Europe and Eurasia


  • International Economic Policy
    Time for China, Germany, the Netherlands, and Korea to Step Up
    The world's surplus countries have the ability to do more to support global growth.
  • Netherlands
    Dutch Elections and the European Economy
    European markets celebrated the strong electoral showing by Prime Minister Mark Rutte’s party (VVD), which looks to ensure another term for him leading a center-right coalition in the Netherlands. The far-right party (PVV) led by Geert Wilders finished second, after leading in the polls through much of the campaign. Other parties performed well, supported by a strong turnout, ensuring a pro-euro coalition can be formed. The vote had become an early proxy for the broader nationalistic winds sweeping Europe. Test passed, the euro rallied more than 1 percent to a five week high of 1.07 against the dollar, and stocks rose across Europe on the news. Still, markets are likely to remain on edge ahead of the declaration of Brexit later this month and French elections in May. While recent polls suggest that Marie Le Pen will fall short in her effort to win the French Presidency, even small changes in her standing or that of alternative parties in Germany (where elections are slated for the fall) are likely to be market-moving in the coming months. And, as I wrote yesterday, the risk of a return of the Greek crisis seems to be underestimated by markets. Against this backdrop, I am surprised that we are not seeing more pressure on the banking systems of France and the periphery of Europe that are seen as most at risk. Beyond these dramatic and hard-to-quantify risks of an election result or a failure of a negotiation that leads to a country exiting the European Union or the euro, the broader challenge facing Europe is the how leaders, even those from mainstream parties, respond to these nationalistic and populist pressures now sweeping the continent. It is not surprising that, seven years after the start of the euro crisis, frustration among voters with a poorly performing European economy and continued austerity is on the rise. This could have a positive outcome, if it leads to countries that have the fiscal space increasing spending to support demand. But, conversely, I am concerned that the ability of political leaders to come together and make decisions on economic policy in the collective interest, whether about Greek debt, Italian banks, or exchange rate policy, will be tested in coming months. While I don’t expect any announcements, soon, such issues will surely be a focus for finance and central bank officials from the G20, meeting this weekend in Baden-Baden.
  • Netherlands
    Dutch Elections and the Future of the EU
    The rise of populist Geert Wilders in the Netherlands is showcasing the pressing need for European Union reform, says expert Pieter Cleppe.
  • Europe
    EUROPEAN UNION: The French & Dutch Referendums
    This publication is now archived. What’s the significance of the French and Dutch "no" votes to the EU constitution?They have dealt the EU constitution a potentially fatal blow, experts say. All 25 members of the EU must ratify the charter, either by parliamentary vote or popular referendum, for it to take effect. French voters soundly rejected the document in a May 29 referendum; Dutch voters followed suit June 1. Because the constitution’s framers expected it to pass, there is no clear procedure for what happens next. The European Council, the EU’s top decision-making body, is expected to debate next steps at its quarterly meeting, June 16-17. What could EU officials decide to do? Among the options:Continue with the ratification process. Some EU officials have suggested this tactic in hopes of winning ratification from the remaining member-states and then dealing with France and the Netherlands at a later date. So far, 10 out of 25 countries have ratified the constitution, all but one by parliamentary vote. (Spanish voters approved the document in a referendum.) But this tactic could backfire on EU supporters. The constitution already faces stiff opposition in Denmark, Czech Republic, and the United Kingdom, all of which have pledged to bring the matter to a popular vote.Revise the constitution. There are no current plans in place to redraft the constitution. "It’s a difficult document to tweak because it’s a delicate product of so many compromises," says Pepper Culpepper , an associate professor of public policy at Harvard University. "There’s no real wording that you can change [that would] suddenly turn French voters around." On the other hand, some EU officials have suggested that small revisions over the next few years could help win the document favor in key states like France or the Netherlands.Hold a revote. This is an option that’s worked for Europe in the past. Irish voters, for example, rejected the Treaty of Nice in 2001 by a slim majority but then approved it the following year. France has indicated it will not hold a revote on the constitution, but some smaller EU members, including the Netherlands, have not ruled out the possibility.Salvage parts of the constitution. Some experts say there are parts of the constitution that are popular and may be subsequently passed as separate treaties. Among the constitutional reforms with widespread support is the creation of an EU foreign ministry to represent the continent. Could the failure of the constitution mean the end of the EU?No, because it will continue operating under existing treaties. But there could be some repercussions, experts say. Decision-making, due to the EU’s recent enlargement, would be less cumbersome under new constitution procedures; the European Union’s seven-year budget could be delayed; and the process of expanding the group to include Romania and Bulgaria, scheduled for 2007, may slow down. Some economists say that uncertainty over Europe’s new constitution, along with the widening gulf between EU members’ economies, could weaken the euro by inhibiting Europe’s ability to exert itself as a forceful and united economic bloc that controls its members’ spending and inflation levels. The day after the French "no" vote, the euro slid to a seven-month low. What concerns Dutch voters about the constitution?Many of their worries relate to the general direction of an expanding EU, the pace and process of constitutional reforms, and a shift in control over major policy issues to Brussels. Among their specific concerns:Immigration. The recent influx of some 700,000 Muslims into