European Foreign Policy and the Euro Crisis

This publication is now archived.

Introduction

Since the onset of the Greek sovereign debt crisis in late 2009, the problems governing the seventeen-member eurozone have laid bare the structural inadequacies of a single monetary plan that must work with seventeen national fiscal policies. They highlight the EU’s mismatch of advanced economic integration and incomplete political union.

This lack of political integration combined with near-constant crisis management over the eurozone have also thwarted European policymakers from forging a more unified foreign policy at a time when myriad challenges, from the escalating civil war in Syria to global climate change, demand a coordinated European response. Expert Walter Russell Mead has called the eurozone crisis (WSJ) "a geopolitical as well as an economic event."

A Common Foreign and Security Policy

The Maastricht Treaty (1992) formally recognized foreign policy as an area of engagement for the EU, reflecting European leaders’ long-cherished aspirations to advance a political union. The milestone treaty carved out "three pillars" of the EU: the European Community (i.e., monetary union), Common Foreign and Security Policy (CFSP), and Justice and Home Affairs. However, the foreign policy pillar remained under the purview of member states, and joint efforts in this sphere were subject to inter-governmental negotiations. (Only the first pillar, dealing with the administration of the currency union, was elevated to the supranational EU level.)

In the intervening years, the EU experienced a rapid growth spurt and its membership jumped from fifteen to twenty-seven member states over a three-year period. To many onlookers, the incorporation of ten former Soviet republics and two island nations during this short period of time signaled a new era of European manifest destiny. No longer facing threats from the East, the EU’s territorial ambitions seemed virtually limitless.

The Lisbon Treaty, which came into force on December 1, 2009, eliminated the pillar structure, and promoted the idea of a pan-European foreign policy by establishing the post of high representative for foreign affairs and security policy and a common diplomatic corps. The European External Action Service (EEAS), which launched on the one-year anniversary of the Lisbon Treaty, was not meant to replace national embassies, but instead complement them.

The creation of the high representative for foreign affairs and security policy post was seen, in part, as a long-awaited response to former U.S. Secretary of State Henry Kissinger’s rhetorical question, "Who do I call when I want to speak to Europe?" Yet critics of the process said it produced a candidate of modest stature with little foreign policy experience (EuroNews). To many critics, Britain’s Catherine Ashton’s chief virtue, apart from representing the center-left faction of European politics, was assuring national leaders that they would not be overshadowed on the global stage.

Competing Theories of Integration

From the earliest days of the European Coal and Steel Community, a precursor to the modern-day EU, integration has always followed a gradual, incremental path. However, competing theories of integration have clouded efforts to forge stronger political ties over the years.

The "Monnet Method," named after EU founding father Jean Monnet, refers to the process of fostering political union through economic integration. Monnet believed that a merger of economic activity in particular sectors across borders would "spill over" and provoke wider economic integration in related areas, eventually producing political integration and the creation of supranational institutions to accelerate this process.

An alternative theory argues that national governments acting in their own economic self-interest are the dominant force in shaping integration. Intergovernmentalists remain wary of the development of EU supranational organizations, which they view as an encroachment upon states’ rights and democratic governance.

These alternative theories correspond to differing German and French approaches of European integration. Historically seen as the central axis of the EU, Franco-German ties worsened after the election of French President François Hollande in May 2012. While Germany, under the leadership of Chancellor Angela Merkel, has made it clear that it wants a fiscal and political union in exchange for continued financial assistance, France continues to favor a more intergovernmental approach that would preserve its sovereignty.

This integration debate is at the crux of resolving the current euro crisis, and "the relinquishing of sovereignty [the fiscal union] will require from member states provides the potential foundation for a collective security policy," writes the Eurasia Group’s Stephen Majors in Foreign Policy. European Commission President José Manuel Barroso told MPs during his State of the Union speech in September 2012, "We will need to move toward a federation of nation states."

But crisis management techniques wrought by the three-year-old crisis have also reinforced strong critiques (Economist) of this top-down approach to European unification--namely that it often shows a disregard for democracy. "The democratic deficit is one of the key issues slumbering at the core of this crisis," says Carnegie Europe Director Jan Techau. "The problem is that we have never tried ’more Europe’ with more democracy."

The Siren Song of Nationalism

A number of experts, pointing to the resurgent nationalism on the continent, have questioned European leaders’ ability to summon the political will to make the practical concessions required for a common foreign policy. "If Europeans were serious about being a major power, they would trade the British and French United Nations Security Council seats for a European one. This is not about to happen," wrote CFR President Richard N. Haass in May 2010 in the Financial Times.

Successive rounds of unpopular austerity measures implemented in peripheral eurozone countries like Greece, Ireland, Portugal, Spain, and Italy by the "troika" of the European Commission, the International Monetary Fund, and the European Central Bank have contributed to the rise of nationalist parties (Guardian) that highlight the growing chasm between European elites and their constituents.

Nationalist politics, fueled by growing anti-immigration sentiment in many crisis-worn states, have also called the future of the Schengen passport-free zone into question. Last year, France responded to the influx of North African migrants by briefly reintroducing checks (BBC) along its shared border with Italy. There is also rising speculation that Schengen states will reinstate passport checks for travelers arriving from Greece (WSJ), as a way of combatting the flood of Central Asian and North African migrants who use the country’s poorly policed borders as their port of entry into Europe.

"There’s a cruel irony to this situation," says CFR Senior Fellow Charles Kupchan. "This is not the time for major strides toward supra-nationalism. This is an era of populism, borne of economic pain."

