Transcript: Q&A

Ten Years After Europe's 'Big Bang': How Enlargement Has Transformed the EU

Jacek Rostowski

Deputy Prime Minister of (2013); Finance Minister (2007-13)

Anne Applebaum

Director, Transitions Forum, Legatum Institute

Dimitar Bechev

Senior Visiting Fellow, European Institute, LSE

Chair: Quentin Peel

Mercator Senior Fellow, Europe Programme, Chatham House

24 November 2014

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2 Ten Years After Europe's 'Big Bang': Q&A

Question 1

A comment to Anne, very briefly. I think you were a bit too tough on Britain. We were the first country to open up, to say that the transition mechanism doesn't apply and we welcome all the proverbial Polish plumbers.

Anne Applebaum

That's true.

Question 1

Indeed, the argument [indiscernible] we thought it was only going to be 50,000 of them and it turned out that it was more like 1 million. So one could argue that the case of Britain, far from being depressing, is a case of a country that was very optimistic about enlargement and was disappointed, which is a slightly different narrative.

But a question to all the panellists, if I may. How much has the European Union itself changed as a result of this enlargement? If you look at Federica Mogherini's election, if you look at the initial reaction to the events in Ukraine, one could argue that we are still on an automatic pilot of a union still dominated by western countries, rather than a true continent, free and united.

Question 2

Would the panel agree that part of the transformation of the EU is greater east European influence in EU institutions and policies now? There are certain obvious – among the personalities, obviously there is the appointment of and good portfolios for east Europeans. But in terms of policy also, in an area that I follow – energy and climate policy – eastern Europe has at last, also thanks to the Ukraine crisis, made western Europe aware of the energy security problem. Even on an area which deeply troubles economically eastern Europe, climate policy (because of its expense), there seems to be a modification. Poland got a rather good deal in the latest 2030 climate target bargain. Anyway, influence of eastern Europe on the EU.

Question 3

I feel that although I've always been very much in favour of the European Union and keen to see it prosper, that many of the unemployed in Britain, France, Spain and other countries would feel that our discussion so far has been far too much in the air, rather abstract. What we're sort of pushing into the sidelines is the fact that the European Union is incapable of producing economic growth, jobs and so on. It's crying out for – well, in the late 1940s it was Marshall aid that allowed Europe to recover. Mitterrand tried Keynesianism in the early 1980s but that was squashed by Thatcher and Kohl. Currently no one has the nerve to come up with Keynesian reinvestment, job-creating policies. So what does the panel really 3 Ten Years After Europe's 'Big Bang': Q&A

think they can do about, or propose, that would actually get the economies going and take these grievances away that are feeding right-wing parties that are threatening the democracy you've been lauding?

Quentin Peel

Okay, thank you very much. So three quite sceptical questions for you, to pop this bubble of good cheer that you were trying to bring to us. Jacek, you go first.

Jacek Rostowski

On the first two: well, maybe when it was six, but the EU has not for a long time been – what was the phrase you used? A union of free and equal partners. No. The EU has for a long time been – at European Council, it's the ministers of the large countries and a few influential medium-size countries who actually have influence. It so happens, and this is in no way an attempt or a suggestion that somehow – well, it's certainly not a criticism of our regional neighbours, but it just so happens that there's only one, by European standards, large country among the new members states, and that's Poland. Therefore, enlargement has in fact meant that the seven people who used to have something to say or used to talk in the ECOFIN, an eighth person got added, or added themselves. That's the way it has effectively worked.

Maybe one of the things that's most striking has been the weakness of the Czech Republic and Hungary in this context, political weakness, for all sorts of also internal political reasons. But the fact is Portugal doesn't have much to say, Czech Republic doesn't have much to say, Romania doesn't have much to say. Part of it is not just how big you are, it's also the quality of your civil service, of your advice; it's somehow easier in a bigger country to get those things done. At least, that was my experience during six years.

So it wasn't really an expansion from 15 to 28, it was an expansion from seven to eight, as far as I'm concerned.

On the third question, I couldn't agree more. Keynes is right once every 80 years and this happens to be the second time in 80 years. We have a major problem. We've constitutionalized anti-Keynesianism in the ECB. We've also constitutionalized it in the treaties. We've constitutionalized it sometimes in our national constitutions, as in Poland. We have deeply legislated ourselves into this situation, and we have to find a way out of it.

