The Troubles of Europe

The Troubles of Europe

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Europe and Eurasia

Diplomacy and International Institutions

Péter Balázs, Director of EU Enlargement Studies at the Central European University; Heidi Crebo-Rediker, Senior Fellow at the Council on Foreign Relations; and Anand Menon, Professor of European Politics and Affairs at King’s College London, join Laura Zelenko of Bloomberg to discuss the current state of Europe’s shifting demographic reality. Faced with a massive influx of refugees coupled with an aging domestic population, Europe’s economic well-being is increasingly at stake. By tying demographic realities to economic affairs, the panel of experts assess the severity of the situation, its security implications, and potential geopolitical resolutions going forward. 


This event is made possible by the generous support of the Hauser Foundation.

ZELENKO: So, welcome, everyone, to the second session of today’s Council on Foreign Relations Symposium on the Future of Europe. This session is titled “The Troubles of Europe.” We’ve already had quite a discussion about this, but we hope to go deeper on many of the issues. And remember, again, please completely turn off your phones, not just on vibrate. And I would like to remind the members that this meeting is on the record.

Our distinguished guests today: To my left is Péter Balázs, director of the Center for European Neighborhood Studies at Central European University. And Péter has an extensive career in government in Hungary and on the EU. Welcome. Thank you for joining us.

Anand Menon is professor of European politics and foreign affairs at Kings College, London, and he has written extensively on contemporary Europe.

And finally, Heidi Crebo-Rediker, senior fellow at the Council on Foreign Relations, and again, a distinguished career both across the private and public sectors, including almost two decades as a senior investment banker in Europe, and positions in the State Department and in Congress. So thank you for joining us.

I would be remiss not to start this conversation with today’s tragedy in Brussels. It has raised to the forefront a number of issues that we had planned to discuss, including Brexit, including Schengen, the issue of combatting terrorism, and, of course, the migrant crisis.

So my first question for you, Péter, is, how can the EU simultaneously protect Schengen, clamp down on terrorists, and have a humane migrant policy, and all the while try to keep the economy growing?

BALÁZS: OK. I think this is the kind of question what we call the impossible trilemma. We have several such trilemmas. You cannot solve all the questions at the same time. I think the most urgent and the most pressing problem is the refugee crisis, where we have found a way out of the actual situation with the help of German diplomacy, the Dutch presidency of the Council. With willingness and openness of Turkey, we have accepted that indicated solution which is full with problems along the whole way.

I think Schengen can only function as a whole system. You cannot take out parts. You cannot put up small fences along the route of the refugees. We have to save Schengen for the benefit of the European Union.

Now, I had the privilege to work in various European institutions, and my conclusion is that we are excellent at solving self-made problems. We create a common currency, then it gets in trouble. We sit around, and then we find the solution. We create or we set a fantastic objective of drafting a constitution, and then it fails. Then we find a way out and we call it Lisbon Treaty. And I could go on with the kind of self-made problems.

We are in trouble when there is somebody else in the room out of the 28 member states, like Russia or the refugees. Any external factor is turning upside down that mechanism which is for internal burden sharing, for internal distribution of costs and benefits between and among the 28. It works sooner or later. For me, the Brexit is an internal problem. It is around the family table. The Greek problem used to be a family problem. The others you asked are partly external problems, and here start all the weaknesses of the EU.

ZELENKO: So Heidi, can the EU adequately fight terrorism without at least considering suspending Schengen? And if any level of Schengen were changed or we see more border closings, how does that affect the economy?

CREBO-REDIKER: So I think, you know, just to take a step back, you know, a lot of the troubles of Europe that we talk about, whether it’s legacies of the crisis, macroeconomic problems that are still there, microeconomic problems that are in the banking system, and that overall fragility that the crisis left, layered on with the migrant crisis and now a real sense that you have core parts of what was the European idea coming apart, my firm belief is that these are all so interrelated and seem to be, at present, mutually negatively reinforcing themselves right now. And that is showing up in what you’re seeing in the politics in many countries where you’re seeing far more left- and right-wing parties emerge, and it’s making the core actually much harder to have the bandwidth to tackle the very significant issue of both migrants and refugees right now. So, you know, you have these multiple layers, they’re all interrelated, and the bandwidth is focused more and more on domestic political challenges for a lot of leaders in Europe right now.

Having been in Brussels at the departure lounge yesterday morning at 8 a.m., I have to say I’m a little—I am really shocked by the tragedy of what happened this morning. And there was a lot of conversation last week in Brussels, after the capture of Abdeslam, that there were likely to be more and more terrorist attacks and it was something that Europe was going to have to come to grips with. I was not imagining that was going to be the following Tuesday.

