Meet the neighbours A survey of the EU’s eastern borders | June 25th 2005

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Meet the neighbours Also in this section

Transformed EU membership has worked magic in central Europe. Page 4

Climate change What post-communist countries need to ourish. Page 5

Taming the Balkans Could EU accession do the trick? Page 6

A bearish outlook The EU’s relations with Russia are bad and may get worse. Page 8

Too big to handle? Turkey’s application to join the EU is causing anxiety on both sides. Page 10 The European Union has been expanding by leaps and bounds. Robert Cottrell asks what happens if it stops

The 4% solution E MUST not let daylight in upon Western European Union, to become an Getting closer to Europe is good for economic Wthe magic, said Walter Bagehot, a organisation with much less political and growth. Page 12 former editor of this newspaper, contend- legal authority, or none at all. This would ing that the authority of the British crown be manageable for existing members, so resided more in the mystique of the institu- long as the single market and the euro con- The shape of things to come tion than in what we might now call hard tinued in business by other means. It The European Union should go its dierent power. Awe-struck politicians and public would, on the other hand, be seen as a ca- ways. Page 13 opinion in Bagehot’s 19th-century Britain tastrophe by nearby countries counting on behaved as though the monarch was Union accession to rescue them from their above criticism, the incarnation of wis- other neighbours or from themselves. An dom and virtue. But for that to go on work- end to enlargement, of which some EU ing, Bagehot said, the precise mechanics politicians now talk, would be just as bad. and limitations of the oce, and of its in- cumbents, should remain obscure. Keep looking east The European Union used to prot This survey looks to the east, where the Acknowledgments from a similar indulgence. It enjoyed a limits to Europe are most changeable. The This survey borrows ideas from many people. Some are mystique founded on its claim to be a new question of where to situate those limits identied in the text. In addition, and without implying that they would necessarily agree with the views expressed and more perfect type of political order, has returned in force since the fall of the here, the author would like to thank: Lajos Bokros, Robert capable of guaranteeing a lasting Euro- Berlin Wall. Last year’s enlargement xed Braun, Martin Bruncko, Robert Cooper, Pavol Demes, Je- pean peace. The complexity of its laws and the Union’s eastern borders at the distant remy Druker, Michel Foucher, Andrew Gardner, Heather Grabbe, Charles Grant, Istvan Gyarmati, David Kral, Mart institutions helped, by blurring popular edges of the Baltic states, and of Poland, Laar, Alina Mungiu-Pippidi, Jiri Pehe, Sandra Pralong, Olli understanding of what the Union did, and Slovakia and Hungary. Now, of 15 contigu- Rehn, Gyorgy Schopin, James Sherr, Pirkka Tapiola, thus allowing both admirers and critics to ous countries lying to the east and south- Emma Udwin and Alexandr Vondra. Three books, all pub- lished this year, proved of particular value: The New Po- make exaggerated claims about its powers. east of those new borders, at least 11 more litical Economy of Emerging Europe, by Laszlo Csaba; The Now the daylight is streaming in on Eu- hope to become EU members, most of System Made Me Do It, by Rasma Karklins; and How the rope, and the magic has gone. Last year’s them within the next ten years or so, sub- East Was Won, by Charles Paul Lewis. enlargement of the Union, from 15 to 25 ject to various ifs and buts. countries, has played a big part in this Romania and Bulgaria have already change, as has the recent constitutional de- signed their accession treaties and expect A list of sources can be found online bate. Almost nobody now imagines that to join in 2007 and 2008, though the trea- www.economist.com/surveys all 25 countries are heading for political un- ties have yet to be ratied by all EU parlia- Past articles on EU enlargement are at ion in the way that the founding six once ments. Turkey has a date to start accession www.economist.com/EUenlargement talked of doing. It is by no means outlan- talks in October, though that process, if it dish, as it would have seemed ten years does begin then, may drag on for a decade An audio interview with the author is at ago, to suggest that the Union may go the or more. Croatia hopes to begin detailed www.economist.com/audio way of the United Nations, or even the talks once it can persuade the EU that it is1 2 A survey of the EU’s eastern borders The Economist June 25th 2005

2 co-operating fully with the UN’s war- champion of ever closer union, wanted to essarily better, than the Barcelona Pro- crimes tribunal in The Hague. The other be less in thrall to the thing it has created. cess, a programme the EU launched in countries of the western BalkansAlba- The history of the Union can almost be 1995 to oer the countries of the southern nia, Bosnia, Macedonia, Serbia and Mon- written in terms of its struggle to nd alter- Mediterranean market access, plus cash tenegrohave been promised EUmember- natives to membership which it could of- and technical aid, in exchange for econ- ship in principle, but without a timetable. fer to keep its neighbours happy but ex- omic and political reforms, but with no Ukraine wants to join, but may be ten cluded. Each time the Union has failed prospect of membership. The EU will have years away from starting talks. Moldova brilliantly, agreeing to an enlargement and spent almost 9 billion in the region by the and Georgia would love to follow. At the making it work. That is a thought to en- end of 2006, with very little to show in re- back of these countries looms Russia. It courage Turkey, Albania or Ukraine, none turn. The economic performance of the has no desire to join the Union as an ordin- of which will be inside the Union for years region has stagnatedpolitical reform has ary member, but it fears loss of inuence yet, but none of which can decently be ex- also been almost non-existent. Societal in eastern Europe, and it has long tried to cluded for ever, or while the Union lasts, trends, for example tendencies in favour of construct a countervailing block of ex-So- whatever Europe’s current mood. radical Islam, are deeply worrying, ac- viet countries, with itself at the centre. The EU’s latest non-membership strat- cording to a recent study by Michael Emer- This survey will look beyond the recent egy for nearby countries, launched two son and Gergana Noutcheva of the Centre post-constitutional doom and gloom years ago, goes by the name of the Euro- for European Policy Studies in Brussels. about Europe’s future, to argue in favour of pean Neighbourhood Policy. Under this continued enlargement of the Union as policy, the Union oers the countries of The carrot of choice the best way to manage relations with North Africa, the Mediterranean, the If the European Neighbourhood Policy of- neighbouring countries, save for Russia. southern Caucasus and eastern Europe fers the countries of eastern Europe and But it will base that argument on the pro- graduated access to the single market, plus the southern Caucasus much the same in- position that enlargement is turning the nancial and technical aid, in exchange for centives that the Barcelona Process oered Union into a more loose-knit and prag- reforms bringing them closer to the Un- the countries of the southern Mediterra- matic undertaking into which new mem- ion’s political and economic models. But nean, it is in danger of producing much the bers can more easily be ttedif necessary these things are presented as a substitute same results. So far, it is easier to nd rea- by denying them some of the rights and for membership, not as a precursor to it. sons for scepticism than optimism about privileges which older members enjoy. It Countries can aim for a partnership with the European Neighbourhood Policy, say presumes that the French-led rejection of the Union so close that it brings them Ben Slay and Susanne Milcher, econo- the EU constitution, once the dust has set- everything but the institutions, said mists with the United Nations Develop- tled, will encourage movement towards a Romano Prodi in 2002, when he was presi- ment Programme in Bratislava. The Union looser Union, even if that is not what dent of the European Commission. spreads its values most eectively through French voters intended. The French no That makes the European Neighbour- peer-pressure for change, linked to hopes said, in eect, that even France, long the hood Policy something bigger, but not nec- of accession. Without such hopes, govern- ments lose motivation. Aid, even market access, is no substitute. European Union members This survey therefore recommends re- FINLAND Current: Pre-2004 Since 2004 versing the headline aims of the European ATLANTIC NORWAY Neighbourhood Policy, at least where the Probable: OCEAN SWEDEN Hoping to join in 2007 or 2008 Union’s neighbours to the east are con- cerned. It suggests oering membership in ESTONIA Prospective: a e Hoping to start accession name to any country that can meet Eu- S talks soon rope’s basic criteria (of functioning demo- North c LATVIA i t Might join some day cratic institutions, a market economy, and Sea DENMARK a l LITHUANIA B the capacity to implement EU law), but 1. Netherlands 2. Belgium membership with restricted rights. If one IRELAND RUSSIA UNITED BELARUS 3. Luxembourg decisive objection to Turkish membership, KINGDOM 1 POLAND 4. Slovakia GERMANY 5. Slovenia for example, is that Turkey’s big popula- 2 6. Croatia tion will give it too large a voting weight in 3 7. Moldova CZECH REP. UKRAINE the EU’s Council of Ministers, then better 4 8. Bosnia 9. MontenegroKA all round if Turkey is allowed to join the SWITZ. AUSTRIAHUNGARY 7 10. Macedonia Union but with its voting rights restricted, Bay of FRANCE 11. Albania 5 6 SERBIA ROMANIA perhaps giving it no vote on constitu- Biscay ITALY tional issues, and no veto at all. 8 C EU 9 Black Sea This approach would mean that BULGARIA GEORGIA 10 membership, certainly for new members, 11 would count for less. But if this survey is SPAIN A right to see a more fragmented Union GREECE TURKEY PORTUGAL emerging, with more limited political am- IRAN bitions, then membership is starting to MALTA ALGERIA SYRIA count for less anyway. MOROCCO Mediterranean Sea CYPRUS IRAQ TUNISIA The idea that the Union is needed to1 The Economist June 25th 2005 A survey of the EU’s eastern borders 3