We've got to cheat. We're using, for instance – I say 'cheating', not really cheating according to all the rules. We have used a national development bank in Poland to encourage investment projects and to give guarantees to small and medium-sized enterprises. It's worked rather well. The Polish government is now proposing a similar – proposed, a couple months ago – a similar idea for the EIB to enable about €700 billion of investment over a couple of years. That's fairly moderate, given what Europe needs. Interest rates in Europe are under 1 per cent. There is no way that one couldn't ensure or absorb, as one used to say, well over a trillion euros of investment that in the current economic crisis would be useful investment, would get growth growing. But unfortunately, unless the EIB can do this – I mean, it's obvious that two years ago when the euro zone was on the verge of collapse, the ECB had a patent obligation to buy Italian, Spanish, Portuguese government bonds. It didn't do that and it couldn't do that, 4 Ten Years After Europe's 'Big Bang': Q&A

at least according to the lawyers. Well, a central bank president who doesn't control his legal department is not really a central bank president. This is the first thing that a central bank president should do, and Mario Draghi has failed to do that.

We could talk about this for a long time but we've put ourselves – this is really the fundamental issue and there isn't an easy way out. The idea was that political union would solve that; we don't seem to be nearer to it.

Quentin Peel

We can come back, but isn't what has happened through enlargement, Anne, is that it's not that the central and east European countries have got a lot more influence, it's that they've shifted the balance of power so that Germany has got a lot more influence. Germany, sitting in the middle, the only country that was really easy with the process.

Anne Applebaum

I'm not sure I would give all the credit to the central and east European countries for putting Germany in that position. I think we can maybe give France some credit. We can give the British a lot of credit. I can answer that by answering Jonathan's question. Yes, I absolutely take your point: the movement toward creating something like a joint EU foreign policy, that looked like it was happening over the last few years, I would say has now comprehensively disappeared. The events of both the selection of commissioners and the way that was done and the way that the crisis with Ukraine has been handled, have indicated that there's really only one country in Europe that has a foreign policy, and that's Germany – and Germany is now, in effect, speaking for everybody else. That is who negotiates with Putin – it's Angela Merkel, it's not somebody from the EU, not even anybody from the US for that matter.

That's a big change, and to some degree it masks a few things. It masks the historic, unbelievably close Polish-German relationship which has partly enabled this to happen. It masks the fact that so many other countries – Italy, Spain, Greece and others – don't have a foreign policy at the moment toward Russia. In effect, there are some accidents that are responsible for this, but it's also true that Germany has decided that it wants to play this role. Most everybody else has allowed them to play it and that's what's happened.

Quentin Peel

There is a certain German reluctance, and there is a certain lack of focus to German foreign policy.

Anne Applebaum

There is a lack of focus, and more peculiarly, there is a lack of national support for it. There is no – an institution like this one, actually, you don't really have. There are some theoretical counterparts in Germany but the institutions to make and discuss and debate foreign policy really don't exist the way they 5 Ten Years After Europe's 'Big Bang': Q&A

exist here or in France or in the United States. It's really striking how few Germans are part of this incredibly important debate, and it is also very striking how Merkel herself has clearly decided to play this role (with the support actually of the Social Democrats, for now). But it is a very exceptional moment.

Quentin Peel

Dimitar, can I ask you to pick up on the last of the three questions, the Keynesian one – the fact that Europe is incapable of creating growth. Do you see it like that?

Dimitar Bechev

You can envisage Keynesian policies, but then I think it all boils down to the issue of political community. You have redistribution where you have a sense of belonging to a political whole, a body politic. What we get with the euro crisis is of course pressure for putting more sovereignty actually, and engaging this redistributive role, maybe expanding the budget or using the European Central Bank to intervene on the bond markets and buy state bonds – but then again, it's not legitimate because the political space has fractured. It's the essential political economy question of interdependency against the background of political tensions and political fragmentation. The kind of policies emerging from Germany haven't helped that much because Germany has seen adjustment as a one-way street where actually the debtor countries adjust and the countries of surplus don't.

Which brings me to this other point Jonathan raised about the new member states. I think there is a fundamental difference between Poland and the rest, in the sense that Poland is a big country. You can see it sitting at the top table in an intergovernmental format, and the euro crisis has pushed the EU in fundamental ways to a more intergovernmental direction. Whereas everybody else is either a small country, a small country with very low income compared to everybody else, which essentially means that you have a stake in a more federal, more solidarity-driven EU. For the likes of Hungary, Bulgaria, you name it, on the periphery of the EU, actually you'd rather go for more federalized structure where actually you have a better chance to influence policies.