But I think this is a challenge that is—it appears to be not going away any time soon. And again, as were the other challenges that I mentioned, it’s all related. So you’re tackling, you know, domestic inequality issues with disaffected, unemployed youth that are the ones that are often committing the terror, so that you really can’t unravel all of these problems. They’re all connected.

ZELENKO: Just on the markets there, I do work at Bloomberg, so I can tell you how the markets have reacted to all of this, and one thing is the pound has fallen today. More questions about whether this reinforces or helps those that are favoring Brexit.

My question for you, Anand, is, whether Britain votes to remain or to leave, does a vote to remain, if it’s less than 55-45—does that take the issue off the table for a generation?

MENON: Well, one of the interesting things about our referendum is, there is no legal provision for what we should do after it. So even if we vote to leave, the government isn’t bound by law to go and ask the European Union if it can leave. The government gets to choose. And this is where actually, for those who were here last night, I thought that the British ambassador got it slightly wrong.

If we vote to leave, we won’t simply apply to leave. I suspect what will happen, particularly if the margin is small—you imagine a 2 percent margin with a 50 percent turnout—the British government will go back to our partners in Brussels and try and fudge a fix, because actually that will be far easier than the chaos of negotiating an exit.

The sad truth is, even if we voted to stay and the margin is 10 percentage points or less, this will not put an end to it and there are good political reasons why this will keep going. One, the Tory Party is going to be dominated by Europe during a leadership election, and it’s not beyond the realms of possibility that the next leader is elected on a platform of doing this again, because actually to win the leadership of the conservative party, all you have to do is sound you’re a skeptic. You will come out of the referendum strengthened even if we vote to stay, because it will have more profile.

And the final thing is, what’s interesting about the referendum campaign in Britain is it’s a campaign, almost, between people who want Britain fully out and people who want Britain half out. There isn’t a campaign to sell the benefits of membership. Even the “in” campaign is selling the dangers of leaving. No one is talking about the benefits of being in.

And it goes back to something that Stewart said this morning. Britain is slightly odd compared to other member states. All other member states have a political narrative that binds them to the European Union. For the original six, it was about peace. For the Southern European countries, it was about democracy. For Eastern Europe, it was about escaping from Russia. For us in Britain, European integration is an economic project that we join for economic reasons. We are transactionalists. We don’t have some kind of narrative that says this is part of who we are. And so our debate is very, very different. And whatever happens in this referendum, the British will not be reconciled to membership and we will remain very, very reluctant members of the club.

ZELENKO: There’s been a lot of discussion here about the future of the East European countries in the EU, and given the discussion with Brexit, do you see Hungary, Poland, other East European members—Eastern members—looking to renegotiate their original contract, looking for new ways of defining their objectives in the Union, Péter?

BALÁZS: I think some countries have already started a kind of silent reconsideration, if not formal renegotiation. There is a kind of a modernization fatigue in the whole East, Central European part in the new member states. It was a fantastic challenge to be an equal member of the European Union, and the original model was full membership for full acquis communautaire, to take over the whole legal and institutional material of the EU in exchange of full membership.

And after a few years it turned out that there are three main benefits of EU membership. One is the four freedoms, including Schengen, the free movement all around on the biggest market of the world. The second is a kind of club membership, to be at the same table as Germany, France, UK and the others, bringing, in a spectacular way, internal political issues on the table of the Council, on the forum of the European Parliament, exporting internal political struggles. And the third one is obviously the EU funds, money. All the rest is a burdensome additional package: the transparency of public procurement, the corruption issues. So the EU should somehow stop that, and for that reason, populist governments try to make a U-turn on that way and contest the value.

Public opinion is very much led by the politicians in those countries. I am speaking first of all, of course, of my country. There was a diffuse support to EU/NATO membership, represented and diffuse by government people. Now it’s just the other way around—a manipulated, constructed opposition. If anybody reads the speeches of Prime Minister Orban, it’s full with attacks against the West, against the EU. And he is greeting Putinism, he likes Erdogan, he declares at the airport of Astana that here in Kazakhstan, I feel home; this is not the case in Brussels. So we said that he should stay there if he likes so much Astana. (Laughter.) But this is a new drive, contesting Europe, and public opinion is following that drive. This is a problem.