From Lisbon to Libya

National interests continue to undermine the Lisbon Treaty’s aspirations of enabling Europe to punch its collective weight on the global stage. For many, the EU’s divided response to the Libyan crisis in 2011 serves as a stark example of the lack of mutual cooperation that continues to hamper efforts to a forge a more unified European foreign policy.

The division that the influx of refugees, fleeing the unrest in Libya, engendered in European countries only deepened as calls for the imposition of a no-fly zone intensified. On March 17, 2011, the United Nations Security Council adopted Resolution 1973, which paved the way for military action in Libya. To the great surprise of many in the international community, Germany broke ranks with France and the United Kingdom by abstaining, aligning with Russia, China, India, and Brazil.

The common security and defense policy (CSDP), an important aspect of the CFSP set forth in Lisbon, was meant to foster cooperation among member states on military and defense issues. However, the CSDP stipulates that unanimity among EU member states is a prerequisite for military action. And as the vote leading up to the adoption of UNSCR 1973 demonstrates, building consensus among European partners can be difficult.

Common Defense Amid Austerity

The shortfalls of the Libyan intervention have prompted many to ask how serious Europeans are about coalescing around a common security and defense policy given the severity of the debt crisis that continues to preoccupy EU leaders. Lisbon’s ambitions of shaping a common foreign policy, drafted in economically flush times, seem increasingly adrift in an age of austerity.

In his outgoing speech (WashPost) to the NATO Council in June 2011, former U.S. defense secretary Robert Gates rebuked European countries for shrinking defense budgets that have left the United States to do much of the heavy lifting on the security front. "There will be dwindling appetite and patience in the U.S. Congress--and in the American body politic writ large--to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defense," he cautioned.

According to figures published by the Stockholm International Peace Research Institute (SIPRI) in April 2012, EU member states spent approximately $281 billion on military spending in 2011, down from $289 billion in 2008 (EU Observer). In contrast, U.S. military spending in 2011 amounted to $711 billion, which accounted for 41 percent of the world total.

The report also notes the effects of austerity on European military spending. While crisis-struck states like Greece, Spain, Italy, and Ireland experienced the deepest cuts, the defense budgets of France, Germany, and the United Kingdom also showed noticeable paring. Since 2008, France’s military budget fell by 4 percent, and while cuts in Germany (1.4 per cent) and the UK (0.6 per cent) have been more modest, both plan to implement further reductions in the coming years.

Some policymakers point to the defense cooperation treaty (BBC) signed by France and the United Kingdom in November 2010, as an important precedent for future EU joint military operations. Spurred on by the economic crisis, both countries, widely perceived as the strongest on defense in the twenty-seven-member body, opted to pool resources.

NATO’s new strategic concept, "Smart Defense," has also tried to advance the idea of "pooling and sharing" military resources and capabilities as a response to Europe’s shrinking defense sector. This project, in effect, aims to facilitate deeper military integration by stressing the savings that European countries can incur by specializing and eliminating redundancy.

But American Security Project Fellow Joshua Foust questions the wisdom (Atlantic) of this "assembly-line" approach to crafting a defense policy. "Once countries specialize so much that they depend on one another to carry out a military campaign, what happens to NATO’s military effectiveness if its political leaders start disagreeing?"

The Future of EU Foreign Policy

Despite these myriad challenges, Carnegie Europe’s Techau insists that it’s not all doom and gloom on the EU foreign policy front. "European foreign policymaking is happening during the crisis," he says, pointing to the EU’s sanctions against Iran (Reuters) as an example of effective foreign policymaking.

Techau also cites Ukraine as an area where Europe can make gains without passing more treaties or taking new steps toward integration. He supports the ratification of the EU Association Agreement, which was initiated in March 2012 but has since been stalled over the EU’s concerns about the country’s slide into authoritarianism. "The EU should sign the agreement because it gives them real leverage," he says.

The Economist echoes these sentiments: "Europe is still rich and has tools of revival in its hands. Its own enlargement still offers the best means of exerting influence." With Croatia scheduled to become the twenty-eighth member of the union in July 2013 and countries in the Western Balkans steadily working toward accession, the EU’s eastern expansion looks to remain on track.

To revive the spirit of Lisbon’s common foreign and security policy, an informal group of eleven European foreign ministers convened in September 2012 and subsequently issued a report that called for closer European integration (PDF) on a number of fronts. Helmed by Poland’s Radoslaw Sikorski and Germany’s Guido Westerwelle, the Future of Europe group highlighted the need for a more muscular EU security and defense policy, with some members going as far to call for the creation of a European army (NYT).

However, experts like Carnegie’s Stefan Lehne stress that economic strength is essential to projecting power in the international arena. "If the EU manages to overcome the crisis, the external challenges will certainly move up the agenda again and will prompt renewed efforts to strengthen the EU’s capacity in this area," Lehne says.

As for the near- to mid-term prospects for the EU, CFR’s Kupchan advises tempered expectations. "The best-case scenario would be one where Europe climbs out of its debt crisis in the next two to three years, the EEAS finds its legs, and [President of the European Council Herman] Von Rompuy and Ashton are replaced by individuals of greater profile and weight. But even that most optimistic scenario doesn’t turn Europe into a major actor; it turns it into a regional player of modest capabilities," he says. The other possibility, he says, is "one where individual national militaries continue to hollow out, countries refuse to pool what they have, and Europe gradually slips into geopolitical oblivion."