the Netherlands from North Africa and elsewhere worries many Dutch. "The elephant in the room that politicians are afraid to talk about is the radicalization of Muslim youth throughout Europe," says Arnaud de Borchgrave, an expert on European politics at the Center for Strategic and International Studies. Fears of Islamic extremism reached new highs last November after the assassination of Dutch filmmaker Theo Van Gogh at the hands of a Dutch-Moroccan extremist. With the European Muslim population now at 23 million, many Dutch worry about further EU control of immigration and asylum policies.Turkey. There are fears the document opens the path to eventual EU membership for Turkey, a country of some 70 million. By the time Turkey joins, it will likely eclipse Germany as the European Union’s largest member. Some voters worry the large influx of Muslims from Turkey would further dilute and transform Europe’s historically Christian culture. "The question facing voters is: ’How do we deal with people with a worldview that’s not as tolerant as the Dutch worldview?’" Culpepper says. Accession talks with Ankara are scheduled to begin October 3."Quality-of-life" issues. Dutch voters worry that EU integration may erode many of the Netherlands’ liberal policies on drugs, gay marriage, and euthanasia. On social models, "there’s always the fear that the European Union is a homogenizing force," says Charles A. Kupchan, director of Europe Studies at the Council on Foreign Relations.Economic stagnation. In 2000, the Netherlands had an economic surplus; now it’s running a deficit. Economic growth has slowed to a dismal clip of 1.2 percent, says Simon Serfaty, senior adviser of the Center for Strategic and International Studies’ Europe Program. Though the Netherlands’ unemployment numbers are not nearly as dire as France’s, many Dutch voters say EU enlargement and moves to consolidate decision-making may further hurt their economy. Others complain the Dutch currency was undervalued by around 10 percent when it switched to the euro a decade ago, prompting some angry Dutchmen to sue their government.Power-sharing worries. Some voters say the constitution confers too much power to larger countries at the expense of smaller states like the Netherlands, whose population is just 16 million. Their concern is that the Netherlands will be rolled over by larger states, despite the fact that the Dutch, on a per capita basis, contribute more to the European Union than any other members. What are some other commonly heard objections?One of the biggest issues, in the Netherlands and elsewhere, is the manner in which the constitution was written. Europeans complain that the constitution, drafted by a select panel of 105 European experts over 18 months, was conceived in secret without any public debate or input from elected officials. "It’s been a project driven by elites," Culpepper says. "And elites have not been that concerned about bringing people behind them and mobilizing support." European voters say they know little about the contents of the hefty 450-page text. Others are concerned the constitution may be too much, too soon. "[W]e may be at one of these times where the Europeans have placed too much on their plate," said Richard R. Burt, a former U.S. ambassador to Germany, at a May 16 event at the Council on Foreign Relations. What does the EU constitution do?Its purpose is to better accommodate a larger European Union that by 2007 will comprise 27 countries and 500 million people. Logistically, it will replace a series of existing EU treaties signed over the past half century with a single, formalized text. "A lot of this constitution is a consolidation [of rules], not an innovation, even though [it contains] important steps forward," Kupchan says. The document is meant to coexist with--not replace--individual members’ constitutions. It also enshrines a number of basic rights for EU citizens, including freedom of speech and religion, as well as the right for workers to strike and move about the European Union freely. How would it improve the current system?By streamlining decision-making, experts say. The 458-article constitution contains a number of important procedural functions to prevent gridlock and improve cohesion within an expanded European Union. Among them:Reallocation of votes. Under current rules spelled out in the Treaty of Nice, EU members are allotted a given number of votes and required to reach unanimous agreement for major policy decisions in certain areas. The new constitution, in response to last year’s expansion to include 10 new members, allocates votes to more accurately reflect countries’ populations, giving greater weight to larger members. It also does away with unanimous voting on justice and law-enforcement issues, leaving only decisions on defense, taxation, and foreign policy subject to unanimity. However, to prevent more populous countries from exercising too much power in votes decided by simple majority, the constitution requires that a "qualified majority" of 55 percent of the member states and 65 percent of the EU population approve a policy before it can become law.Coordination of foreign policy. The new constitution creates the post of EU Minister of Foreign Affairs. The purpose of this position, according to the European Union’s website, is to "give the EU a higher profile in the world and a single human face to represent it in international relations." The EU foreign minister is meant to work with individual members’ foreign ministers, not supplant them. The constitution also creates the beginnings of a diplomatic corps and consolidates EU policy on the distribution of humanitarian aid.Strengthened executive. Previously, the presidency of the 25-member European Council, the top decision-making body in the European Union, rotated alphabetically by country, and each president served a six-month term. Under the new constitution, the president will lead the European Council for a term of two-and-a-half years, allowing him or her to set a stronger long-term agenda.Reiteration of EU authority. The constitution is clear about which matters the European Union will have authority over (trade and customs, agriculture, workplace safety, the environment, among others) and which are relegated to individual members (foreign, defense, and tax policies). The constitution confers additional power to Brussels over issues like immigration and justice. In these areas, as before, EU law supersedes domestic law.-by Lionel Beehner, staff writer,