ZELENKO: You bring up Putin, and one of Europe’s troubles certainly is Russia, continues to be Russia. By some assessments, Putin’s ultimate geopolitical prize is Europe. Medvedev has called for a revision of the architecture of the Euro-Atlantic security, and as a recent Guardian opinion piece stated: This year is one that arguably offers Russia an unprecedented window of opportunity to push that demand. The refugee crisis threatens key EU institutions, a referendum looms on the U.K.’s relationship to Europe, the Franco-German couple is in dire straits, Angela Merkel is politically weakened, Ukraine is unstable, populist movements are spreading throughout the continent, the Balkans are experiencing new tensions, and the U.S. is busy with its election campaign.

So I open this up to any of you who want to answer this. What is your own assessment of Putin’s ultimate geopolitical goal? And how does Europe confront this challenge, given all of the other troubles its leaders are dealing with?

MENON: It’s always struck me—I mean, I’m not his psychotherapist, I can’t read what he’s thinking—but it’s always struck me that Putin is a tactician rather than a strategist, and that he’ll take opportunities as and when they come. And, you know, as you’ve said, he’s had several opportunities recently and he seized them quite effectively.

I have been struck, and it’s a low bar, I suppose, but the European Union has reacted better to what has happened in Ukraine than I would have predicted. That is to say, it has put—and partly through contingencies; the shooting down of the Malaysian airliner over Ukraine was a fundamental turning point—and I think to have put in place a rather tight sanction regime and maintained them the way that Europe has, we wouldn’t necessarily have predicted that beforehand.

Above and beyond that, you’ve got to bear in mind the European Union is almost uniquely ill-adapted to deal with foreign policy crises. The European Union, European integration was created to deal with internal hegemony. It was created to stop Germany taking over Europe again. And to do that, we created a system where power was diffuse, where everything was complicated, where decision-making was technocratic. It was ideal for preventing the emergence of a leader within Europe. But it’s also about as bad as you can imagine for projecting power outside. And that’s the problem, is that a set of institutions set up for one purpose are now being asked to fulfill a completely different purpose.

And so if you’re looking to the EU for rapid and effective foreign policy responses, you will look in vain. Fortunately, sanctions and economic coordination are a powerful tool when you’re dealing with Russia, and for that, I think, we should be thankful.

ZELENKO: Heidi, do you think the sanctions should be lifted at this point?

CREBO-REDIKER: Absolutely not. I think that I would concur absolutely that the sanctions regime and the cohesion between the U.S. and Europe on sanctions has been incredibly impressive and it’s been effective. And both sides have held to the fact that Minsk needs to be implemented and that that is a prerequisite for sanctions to be lifted, and that is correct.

In terms of Europe and security in thinking about Russia, we can touch on NATO, which does have, obviously, European members who do think quite a bit about Russia and recent Russian aggression and how to think about working with Russia moving forward.

In terms of where some of the sensitivities are right now, I would say that on the U.S. side—and I’m bringing the U.S. into this as to where we actually do think a lot about what’s happening in Europe—we are still providing 75 percent of the financial support and contributions to NATO; and that there is going to come a time where it really needs to be a much more equal burden sharing at a time when, again as I mentioned earlier, the fact that Europe is slower in coming out of an economic crisis makes it that much more demanding for scarce funds coming out of budgets. But we do need to keep emphasizing the contribution to budgets for NATO is very high on—should be very high on the radar of European countries, whether or not they have a foreign policy construct that you were referring to that is able to adeptly manage aggression from Russia.

ZELENKO: Péter.

BALÁZS: I think the EU can speak three kinds of languages with external partners in a proper way. These are trade, aid, and enlargement. When we speak about those three, then the EU has clear messages. Russia is not interested in the enlargement. The EU is not interested in granting aid to Russia. The only language we can use with Russia is trade, trade sanctions. This is the only way.

I agree that NATO could speak a language which is understandable in Moscow, which is a security language, which is a big-power language. And the problem with Russia is that Russia is contesting the whole post-Soviet status quo in—not in a very direct way, but has created several what we call today frozen conflicts. Not all of them are deep-frozen; some are quite hot, with special regard to Ukraine. And Russia is questioning the borders.

There was a silent hypothesis that after the dissolution of three federal states—Czechoslovakia, Yugoslavia, and the Soviet Union—all the former administrative units of those federal states are going to be new states. And there has been a lot of trouble in Yugoslavia. There was one single peaceful divorce, that of Czechoslovakia, no problem with that. All the rest is spotted with unfinished conflict situations, and Russia is interested in maintaining such situations, starting with Nagorno-Karabakh, Transnistria, South Ossetia, and all the rest. We know the list. The hottest problem is, of course, the annexation of the Crimea and the whole situation in Eastern Ukraine. And here we have a widely open set of problems with Russia.

ZELENKO: Anand?