But Europe à la carte may yet mean a Alexander Lukashenka. happier and more eective Union, if it This puts pressure on Europe to take means that more things get done. Not all sides. Either it oers these new and future EU countries want to harmonise their cor- post-Soviet democracies the prospect of porate taxes, or share a public prosecutor, membership in some form, which is what or pool their votes in the International they and America would wish. Or it says Monetary Fund, but that is no reason why to them that they do not belong to the sub-groups of them should not agree to do West, but to some vague domain between so. Any trade-o between the widening the EU and Russiawhere, in eect, Russia and the deepening of Europe is proving could dominate them. less simple than advocates of either course Given the deciencies of Russia’s politi- have usually claimed. A widening Europe cal and economic institutions, there is a is a more uneven Europe, deep in some strong case for Europe to reach out more places and shallow in others. boldly to Ukraine, and Moldova, and What matters externally is that Eu- Georgia, just as it should to the western George speaks, Georgia listens rope’s political and economic values Balkans and Turkey. But it is important to should go on penetrating and changing the recognise the resistance to further enlarge- 2 stop its founding members from going to countries round about. It may sound arro- ment that has grown within the Union war with one another has long faded. gant to talk of the Union as oering the countries, and the reasons for it. Further Stripped of its early Utopian rhetoric, the only viable model for European states, but enlargement of the Union in its present Union can be seen as the sum of its func- so far the alternatives are not encouraging. form would mean open borders with the tions and nothing more. Some of those Ukraine and Georgia have revolted against Balkans, Chinese-level wages in some la- functions are good (such as the single mar- a post-Soviet model of crony capitalism bour markets, and Turkey as the greatest ket, and the Schengen agreement to open and rigged democracy. Moldova is half- power at summits in Brussels. There internal borders). Some are bad (such as way to following, and Belarus may do so would be much to be said for each of these the common agricultural policy). All are one day. European liberalism oers Turkey things, but not nearly enough to win over open to debate. It is external security the best hope of preserving its delicate bal- public and political opinion. threats, and relative economic stagnation, ance between moderate Islamic society that worry European countries now, and and secular state. For the Balkans, Europe Ever wider union countries dier about how best to tackle appears to be the only possible escape The issue for the EU is no longer how to ex- them. Flexibility is needed. from post-war poverty and isolation. port stability and prosperity to the coun- Conventional wisdom in Brussels has The main organised challenge to the tries around it. It has learnt how to do that come round to the idea that not every European model comes from Russia, through enlargement. The issue is how to country needs to take part in every Union which covers or dominates the rest of the continue enlarging, how to persuade pub- project. This is already being put into prac- extended continent. Russia is still in a pro- lic opinion within the Union that stability tice, but as the exception rather than the cess of self-discovery, but seems to show a and prosperity can be exported without rule. Only 12 of the EU’s 15 pre-2004 mem- continuing strong bias towards authoritar- importing instability and poverty in ex- bers have joined the euro zone, for exam- ianism, so far of a mild and partial kind. It change. That is doubly dicult when pub- ple, and only 13 of the 15 have imple- is enough to worry most western coun- lic scepticism cuts so deep. A majority of mented the Schengen convention tries but not yet to repel them. EU countries voters in France, and perhaps in other abolishing internal borders. disagree about how best to manage rela- countries too, seems to doubt that the Un- This is the trend that used to be called, tions with Russia, because of their dier- ion is a force for stability and prosperity disparagingly, Europe à la carte, mean- ent interests and dierent experiences even across its present membership. This ing the freedom for countries to pick and there. The main common strand in their re- is dangerous disenchantment. choose between the projects they wanted lations is an imprudent but increasing reli- To meet the neighbours, and to con- to join and the commitments they wanted ance on Russian energy. sider further what continued enlargement, to make within the Union. Once countries The United States is also deeply inter- or the lack of it, might mean to them, this were allowed to diverge in some things, ested in the countries to the east of the EU, survey will begin with those countries the argument went, they would diverge in bringing its own priorities and policies to that joined the EU last year, and those on all things, and the Union would break up bear. America has most to fear from an the point of joining in a couple of years’ altogether. anti-democratic Russia allied with an anti- time, Bulgaria and Romania. It will then In some ways, the Union is indeed democratic China. It needs either a strong adventure into the wider and wilder Eu- growing weaker. The supranational insti- democratic Russia, or a weak Russia re- rope beyond, moving through the Balkans tutions are losing ground against nations gardless of government. In either case, and eastern Europe before coming to rest and governments. Just look at Germany’s prising away the countries around Russia’s on Turkey’s Black Sea shores. It will see and France’s revolt this year against the sta- borders, and building friendly democra- Russia as a country set apart from the rest bility and growth pact, which was sup- cies there, is a step in the right direction. of Europe by history and geography, but it posed to be a foundation of Europe’s That is what George Bush has been doing will look to a Russian monarch, Catherine monetary union; or at France’s overturn- this yearreassuring the Baltics, praising the Great, for the pithiest summary of Eu- ing of the services directive, which would Ukraine, encouraging Georgia’s new pro- rope’s place in the world. I have no way to have doubled the scope of the single mar- western government, and inciting the defend my borders, she once said, except ket; or at the debacle over the constitution. Belarussians to get rid of their dictator, to extend them. 7 4 A survey of the EU’s eastern borders The Economist June 25th 2005

