shift in trade routes, that made having an Atlantic coast a requirement for success, brought the end of the league, with its final meeting taking place in 1669. Only three cities (Lübeck, Hamburg and Bremen) remained as members until the league’s final demise in 1862.
Several cities still maintain the link to the Hanseatic League. Dutch cities including Groningen, Deventer, Kampen and Zutphen, and a number of German cities including Bremen, Demmin, Greifswald, Hamburg, Lübeck, Lüneburg, Rostock, Stade, Stralsund and Wismar still call themselves Hanse cities. Lübeck, Hamburg, and Bremen continue to style themselves officially as “Free Hanseatic Cities.” In 1980, former Hanseatic League members established a “new Hanse” in Zwolle, the “City League – The HANSE”. This league is open to all former Hanseatic League members and cities that once hosted a Hanseatic kontor. The latter include twelve Russian cities, most notably Novgorod. The “new Hanse” fosters and develops business links, tourism and cultural exchange. The headquarters of the New Hansa is in Lübeck and each year one of the member cities of the New Hansa hosts the Hanseatic Days of New Time international festival.
a) After the EU enlargement to the East in May 2004, experts wrote about the resurrection of the Baltic Hansa. The Hanseatic model was evoked in the Baltic Republics, where common interests between Estonia, Northwestern Russia and the entire Baltic and North Sea area were identified, as well as possible joint projects, such as a natural gas pipeline to convey Norwegian gas through the Kola Peninsula and the Baltic states up to Hamburg, a motorway from St. Petersburg through Estonia, Latvia and Lithuania to Berlin and further (the „Via Baltica”), as well as free trade zones and development areas for new initiatives. Hansa-like cooperation is considered a natural outlook for the future for the Baltic and North Sea states.
b) In a speech at the beginning of 2013, the British prime-minister David Cameron sketched a vision of a leaner, more competitive Europe in the interests of “the entrepreneur in the Netherlands, the worker in Germany, the family in Britain”, a phrase that generated talks about a new Hanseatic League. Since 2011, David Cameron also has convened an annual “Northern Future Forum” of Nordic and Baltic states. In the same period, the British government’s review of the balance of powers between Brussels and London attracted interest abroad. The Dutch held a similar review, which concluded that Europe should integrate less and liberalize more.
The Hanseatic spirit is common to Great Britain, Germany, the Netherlands, the Nordic and the Baltic states that share a taste for balanced books and free trade. Most underwent economic reforms before the euro-zone crisis and many have prominent Eurosceptic parties such as the True Finns, Alternative for Germany and the UK Independence Party, which channel voters’ anger at being obliged to help Europe’s unreformed south.
For the British prime minister and his allies, a division of Europe into pro-British, free-trading northerners and statist southern farmers is more convenient than one of euro ins and outs.
However, although the Hanseatic states share some trading traditions, their priorities differ. Unlike Britain, Germany, the Netherlands, Estonia, Latvia and Finland use the euro and Poland hopes to follow. And although the states around the North and Baltic seas share fiscally conservative instincts, countries like Poland and Lithuania receive too many transfers to want to cut the EU’s budget. On foreign policy, Britain is much closer to nuclear-armed France than to its non-interventionist German and Nordic partners. On the problem of the freedom of movement, too, Britain’s allies are divided.
Yet a new alliance has its uses. Recent initiatives originated by Britain and the Nordics succeeded in a campaign to give non-euro-zone states a say in the running of the EU banking union. As a result, votes in the European Banking Authority require a double-majority of euro-zone and non-euro-zone states. Similarly, during the negotiations over the EU budget in February 2013, Britain and Germany forged a cost-trimming coalition, with the Swedes and the Dutch. With northern allies at its side, Britain has also championed EU reforms to curb overfishing, leant on the European Commission to cool a protectionist dispute over Chinese solar panels and pushed for a transatlantic free-trade deal.
New economic horizons
Another development that marks a trend of Europe’s taking some distance from the institutions that have shaped the post-WW2 period is the decision of some of Europe’s biggest economies to become founding members of a new Chinese-led Asian investment bank, the Asian Infrastructure Investment Bank (AIIB), that the United States views as a rival to the World Bank and other institutions set up at the height of American power after World War II[2].
The announcement by Germany, France and Italy that they would follow Britain and join the Chinese-led venture was perceived by Washington as a blow from some of its closest allies. American officials criticized China for not approaching the Group of 7 but picking off individual members, setting a deadline of the end of March for them to decide whether to join the AIIB.