MENON: I just wanted to add, I agree absolutely with Péter that you have trade, you have aid and you have enlargement, and that’s what the EU does well. But because it does trade, aid and enlargement, the EU can sometimes be staggeringly geopolitically naïve. And I think its attempts to use trade and aid and a vague promise of enlargement towards Ukraine before what happened in Crimea played a part in provoking Russia. This isn’t to justify what Putin did, in any way, shape, or form, but I think there was a certain naiveté about the way the European Union approached Ukraine in 2013,where there was a blindness to what Russia might be thinking because of this approach, and that partly led to the problems we have.

BALÁZS: I think in the case of Ukraine—and we can, mutatis mutandis, say it for Moldavia and some others—the EU could not judge realistically its attractive power because this has ended with Poland, Romania and all the countries. There was no question in Warsaw, Budapest and Bucharest where to go, East or West. In Kiev, this is a division of the society. And I was really wondering about the efficiency of our diplomacy. Including all the bilateral embassies and the EU representation in Kiev, they could not predict that situation that Yanukovych would stop his hand in the air and not putting his signature on that famous association agreement. We have misjudged the situation, because Ukraine is deeply divided on the EU, and part of—the eastern part is attracted more by Russia.

ZELENKO: I think this segues nicely into the Turkey agreement on Friday. Do you feel that any of the carrots offered to Turkey by Merkel are credible? I guess I’ll put this to Heidi. Fast-tracking membership talks, a proposal that fills people like Cameron and the Poles with horror and most certainly would be vetoed, does this all show just how weak Merkel is, or do you think this is an agreement that could stand?

CREBO-REDIKER: Well, since I usually talk to economic issues, I’ll punt the first part of that to my colleagues that speak more on security. But in terms of looking at where the flows need to be stemmed in the immediate future, the first line has to be some kind of a way for refugees to come into the European Union in a way that is manageable.

And I would say that one of the big takeaways for me in Brussels the past few days is the real need to distinguish refugees from migrants, because they are making a big—they’re taking a lot of care in making that distinction because they’re not all Syrian refugees. You have refugees coming from many parts of Africa, from Iraq, from Afghanistan, looking for a better future, and that’s qualitatively different than having someone escaping a war in Syria that ideally would like to go back to their country at some point.

So again, this will all impact the economic future of Europe both in positive and negative ways that we don’t quite understand yet, because you do have the demographic challenge in many European countries for which an inflow of young people would be in theory a very good thing. How you actually integrate those people, teach them languages and ramp their skill sets up—because they’re getting a lot of people with very different sets and levels of skills into economies that some are very good at integration and others are really not. So how successful that can be is going to be, I think, a big challenge.

But to get back to your first point, the first port of call is really coming up with some kind of a mechanism, and that mechanism can’t just be with Turkey, because I believe as soon as it becomes warmer, you’re going to start to see the flows coming from Libya through to Italy again.

ZELENKO: Anand?

MENON: Yeah. I’ll make three points about this. The first thing is, Europe talks a good game when it comes to human rights and compassion, but the fact is, the European Union has a long and ignoble history of subcontracting migrants to unpleasant regimes. While he was in power, we used Colonel Gaddafi to stick people in camps so that they wouldn’t reach us. So actually in that sense, if you want to be cynical, I suppose Turkey marks a slight degree of progress because it’s not quite as unpleasant as Gaddafi’s Libya.

Merkel can’t deliver the deal on Turkey because she’s dependent on other member states. And this is the sort of weakness of the EU system I was talking about earlier. Cyprus has a veto, and Cyprus isn’t known for playing fairly or altruistically when it comes to discussions about Turkey. Cyprus is very, very steadfastly refusing to reopen the enlargement chapters. And enlargement is something that’s at least 15, 20 years away, if at all, so it’s not a short-term thing. But even given that, I struggle to see how the European Union will come to agree on the moves that we’re agreeing towards Turkey.

And it puts governments in difficult situations. You said David Cameron. The British government’s official position is to support Turkey’s membership in the European Union. That’s kind of coming back to haunt them now because, of course, the issue of Turkish membership is being used by the “leave” camp, who are coming out and saying Turkey will be a member within a year, which is absolutely nonsense.

So I think we will struggle to get the deal with Turkey passed by all member states, at which point it is very, very hard to say where Europe will go from there.

ZELENKO: Péter.

BALÁZS: Let’s be very clear. That deal has been a deal between Germany and Turkey; has been forged by Angela Merkel. And she achieved two fantastic diplomatic goals at the same time inside the EU and with Turkey. Inside the EU, she could eliminate opposition. Everybody expected at least a Cypriot veto or something about that kind, and the room was silent. The 28 nodded on—the 27, on the German proposal, with strong support from the Dutch Council presidency. This was one gain for Europe.