One way, by the way, to see the EU is as a mechanism to even the power balance. Of course, nobody is equal, let's not make a mistake. But without the EU, the asymmetry would be much greater. So having the European Commission, having the European Court of Justice, it does help a lot.

Quentin Peel

That was the point I would certainly have underlined, that actually very often you feel the resentment is from the big countries, because they resent giving up so much of their sovereignty – look at the way Jean- Claude Juncker plays it. Why was David Cameron so opposed to Jean-Clause Juncker? Because he's a small-country champion who actually gives the small countries a bit more space.

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Dimitar Bechev

Can I just say something, because there was a question about the neighbourhood policy and energy. I think that's a good example how the new member states, after 2009 and the crisis – of course it's a piecemeal process to create much more integrated gas markets. We know all the pitfalls and it hasn't gone that far. But you can see the impact of the new member states and also the neighbourhood policy. Without Poland being there, the question of Ukraine wouldn't have been on the table.

Question 4

I think we all know in this room and more broadly that EU enlargement to central Europe is the success that we all expected it to be and were confident that we should be working for, and it is that success. I think just the transition from seven to eight is a good thing. The transition from 15 to 28 is, on balance, a good thing. That greater diversity, greater multifaceted nature of the EU, has to be a strong positive. But I do think that in this discussion, as in all discussions about the EU, we've become so fascinated by the complexities of this EU system that we lose sight of the fact that there is a world out there. There is life outside the treaties. The EU only works really when it goes with the grain of what's happening outside. So I do think we need to look at things that are not actually based on the treaties. One, I think, is Anne's point about the central importance of democratic transition. It was a requirement for enlargement but the EU really didn't have the means or the instruments to help bring it about. It was central Europe's own efforts as well as help from western countries that made it possible. I do think that the central Europeans now have an obligation to remind us all of the central achievement there, because we and our peoples are in danger of losing their sense of value for the democratic process. It's very useful to have people to remind us just how important it is and just how valuable it is.

But more broadly, we talk about the economic crisis in Europe, but actually this is a global crisis. This is the global crisis of developed western countries, where there is just not enough growth, not enough jobs and not enough income development. That goes far beyond Europe. It may be aggravated by the EU crisis but it goes beyond Europe. Until we all start to address that central question, the EU issues will not get easier.

Question 5

Anne mentioned the promotion of democracy by the EU. One remembers the Copenhagen criteria of 1993 which set out certain values for democracy and governance, such as the separation of powers, the rule of law (which Dimitar mentioned), minority rights and a free media. How far do the panel feel these values have been successfully promoted or not in the last ten years by the EU? What further work needs to be done?

Quentin Peel

Any particular country in mind?

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Question 5

If I may mention what has been reported about Hungary, yes.

Question 6

I wanted to ask Mr Rostowski: you talked about the flaws in the design of the euro, and Poland is in the strange position of being bound to join or committed to join by treaty – well, the goal posts have moved somewhat, and the political goal posts connected to membership of economic and monetary union are moving as well. So a very simple question: should Poland join the euro, and will it?

Jacek Rostowski

When the time is right.

Quentin Peel

And with a political union, with much closer –

Jacek Rostowski

Exactly.

Quentin Peel

And with all this bad design? And you're still going to go.

Jacek Rostowski

No, when the euro has been repaired, and that requires political union. I just wanted to come back to the point that was made a little bit earlier. Poland, in spite of being relatively big, still sees itself as sufficiently small to be very communitaire and pro-Commission on most issues along those sorts of lines. So it hasn't yet, and I hope won't for quite a while, shift over to the club of the big countries.

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Anne Applebaum

There's a saying in Poland that Poland joining the euro is a little bit like St Augustine – you remember St Augustine says to God: please make me good, but not yet.

I have a problem with singling out Hungary in some ways, because as of yet Hungary is a democracy, nobody goes to jail, there's a free press. I would argue that some of the kinds of problems we see in Hungary are actually problems of European democracy. I would argue that the problem of the media in Italy, when Berlusconi was president, was in some ways worse than the problem of the media in Hungary. The problem that there's a very powerful far-right which you have in Hungary is obviously matched and maybe exceeded by the problem of the far-right in France. Hungary has had some – there have been bumps along the road in the last few years, but I would put them – if you look across the spectrum of Europe and you see the media issues, the judiciary issues in some places, the issues of extremist parties (which you have, for example, in Greece as well), Hungary certainly belongs in that group. I would hesitate about somehow isolating it as a special problem, an east European kind of problem.