Transformed

EU membership has worked magic in central Europe

Y CULTURE and language, by history have seen their friends and neighbours in Soon they will have it. From the view- B and landscape, the countries that central Europe transformed by EU acces- point of the western European countries, joined the European Union last year of- sion. Having failed to catch that rst wave the transition in central Europe has fered more of a complement than a con- of enlargement themselves, they are now worked almost embarrassingly well. By trast to the existing membership. Slovakia, praying for a second chance. the end of the 1990s, the countries there the Czech Republic, Hungary and Slovenia The EU’s newest members, though had reached a level of political and institu- were recognisably still the Habsburg cous- much poorer than France or Germany, are tional development that made it impossi- ins of Austria, if a little countried by sepa- already a lot richer than they were imme- ble to refuse them membership of the Un- ration. Poland and the Balts echoed an diately after communism’s collapse. In ion, even though their incomes and wages older Hanseatic order. 1991, Poland’s GDP per head was just were still only a small fraction of those in It was only when you asked people $1,998. The EU led the way in central Eu- the older member states. Now their econo- what they earned that the real division be- rope’s rehabilitation, helped by America’s mies are continuing to grow at rates sham- tween the West and the rest became clear. USAID and other international agencies, ing the ones that used to be their models When you crossed the border from Ger- giving or lending $18 billion to central Eu- (see chart 1). This year even the laggard of many into Poland in 2003, average income rope in the 1990s. Just as valuable was the central Europe, Hungary, is likely to grow per head fell by four-fths, from $27,600 in work of multinational companies that more than twice as fast as the euro zone. Germany to $5,400 in Poland. When Ro- bought or built operations in central Eu- The Baltic countries look set to grow at mania and Bulgaria join the EU in 2007 or rope. They set new standards for wages, more than four times the euro zone’s pace. 2008, they will be poorer even than the training, workplace safety and technology central Europeans. According to Deutsche transfer, creating a meritocracy in which Watch them grow Bank, Romania’s average income per head hard work, ethical behaviour and a desire Extrapolate from that, and the implica- in 2005 will be $4,084 and Bulgaria’s only to learn were properly valued locally for tions are startling. Latvian incomes are cur- $3,735, roughly half Poland’s current level. the rst time in decades, says Charles Paul rently the lowest in the EU, but if the Lat- Figures like this help to explain why the Lewis, author of a study on these compa- vian and the German economies were to EU has lost so much of its enthusiasm for nies’ role in post-communist Europe. go on growing at last year’s rates of 8% and enlargement, despite the relative success But even this intervention brought 1.6% respectively, then, all other things be- of the 2004 round. It has grown panicky deep change only because the central Eu- ing equal, Latvian incomes would over- about competition for jobs and invest- ropeans really wanted to anchor their de- take German ones in 2032which is to say, ment from the countries it has just em- mocracies and raise their long-term living within the working lifetime of a young braced. It is reluctant to add to that compe- standards, even at the cost of short-term adult. That should be a thrilling thought tition by promising to admit even more disruption. The accession process gave for Latvians. It should be a thrilling low-wage countries later. The Polish bor- politicians an alibi for unpopular reform. thought for Germans too, since they der is 1,800km (1,120 miles) from London Civil servants spent so much time in Brus- would then no longer have to worry about but 80km from Berlin, says one German sels that they felt as accountable to the low-wage competition. In reality, how- ocial, asked why Britain has opened its European institutions as to their govern- ever, the thought of becoming poorer than labour market to the eastern newcomers ments at home. Voters wanted the West, if a former Soviet republic is likely to make but Germany has not. Germany fears a not for themselves then for their children. Germans unhappier still. free ow of Polish workers, and even more The fear of workers ooding in from Po- of Turkish ones. Turkey’s population of al- land or Estonia has caused all but three most 70m is about the same as the com- New blood 1 countries in western Europe to close their bined total of all ten countries that joined GDP, annual increase, % labour markets to the new members for up the EU last year, and it is poorer than any to seven years. This year France and Ger- of them. Ukraine, another would-be mem- 6 many blocked an EU law opening up na- ber, has 47m people, with an income per 5 tional markets to services from anywhere head of around $1,000 in 2003. in the Union, for fear that self-employed Western Europe’s fears are understand- 4 workers would arrive by this route. This EU10 able but counterproductive. Low-wage 3 French-led move was inexplicable to any- countries next door should be seen more body from a more consumerist society. as a resource than a threat: they attract 2 French trade lobbies gave warning that EU15 business that would otherwise go to low- 1 Polish plumbers would swamp the coun- wage countries on the other side of the try, yet they also agreed that France was world. But can Europe come to see it that 0 desperately short of plumbers. The arrival way? The would-be members among the 200001 02 03 04 of Polish plumbers, even by the thousand, EU’s neighbours can only hope so. They Source: IMF could only have been a blessing. 1 The Economist June 25th 2005 A survey of the EU’s eastern borders 5

2 The new members have also upset the many or France. But it is better for all of Eu- old with their taste for at and often low Europe’s low-cost back yard 2 rope if new investment goes to eastern Eu- rates of personal income tax and corporate Monthly minimum wage, 2003, ¤ rope and not to faraway China or Brazil. tax, chosen mainly for ease of collection. More investment and more growth in low- 0 50 100 150 200 250 Other payroll taxes and indirect taxes wage Europe generates more demand for mean that the overall tax burden in the Croatia goods and services from high-wage Eu- new member states is still similar to that in Hungary rope. That helped Germany to run a trade the old. But France, Germany and Belgium surplus with Poland last year, for example. Poland have accused the newcomers of unfair tax The EU countries with more to fear competition, and called for minimum Czech Republic from further enlargement should be those rates for corporate taxes across the Union. Turkey* in central Europe which are the Union’s Nicolas Sarkozy, when French nance lowest-cost producers right now. Slovakia Slovakia minister last year, suggested cutting EU has had spectacular success in attracting budget payments to new members that in- Romania foreign direct investment, especially from sisted on setting low tax rates. Shanghai† the car industry. Soon it will produce more Investors, by contrast, love the new Bulgaria cars per head of population than any other members for their low wages, high pro- country in the world. But in ve or ten Sources: IMF; China Daily *Gross wages in industry †2004 ductivity and simple taxes. Build a factory years, says Ivan Miklos, the Slovak nance there, and you get EU market access at far minister, the country’s competitive advan- less than average EU costs. According to the ued. Firms will build factories in dicult tage in mass production will slowly but Boston Consulting Group, if you want to places if they have to, but they much prefer permanently decline as Romania, Turkey sell refrigerators or cars in western Europe, places where contracts can be enforced, and Ukraine catch up. Slovakia wants to it can be cheaper to make them in Poland property rights are secure, taxes are pre- encourage more high-tech and service than in China. A.T. Kearney, another con- dictable, executives feel safe, and workers industries by improving the education sys- sulting rm, reckons that the acceptance of get basic social services from the state. tem and the business climate. Ukraine as an EU candidate could quickly Conditions like that help to mobilise do- The Slovaks have it right. Enlargement triple the recent rate of foreign direct in- mestic investment too. is globalisation in miniature. If the EU vestment there. holds its neighbours at bay, it is putting o But it was not only EU market access, In our back yard a shock of adjustment that will get bigger granted progressively to the central Euro- If Ukraine and Turkey are brought inside and bigger the longer it is delayed. Ger- pean countries through the 1990s, that at- the EU, they will create, together with Ro- many has 5m unemployed, not so much tracted investors to the region then and mania and Bulgaria, a low-wage industrial because old jobs in old industries are van- continues to attract them today. It was also powerhouse in Europe’s back yard, a zone ishing there (though they are) but because the expectation that the rule of law and the of 150m people able to compete even with an inexible German labour market deters quality of government would rise towards China or India (see table 2). That thought rms and individuals from creating new EU levels as the accession process contin- might frighten highly paid workers in Ger- jobs in new industries in which German1

What post-communist countries Climate change need to ourish

HE further east you went in the rst much of the Balkans, and in much of the multitude of sins, but the kind most Tdecade after communism, the more Commonwealth of Independent States harmful to a whole country is state cap- remote the European Union became, and (the ex-Soviet Union minus the Baltics). ture, whereby a group of political and the easier it got for crooks and populists to Often, the new ruling groups defended business insiders bribes or bullies its way capture power. In every post-communist themselves by claiming that conditions in into control of a ministry or a govern- country, the rejection and collapse of the the country were not suited to reforms ment agency and then runs it for its priv- old order forced at least some shaky rst along western lines. The most common ate prot. State capture may establish a steps towards democracy and the market feature of laggard countries was a drift in hidden political regime at odds with the economy. But this progress soon faltered policymaking and a search for a peculiar constitutional purpose of state institu- if predatory groups of rich and violent national model of development at the tions, says Rasma Karklins, a political sci- people could invade and capture govern- level of theorising, says Laszlo Csaba, a entist at the University of Illinois. It ment, rigging privatisations, stealing pub- political economist at the Central Euro- undermines democracy as well as econ- lic money and blocking further reforms pean University in Budapest. omic growth. That may be a large part of that might encourage more competition The inverse of reform in post-commu- the reason why democracy and growth in business or in politics. nist countries was, for all practical pur- have gone hand in hand in the post-com- This was the story of reform in poses, corruption. The term covers a munist world. 6 A survey of the EU’s eastern borders The Economist June 25th 2005

2 companies are still world-beaters. The central Europeans’ experience sug- where, despite a customs union with the All the same, tactically it may be a good gests that the more assured Turkey and Uk- EU, foreign direct investment has been idea to accept that free movement of la- raine can be of EU membership, the more much lower than in most central European bour is incompatible with further EU en- foreign investment they will get. countries relative to the size of the econ- largement, not for economic reasons but If, on the other hand, these countries omya fth of the Czech Republic’s level for political ones. If rich countries want to are kept outside the EU, investors will ex- and a third of Poland’s between 1994 and block cheap labour, let them do so. Europe pect political and economic reform there 2003. Less investment means fewer jobs at has capital mobility to compensate. If to be slower and less secure. Investment home, lower incomes, less trade and more workers cannot come looking for the jobs, will be lower, and growth with it. Some- pressure on workers to nd jobs else- the jobs will go looking for the workers. thing of the sort has been visible in Turkey where. Everyone loses. 7 Taming the Balkans

Could EU accession do the trick?

