Annual Report 2014

Annual Report 2014 annual report cover 2014.indd All Pages 23/01/2015 15:06 THE CER IN DECEMBER 2014 About the CER FROM LEFT TO RIGHT, TOP TO BOTTOM: Rem Korteweg, The Centre for European Reform is a think-tank devoted to making the European Union work Christian Odendahl, better and strengthening its role in the world. The CER is pro-European but not uncritical. Ian Bond, Simon Tilford, We regard European integration as largely benefi cial but recognise that in many respects Yehuda Ben-Hur Levy, the Union does not work well. We also think that the EU should take on more responsibilities John Springford, globally, on issues ranging from climate change to security. The CER aims to promote an open, Stephen Tindale, outward-looking and eff ective European Union. Agata Gostyńska, Lucy Katz, Camino Through our meetings, seminars and conferences, we bring together people from the worlds Mortera-Martinez, of politics and business, as well as other opinion-formers. Most of our events are by invitation Jordan Orsler, Anna only and off -the-record, to ensure a high level of debate. Yorke, Charles Grant, Sophie Horsford and The conclusions of our research and seminars are refl ected in our publications, as well as Kate Mullineux. in the private papers and briefi ngs that senior offi cials, ministers and commissioners ask us to provide. The CER is an independent, private, not-for-profi t organisation. We are not affi liated to any government, political party or European institution. Our work is funded mainly by donations from the private sector. The CER’s work programme is centred on eight themes: The euro, economics and fi nance Energy and climate EU institutions and policies Justice and home aff airs EU foreign policy and defence Britain and the EU Enlargement and neighbourhood China and Russia 11156 TEXT CER annual_report2014_30jan15 GB.indd 1 02/02/2015 14:32 Three challenges for Europe by Charles Grant ABOVE: Since its foundation in the 1950s, the EU has seldom been free of Emmanuel Macron and troubles. But the challenges it faces in the coming years – as a new team Charles Grant of leaders takes over the Brussels institutions – are existential and have the capacity to destroy or greatly weaken the EU as we know it. Lunch on ‘Reform in First, the EU has to work out what to do about the EU’s response to events in Russia and France and in a paranoid, nationalistic Russia that is prepared Ukraine, the eurozone’s attempts to revive its the eurozone’, to solve problems by force and whose economy economy and any British move to renegotiate its London is starting to spiral downwards. Second, the membership of the EU. eurozone’s economy remains dangerously weak: growth has stalled, unemployment is The fi rst problem, Russia, has the potential to unacceptably high and defl ation is making debt either fracture or strengthen the Union. Russia’s burdens increasingly unsustainable in several conduct in Ukraine has – so far – helped to member-states. Partly because of these economic engineer a unifi ed European response. But the diffi culties, anti-EU or anti-euro populism, from unity is fragile. And the nature of the EU means the left and the right, is on the rise across much that it reacts slowly and uncertainly to events of the continent. The third challenge is the in Eastern Europe – as it did when Ukraine’s risk of a British departure from the Union, or president, Viktor Yanukovych, fl ed Kyiv in ‘Brexit’ – a prospect which became more likely in February; when Russia annexed Crimea in March; 2014, with the successes of the United Kingdom and when Russian forces moved into the Donbas Independence Party (UKIP) enabling it to set the in the summer of 2014. tone of Britain’s political debate. The EU was not to blame for the tragedy of the Germany is pivotal to all three challenges. fi ghting in Ukraine, which had killed nearly The actions and policies of Angela Merkel’s 5,000 people by the end of the year. But many government will play a huge role in shaping on the far right and far left in Europe, as well 11156 TEXT CER annual_report2014_30jan15 GB.indd 2 02/02/2015 14:32 ANNUAL REPORT 2014 January 2015 3 [email protected] | WWW.CER.ORG.UK as Kissingerian realists, think that it was. They Germany’s political, business and media elite accuse the EU of provoking Russia by extending towards a harder line than would have seemed its reach – through ‘deep and comprehensive conceivable in 2013. Nevertheless in many free trade agreements’ and ‘association parts of the EU there remains much wishful agreements’ – into Russia’s sphere of infl uence. thinking about Russia. For example some That is a fair argument only if one believes that companies involved in Russia hope – for very big countries should be