Initiated by China in October 2014 and headquartered in Beijing, AIIB it is already being considered a potential rival to established financial institutions such as the World Bank and the Asian Development Bank (ADB). China is set to provide up to 50 percent of its $50 billion initial capital, is designed to finance infrastructure projects in areas such as energy, transportation, and communication in Asia.
Europe’s defiance of Washington over the bank does not signal a major rupture, but it adds friction at a time when the project of trans-Atlantic solidarity, a proposed free trade deal, faces hostility from some European politicians and activists opposed to the American-style capitalism.
Beijing has also put itself at the center of a four-year-old grouping of 16 Eastern and Central European countries (the so-called 16+1 summit, which was yearly held in Budapest, Warsaw, Bucharest and Belgrade), promising investment to the region, in a push for influence that has raised eyebrows at the headquarters of the European Union. Some see the venture as an attempt to divide the European Union and circumvent the bloc’s rules and standards. Eleven of the nations courted by China in Eastern and Central Europe belong to the union.
Germany: a (not so) reluctant European hegemon
The West’s need to overcome the centrifugal tendencies that threaten the European Union from within and the growing economic importance of Germany led to this country becoming Europe’s indispensable power. Berlin has quietly moved into a leadership position in the EU, and this became obvious during the euro crisis. The Ukraine crisis clarified that German leadership is not limited to internal EU affairs, where Germany has always been a powerful player. Berlin also speaks and acts increasingly on behalf of the EU in foreign affairs, at least when it comes to relations with the EU’s Eastern neighbors. Global powers such as the United States and China acknowledge these developments by viewing Germany as their most important European interlocutor.
Historically, the post-World War II reintegration of Germany into Europe rested on the U.S. security guarantee in the face of the Soviet threat, the Franco-German reconciliation, and Germany’s view of itself as a derivative foreign policy actor. The rule was that Germany could act only within the European project, and the European project could prosper only within a Transatlantic context. Germany thus became the quintessential European multilateralist and one of America’s closest NATO allies.
Since 2008, Germany’s view of itself as a policy actor has changed as the crisis reordered its relations inside the European Union. While shouldering the brunt of the bailout assistance to overleveraged European governments and banks, Berlin became an increasingly overt norm-setter. So while, historically, German policy had to be “European” first, by 2010 the policies of individual European states had to be “German” first, at least on key fiscal policy issues.
The road to leadership
The development of Germany after World War Two needed a stable market, and in 1951, the European Coal and Steel Community (the European Union’s predecessor) was formed. For France, Germany’s primary partner in this venture, the attraction was obvious. By joining the European project, France, which had been invaded by Germany three times in 70 years, could shield itself from German attacks and position itself to take a leading role in Europe’s development. Germany, meanwhile, obtained a tariff-free market for its products, and the close alliance with France allowed it an influential, yet less menacing voice. As a result, German exports today make up 50 percent of Germany’s gross domestic product, one of the highest such percentages in the world. Just as the Hanseatic League did, Germany found a target market in the rest of Europe and proceeded to outcompete it, becoming more and more economically powerful.
Having been a frontier state during the Cold War, in the last twenty-five years Germany became the economic and infrastructural center of Europe. What was once Germany’s handicap – its geopolitical position – has turned into an advantage. From the German unification in 1871 until World War II, fear of encirclement by a hostile alliance was a main driver for German foreign policy, with the well-known fatal consequences. But as European states have moved, in the second half of the twentieth century, from a system of competition to one of cooperation and coordination, Germany now can benefit from its geographical location, as it connects and reflects the continent’s diversity.
The geopolitical environment shaped by the U.S. and by the European integration allowed Germany to take a leadership role in the European Union. Today, Germany is widely seen as the strongest in Europe. In an environment defined by economic interaction, German economic strength easily translates into power.
The current weakness of France, Germany’s traditional partner in Europe, makes Germany look even stronger. And the division of the eurozone into creditors and debtors as well strengthens Berlin’s hand in intra-European affairs.
The EU’s Eastern enlargement is another factor that has contributed to German power. The “new Europe” now largely looks to Germany as a regional leader. Poland, the Czech Republic, and others have entered into the value chain of German business, and increasingly, they also expect leadership from Berlin.
