Written by 12:00 pm Europe Economy

Europe’s leaders must avoid divisions that would only benefit Putin

A giant flame burning outside St Petersburg, big enough to be seen from Finland, captures Europe’s challenge as autumn approaches: Vladimir Putin is flaring off gas while the continent braces for a winter of discontent triggered by record energy prices.

Putin’s attack on Ukraine has brought home the need for more pan-European public goods and joint action, above all for security and energy independence. It reinforces a realisation that was already seeping into the political consciousness thanks to the pandemic and the climate crisis.

But the next six months will put leaders’ best intentions to severe political and economic tests. The need to do more together comes just as national politicians face extreme temptation to become more inward-looking. And governments will have to invest more money in the common good just as their economies take a turn for the worse.

At home, every country is racked by high energy prices, and the demand to cushion the blow for voters and businesses will take up ever more political attention. It would be a mistake to let the cost of living crisis distract from helping Ukraine, since it is largely caused by Putin’s weaponisation of gas prices. But the temptation to do so, and the pressure to put one’s own country first, will only get stronger as the suffering from rising energy bills becomes more severe.

Then there are pre-existing frictions that undermine the EU’s ability on collective action. Poland’s and Hungary’s erosion of the rule of law remains unresolved. The European Commission has declined to approve the latter’s recovery plans and has launched its new instrument for holding back other budget transfers to Budapest, too. Warsaw’s plan is approved but any disbursement is conditional on further concessions on its politicised judiciary reform. The economic squeeze may bring both back into the fold but it could also tempt them to play a bigger spoiler role.

Elsewhere, the political spectres from the eurozone crisis have started appearing again. Suspicions about how Italy is spending its recovery fund money are not far below the surface. Grumbles can be heard that Berlin has not shed its penny-pinching instincts when it comes to EU financial aid for Ukraine. And in Spain — previously hard hit by crises but today relatively well placed with its large gas import capacity — politicians find it hard not to invert Germany’s old lecturing, accusing it of living beyond its (energetic) means.

Beyond the politics, economic obstacles to policy action are mounting, too. Inuring Europe from Putin’s energy manipulation will require investments to better tie the bloc’s energy infrastructure together. But public and private finances are set to deteriorate.

Most growth indicators point in the wrong direction; mere stagnation would be a lucky outcome. Even if Europe is spared an outright recession, Putin’s gas games make it poorer through much-worsened terms of trade. Germany, of all countries, has gone into trade deficit on the back of expensive gas imports. Add to this a monetary orthodoxy telling the European Central Bank to reduce aggregate demand, damp wage demands and rein in the eurozone’s (impressive) job growth.

This perfect storm makes for a winter of divisiveness and therefore indecision. That, of course, is Putin’s goal. It must be all of Europe’s goal to avoid it.

It is a good start that EU leaders are keenly aware of their predicament. As all face energy crises at home, they understand the domestic pressures on their counterparts. Some are trying to prepare voters for what is going to come. But it will take great political deftness to land such a message among those who have long felt bypassed by whatever abundance there may have been.

Between EU countries, intriguing political reconfigurations are under way. Hungary’s friendliness with Russia has alienated it from Poland. This has neutered the Visegrad group, joining both with Czechs and Slovaks, often in opposition to western Europe. Countries on the EU’s northern flank are awkwardly finding they cannot be defence hawks and fiscal hawks at the same time: if they want greater investment in Europe’s security, they must be open to more joint spending or laxer restrictions on national budgets.

These are at most hints of a more cohesive politics. To realise it, and frustrate Putin’s designs, government chiefs must resist their instincts as merely national leaders. German chancellor Olaf Scholz’s much-awaited speech in Prague on Monday is the best chance to give a strong lead. To say it is a make or break moment for Europe’s future may be an exaggeration. But only a slight one.


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