And the other one is an interesting situation because after quite a long period, Turkey is open to talk with Europe. Those two additional conditions, speeding up accession talks on the one hand, and granting visa-free treatment to Turkish citizens on the other, are showing some Turkish interest towards Europe. This was not the case in the last decade. Turkey turned away from Europe.

Now, all the three big issues—the refugee issue, EU accession talks and visa-free treatment—had their own sets of conditions, which are extremely complicated. So it will start now to see. The visa-free treatment, that is a famous list of 72 preconditions, and Turkey has fulfilled so far roughly the half of that. A biometric passport, a lot of agreements, procedures are needed to grant, but there is a demand on the Turkish side, and that is a positive attitude on the EU side, and this is good.

And the same goes for Turkish membership. I cannot see the preconditions for Turkish membership because it would require unanimity within the EU, and I cannot see that unanimity for the time being. But we have to set a lot of chapters before coming to that political decision. Why not go on with pulling Turkey a bit closer to European norms? So this is a good opening; let’s see how it works.

ZELENKO: Did you have something to add? No.

I’m going to now open it up to the members and the guests to ask questions. I’m sure you have many. Please, a couple of rules here. Wait for the microphone, speak directly into it, stand, state your name and affiliation, and please be concise so we can ask as many questions as we can. Thank you.

Right here in the third row.

Q: Thank you. I’m Ronnie Goldberg from the United States Council for International Business.

You’ve so far concentrated exclusively, and understandably and justifiably, on the security, the migration, the external threats to Europe. I wonder if the panel could address the economic threat or the economic situation internally in the EU: competiveness problem, serious problems with key economies, not just Greece, but France and Italy, and how you see that playing out. Thank you.

ZELENKO: Heidi, do you want to take that?

CREBO-REDIKER: So a lot of what you’re talking about, there have been challenges for many years, and coming out of the financial crisis we still have many legacy issues of an imperfect union that are showing their heads right now. I think Europe is at a bit of an inflection point. It probably would have been at an inflection point even without the migrant crisis, but it’s even more—it’s more acute right now.

You have a system where you don’t really have this sense of what will eventually need to be some transfer union, where you don’t have a situation where New York questions Mississippi’s business model and whether or not they are doing the right things or should be like New York, because Mississippi’s not going to be New York. That that doesn’t preclude the U.S. states from having a shared need for a kind of transfer union within the U.S. And that doesn’t really exist.

And it’s generally—you know, you have splits with countries that are less competitive; they have challenges in their banking systems that are unresolved; they have, you know, much higher unemployment issues, tougher politics to deal with structural reforms, and legacy issues of that lack of competitiveness that you mentioned earlier. And those are all still there.

You mentioned Italy. Italy is the fourth-largest economy there, and they are actually having some significant struggles with their banking system right now. They’ve missed the window to create a bad bank, and new rules came in on January 1st through what was the European Union’s answer to how to deal with the banks. They have a supervision mechanism in place, they have a resolution mechanism in place, and Italy didn’t take advantage of that, the resolution, prior to January 1st. So they have a lot of nonperforming loans, they’re struggling right now, and this is the fourth-largest economy in Europe.

So, you know, a lot of these legacy issues are still there and are playing out with the same leaders that are trying to tackle the migration crisis right now, which is why I said bandwidth is, I believe, one of the greater challenges with tackling the myriad of issues right now that the European Union faces. And I’m generally an optimistic person, so I’m not trying to paint, you know, a very dark view, but I do think that there are legacy issues, as I would call them, that are very prominent, and particularly in Greece and in Italy.

ZELENKO: Given the weakness of the banking sector, in your view is this new financial architecture put in place strong enough? There’s been a lot of criticism that it’s not as strong and doing as good of a job as what the U.S. has put in place.

CREBO-REDIKER: So the U.S. and Europe took different paths, and there was a lot of what we would refer to as kicking the can down the road throughout the crisis in Europe that was frustrating on this side of the Atlantic. But I would give credit where it’s due in terms of the degree of difficulty of bringing together all of the eurozone countries to come up with a single supervisory mechanism so that you had an institution that had at least a sense with the biggest banks of what was actually going on, to the best of their ability. And so I think that that was a victory.

In terms of having this resolution mechanism in place, it basically is a solution to the taxpayers are not going to bail out banks in the future, and I think that that is a victory. It didn’t take into account that Italy—that the bondholders in Italy’s banks were moms and pops. So if you’re going to bail them and to protect the depositors, you’re basically—there’s an inconsistency there. So that’s a legacy issue.