A contradictory position
The confluence of a financial crisis in Europe with the threat of war in Ukraine transformed Germany’s world. The European financial crisis transformed itself into a political one. The Ukrainian crisis placed Germany in the uncomfortable position of playing a leading role in keeping a political problem from turning into a military one.
Germany faces a complex and contradictory situation. It is trying to hold the European Union together, but it wants to make certain that Germany will not bear the burden of maintaining that unity. In Ukraine, Germany does not want to back away from support for the government in Ukraine, but the Germans do not want to partake in any military reaction to Russia.
Although Germany does not want to look assertive or threatening, it took positions that are both. Germany is the most rigid on the Greek and on the general question of Southern Europe and its difficult economic situation. In Ukraine, Berlin supports Kiev and thus opposes the Russians but does not want to draw any obvious conclusions. In Europe, Germany is playing a leading but aggressive role. In Ukraine, it is playing a leading but conciliatory role. In both cases, Germany has been forced – more by circumstance than by policy – to play leading roles, which is not comfortable for Germany and neither for the rest of Europe.
Developing a grand strategy
The recent developments forced Germany, under Chancellor Angela Merkel, to redefine German power as a result of circumstances, not because of a comprehensively pre-prepared plan. In recent times, in quick succession, war broke out in Ukraine, populist and extremist parties made strong gains in European elections, and the Greek conundrum returned to the eurozone.
In the Greek issue, Germany saw a larger strategic question beyond the immediate financial issue. If Greece falls out of the eurozone, it would be a signal of disintegration at a time when geopolitical threats are graver than ever. Berlin paid close attention to the rapprochement of the Tsipras government to Russia, possibly in the hope of leveraging Russian financial support against Brussels’ offer. When the German chancellor recently warned that Russia might start eyeing up the Balkans next, she may not just have had Serbia, but also Greece, in mind.
A strategic approach is also visible when it comes to confronting populist political forces in Europe. Merkel has taken a clear stand against Pegida, the anti-Muslim movement in Germany now trying to spread elsewhere in Europe. She is also worried about the growth of France’s Front National, whose leader Marine Le Pen, wants to pull France out of the euro if she comes to power. The European Commission recently granted France a two-year extension to bring its budget within EU rules, and French officials privately admit that German concerns about the ascent of the far-right in France played no small part in the Brussels decision.
In responding to the Ukraine crisis, Germany assumed a geopolitical leadership of Europe for the first time since 1945. Germany took charge of Western diplomacy, a task that, according to many analysts, U.S. President Obama essentially outsourced to Berlin. Angela Merkel was the one Western leader who still had Russian President Vladimir Putin’s ear, partly because she speaks Russian (which she learned in her East German school days) and partly because Germany has been Russia’s best Western friend ever since Moscow peacefully withdrew its forces from eastern Germany a quarter of a century ago.
As the Russian takeover of Crimea progressed, Merkel remained in contact with Putin, counseling him to pull back from Ukraine while the West could still help him save face. Her warning was firm from the outset: Russia would come under severe financial sanctions if Putin refused to comply. Yes, the sanctions would hurt Europe’s economy, but they would damage Russia’s economy far more – and he should not expect Germany’s pro-Russian businesses to veto the measures.
Armed with Germany’s example of tolerating economic pain to uphold Europe’s taboo on the forcible change of borders, Merkel convinced her 27 partner states in the EU to do the same. France reluctantly suspended the planned delivery of two helicopter carriers to Russia. The United Kingdom subordinated the commercial interests of London banks and realtors to the common cause. Even Hungary, despite its recent vaunted turn to Russia, chose not to be the odd man out. By rallying the EU countries to the common cause, Merkel got the union to unanimously agree to impose sanctions on Putin’s wealthy inner circle.
The dangers of being an economic hegemon
On economic terms, trouble emerged with the creation of the euro in 2000. A common currency removed the only real defense the other European countries had against the German trade machine: the ability to devalue. When periphery countries were forced to reconcile their current account deficits with the post-2008 economic realities, it led to debt explosions that contributed to the 2012 euro crisis.
Germany’s position in the new Europe began to redefine itself following the 2008 financial crisis, with two emerging groups, defined in various terms: the center and the periphery, the north and the south, the producers and the consumers. Basically, one side, led by Germany, provided finance, and the other, fronted by Spain, Portugal, Ireland and Greece, promised change.
