By Francis Lee for the Saker Blog

There is a human tendency to cling on to cherished beliefs even in the face of overwhelming evidence to the contrary. There was a time, during the heady days of Jacques Delors and the Social Chapter, when the EU appeared to represent a social-democratic and neutral geopolitical bloc; a third force between the USSR as it then was and the US/NATO – this, however, is no longer the case. The EU has long since transmuted into part of an aggressive neo-liberal and neo-conservative imperial alliance under US command. The liberal, centre-left Remainers such as Yanis Varoufakis seem to think that it is possible to reverse this development and get the EU back to its original prototype, presumably by dint of political will. In view of historical developments this view seems increasingly difficult to sustain.

EU/NATO PUSHES EAST.

In particular since the ratification of the Lisbon Treaty of 2005 the EU Defence and Security Policy has been aligned with NATO. Indeed, EU membership has become a stalking horse for NATO membership and vice versa. NATO’s geopolitical drive to Russia’s western borders has been concurrent with the EU’s economic expansion – a strategic partnership between a military push and an economic push.

Not surprisingly perhaps the Russians see the siting of US anti-ballistic missile systems on their western borders in Romania and Poland, together with ongoing NATO military exercises involving tens of thousands of alliance troops as something of a provocation. Little wonder we now have a second cold war.

The position of the EU is, in geopolitical terms, completely subordinated to US interests. If there is a Russian-NATO conflict it will be fought on Europe’s turf not on America’s; Europe is ultimately expendable. This much can be inferred from facts on the ground, though this must be kept assiduously secret from the electorates of western Europe. Eastern Europe, however, seems only too willing to serve as the cannon-fodder for the US imperial designs; witness the incessant baying for war on the part of Russophobic states such as Poland and the Baltics, as well as NATO-EU wannabees like Ukraine and Georgia. It was precisely this expansion to the East (or new Europe as it was called by Donald Rumsfeld) which served as the essential prerequisite for the NATO takeover of the whole of Europe. The change has been noted:

EUROPE FROM LISBON TO VLADIVOSTOCK – AN IMPOSSIBLE DREAM.

‘’The destructive Russophobia of the new Europe undermined the credibility and cohesion of Europe as a whole. It had been anticipated that the new members’’ – Poland, the Baltics. etc. – would be ‘socialised’ into the ways of the EU, but, instead, the EU was in danger of reverse socialization incorporating the axiological (ethical – FL) dynamics and virulent neo-liberalism of some of the newer members, accompanied by their prioritisation of Atlantic Security over EU social solidarity.’’ (1)

In its original quasi-Gaullist form the EU might have played a constructive part in the Ukrainian crisis as a third party and disinterested broker between Russian and American interests, but by 2014 the EU had been transformed into something very different from its original configuration: it had become joined at the hip to the US imperial juggernaut. Moreover, the EU’s status in this relationship was subaltern rather than equal. It should be understood that the United States does not do ‘partnerships’ only master and flunkey slave relationships. It is further commented that:

‘’Instead of a vision embracing the whole continent it (the EU) it has become little more than the civilian wing of the Atlantic security alliance … The drift toward a merger with the Atlantic Security system left it bereft of autonomy and policy instruments when it really mattered – maintaining peace on the European continent.’’ (2)

COSTS IN EUROPE OF US FOREIGN POLICY

The terrorism and refugee crisis in Europe – the blowback – was unquestionably traceable to the US bull-in-a-china-shop foreign policy in the middle east, this much is obvious to even an impartial observer; but answering the call of duty the western media has strained every nerve and muscle in an attempt to deny what was a blatant fact. Terrorism and refugee flows were ripped out of the wider context in an attempt to obfuscate any causal connexions with these phenomena and US/EU/NATO foreign policy. The media propaganda tsunami notwithstanding the electorates of Europe were able to put 2 and 2 together, and this resulting in an ongoing political crisis in Europe which shows no signs of stabilization and, if anything, seems to be intensifying including the Brexit vote which committed the UK to leaving the EU, and, the electoral advances for the AfD in Germany as well as anti-EU sentiments which in Hungary and Poland has gained significant support from the population of those states. Propaganda and economic stagnation seems to have its limits; like Abe Lincoln said: ‘You can’t fool all of the people all of the time.’

So much for the geopolitics.

WASHINGTON CONSENSUS CROSSES THE POND

Perhaps as significant is the shift in economic policies and development which has taken place within the EU. Without doubt there has taken a sharp right turn since the 1980s.This policy consists of full-on neo-liberal economic and social imperatives involving the imbibing of a ruthless, winner-takes-all orthodoxy and its equally brutal imposition; Greece is perhaps the most egregious victim of this frugal economic diet, followed by Latvia, Estonia, Ireland, Portugal, Greece and even Italy, all of which are being forced into penury and debt-peonage courtesy of the Troika’s relentless austerity programme.