The deposit insurance, which is that last part of this, is still a huge issue. Germany, rightfully so, does not want to take on legacy issues of banks that are not in a much better place than they are right now, and so they’ve taken a principled stance on this. And the only problem is—and I’m going to quote someone I spoke with over the weekend—that they’re very good at saying this is not fair and this is principled, and they are right; but if we all go down together, then it doesn’t matter whether you were principled or fair about this in the first place.

ZELENKO: Yes. In the front row.

Q: Laetitia Garriott, Entrepreneurs for Hillary.

Heidi mentioned the importance of increased burden sharing in NATO from our European colleagues. The question is to any of you. Do you believe meaningful progress can be made in the current European fiscal context? And if so, what are the means and pathways to get there?

ZELENKO: Thank you. Yes, you want to take that on?

MENON: Yeah. Burden sharing is a tremendous problem in NATO, and since the Cold War, at least, Europeans have become very comfortable with the idea of free-riding on American power. And the problem isn’t just fiscal. I mean, it predates the economic crisis. The problems—there are several dynamics there. One is a gradual disengagement of European publics. European public opinion is fundamentally disinterested in foreign affairs, and they don’t think it’s right that we invest in the military, that we have active foreign policies.

So there’s a public element to this, and that’s being mirrored politically, as well. In my own country, we had the Syria vote, which I think was over-interpreted, but it certainly did indicate that there’s a slight shift in terms of the attitude of British politicians. I mean, one of the most depressing things about British political life is if you listen, at the annual party conferences, to the speeches that the leaders make, the only reference that you will be guaranteed to hear to the outside world is, it’s the place where the migrants we don’t want come from. There is no sense of a strategic vision.

And I think across Europe, with the possible exception of the French, actually, there has been a sort of decrease in awareness of external threats and a decreasing willingness to step up to the plate. How the Americans manage to get their partners to pay a fair share of the burden, I do not know, but I think it is nothing short of appalling, the fact that the Europeans still allow the Americans to do so much of the heavy lifting.

CREBO-REDIKER: We’re increasing by more than 3 billion (dollars) this year for the Eastern Partnership. So it’s not—it’s not just that we’re pulling back; we’re actually putting in more.

ZELENKO: An interesting aspect of this—we did a story recently on Sweden’s expenditures for the refugee crisis being higher than their expenditures on the military and what the implications of that are for specific nations.

Yes?

MENON: Well, I mean, I’d say two things. There is capability and there is a capabilities crisis in Europe, and there’s also political will to use those capabilities. There are many member states in Europe that have functioning armed forces but a government with no desire ever to deploy those armed forces. There’s a sort of allergy to doing so.

ZELENKO: Péter.

BALÁZS: There are subsystems testing our burden-sharing capacities, like the agricultural policy, transport policy, energy policy. Everything is interconnected, and there are side payments, package deals and various solutions. But it is manifested in those subsystems in practice, in everyday practice. Very soon we’ll have a great test. This is the sort of negotiations about the new long-term EU budget, which would come on the table next year, roughly. And then we are usually polarized because there is a group of net contributors and another group of net recipients, and we will start again the fight.

I am afraid that this time, the long-term what we call financial perspective will be different from the ongoing seven-year framework.

ZELENKO: Yes, here a question.

Q: My name is Donald Shriver, from Union Theological Seminary in New York.

Some weeks ago I asked the foreign minister of Italy, who was on that platform, is the challenge of the refugees such that national budgets are going to be severely challenged for taking care of the physical needs of these people who are on the move? And he said that he felt Europe was rich enough to take care of the needs of the refugees, especially if it were done on a continent-wide basis.

So my question is, is there will and way for the European Union to respond to the economic challenge of refugees and migrants so that individual governments are actually being helped by its relationship to the EU? Is there a collective passion for dealing with the refugee question and its economics on a continent-wide basis?

ZELENKO: Thank you. Heidi, do you want to take that?

CREDO-REDIKER: So it’s early days to figure out what the economic costs and benefits are going to be. Some of the work that the IMF has done very recently has looked at actually the spending that would need to be done for social infrastructure, physical infrastructure; that that spending would actually be a boost, in certain countries, to growth; and that the inflow of new workers, and particularly younger workers, will short to medium term—if the integration of those workers into employment is facilitated, that that could be a boost to growth; and then longer term, if you have the right type of integration and the right type of skill mix, that it would help with the demographic challenges. So that’s sort of the glass-half-full side.