OR a gruelling decade, the world it published its annual White Book on tional questions. Why have things not Fviewed the Balkans through the prism business conditions in March. On paper turned out quite that way? of the region’s most strife-torn country, things might be looking better, it said, but: Part of the problem is that, even in says Ivan Krastev, a Bulgarian political sci- times of peace, the power and assets of a entist. In the early 1990s that country was The adoption of laws without implementa- weak state are still up for grabs, especially Croatia or Bosnia. By 1999 it was Kosovo, il- tion and enforcement achieves little[The] if the state has been federalised and if the momentum which Serbia’s transition pro- luminated by the bombing of Belgrade. cess had gathered in earlier years has now constitutional order has not been en- Two years later attention shifted to Mac- dissipated. trenched beyond any expectation of edonia, brought to the brink of civil war by change. The country will be restless, com- ethnic tensions between Macedonians There are patches of relative optimism munities will compete, the rule of law will and Albanians. These successive crises here and there. This year the International be fragile, the government will be frac- promoted the image of a whole region in Monetary Fund praised as remarkable tious, private investment will be risky. So it continuing turmoil, even though the worst and commendable the economic perfor- is across the Balkans. Whatever the nal was over by 1995. mance of Albania, where real incomes constitutional order is going to be for any This pessimistic view did at least have have doubled since 1998. Macedonia’s of these countries, the important thing is one redeeming quality. It allowed outsid- constitutional order has been looking that its nality should be obvious to every- ers to hope that, when peace was restored more robust since voters allowed a new one, and universally accepted. across the region, everything else would law on local government to pass late last start to come right. Economic recovery year. But by and large, the coming of peace No loose ends would provide the foundations on which to the Balkans has merely allowed the That is one argument for giving indepen- durable and free-standing democracies deep problems of state weakness, and of dence to Kosovo and Montenegro now. In- could be built. But now peace has indeed incomplete state-building projects, to be dependence for both would have an air of been restored, and yet the good news more seen more clearly. nality about it which a loose federation or less ends there. Economic recovery has The open status issues of Kosovo and or a special jurisdiction never could. Sepa- been patchy, and has not yet led to irre- Montenegro obstruct the normalisation of ration would allow those new countries, versible and locally rooted political political life in Serbia, the western Balkans’ and Serbia, to concentrate on the quotid- change in most of the region. biggest country, and thus overshadow the ian business of economic reconstruction, The International Commission on the whole region. International talks on the fu- and of capacity-building in government, Balkans, a non-governmental body of ex- ture of Kosovo, which legally is still part of without national questions to distract perts led by Giuliano Amato, a former Ital- Serbia, are due to begin later this year and them, and with nobody else to blame for ian prime minister, published a report in may well lead to eventual independence. their problems. April that gloomily reected: The future of Montenegro may be decided Opinion polls show that most commu- by a referendum next year. The choice is nities in the Balkans are ready to accept the The region is as close to failure as it is to suc- between independence on the one hand sort of order which most western govern- cess. For the moment, the wars are over but and the status quoa loose federation ments would like to see installed there. the smell of violence still hangs heavy in the with Serbiaon the other. This would mean independence for Ko- airEconomic growth in these territories is low or non-existent; unemployment is high; Outsiders hoped and assumed a few sovo, probably in stages, severing it from corruption is pervasive; and the public is years ago that peace in the Balkans would Serbia but denying it union with Albania. pessimistic and distrustful towards its na- free people in the region to concentrate on It would mean independence for Monte- scent democratic institutions. economic development. Voters would negro. And it would mean making the best push leaders to worry much more about of Bosnia as a hybrid state, half run by The Foreign Investors’ Council of Ser- raising living standards and much less Serbs and half by Bosniaks and Croats. bia sounded only slightly less bleak when about re-opening quixotic and violent na- Fears that independence for Kosovo1 The Economist June 25th 2005 A survey of the EU’s eastern borders 7

2 might inspire fresh independence strug- gles among Serbs in Bosnia and Albanians in Macedonia may be exaggerated. Polls show that Bosnia is no longer what the Amato commission calls a highly con- tested state. Most Serbs in Serbia, and al- most half the Serbs within Bosnia, do not want to break Bosnia up and join its Serb half with Serbia. Across the region, there is a consensus view that Serbia and Monte- negro will probably go their separate ways (even though most Montenegrins cur- rently want to keep the status quo), and that this separation will be a good thing. Most Macedonians strongly reject the idea of dividing Macedonia into Macedo- One day, Croatia’s boat may come in nian and Albanian statelets, and joining the Albanian part of it with Albania itself. them in order and in funds. On a per-head That was enough to derail Croatia’s Albanians are very slightly in favour of it, basis, the world has put 25 times as much hopes of opening talks with the EU in mid- but most do not think it will happen. The money and 50 times as many troops into March. The EU postponed them the day one possible upset is over the question of Kosovo as it has put into post-conict Af- before they were due to start, mainly at the joining Albania with an independent Ko- ghanistan. The aid the EU has given to the urging of Britain, and over the objections sovo. Kosovo Albanians are keen on the Balkans in recent years dwarfs the of Austria and Hungary. The right out- idea, Albanians in Albania just about in fa- amounts given to other countries on its come would be a reform of Croatia’s intel- vour, and both think it is more likely to borders (see table 3). ligence services and special police to sack happen than not. or demote those responsible for shielding If the commission and its polls are Croatia’s credentials Mr Gotovina. Even if that does not pro- right, therefore, the public mood in the Bal- The road to EU membership is currently duce the man himself, it would at least kans may be ready for some big steps for- being explored by Croatia, which nished show that the elected government had ward. The acquiescence of the Serbian its territorial war and its ethnic cleansing gained full authority over the state secu- government in Belgrade will be the key to a in 1995. The completion of those projects, rity services, which in March was still far peaceful break-up of the country and its followed by the death in 1999 of the coun- from clear. approval by the United Nations. If the gov- try’s veteran leader, Franjo Tudjman, al- Croatia can scarcely aord to drag its ernment in Belgrade objects, then China lowed a line of sorts to be drawn between feet. The job of reforming its public admin- and Russia will probably take its side in the wartime Croatia and its post-war continu- istration and its economy looks like at least UN Security Council, blocking progress ation. Croatia re-cast itself as a more or less ve years’ hard work. The state controls and perhaps provoking fresh unrest in Ko- liberal democracy where nationalism had too much and delivers too little. Public sovo. The question is how to win Serbia been tamed, a country still a little rough spending accounts for fully half of GDP. over. Probably the only answer is by giving round the edges but ready and willing in Public debt rose from 30% of GDP in 1995 it a faster track towards EU membership. principle to form part of a peaceful and or- to 55% in 2003. External debt doubled from The next question is whether the EU is derly Europe, a place where moderate na- 41% of GDP in 1997 to 82% in 2003. Key ready for that. If that strategic bargain can tionalists could provide a soft landing for health indicators are far below EU aver- be struck, then it will become harder to exhausted or failed nationalist projects, in ages. Half the beneciaries of social assis- deny the remaining countries of the Bal- the words of Jacques Rupnik, a French po- tance are able-bodied but unemployed. kans a fast track too. Otherwise, what will litical scientist. Only 60% of adults have had more than be left there? A sink of countries seemingly But Croatia exaggerated the depth of its eight years of schooling. unable to generate the hope and con- transformation for foreign consumption, Working in Croatia’s favour are two dence needed to trust their own govern- and perhaps ended up believing some of main factors. By the standards of EU candi- ments, let alone the neighbouring ones, its own publicity. It thought, wrongly, that dates it is relatively rich, with a GDP per and obliging the rest of the world to keep other European countries were so keen to head of $7,700 last year, more than twice put the ghosts of the Balkan wars behind the level in Bulgaria or Romania. And it them that they would forgive Croatia’s fail- has a beautiful Adriatic coastline, making Nearest and dearest 3 ure to co-operate fully with the United Na- it a favourite holiday destination for mil- Development aid received per person, 1995-2002 tions war-crimes tribunal in The Hague. lions of Europeans, a sentimental factor Region ¤ The tribunal’s most wanted fugitives in- not to be underestimated. It can be hopeful EU Balkans 246 clude Ante Gotovina, a Croat general of entry by, say, 2010 if only it can solve charged with ethnic cleansing during the Gotovina problem (and, of course, if South and east Mediterranean 23 Croatia’s war with the Serbs. Carla del the EU is still in business then). European CIS 9 Ponte, the tribunal’s chief prosecutor, said But the graduation of Croatia from the Central Asian CIS 4 the Croats could do much more to help badlands of the Balkans to the safe haven Source: “European Neighbourhood Policy: Strategy or Placebo?” nd him; the Croats said they had no idea of the EU will only increase the sense of by Michael Emerson, Centre for European Policy Studies, 2004 where he was. isolation and abandonment across its hin-1 8 A survey of the EU’s eastern borders The Economist June 25th 2005