In 2012, Germany financed the EU rescues of several member states, but the conditions it attached have since created more problems. The bailed-out nations had to enact painful changes to increase their competitiveness, at a lifestyle cost to their citizens. The rest of the union had to commit to financial reform by signing the European Fiscal Compact. With these conditions, Berlin hoped to bring the rest of Europe through a process Germany had already undergone. All of Europe would be reformed and brought into a modern day Hanseatic League, ready to export their products competitively, just as Germany did. It is no coincidence that around this time, talks began on a new trade agreement with the United States known as the Transatlantic Trade and Investment Partnership. A larger “league” would need a substantial external market with which to trade.
Two years after the 2012 crisis, the bailout countries have suffered greatly from the austerity measures, but there are signs that their competitiveness is increasing and beginning to turn them around. France and Italy, by contrast, have not reformed, and their economies have stagnated as a result. Furthermore, the European Commission’s failed attempts to change French and Italian behavior have exposed the weaknesses in Europe’s institutions.
France’s shift from central power to problem case presents a huge issue for Europe. Berlin finds itself having to make difficult decisions alone, and the latent fear of a powerful hegemon across the Continent constrains Germany’s ability to enforce its decisions. Germany is battling millennia of cultural history, and it does not have the power to change Europe on its own.
According to Greek finance minister Yanis Varoufakis, “Germany’s attempt to preserve the rules that were the basis of the formation of the Eurozone is bound to fail… Austerity, coupled with some essential ‘bending’ of the rules by the European Central Bank, may have succeeded in keeping the lid on the boiling cauldron… In the end, either Germany will let the lid be blown off, and reluctantly create a Neue Deutsch Mark, from which France and the PIIGS shall be excluded (dealing a death blow to the European Union itself), or it will have to accept that the Maastricht rules are dead-in-the-water and in urgent need of a drastic revamp. But to design and implement these new rules, Germany needs to become hegemonic. And to become truly hegemonic, as the United States did after the end of WW2, German elites must grasp a simple, twofold, reality:
First, being hegemonic is diametrically opposed to being authoritarian. Secondly, at a time when a majority of Europeans are suffering from depression (economic and psychological) due to the insistence on old rules that have been overtaken by reality, the German commitment on the old rules is a de facto authoritarianism that not only damages Germany’s relationship with the rest of Europe but, worse still, undermines the viability of the Eurozone which the German elites seem keen to preserve.”
“A properly hegemonic Germany must forge new rules that reflect the abandonment of the project to turn the rest of the Eurozone into Bismarckian net exporting nation-states. It will understand that a deep cause of its success is that the rest of Europe is not like Germany.”
Power balance: from geo-politic to geo-economic
One of the key geopolitical issues in Europe prior to the Second World War was how the power of Germany could be effectively balanced by other European states. While Germany is no longer a threat from a military perspective, its economic power has put intolerable pressures on other members of the Eurozone, generating instability in much the same way as its previous military power once did. This instability is now centered on the standoff between creditor and debtor countries, underlined by the victory of Syriza in the Greek parliamentary elections, and potential future electoral success for parties such as Podemos in Spain.
The “German question”[3] has now re-emerged in a “geo-economic” form. Whereas in the past Germany faced potential enemies on all sides, it is now surrounded on all sides by NATO allies and European Union partners – in other words, in geopolitical terms, Germany is benign. But Germany’s persistent current account surplus puts intolerable pressures on other countries in the Eurozone and in particular on the countries of the “periphery”. The size of Germany’s economy, and the interdependence between it and those around it, is now creating instability within Europe as its military power once did.
What this may mean is a geo-economic version of the conflicts within Europe that followed German unification – in particular, something analogous to the kind of competitive dynamic of coalition formation among great powers that existed in Europe before 1945. Since the crisis began, some member states (especially those in central Europe whose economies are now deeply integrated with Germany’s) are beginning to form a kind of geo-economic equivalent of a sphere of influence; others (especially those of the so-called periphery) have found themselves under increased pressure to form what George Soros has called a “common front” against Germany.
This seems to be leading to a geo-economic version of the old German fear of encirclement: Germany now fears the emergence of a coalition of weak economies rather than strong armies. Europe’s geopolitical dilemmas seem to have returned in geo-economic form, centered this time on the conflict between the interests of creditor and debtor countries locked into a single currency.