THE EURO – A NON-OPTIMAL CURRENCY WITHOUT A STATE.

Piling on the agony the creation of the Euro single currency (the key problem) since 1992 has put the Euro member states into an economic strait-jacket. The currency value cannot be changed or devalued to boost national exports during economic downturns such as that experienced since 2008. The result has been that the largest industrial power in the Eurozone, Germany, has benefited from the stable euro while weaker economies on the periphery of the EU, including most notably, France, have endured catastrophic consequences to the rigid Euro rate. The cost and productivity structures of Germany and the northern bloc in the EU, means that its goods will be cheaper than the higher costs and lower productivity levels in the southern belt. It follows therefore that the northern bloc runs permanent trade surpluses whilst the south has permanent trade deficits.

In a new report, the Dutch think-tank, Gefira Foundation, notes that French industry has been contracting since the adoption of the euro. “It was not able to recover after either of the 2001 or 2008 and present crisis because the euro, a currency stronger than the French franc would be, has become a burden to France’s economy. The floating exchange rate works like an indicator of the strength of the economy and like an automatic stabilizer. A weaker currency helps to regain competitiveness during a crisis, while a stronger currency supports consumption of foreign goods.

The only reason that the Germans were prepared to abandon their beloved deutschmark was that it would be replaced by a hard euro whose exchange rate was fixed and overvalued. The euro is an orphan, a currency without a state, and thus a foreign currency to all the European states in Europe.

EASTERN EUROPE:

TWO COLLAPSES. 1. COMMUNISM, 2. NEOLIBERAL CAPITALISM

The EU’s eastern periphery also has problems, but of a different kind. However only the Baltics, Slovenia and Slovakia actually use the euro. It is planned to include them into the euro in the fullness of time. Apart, that is, from basket cases like the Baltics whose government, unlike the people, went where angels feared to tread – into the Eurozone and the euro.

Excluding Russia, of course, these Eastern European states – termed ‘transitional economies’ – have become stalled in economic stagnation which so far has been difficult if not impossible to overcome. These obstacles have been specific to the Eastern periphery. The European Union now consists of 28 states. No fewer than 10 of these are former states of the Eastern Bloc, and this proportion is set to grow with the impending accession with some minor Balkan nations. Although Georgia and Ukraine are in line for membership of the EU, they are also expected to join NATO as has become customary for aspirant EU states.

Whether they obtain either is a matter of conjecture, however, as this would be almost certain to cross Russia’s red lines and result in a major geopolitical flareup. Europe’s centre of gravity is shifting. And while the process of joining the European Union is driving change within these countries, it is also changing the nature of Europe itself. Those Eastern European states which emerged from the break-up of the Soviet Union had been led to believe that a bright new world of West European living standards, enhanced pay levels, high rates of social mobility and consumption were on offer.

Unfortunately, they were sold an illusion: the result of the transition so far seems to have been the creation of a low-wage hinterland, a border economy on the fringes of the highly developed European core; a Euro version of NAFTA and the maquiladora, i.e., low tech, low wage, low skills production units on the Mexican side of the US’s southern borders. Moreover there are acute demographic problems confronting the ‘new Europe’.

Eastern Europe is bleeding people. With low fertility rates, higher death rates, and emigration. Case study:

‘’IN THE Lithuanian town of Panevezys, a shiny new factory built by Devold, a Norwegian clothing manufacturer, sits alone in the local free economic zone. The factory is unable to fill 40 of its jobs, an eighth of the total. That is not because workers in Panevezys are too picky, but because there are fewer and fewer of them. There are about half as many students in the municipality’s schools as there were a decade ago, says the mayor.

Such worries are increasingly common across central and eastern Europe, where birth rates are low and emigration rates high. The ex-communist countries that joined the European Union from 2004 dreamed of quickly transforming themselves into Germany or Britain. Instead, many of their workers transported themselves to Germany or Britain. Latvia’s working-age population has fallen by a quarter since 2000; a third of those who graduated from university between 2002 and 2009 had emigrated by 2014. Polls of Bulgarian medical students show that 80-90% plan to emigrate after graduating.

Lithuania’s loss of workers is costly, says Stasys Jakeliunas, an economist. Remittances and EU money for infrastructure upgrades have helped, but labour shortages discourage foreign investment and hurt economic growth. According to the IMF, in some countries in eastern Europe emigration shaved 0.6-0.9 percentage points from annual GDP growth in 1999-2014. By 2030 GDP per person in Bulgaria, Romania and some of the Baltic countries may be 3-4% lower than it would have been without emigration.