There are clearly strains on, for example, Greece right now, at a time where they are uniquely challenged from an economic perspective within the EU, within the eurozone. And so I think it’s really—you know, the story is still too soon to say whether or not you’re going to have this great benefit come out of a new population coming into the EU or whether or not it’s going to end up being a drag. And a lot of it has to do with whether or not certain very difficult reforms can be made to labor systems that haven’t been adept at changing even during the worst financial crisis that the continent’s seen in a very long time.

So can you make employment flexible? Can you play around with minimum wage? Can you have different paths for entry for migrants and for refugees coming in that don’t totally strain the social safety nets that Europe has in place? I think it’s the long way to say it’s a little too early to tell. And it’s going to take a lot of work on behalf of the individual countries to see if they are going to be able to integrate these new—these new refugees and migrants in way that can be productive.

ZELENKO: Anand?

MENON: Just, I mean, a couple of things on this question. Firstly, you said European Union. And I think it’s worth remembering, the European Union has very little money. The EU’s total budget is about 1 percent of European GNI. So it’s member states that are going to have to pay. And there is no appetite for that kind of solidarity amongst European member states.

The second thing though is, so just to bring up—just to follow on what Heidi said—she’s absolutely right. Every study you see, and there have been a lot written over the last two or three years, all say, yes, migrants are good for the British economy. They lead to positive benefits. They lead to GDP growth. They increase our skills level. But actually, that’s not the point. The point is that we live in an age in Europe where you have insurgent political parties that are preying on the fears of often—of the people who feel they’ve lost from globalization and see these incomers as a threat.

You know, you elites in the Council on Foreign Relations might say 3 percent on GDP, but that doesn’t help me, is the refrain you hear, when I can’t get my kid into a school, I can’t get into a hospital. And identity politics is looming large. One of the scariest things, I think, that Nigel Farage ever said, he said it on the radio a couple of weeks ago, and he was challenged on this. And they said, but, immigration makes us richer. And he said, well, maybe I’d be poorer but British—I’d rather be poorer but still British. And this is the politics of identity. And it makes it very, very difficult indeed for governments, faced with severe challenges from the extremes of the political system, to argue in favor of long-term economic benefits. And that’s one of the major constraints, I think, in Europe at the moment.

ZELENKO: Yes, Péter.

BALÁZS: Let me add that the distribution of the expanses of the refugee crisis is highly asymmetrical within the European Union. There is a very big burden on Germany alone, first of all—first and utmost. And then a few countries along what we call the Balkan route, entering the EU territory in Croatia, then Slovenia, and Austria. There was a time when Sweden had additional expenses. The immediate needs of food and shelter administration, receiving the refugees, are unexpected amounts, but not beyond the capacities of the member states. The additional 3 billion we promised to Turkey would require some reshaping of some chapters in the budget. But even that is feasible. The refugee problem for the time being is not a question of money.

ZELENKO: Interesting.

Questions? Yes.

Q: Thank you. I’m Alexandra Starr with National Public Radio.

This should dovetail a little bit about what you were saying, Anand, about how the rise of populist rhetoric in Europe, you know, we’ve seen right-wing parties do very well across the continent. Heidi, you said earlier that there were some countries that you felt had done a good job of integration of refugees. I kind of want to meld those two together. Are you—I mean, which countries would you point out as having done a good job, and are you concerned that the rise of this populist right-wing rhetoric might imperil that in the future?

CREBO-REDIKER: I am incredibly concerned that the right-wing rhetoric is going to imperil integration. And I mean, we see—we see some of those debates playing out here as well. But there are certain countries, and particularly Central and Eastern European countries, and as you get further east they’ll be the ones who will be the first to say that they have not had experience with significant integration of immigrant populations. I mean, you can look at the success of the Romas. You know, it’s—I’m being facetious, obviously.

As you get—as you get to various Western European countries that have tried different types of models, you can see where some have been more effective than others, and where there’s been, you know, less effectiveness. But I do very much worry that the number of flows coming in, the potential for the overlay of terrorism and its affiliation—even though if you look at many of the—you know, the more recent terrorist acts, they were—they were home grown. So it’s really—it’s something that I think—I unfortunately think will continue as waves—as more waves of migrants and refugees come in. You’re going to continue to see a disproportional response towards extreme parties.

ZELENKO: Anyone else?

MENON: No, I agree.

ZELENKO: Any questions? Heidi, I did want to ask you, you mentioned that you were just in Brussels and there was a lot of talk about Trump. I just wonder if you could explain what some of the context was and where the concerns are from the people you were talking to.

CREBO-REDIKER: So a lot of concerns. (Laughter.) And really good questions. This was in the context of the past week in Brussels, talking with a lot of different people. And Muslims in—you know, who are worried that he’s helping fuel some of the anti-Muslim sentiment in Europe, that he’s sort of feeding into the worst leanings of people who are leaning towards some of those more radical right-wing anti-immigrant, anti-EU parties, and that he was actually feeding into that. So I’m reflecting the comments that I heard and concerns overall.