2 terland. The International Commission on map to membership. in Brussels, and vested in an EU accession the Balkans proposes a general solution Macedonia would be invited to start EU negotiator there. The hope would be that that is admirable in its detail and its direct- accession talks by the end of that year. Ser- all these processes could be completed, ness. It says that Kosovo should be bia and Montenegro, as one or two coun- and the EU enlarged into the Balkans, by launched on a phased transition towards tries, would also be invited to start negotia- 2014. Europe’s present mood does not fa- full independence and sovereignty, for the tions or, failing that, would be oered a vour that outcome, but it is hard to think of rst few years of which the international Europe Agreement similar to those given one that might work better. community would reserve powers over to central European countries before they The solution proposed by the Amato human rights and minorities. Once that began negotiations. Albania would be of- commission mixes practicality with ro- was agreed, and Montenegro had decided fered the same sort of deal, and invited to mance, optimism and desperation. Proba- whether to stay with Serbia or go it alone, join NATO. The powers of the Oce of the bly all those things are needed in equal the EU should convene a Balkan confer- High Representative in Bosnia would be measure if the Balkans are ever to be ence in 2006 and give each country its road transferred to the European Commission helped to help themselves. 7 A bearish outlook

The EU’s relations with Russia are bad and may get worse

OR most of the past 500 years, the idea There are six major features of Russia which It invaded them, unprovoked, within liv- Fof Europe has served to dene a shift- must be taken into account today. First, to- ing memory. France sees Russia as a great ing huddle of western countries seeking to day Russia has no independent judicial sys- diplomatic ally, another counterweight to distinguish themselves from two great Eur- temSecondlyRussia has no elements of America. Germany sees it as a vital econ- [an] independent parliament. Third, Russia asian powers in the east: the Turks and the omic partner, an indispensable supplier of has no public or parliamentary control on Russians. Now both Turkey and Russia secret services and law-enforcement struc- gas. Britain is somewhere in the middle, think that they should be seen as part of tures. Fourth, Russia has no [powerful] inde- shifting from optimism about Russia to- Europe too. And Europe, as represented by pendent media. Fifth, elections in Russia are wards scepticism. The result is an absence the European Union, more or less agrees. [subject to] very substantial pressure from of common policy, and in place of it a com- The idea is pleasing, but the implications the authoritiesLast, but very important, petition for Russia’s friendship between are perplexing. Russia has an economic system which is in France and Germany, which Britain used Turkey wants to become a full member fact a 100% merger between business and to join but rarely does now. of the Union (for its chances of getting in, authoritiesEvery single important bureau- Relations could probably carry on that crat in Russian government or Russian ad- see next article). Russia does not seriously way, save that America’s policy towards ministration is at the same time deeply want to join the Union, mainly because, involved in businesses or represents their in- Russia and its neighbours has been chang- like America and China, it sees itself as a terests. ing, with and since the orange revolution country too great to accept constraints on in Ukraine. It is forcing choices on Europe. its sovereignty. But at the same time Russia Very roughly speaking, and ignoring To most west Europeans, the orange hates the thought of being excluded from the rest of the former Soviet Union, Russia revolution was an inconvenience, some- anything. Ideally, it would like a special today is arguably where it might have thing that would trouble relations with relationship giving it visa-free travel in EU been if it had avoided perestroika and the Russia and bring Ukraine to the EU’s door countries; generous access to the single collapse of communism, choosing instead as an unwanted candidate. Americans market through what it calls the Com- a Chinese path of strictly limited freedom. saw it dierently, as the most inspiring mon European Economic Space, a loosely Under Mr Putin it has moved close to event in Europe since the fall of the Berlin dened agenda of trade and market poli- China’s model of a one-party state, in Wall and the revolt of the Baltic states. cies; and a voice but not a vote in EU poli- which the ruling party (which in Russia is They were pleasantly surprised by the cymaking, of the kind it already has in more of a clan), though a monopoly, culti- scale and the relative ease of Viktor Yush- NATO aairs. vates real popularity as a source of stabil- chenko’s triumph over a Russian-backed Those hopes are ambitious but not ab- ity and legitimacy. challenger, and by what it revealed about surd. They could all be realised within the The EU would be foolish to institution- the weakness or incompetence of Russia space of ve years if Russia now pos- alise closer ties while there is any risk that under Mr Putin. A stronger or cleverer Rus- sessed, or was moving condently to- Russia will go on moving in this direction. sia would have found a way to keep con- wards, a liberal and democratic political Even if the EU feels comfortable with Rus- trol. Russia also damaged itself in Ameri- model. But for the moment, to judge from sia now, that may change. Cutting new ties can eyes by renationalising the Yukos oil the way President Vladimir Putin’s second would be far more awkward, and far more company. That has depressed potential in- term has gone so far, Russia is moving in insulting to Russia, than avoiding them in vestment and output across the Russian oil the opposite direction, towards increased the rst place. industry, just when America would have authoritarianism. As one liberal Russian EU members dier widely in their atti- forgiven Russia almost anything in ex- politician, Grigory Yavlinsky, summarised tudes towards Russia. To the Balts and the change for more and cheaper oil. the trend in a talk last year: Poles, Russia is a clear and present danger. Perceptions of Mr Putin’s weakness1 The Economist June 25th 2005 A survey of the EU’s eastern borders 9

2 and drift, revealed and increased by the is sending the right signals: it started an complete condence. It has spent most of loss of Ukraine, appear to have become a intensied dialogue with Ukraine in this year ghting res instead of sticking new driver of American policy. America April that is widely seen as a prelude to to the intended agenda, says one adviser. calls openly for the ousting of Alexander membership. Rivalries between ministers have made Lukashenka, the pro-Russian dictator of Nothing of that sort is currently in pros- things worse. Anders Aslund, head of the Belarus, implying another revolution pect on the EU side, however. The EU has Carnegie Endowment’s Russian and Eur- there. In May George Bush visited Tbilisi to nudged Ukraine not to press publicly for asian programme, says Mr Yushchenko’s give public support to Mikhail Saakashvili, early membership, in exchange for which prime minister, Yulia Timoshenko, has the pro-western president of Georgia, who the EU maintains a studied ambiguity been pursuing socialist and populist is trying to close down Russian military about Ukraine’s hopes of ever joining. Uk- policies by raising state wages sharply, bases on his soilRussia says it will leave raine has done its best to obey that gagging weakening property rights and increasing by 2008and regain control over Russian- order, but its hard-pressed new govern- the tax burden. That contributed, Mr As- backed separatist enclaves. Only a year ment is starting to hunger for some more lund says, to a fall in the rate of economic ago, America, although sympathetic to constructive arrangement. Mr Yush- growth from 12% last year to 5% in the rst Georgia, was far more reticent. chenko has proposed opening the ques- four months of this year. This American assertiveness leaves the tion of Ukraine’s candidacy if and when In one sense, that might seem to hold EU struggling to decide how to react. So far Ukraine successfully completes an action some comfort for the EU. If the Yush- Europe’s record has not been good. When plan of economic and political reforms al- chenko government does badly, there is Ukraine’s orange revolution was gathering ready agreed on with the EU, which even less pressure on the EU to take Uk- pace, west European governments were should take about three years. raine seriously as a candidate. But that conspicuous by their hesitation. Luckily That sounds a good compromise, the analysis is dangerously short-sighted. Uk- for Europe’s self-respect, Poland sized up sort of thing the EU should endorse. But raine has to come right, for its own sake the situation and, helped by Lithuania, the view in most western European capi- and for Russia’s. Russia is too big and too joined America in pushing for a fair elec- tals is that it will be at least ten years before obstinate (and too tired of bad foreign ad- tion and an orderly transfer of power. the EU is ready to start talks about talks vice) to take any notice of the EU’s preach- More recently, the EU has spurned Geor- with Ukraine, and then only if it has more ing on democracy and political reform. It gia’s plea for a mission to monitor its bor- or less nished negotiations with Turkey. might possibly be inuenced, on the other der with Russia. One or two EU governments may even be hand, by the spectacle of a ourishing Few doubt that durable democracy- temporising deliberately as a way to reas- European-style market democracy in Uk- building in Ukraine will be much easier if sure Russia, a more important goal in their raine, a country which Russians still feel to Ukraine has a clear prospect of EU mem- eyes than reassuring Ukraine. be an extension of their own. bership within a meaningful time-frame. None of this is to say that bringing Uk- Ten years might be manageable, so long as raine into the EU would ever be an easy Leading by example other institutional ties came much sooner, job. Ukraine is a big and very poor coun- This is a long shot. If a more authoritarian giving Ukraine the sense of having joined, try, with a strongly russied east. The Russian regime is well entrenched and the irreversibly, the European family. NATO Yushchenko government has yet to inspire economy is doing ne, a democratic Uk- raine might well make very little impact at all. But if Ukraine’s orange revolution does collapse, it is certain to extinguish any last support for liberal democracy which may have gone on ickering in Russia under Mr Putin. If Ukraine fails, with it goes any hope of changing Russia for the better in this generation, and with it any hope of a Russia that can rub along with Europe in genuine friendship. The stakes are lower when dealing with the two other countries caught be- tween Russia and the EU. But they are still worth playing for. One of them, Belarus, is a poor, sad place, isolated from the West since Mr Lukashenka took power 11 years ago. In that time he has descended from crude paternalism to outright dictatorship, supported by Russia. Popular revolution will be much harder in Belarus than it was in Ukraine or Georgia, because Mr Luka- shenka has left no room for dissent to mo- bilise. He has bankrupted local NGOs and driven out foreign ones. His government controls all broadcast media and most Where Europe leads, will Russia follow? print media too. Sparse private business1 10 A survey of the EU’s eastern borders The Economist June 25th 2005