Quentin Peel

It's my fault for singling them out, perhaps, but the wider question of human rights –

Anne Applebaum

I think some of the questions of democratization and has it succeeded or failed, I think those are questions you can ask in a lot of European countries and a lot of democracies. Democracies go up and down and they have successful periods and less successful periods. In the United States there are these famous waves where there's more civil rights and less civil rights, and more government interference and less government interference. I would say that these are patterns that – I wouldn't say that anybody has yet fallen out of the game, if you see what I mean. Not yet. It could happen.

The problem for small countries with weak media or with media which is totally dominated by one or two groups is a very deep problem, and it's a problem across the EU in a lot of countries. We don't think about it here in Britain because we still have a big enough media, but you can actually see it beginning in Poland, you can see it in some Scandinavian countries even, where the media is now supported by the state because people are worried about it being weak. You can see it in a lot of east European countries. There are problems with democracy that are emerging across Europe. They're worse in some places than in others, that's what I would say. I wouldn't say it's an east European problem, I would say it's a European problem.

Quentin Peel

Dimitar, we're going to have to wrap up the discussion, but nonetheless: are we in danger in the old member states of losing sight, because of the economic crisis, of the extraordinary achievement of what enlargement was for the new member states? 9 Ten Years After Europe's 'Big Bang': Q&A

Dimitar Bechev

I think if you look at what Mr Juncker had to say about it last month, in a very polite Luxembourgish way, you might be right unfortunately. Enlargement is not something you put on your lapel as a big achievement. It has turned into a liability, unfortunately.

Quentin Peel

But shouldn't actually central and eastern Europe be shouting from the rooftops what has been achieved? You have done it tonight, I compliment you all.

Dimitar Bechev

Yes, they have done it, but let me come back to this other issue about democracy, because I think it's absolutely essential. The question is: is the EU adding to democracy in those countries or is it turning into an impediment? If you listen to the likes of Orban, his answer would be that we have emancipated ourselves and the EU is a liability, it's a burden on our democratic development – because his reading of democracy is very –

Quentin Peel

A little different.

Dimitar Bechev

Yes. Based on majorities and elections, and you have this model. Whereas in other countries it's been the opposite. You can argue the EU is the lead external corrective. It's helping overcome deficits at home. But the problem with that argument though, and we see the limits in a number of places, is that it works in the short term but it doesn't work in the long term. For long-term, even in places like Bulgaria but elsewhere as well, you trust Brussels more than you trust your politician. But it creates a vicious circle, this trust that undermines democracy.

Quentin Peel

That's an interesting question, because that was always said to be true. Italy, Belgium, always trusted Brussels more than they trusted their own.

10 Ten Years After Europe's 'Big Bang': Q&A

Dimitar Bechev

But the question is, is that sustainable? How do you go over this equilibrium?

Jacek Rostowski

I agree absolutely with what Anne said about Putin and Ukraine. Putin's problem with Ukraine is that he's afraid of democracy, and he's right to be afraid of democracy. He's afraid of democracy spilling over from Ukraine into Russia, and of course that's got nothing to do with Brussels, because nobody expects Russia to join the European Union. So we have no reason to keep thinking about democracy as being some incredibly exotic plant which has to be constantly tended by all sorts of European institutions. It's a natural instinct among people. You all know Leonard Cohen's song about democracy coming to the USA. Well, that's of course an absurdity, because it is in the USA, but it's certainly Vladimir Putin's nightmare that it will come to Russia. There's nothing we can do to allay him in his fears and there's nothing we should do.

Quentin Peel

Except show to the rest of his population that it works.

Jacek Rostowski

And the best people to do that are the Ukrainians, because the point that's so deep in Russian tradition and psychology is that Ukraine and Russia are one cultural space, and if it works in Ukraine that means it – how is it possible that the Ukrainians would have a successful democracy and it was good enough for them, they were good enough for it, but Muscovites and Petersburgers are not? It's as simple as that.

Quentin Peel

Well, we finish with Ukraine. Thank my panel very much for a splendid discussion which could have gone on considerably longer. I apologize to you all that it's gone on a little bit long. Thank the panel, please.