All of this imperils public finances. Pensions, which take up about half of social spending in eastern Europe, are the biggest worry. In 2013 Latvia had 3.3 working-age adults for each person older than 65, about the same as Britain and France; by 2030 that is projected to fall to just over two, a level Britain and France will not reach until 2060. Countries are raising the retirement age (apart from Poland, which is recklessly lowering it). Benefits are already meagre, leaving little room for cuts. As a share of GDP, social spending in Bulgaria, Romania and the Baltic states is roughly half of that in many richer European countries.

Unable to dissuade people from leaving, governments are trying instead to lure them back, inspired by successful efforts in Ireland and South Korea. Daumantas Simenas, project manager of the Panevezys free economic zone, credits his return from Britain to the country’s “Create for Lithuania” programme, which matches educated professionals from the diaspora with government jobs. Having a job already lined up made the decision to return easier, he says. Plus, he adds, “home is home.”

Whether such efforts can turn the tide seems doubtful. “Create for Lithuania” has brought back more than 100 people since its launch five years ago, says Milda Darguzaite, who started the programme after leaving an investment-banking career in America for a government post in Vilnius. Returnees include an MP, a deputy mayor and several advisers to the prime minister. Bringing back doctors and engineers, however, is trickier. Studies show that skilled workers from eastern Europe are attracted abroad primarily by the quality of institutions such as good schools; better social benefits matter more for unskilled migrants. Data on return migration are scanty, but a recent report by the IMF suggests it has been “modest”, in some countries as low as 5% of those who left.’’ (3)

In more general terms figures for Eastern and central Europe as a whole are as follows. With the exception of the Czech Republic and Slovakia and Russia, every eastern European country has a declining population. Population declines as follows from 2006 to 2018:

Latvia and Lithuania = 12%

Ukraine = 9%

Hungary = 8.5%

Romania = 7%

Bulgaria = 6%

Estonia = 1.5%

Poland = 0.3%

The comprador vassal elites on the wrong side of the Oder-Neisse Line have been caught in the trap of dependency and semi-development, and in some cases under-development, and this was partly of their own making due to their rush to throw themselves into the arms of the US-NATO-EU alliance and an expected pay-off/bribe. The only states to avoid this have been Czechia, Slovakia and Russia. In the Balkans the same devastating NATO coalition engineered the destruction and break-up of what was once the sovereign state of Yugoslavia.

Thus In both economic and foreign policy the European political and financial elites have acted as overseas branch managers of a multinational enterprise whose HQ is on the other side of the pond (the US) where policy is determined and exported. Quislingism might be an appropriate word in this context.

DEMOCRATIC DEFICIT – THE FINAL ACT.

Finally, we come to the democratic deficit. This is important since the only way that change is possible is through the EU institutions. In order of importance these institutions comprise 1. The Council of Ministers, 2. The European Central Bank, 3. The European Commission. The last of these institutions consists of a President, at present, Ursula Von der Leyen, and formerly, Jean-Claude Juncker, seven, Vice-Presidents, whose identities are not known to me, and twenty Commissioners, equally obscure. Juncker succinctly enunciated the process of EU’s decision making as follows: ‘’If it’s Yes, we will say on we go, and if it is a No, we will say we will continue.’’ So much for open and flexible debate on policy.

The Council of Ministers and the ECB also pull various levers, often in tandem with extra-European global institutions such as NATO, WTO and IMF. Of course there is absolutely no sign that the current policies of the EU are not continuing along their present reactionary trajectory; and since the electorates of the EU have no control of the Council of Ministers and ECB there seems no way to break into this closed system of rule by a technocratic oligarchy. Once again political unrest in Europe suggests a causal connexion between the nature of the EU’s political and economic structures and the policies and outcomes emanating thereof.

This is not the EU we (the UK) signed up to in 1976, and there comes a time in politics where it is judicious to give up flogging a dead horse. A ‘progressive’ Labour government – if such a political animal is possible – would not be allowed by EU law to implement its economic reforms, cancel Trident, leave or even modify its NATO membership. Democracy is impossible without some measure of sovereignty, and nations must get control of their own foreign and economic policies since if they don’t the globalisers and Bilderbergers will and have done. There is nothing wrong with a volte face in politics.

It was J.M. Keynes who once said: ‘’When the facts change, I change my mind. What do you do sir?’

NOTES

(1) Richard Sakwa – Frontline Ukraine.

(2) Sakwa, Ibid. pp.227/228)

(3) The Economist – 19/01/2017. It should be added that the Economist is very much the house journal of the British elite. Yet even they have their doubts about the Euro project.