2 survives only with the state’s blessing. Po- condemn the dictatorship in Belarus, they Od e TRANSDNIESTRIA litical challengers risk being kidnapped or ssa-Brody Selected will make these adventures much more MOLDOVA Oil Gas killed. UKRAINE C expensive for Russia politically, at no great Tiraspol Chisinau Odessa U The other post-Soviet state, Moldova, is Sea of cost to themselves. crippled by a Russian-sponsored separat- Azov RUSSIASource: Pe That will probably not spell the end for BucharestROMANIA CHECH ist regime in its eastern province of Trans- INGUSHETIA Mr Lukashenka, at least until Russia nds Novorossisk DzhubgaABKHAZIA SOUTH Grozny dniestria. Russian troops helped local Rus- m OSSETIA someone tamer who can still keep Belarus a BULGARIA e Black Sea r t Burgas s Sukhumi Pankis sian settlers win a brief but bloody war of e Gorge a no-go area for the West. But Transdnies- Bosporus lu B Tbilisi secession there after the Soviet Union col- Istanbul GEORGIA tria, South Ossetia and Abkhazia are an- Samsun lapsed in 1991, amid spurious claims that ARMENIA other matter. Their continued existence Erzurum AZERBAIJ Moldova might be swallowed by Roma- Ankara Yerevan serves the interests of crooks and national- AZ. nia. The Transdniestrian enclave now TURKEY ists and generals inside Russia, not the Rus- 400 km IRAN oods the rest of Moldova with untaxed BTC sian government or state. Russia might let spirits and consumer goods smuggled in these enclaves go if they were doing seri- through Ukraine. It exports steel and small just as far outside the law. And Mr Luka- ous damage to its standing in the world. arms through Ukraine by day, and much shenka’s dictatorship in Belarus would At the moment, however, most Euro- nastier things by night. Transdniestria is, in have trouble surviving three months with- pean leaders prefer to atter Mr Putin. eect, a big criminal racket with a small out Russian support. The Kremlin does Even if they see his faults, they fear that piece of land attached. Partition has para- not like Lukashenka, but it likes the orange whatever comes next will be worse. This lysed and disoriented Moldova, making it revolution even less, explains Anatoly Le- may be so. But the answer, surely, is to do the poorest country in Europe and the only bedko, one of Mr Lukashenka’s brave op- something to reverse that trend. post-communist country to have re- ponents. Europe has a better political and econ- elected an unreformed communist party. omic model to oer, but it has to make the But even Moldova’s communists have Straight talking virtues of that model clear to everyone. switched their allegiance from Russia to Here lies one way forward for Europe, and That means criticising Mr Putin’s govern- the West, unable to stomach Russia’s con- everyone else, in relations with Russia: ment for its undemocratic behaviour at tinued support for Transdniestria. brutal honesty. Whatever else Russia home and its anti-democratic behaviour It beggars belief that Russia can claim craves, it always craves respect. If western abroad. It means giving support to coun- international respectability while at the leaders challenge Mr Putin publicly about tries around Russia that want to do things same time propping up Transdniestria and the smuggling and criminality in Trans- dierently. The aim of all this is not to two other separatist enclaves in Georgia, dniestria and South Ossetia each time they weaken Russia, but to strengthen it, by en- South Ossetia and Abkhazia, which are meet him, and if they press him publicly to couraging it to govern itself better. 7 Too big to handle?

Turkey’s application to join the EU is causing anxiety on both sides

HE desire of Turkey to join the Euro- the 1990s, marked by civil war, secular-Is- against women, were incompatible with Tpean Union may well be the greatest lamic polarisation, authoritarian procliv- [Europe’s] common values. tribute ever paid by an outside power to ities, economic crisis and systemic corrup- Last year the EU declared itself ready to the EU’s brand of liberal democracy. Both tion, in the words of Omer Taspinar, open negotiations with Turkey this com- Turkey’s secular elite and its moderate Is- co-director of the Turkey programme at the ing October so long as Turkey met some lamic-backed politicians think that Eu- Brookings Institution, an American think- last pre-conditions, mainly by bringing an rope’s pluralist model can best protect tank. It had suered three military coups amended penal code into force and ex- their values and interests. With a lot of since 1960, four if you counted the army’s tending its customs-union agreement with luck, both might be proved right. help in bringing down a government in the EU to cover all the new members, in- But reaching an accommodation with 1997. Weak and shifting coalition govern- cluding Cyprus. Turkey duly implemented Turkey also presents one of the biggest ments were the rule until the centre-right the code in June and was also expected to challenges faced by the EU in more than 30 AKP party, appealing to moderate Islamic extend the customs-union agreement, years of admitting new members. Turkey voters, won a landslide victory in 2002. though without meeting Cypriot de- is big, poor and populous. It sprawls from Turkey still falls far short of European mands for access to Turkish ports and air Europe into Asia. Its people are over- standards in many areas of human rights, space. Cyprus has been a sore point in whelmingly Muslim, although its political despite recent bold reforms. The German Turkish-EU relations since Turkey invaded institutions are secular. The EU’s decision chancellor, Gerhard Schröder, one of Tur- the northern part of the island in 1974 and to declare Turkey a candidate for member- key’s staunchest friends within the EU, installed an illegal government there. Cy- ship in 1999, 12 years after Turkey formally said in May that the country’s heavy- prus joined the EU last year despite this de applied, was a bold move. Turkey was just handed policing methods, limits on free- facto partition. Hopes for reunication starting to emerge from a lost decade in dom of expression, and discrimination have come to rest mainly with a United1 The Economist June 25th 2005 A survey of the EU’s eastern borders 11