As Stratfor analysts pointed out recently, Germany’s difficult position is given by its disproportionate strength overlying genuine weakness. The Germans are trying to reshape Europe, but their threats are of decreasing value. They tried to reshape Ukraine but got trapped in the Russian reaction. In both cases, the problem was that they did not have sufficient power, instead requiring the acquiescence of others, which is difficult to get. The Germans are too strong to be ignored and too weak to impose their will. Historically, the Germans tried to increase their strength so they could impose their will. It remains to be seen if history will repeat itself.
The Russian threat
The world that German chancellor Angela Merkel faces today consists of a European Union in a deep crisis, with many blaming Germany and saying that its aggressive export policies and demands for austerity were self-serving and planted the seeds of the crisis. The vision of a benign Germany has evaporated in much of Europe, and in many places old images of Germany have re-emerged and Germany has become the country that other Europeans fear.
At the same time, the peace that Germany had craved is in jeopardy. Events in Ukraine have aroused Russian fears of the West, followed by the annexation of Crimea and the support of the insurgency in eastern Ukraine. Russia’s actions have sparked the United States’ fears of the re-emergence of a Russian hegemon, and the United States is discussing arming the Ukrainians and pre-positioning weapons for American troops in the Baltics, Poland, Romania and Bulgaria.
Notwithstanding Germany’s leading role in Europe, the growing difficulties in reaching a common position in some of the essential economic and political problems facing the European Union are seen in sharp contrast with Russia’s efforts to rebuild its sphere of influence and its controlled “buffer zones” affected by NATO’s and the European Union’s eastward extension.
Soon after the fall of the communist regimes in Eastern Europe and the collapse of the Soviet Union, Eastern European personalities warned about the dangers of a resurgence of Russian expansionism that may have effect on the geopolitical scene.
In 1994, the Estonian President, Lennart Meri, spoke about a documents issued by the Russian Ministry of Foreign Affairs, which stated that the problem of the ethnic Russian groups in the neighboring countries cannot be solved by Russia by diplomatic means alone. The Estonian president also warned against the West’s so-called “appeasement” approach towards Russia, under the label of “Realpolitik”, and stressed that the democratic West should contribute to the stability and security of the medium and smaller-sized states to the east of the German border, from the Baltic Sea, to the Adriatic, including Ukraine.
Such warnings culminated recently with the Polish statesman Lech Walesa who mentioned even the threat of a World War Three. In a recent interview with TBVN24 channel, Walesa said that “Putin has started a war with the whole civilized world… He broke agreements, contracts, guarantees…The world cannot just leave it like this. If something like this happens, only force is left… How can we win, if he is boxing, and we are playing chess?”
Walesa’s warnings were launched soon after Russian President Vladimir Putin ordered massive military drills that include sending nuclear capable “Iskander” missile systems to the Kaliningrad enclave (between Poland and Lithuania), as well as deploying TU-22M3 strategic bombers along with fighter aircraft to Crimea.
According to U.S. analyst Wess Mitchell[4], under the leadership of Vladimir Putin, Russia has reemerged as a “territorially unsatisfied, militarily capable, and ideologically anti-Western state with the capabilities and intentions to overturn the post-1991 settlement in its neighborhood”. The Ukraine war showed that Russia is willing to play this role using not only subversion, bribery and intimidation but also by using military force against its neighbors.
In this context, the following emerging risks were identified:

  • The risk of a re-activated Eastern military frontier with a continuing Russian advance on southern Ukraine and agitation in Moldova and Transnistria;
  • The risk of a re-militarized Black Sea, with the annexation of Crimea putting Russia in a position to disrupt maritime energy and economic development;
  • The risk of regional economic uncertainty and loss of foreign investment, which was already pointed out in a recent EBRD report that will happen in Central Europe if the crisis in Ukraine stretches into a second year.
  • The risk of resurrected regional nationalism: the Ukraine war reintroduced ethnic-based territorial revisionism to Central and Eastern Europe for the first time since the 1940s. Irredentist nationalists from Transnistria to Transcarpathia and Transylvania took note of Crimea and are being actively encouraged by Vladimir Putin and Alexandr Dugin.
  • The risk of co-optation through corruption, since the intensification of geopolitical competition increases the chances of foreign powers to make use of corruption as a national-security liability.

According to other U.S. analysts, the separatist revolt in eastern Ukraine is part of Moscow’s larger grand strategy. The Russian president seeks a post-Warsaw Pact buffer zone in Central and Eastern Europe, using the Kremlin “play book”: imperialism by way of forcing energy dependence, intelligence operations, criminal rackets, buying infrastructure and media through third parties, the bribing of local politicians and playing off the insecurities of ethnic minorities.