allowed spheres of understandable reasons – that relations with infl uence, and that little countries nearby should the West will soon return to the status quo ante not be free to run their own foreign policies. bellum, as they did after Russia’s war against Georgia in 2008. And some analysts argue that Many European leaders rightly regard spheres moderates in the Kremlin, who understand that of infl uence as incompatible with the principle the Russian economy needs good relations with of democratic self-determination, and therefore the West, will win the argument for a softer line unacceptable. Nevertheless a lot of the 28 on Ukraine. member-states did not really want strong EU sanctions against Russia. Some depend on Russian gas. Others think that foreign policy Russia’s actions have turned opinion in Germany’s should be driven by commercial interests “ rather than strategic considerations. Some elite towards a harder line than would have seemed believe in Europe maintaining a kind of Gaullist conceivable in 2013.” equidistance between Russia and America. And in an alarming number of countries, Russian money has corrupted the political class. These optimists are unlikely to be right, at least in the short and medium term. Most EU Yet the EU has imposed several rounds of governments would like to lower tensions sanctions, some of which, notably those on the and remove the sanctions – but that would energy and fi nancial sectors, are hurting Russia require President Vladimir Putin to curtail his (even though the drop in the oil price, which support for rebel forces in the Donbas (most began mid-year, hurts even more). How come? EU governments can live with the de facto The answer is Angela Merkel. After the shooting occupation of Crimea) and accept that Ukraine down of fl ight MH17 by Russian-backed rebels in is free to tighten ties with the EU. Given the July, the normally cautious Merkel decided that apparent belief in the Kremlin that Russia is the West had to present a strong and united front at war, that the West (and especially the US) is to the Russians. She badgered many reluctant out to encircle Russia and ultimately destroy its European leaders to swallow the sanctions regime, that most Europeans are too soft and – though she was helped by pressure from decadent to off er serious resistance to the use Washington, London and Warsaw. of force by Russia, and that economic autarky is the best option for the Russian economy, Earlier in the year, I had been commissioned there seems scant prospect of a Russia that is (alongside other researchers) by Frank-Walter willing to engage with the West. As a Russian Steinmeier, Germany’s foreign minister, to write commentator said in Washington in November on ‘What is wrong with German foreign policy?’ at the Daimler Forum that the CER organises My answer, published by the CER in May, with the Brookings Institution and the Stiftung argued that German foreign policy tended to be Wissenschaft und Politik, it may be at least a insuffi ciently strategic and more commercially- generation before Russia’s relations with the driven than that of some other countries. West improve. And this Russian did not rule out Subsequent events, and in particular Merkel’s the risk of a hot war. role in the EU’s discussions on sanctions against Russia, have shown that German foreign policy The year ended with the oil price, the rouble and is now evolving in a more strategic direction. Russian GDP heading downwards. Is it possible that a suffi ciently grave economic crisis could Russia’s actions, and especially its failure to make Russia not pricklier, but more willing to implement the ‘Minsk protocol’ of September, compromise? If it does, the EU will be ready to which set out a path for de-escalation between work with Moscow to help stabilise their common Russia and Ukraine, have turned opinion in neighbourhood and the Russian economy. The euro crisis The EU will fi nd it harder to deal with Russia The euro crisis appeared less acute after the and support Ukraine if its internal cohesion is summer of 2012, when Mario Draghi, the undermined by persistent economic weakness. president of the European Central Bank (ECB), 11156 TEXT CER annual_report2014_30jan15 GB.indd 3 02/02/2015 14:32 announced that he would do whatever it believe that in the long run the eurozone requires took to save the euro, and then unveiled the some sort of mutualisation of debts – if not the (still unused) bond-buying scheme known as ‘eurobonds’ that Germans fi nd so toxic. ‘Outright Monetary Transactions’. Some of the troubled countries, notably Spain, Portugal and That is the view in France, among other Ireland, have returned to economic growth.

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