gotiations or even after, that the EU had changed its mind about membership, then Turkey would not feel privileged at all. On the contrary, it would feel frustrated and embittered, and understandably so. The politicians who had bet their credi- bility on taking Turkey into the EU, and who had carried out controversial reforms as part of that project, would be discred- ited. Their reforms would be reviled, per- haps reversed. The country might retreat towards radicalisation and polarisation, in a geopolitical climate much more danger- ous than that of the 1990s. Italy’s foreign minister, Gianfranco Fini, said in May that a rejection from Europe at this stage might Turkey’s policing methods didn’t go down well in Europe be enough to turn Turkey from moderate towards fundamentalist Islam. What price 2 Nations peace plan that Turkey is willing to setting nationalists and traditionalists. a privileged partnership then? swallow, but which Cyprus thinks is too This friction on the right may have A Turkey successfully integrated into generous to the occupier. played a part in the slowing of Turkey’s re- the EU, on the other hand, would be a great Even if the accession talks do get started form programme this year, after the EU’s achievement in many ways. It would be in October, the EU has gone out of its way agreement in December to open accession evidence, to quote Mr Fini again, of the to say that a successful completion cannot talks. The EU’s chief of mission in Ankara, compatibility of Islam with democracy, be presumed, still less guaranteed. At best, Hansjörg Kretschmer, in March spoke of setting an example for the Middle East be- an accession treaty with Turkey may be ten slippage. He had in mind restrictions on yond. It would bring an end to the division years away. Even if one does comes then, foreign property ownership and on reli- of Cyprus, removing the main potential France has promised a referendum on fur- gious minorities, together with policing trigger of fresh strife between Turkey and ther EU enlargement, which in the present methods. The last of those made western Greece. It would align more closely the in- climate of opinion would certainly go headlines on March 6th when Turkish po- terests and the memberships of the EU and against Turkey. Fear of Turkish entry prob- lice beat women demonstrators in Istan- NATO, so reducing the scope for tensions ably played a signicant role in the French bul. Instead of condemning the police, the between the two: a separate European de- rejection of the EU constitution in May. government defended them. fence capability would become both eas- Turkey’s international image slipped ier to manage and less necessary. Member or partner? further in April, with the commemoration With Turkish accession, the EU would A change of government in Germany may of the 90th anniversary of Turkey’s mass extend into the southern Caucasus, help- do even more to hurt Turkey’s perceived murder of Armenians in 1915. The govern- ing to stabilise new pipeline routes bring- chances, if Mr Schröder loses the early ment struggled to defend the Turkish ver- ing oil and gas westward from the Cas- election which he has called for the au- sion of events, and above all to reject pian. These will lessen Europe’s energy tumn. Opinion polls say that the next Ger- charges of attempted genocide, when an dependence on Russia. A pipeline running man government will be led by the Chris- apology for the many deaths that un- from Baku in Azerbaijan, through Georgia, tian Democrats. Their policy is to make doubtedly occurred, or simply a respectful to Ceyhan in Turkey, loaded its rst oil in Turkey a privileged partner of the EU, silence, would have gone down much bet- May. A European Turkey would also be un- but not a member. The rest of Europe ter abroad. der strong diplomatic pressure to normal- knows that relations with Turkey are a vi- But if the government of Recep Tayyip ise relations with Armenia, drawing Ar- tal national issue for Germany, which has Erdogan has not been looking its best this menia closer to the West and opening up a resident Turkish minority of almost 3m. year, it can still point to some impressive new possibilities for peace between Arme- Germany is also the biggest net contribu- achievements since the prime minister nia and Azerbaijan. Georgia’s hopes of fol- tor to the Union’s budget. Germany alone took oce, including scrapping state secu- lowing Turkey into the EU would be quick- could not secure Turkey’s admission to the rity courts, cementing civilian control of ened, which would be all to the good. Union, but it could certainly block it. the army, allowing Kurdish-language Georgia deserves much more support and A privileged partnership with Turkey teaching and broadcasting, and shaking encouragement from the EU for the politi- might sound like a good compromise to up the judiciary. These are the sort of cal and economic reforms it has pushed many on the EU side. It may even sound at- things a country does when it is very seri- through since President Saakashvili won tractive to a rising number on the Turkish ous indeed about trying to join the EU. power in the rose revolution of 2003. side, where enthusiasm for Europe has They are not, however, the sort of America would like few things more been declining, though it is still high. A poll things a country does merely to have a than to see the EU and NATO working to- in May found that two-thirds of Turks privileged partnership. Russia claims a gether to stabilise the Black Sea and the wanted to join the EU, down from three- partnership with the EU, but makes no southern Caucasus. Energy exports aside, quarters a year earlier. Commentators said concessions to the EU’s political or social the region oers a bridgehead into what that the social and political changes agenda at all. If Turkey was to be told now, America calls the Greater Middle East, use- needed to please the Europeans were up- on the brink of starting its membership ne- ful for projecting democratic values and1 12 A survey of the EU’s eastern borders The Economist June 25th 2005

2 military force. America has lobbied Eu- rope repeatedly in past decades to be more welcoming to Turkey. Bringing Turkey into the EU would probably be easier now if both could turn to Washington as a com- mon friend.

Iraq’s shadow Worryingly, however, relations between Turkey and the United States have deterio- rated signicantly since Turkey refused use of its territory for the invasion of Iraq in 2003. Turkey has fretted since about the possibility of a Kurdish state emerging in northern Iraq, giving fresh impetus to Kurdish separatism across the border in eastern Turkey. The choice this year of a The old way for Turks to join the EU Kurd, Jalal Talabani, as president of Iraq, may have helped calm Turkish fears, by entering a dicult and problematic period both for itself and for US-Turkish rela- giving the Iraqi Kurds a stronger interest in stagethe ruling AK party seems to have tions, which deserves serious attention. national unity. taken a turn for the worse, characterised by That may be a harsh assessment. The In testimony to the Senate this year, strident anti-Americanism, cultural anti- Turkish government would certainly Bruce Jackson, an inuential American Europeanism and a resurgent xenophobia- claim so. Its ministers have been insisting NATO Perhaps most worrying are reports of lobbyist for expansion, said re- Turkish-Russian discussions of a co-ordi- repeatedly this year that the talk of pro- newed tensions in Turkish-American rela- nated policy in the Black Sea region which blems with America has been overblown. tions were a sign that would inevitably be conducted at the ex- As if to argue the point, Mr Erdogan made Turkey’s national and geopolitical identity pense of smaller pro-European democra- his third ocial visit to Washington, DC, in crisis is far from over and that Turkey may be ciesTurkey has entered a dangerous early June. A month earlier he had been1

Getting closer to Europe is good The 4% solution for economic growth

URKEY’S population of 70m is grow- tion is forecast to pull ahead of Ger- Daniel Gros, director of the Centre for Ting at 1.1% a year, whereas that of most many’s, reaching 85m or more in 2035, European Policy Studies in Brussels, ar- EU countries is stable or shrinking. Ac- whereas Germany’s may fall below 80m. gues that if Turkey can improve its busi- cording to Deutsche Bank, by 2020 the If west European countries ever get seri- ness climate, attract more foreign invest- median age in Turkey will be only 32, ous about liberalising their labour mar- ment and redeploy its workforce more compared with 45 in western Europe. kets and creating jobs, Turkey can supply productively as part of a successful EU ac- Around the same time Turkey’s popula- all the manpower they will need. Con- cession, then over the long term its an- versely, if they decide to keep cheap la- nual growth rate could be 3-6 percentage bour at bay, Turkey is the last country points a year ahead of that in west Euro- Pick your scenario 4 they will want at the door. pean countries and 1-3 points a year GDP per person, $’000, PPP Deutsche Bank suggests three possible ahead of central European countries. 12 scenarios for Turkey over the next 15 Long-term forecasting is a particularly “Turkey in Europe” years. In the rst, Turkey pursues the inexact science as applied to Turkey, Mr “Back to the 1990s” economic and political reforms needed to Gros notes, because its recent perfor- “Turkey in the 10 converge with the EU; in the second, it mance has been so volatile. Given the Middle East” drifts back to the weak governments of macroeconomic instability of the past de- the 1990s, but with less economic volatil- cade, it is almost a surprise to nd Turkey 8 ity; and in the third, it is destabilised by notched up any growth at all over that geopolitical uncertainty, kept at bay by period. But Mr Gros nds perverse en- the EU and polarised by tensions be- couragement in its recent record. If the 6 tween secular and religious forces. The Turkish economy could survive the politi- long-term annual growth rates associated cal ill-treatment it received in the 1990s, 200306 09 12 15 18 21 with these scenarios are, respectively, he says, then deep down it must be very Source: Deutsche Bank Research 4.1%, 3.1% and 1.9% (see chart 4). robust indeed. The Economist June 25th 2005 A survey of the EU’s eastern borders 13