Russia has a North European Plain strategy in the Baltic states and Poland, which emphasizes dependence on natural gas and the manipulation of Russian minorities in the Baltic states. It also has a Black Sea strategy, as seen in the annexation of Crimea and the desire for a land bridge to separatist eastern Ukraine, the military pressure on Georgia, and President’s Putin friendship with Turkey’s President Recep Tayyip Erdogan, aiming to indirectly increase Russian influence in the Balkans, thus inside Europe.
Trying to split the Union
Russia’s resurgence comes at a moment of weakness for the West, since United States’ influence in Central Europe is being supplanted by other powers. The Ukraine crisis showed the limits of the EU’s ability to export – without possessing the traditional elements of geopolitical power – its model of governance in contested spaces, against the will of a determined Russia. Inside the EU, the reform agenda has stalled in many EU countries, with populism and nationalism on the rise and euroskepticism growing.
Russia is taking advance of the current trends, especially of the economic difficulties of some of the EU members in order to “split” the European Union and prevent its taking of more severe measures against Moscow. Sanctions require all 28 EU countries to agree, enabling skeptics to play for time, shape policies to their liking and, in the extreme, cast a veto.
On the political and diplomatic level, Russia is developing ties with potential veto-wielders. It held high-level meetings with Cyprus, Hungary, Italy, and Spain, while the Greek PM and the EU foreign relations chief, Federica Mogherini, are expected in Moscow next April.
Cyprus President Nikos Anastasiades, who visited the Russian leader in February, granted the Russian navy access to Cypriot ports, and Italian Prime Minister Matteo Renzi, was labeled a “privileged partner” by Putin.
Russia is also intensively using its “active measures” skills developed during the Cold War, helping and cultivating ties with anti-European Union groups and developing small and big-scale propaganda and disinformation operations.
– On March 22, 2015, nationalist supporters of Russian President Vladimir Putin brought together controversial far-right politicians from across Europe in an effort to demonstrate international support for Russia and weaken European Union commitment to sanctions imposed on Russia over its role in Ukraine. Among the more prominent Europeans at the gathering was Nick Griffin, former EU parliament member and former leader of the anti-immigrant British National Party, Udo Voigt, a senior figure in Germany’s neo-Nazi fringe National Democratic Party and a member of the European Parliament; Roberto Fiore, leader of Italy’s far-right party Forza Nuova, and members of the neo-Nazi Greek party Golden Dawn.
Not too long ago, a similar gathering organized by the Russian “Eurasia” movement was held in Vienna, with the participation of the French National Front, the Spanish Catholic-monarchist Carlist movement, the Austrian right-wing populist Freedom Party, the Bulgarian far-right Ataka party and right-wing extremists from Croatia.[5] – According to claims in the Swedish media, the Left Party, which is not part of Sweden’s governing coalition but has 21 seats in the Swedish Parliament, was recently accused of transferring money to Borotba, a radical left wing group operating in Ukraine with links to President Vladimir Putin and separatists fighting against government forces in eastern Ukraine. The sum of 219 000 kronor ($25,397) was moved from a bank account linked to the Left Party’s aid organization VIF, to a bank account in the name of an ex-girlfriend of Borotba’s leader, Victor Shapinov.
Shapinov previously worked as a political consultant for Vladimir Putin’s United Russia party. He moved to Ukraine in 2006 and founded Borotba in May 2011. He was arrested in November 2014 in Moldova amid rumors that he was trying to promote Russian separatism in the state and even overthrow the political regime there, although Moldovan authorities have never made public the reason he was held.
The Left Party has previously admitted to collaborating with Borotba, but cooperation was supposed to have ceased in December 2014. News of the scandal broke as Sweden’s Prime Minister Stefan Löfven visited the Ukrainian capital, Kiev, and offered the country an 850 million kronor ($100 million) loan.
– During the summer of 2014, the British newspaper “The Independent” revealed the existence of a secret plan negotiated by German chancellor Angela Merkel and Vladimir Putin to end international tensions over the Ukraine. Such a plan would have included the Russian withdrawal of its support for the pro-separatist groups in eastern Ukraine, and in exchange, the region would be allowed some devolved powers. At the same time, the Ukrainian President would agree not to apply to join NATO, and in return, President Putin would not interfere with Ukraine’s trade relations with the European Union under the association pact. If the deal were to be acceptable to the Russians, the international community would have to recognize Crimea’s “independence” and its annexation by Russia.
The newspaper commented that the prospective deal – which was supposedly discussed personally by the German and Russian leaders – was motivated by Germany’s strong economic interests in Russia and by the fact that the sanctions introduced by the EU towards Russian individuals and banks will hurt all the European Union and particularly Germany.
While there was no confirmation of The Independent’s allegations, it is worth noting that the British newspaper was bought in 2010 by the Russian oligarch Alexander Lebedev, a former KGB lieutenant-colonel who worked undercover in the USSR’s Embassy in London, and who is considered in Russia as being close to former Russian leader Mikhail Gorbachev, with whom he owns the Novaia Gazeta newspaper.
– At about the same time, the German “Welt am Sonntag” newspaper published an investigative article about the ties between Vladimir Putin and prominent German businessman Matthias Warnig, an ex-STASI officer, who is supposedly closer to Putin than former German chancellor Gerhard Schröder. The article included details not only about Matthias Warnig being a close friend of Vladimir Putin and one of the most powerful managers in Russia’s economy, but also about his important positions in several German big companies, including Nord Stream AG, the company that operates the gas pipeline connecting Russia and Germany via the Baltic Sea, and where the chairman of the shareholders’ committee is Gerhard Schröder.
European reaction
In the European Union the reaction to such activities is still considered to be slow, as most of the governments are not prepared to confront the complex activities that form the so-called “hybrid war” launched by Moscow.
– One of the sessions of the recent Munich Security Conference was titled Who is ready for hybrid warfare? and it was chaired by a panel that included General Philip Breedlove, NATO’s military commander, Edward Lucas, the Economist’s energy editor, and Ine Eriksen Søreide, Norway’s minister of defense.
The participants stressed the role of Russia’s powerful propaganda machine, and also the fact that the Europeans have been so slow to react. It was suggested that European governments in general and the EU in particular explain to Russia as well as to the countries of Eastern Europe what the union stands for. If the EU wants to get across to its Eastern and Southern neighbors what it stands for, it has to go on the offensive, using the missions under the European External Action Service.
– In a further effort to curb the Russian state’s influence in Europe, at the European Council last March, the leaders instructed EU foreign policy chief Federica Mogherini to draw up a strategy to counter Russian “disinformation campaigns”.
The counter-propaganda initiative tasks Mogherini with creating a new “communication team” which is “to prepare by June an action plan on strategic communication in support of media freedom”. The new Brussels unit’s main tasks will be the correction and fact-checking of misinformation and to develop an EU narrative through key messages, articles, op-eds, factsheets, infographics, including material in Russian language.
Urging the U.S. to step in
In a recent open letter addressed to Europe’s key leaders, more than one hundred prominent Czech and Slovak public intellectuals warned against a “path of appeasement” with Russia, evoking the Munich agreements in 1938 that led to Nazi Germany’s invasion of Europe. After signing in 1994 the Budapest Memorandum, by which Ukraine surrendered its arsenal of nuclear weapons, the United States and the United Kingdom became guarantors of a disarmed Ukraine’s territorial integrity and independence, but they have betrayed that pledge.
For the authors of the letter, the paucity of support for Ukraine from the Western democracies is a reminder of their failure to stand up to Hitler and the refusal to live up to the Budapest Memorandum is casting a shadow on the credibility of other international guarantees and agreements, including the mutual-defense assurance that lies at the heart of NATO membership.
The inability of the European Union to face Russia’s aggressiveness in Ukraine also made several analysts point out that the United States should to step in with a strategy to defeat Russia’s geopolitical ambitions. Among the elements of such a strategy, it was suggested that the U.S. concentrate on protecting and fortifying what the Polish general of the interwar era, Józef Pilsudski, called the “Intermarium”[6], a belt of independent states stretching from Estonia south to Bulgaria that could withstand Russian aggression from the east and German aggression from the west. The new “Intermarium” might even extend from the Baltics to the Caucasus, with Poland in northeastern Europe and Romania in southeastern Europe as main a pivot states as well as oil-rich Azerbaijan. Other elements of such a strategy that were suggested were to invite recently elected Romanian President Klaus Iohannis and other deserving Central and Eastern European leaders on state visits to Washington, to increase the tempo of bilateral military exercises with allies bordering Russia, and to offer more intelligence against Russian criminal organizations[7].