2 reaching out indirectly to America by visit- Iraq. It is rather as though Turkey’s pro- Now that Turkey is approaching its EU ing Israel, trying to repair relations which Americanism worked well so long as entry talks, it may be discovering that Eu- touched a low point last year when he ac- America kept a respectful distance. It rope, too, looks better from a distance. Ac- cused Israel of practising state terrorism works less well when America is in Tur- cession talks can be humiliating at times, against Palestinians. key’s back yard, shaking up countries and Turkey may be less good than the cen- But still, America must doubt very nearby and casting covetous eyes on the tral Europeans were at quietly putting much that Turkey shares its vision of radi- Black Sea. At such a point, says one west- aside national pride. It is, after all, the cal change in the Middle East. The funda- ern diplomat, Turkey’s older instincts rump of an empire with a history as long mentals of Turkish policy there include im- break ground. Where regional politics are and lofty as Europe’s own. That makes its proved ties with Syria, touchy relations concerned, it shows itself to be a status accession to the EU all the more desirable, with Israel and fear of further upheaval in quo power, not a force for change. and all the more dicult. 7 The shape of things to come

The European Union should go its dierent ways

HIS is my grandfather’s axe, as a ship would still be enough to promote ence to their neighbours to the east. They TPolish saying has it. My father deep political and economic change in can oer reassurance that the principles of changed the blade, and I have changed the candidate countries, of the kind already reform, properly applied, do work on even handle. Almost everything about the seen in central Europe. The answer is prob- the most vandalised economies. European Union has changed since it was ably yes. And it is certainly worth trying, if The European Commission has be- rst put together. The six founding coun- it is the best oer the EU can hope to make. come a highly skilled manager of the ac- tries are outnumbered threefold by those A restrictive membership could still be cession process. It has written the book on who have joined since. There is no longer a sold as a membership to voters in the member-state-building. Any country that communist threat from the east, uniting candidate country. It would give them a vi- truly wants to adopt a European model, western Europe against it, with America at tal sense of belonging. The accession pro- and is prepared to give that project a clear its back. There is no credible threat or cess would expose politicians and civil run of ve years or so, under the tutelage expectation of war anywhere in Europe, servants to the full weight of peer pressure of Brussels, can reasonably expect success. save perhaps for the fear of civil conict in within the EU institutions. And any restric- Even if a country decides in the end not to the Balkans or Moldova. Of course history tions would probably prove to be tempo- join the Union, or is rebued, it will have must be remembered, for fear that it may rary, once the newcomer had a track re- had ve years of institution-building and be repeated. But the question now is what cord as a Union member. policy-anchoring. A country made ready the EU can do for its citizens in the future, The Union is, moreover, better to join the European Union is a country not what it has done for them in the past. equipped than ever to integrate new mem- better able to compete in the world what- And from there it is a short step to asking bers, however big and dicult they may ever course it chooses. whether the Union can hold together at all. be. The countries of central Europe are on A Union accommodating shifting alli- This survey has guessed that it will, but hand to give advice and pass on experi- ances of members, sometimes pulling in1 argued that the disaggregation of Europe into overlapping projects and groups will continue and that any future members will have to accept some exclusions. They may not share in the Schengen zone of passport-free travel, nor enjoy free move- ment of labour, nor receive direct farm subsidies, nor have a vote on constitu- tional issues touching on the Union’s ba- sic rules and powers. Indeed, the Union re- served some of these options last year when it decided in principle to open nego- tiations with Turkey. Such restrictions will anger countries waiting to join the Union. But by answering to the main worries in western public opinion about further en- largement, they may be decisive in making it possible for Turkey, or Ukraine, or the countries of the Balkans, ever to join at all. The big unknown is whether the pros- pect of a more restrictive form of member- It worked for them 14 A survey of the EU’s eastern borders The Economist June 25th 2005

2 dierent directions, is inevitably going to scape will have changed at all, save that be less cohesive and less eective as an in- the Balkans will continue their slow recov- ternational actor. If countries no longer ery. If so, that would count as a good re- think that they are moving towards a full sultcompared with, say, a decade in political union, they have much less incen- which the EU fell apart, Turkey grew more tive to align on big issues of foreign policy. polarised and radicalised, the Balkans But perhaps the idea of a common foreign stayed restless, and civil strife broke out in policy for Europe has already lost its the southern Caucasus and Moldova. charm with the Iraq crisis. Whether you subscribed to the British position on Iraq Give it time or the French one, you would not have This survey has argued for a best-case re- wanted to be trapped in the opposite camp sult in which the EU goes on using the and forced to support a policy which you power of membership to change the coun- believed would ruin relations with the tries around it for the better. But Europe is Middle East, or with America, or both. much less likely to nd the energy and the Smaller alliances will become the rule generosity for that strategy, now that it has in foreign policyand even these will be lost its sense of purpose and condence in shifting ones. France and Germany have itself. How can those things be restored? been remarkably intimate under President The best hope is democracy itself. Chirac and Chancellor Schröder, enough Given enough time, voters have a great gift to promote periodic talk of a much deeper Basescu picks his axis for getting things right. Economic stagna- bilateral union, for example. But relations tion has forced an early election in Ger- might be less indulgent between a Ger- that Israel should draw much closer to many. When France emerges from its cur- many run by Angela Merkel and a France both the EU and NATO, perhaps joining rent identity crisis, it must surely also want run by, say, Nicolas Sarkozy. them, as the Middle East and Europe big changes in national policy. If these two The weaker a common foreign policy, merge into the same security space. struggling giants of Europe, Germany and the weaker any European Defence Iden- The idea of uidity is inseparable from France, can regain some of their poise and tity, or whatever it comes to be called. In- that of unpredictability. Look back to 1995, condence, then so can the EU as a whole. stead, NATO can reassert its historic role as and it was much easier to predict what the We may, in other words, have to wait the sole plausible vehicle for common EU and its neighbours would look like in ve years or so before we can even sketch European defence. The countries of central ten years’ time. You would have bet on an in the political contours of a wider Europe and eastern Europe will put even more EU that had enlarged, or was about to, into ten years hence, before we can say weight on NATO, and on their bilateral ties central Europe; a Turkey still banging at the whether the EU will be strong and inclu- with the United States, as guarantees of door; a messy but probably no longer war- sive or weak and exclusive. That uncer- the hard security that Europe looks less ring Balkans; and a Russia gruy going its tainty must make the EU an infuriating and less likely to provide, especially with own way, dragging neighbouring coun- partner with which to deal. It is so often respect to Russia. Traian Basescu, when tries in its wake. You would have been moody, self-absorbed and hard to under- elected president of Romania in Decem- right on all counts, save for the revolt of stand. But of all the powers and empires in ber, caught the mood of his region by an- Ukraine, and even that is not irreversible. the world, it is still the one that most coun- nouncing that he would pursue a Bucha- Looking ten years ahead from today, tries on its fringes would want as their rest-London-Washington axis in foreign we might bet that nothing in that land- neighbour. 7 relations, pointedly neglecting to mention Brussels or Paris or Berlin. He appears to have decided that, although the prosperity Oer to readers Future surveys Reprints of this survey are available at a price of of his country will best be assured by join- £2.50 plus postage and packing. Countries and regions ing the EU, its security will best be assured A minimum order of ve copies is required. America July 16th by making it conspicuously useful to the Send orders to: Japan October 8th United States. Canada November 19th The Economist Shop Italy November 26th Taken together, the great trends of the 15 Regent Street, London SW1Y 4LR moment touching upon Europe and its Tel +44 (0)20 7839 1937 Business, nance and economics neighboursthe weakening of the EU, the Fax +44 (0)20 7839 1921 Higher education September 10th hardening of Russia, the confrontation be- e-mail: [email protected] The world economy September 24th tween Islam and democracy in the greater IT/telecoms October 22nd Middle East, and the resurgence of Ameri- Corporate oer Micronance November 5th can interest in eastern Europe and the For corporate orders of 500 or more and customisation options, please contact the Rights Black Sea regionsuggest a period of what and Syndication Department on: two American commentators, Ronald As- Tel +44 (0)20 7830 7000 mus and Bruce Jackson, have called stra- Fax +44 (0)20 7830 7135 tegic uidity, in which countries may or e-mail: [email protected] Previous surveys and a list of forthcoming glimpse new possibilities and be tempted surveys can be found online to make bold changes of direction. Mr As- www.economist.com/surveys mus and Mr Jackson argue, for example,