Conclusion: Shifting geopolitical entities
The waning of America’s attention to Europe has been accompanied on the Continent by the geostrategic reconfiguration of NATO’s northeastern flank, namely the area encompassing Central Europe and the Baltic States and their perimeter. This reconfiguration has been driven by three interlinked factors: the resurgence of neo-imperial thinking in Russia; the restructuring of Europe’s economic power distribution; and the weakening of hard security linkages between the United States and its allies. The resurgence of Russian aggressiveness in Ukraine, in particular, threatens to warp the entire region’s security prospects.
After the fall of Communism, the restoration of “Central Europe” (or Mitteleuropa in classic Germanic terminology) as a structural category came to be justified: institutional transformation driven eastward by NATO and later EU enlargement created the structural foundations of a new Central European geostrategic space.
For the countries that used to be caught in the vortex of great power competition, NATO enlargement offered a pathway for overcoming the historical dilemmas of being either in the middle of some empire or on the periphery of some great power. As long as the process remained open, Central Europe could hope that by entering an established security system backed by U.S. power it would eventually escape its “center-periphery” dilemma.
Those expectations shuddered to a halt in 2008, when, at the Bucharest NATO summit, the alliance chose not to offer its Membership Action Plan to either Ukraine or Georgia. The summit shut the door to NATO’s future eastward enlargement. The Russia-Georgia war that soon followed threw the final bolt, as Moscow’s victory ended any prospect of NATO enlargement into the Caucasus.
With a small military campaign, the Russians halted the west-to-east enlargement momentum, with backpressure building up in Belarus, Ukraine and, by extension, in the Nordic-Baltic region and Central Europe.
Central Europe found itself once more on a periphery. For Ukraine in particular, the Obama Administration’s “reset” of the US-Russia relationship marked the beginning of the return of history, it having been made clear that its chances of joining the West were now exponentially smaller and that ultimately it could end up on the wrong side of a re-emerging divide.
The greatest beneficiary of the Obama Administration’s “reset” and its “pivot to Asia” has been Russia, which is today an openly revisionist power, determined to change the post-Cold War balance of influence in Europe and intent on rebuilding its influence and reducing the West’s reach into its “near abroad.”
Today Central Europe is contemplating a historically familiar formula: growing insecurity and a need to rely on one’s own military capabilities to an ever greater degree, no matter how uneven the competition seems to be.
In broader terms, the conflict over Ukraine has also put into question the premise on which the EU’s Eastern Policy has been built so far. Apparently, it has become impossible for the EU to reach out to the Eastern Partnership (EaP) countries – Armenia, Azerbai­jan, Belarus, Georgia, Moldova and Ukraine – and build a strategic modernization partnership with the Russian Federation at the same time. One lesson learned is that the EU’s policy approaches vis-à-vis its Eastern neighbors cannot be viewed independently from each other. If one looks beyond the crisis management that is necessary today, one has to consider an integrated approach for the EU’s Eastern Policy in the future.
[1] The term refers to a loose grouping of Poland, Germany, and France, intended to promote co-operation between the three countries in crisis zones. It exists mostly in the form of summit meetings between the leaders of these three countries, the most recent of which occurred on February 7, 2011.
[2] However, on 22 March International Monetary Fund chief Christine Lagarde said the IMF would be “delighted” to co-operate with the AIIB.
[3] After the unification in 1871, Germany was too powerful for any of the other great powers of the time to challenge, but not powerful enough to defeat a coalition of two or more of them. This was the essence of the “German question”. The German historian Ludwig Dehio later described Germany’s position in Europe during this period as one of “semi-hegemony” rather than hegemony. This structural problem encouraged other European states to form coalitions to balance against German power. That in turn created fear in Germany – the so-called cauchemar des coalitions, or nightmare of coalitions. Thus began what the historian Hans-Peter Schwarz has called a “dialectic of encirclement”, which culminated in World War I.
[4] President and co-Founder of the Center for European Policy Analysis (CEPA), a U.S. foreign policy institute dedicated to the study of Central Europe. The remarks were made in January 2015 at a conference at the Babes-Bolyai University, Cluj-Napoca, titled Romania after the Ukraine War: Threats and Opportunities.
[5] See our previous work Geopolitics: a century-old science to assess the future
[6] For a detailed presentation of the Intermarium concept, see our previous analysis Geopolitics: a century-old science to assess the future
[7] Cf. Robert D. Kaplan: Countering Putin’s Grand Strategy, 11.02.2015, Wall Street Journal

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