But I think there was also an understanding of looking at the—looking at the political dynamics on both sides of the Atlantic, that there was an understanding that there are similar inequality-based reasons that were feeding both left- and right-leaning populations that are feeling that they are at the very—at the very wrong end of globalization. And that’s something—you know, X migrant, X immigration debate, that there was a real sort of we feel this here, it just took longer to get there.

ZELENKO: Interesting.

MENON: I mean, it strikes me this is just a chronic failure of public policy, that 20, 30 percent of Western populations feel like they’re lost and no one will listen to them. And they’re turning towards these ever zanier political forces out of desperation because mainstream politics won’t give them a voice. And it’s common across the Western world. And actually, there are no—there are no solutions that I see as being convincing being put forward as yet. That sort of the losers from globalization are finding a voice at last. And our political systems are struggling to cope. And that’s just—and that’s not just an American problem.

ZELENKO: It raises the question to me, you know, if we can talk about a leadership vacuum in Europe right now, and is Merkel the last best hope? What are the implications of these growing populist parties? And what would be your assessment of leadership in Europe right now?

MENON: Well, on issues like this, it’s fragmented, and necessarily so because politics is a national game. I mean, every leader worth—you know, even if they go and negotiate in the European Council, their raison the national electorate, what this will mean for me in the polls. And more and more to do well in the polls means showing that you’ve got one over on your European partners. So it becomes an internal competition. I mean, David Cameron goes out and brags: Britain won’t participate in any of the schemes for sharing the burdens of the refugees, because that sells well at home. That reassures us. So politics works against sort of cross-border solidarity.

BALÁZS: Well, let’s add the composition of the European institutions, because there are some differences in stability and the setup. The European Commission is there for five years. We have Mr. Juncker and his team. They started back in 2014 and they are using their mandate up to ’19. This is, for me, a bit overdone as a stability element, but, well, let’s hope they will do a good job. Then comes to the European Parliament. Again, there is a stability for five years. In the ranks of the EP, we have got some extremist parties. They can make noise in the backbenches, but they have not influenced the big party families, the people’s parties, socialists, liberals, and the greens.

What is really important who sits around the table of the Council? We have every second month now a top level European Council meeting of prime ministers. And the question is: How many prime ministers are coming from that political camp? We have got Viktor Orbán from Hungary, we have got Beata Szydlo from Poland. But they are not in majority, for the time being. There were some attempts trying to create an opposition to Angela Merkel and to the humanistic solutions of the refugee crisis, but they failed, for the moment. Now, we are looking forward to the next year’s French elections, and several others. Who is the one representing a national government in that Council?

ZELENKO: Yes.

Q: Thank you. My name’s Cordelia Buchanan Ponczek. I’m with the Polish Institute of International Affairs.

Mr. Anand, you mentioned that politics works against cross-border solidarity. We’ve talked a lot about transatlantic solidarity, with NATO in defense, economic sanctions against Russia. Do you see the spillover—all three of you; whoever wants to take it—do you see this sort of illiberalism and these far-right parties spilling over and splintering transatlantic solidarity and the way that they confront these ever-growing problems? Thank you.

MENON: I think one of the side effects, and one of the things that a lot of these right-wing parties have in common is they want to reshape our foreign policies. They are more or less anti-American. I mean, the Front National does a nice line in anti-Americanism. Nigel Farage is a lot more quiet on anti-Americanism. They also tend to have in common a certain level of sympathy for President Putin that is quite disturbing. If they ever got their hands on the levers of power, they would change foreign policy quite drastically, I think. I don’t think that’s in prospect at the moment. But one of the things they feed into is this sense that this whole liberal project has been a waste of time for normal people and we should retrench.

And the kinds of things that Donald Trump was saying was—you know, he has a typically outlandish way of saying them—are not that dissimilar from the refrains of some of these parties, which is: Why should we go out on a limb to help people in far-away countries? And that, I think, is feeding into our foreign policies. And you can see that in the mainstream political establishment in my country, that members of Parliament are very, very reluctant to sanction the use of force, to sanction interventions abroad, because they’re not our problems anymore.

And the real theory is down the line, this migrant problem is a warm-up for the real one. And the real one will come when the next population explosion happens in sub-Saharan Africa. And if those people aren’t relatively prosperous, and if those people aren’t secure, they will head north in numbers that will dwarf the numbers we’re seeing already. And actually what is required to head that off is the kind of enlightened internationalist approach that the West is increasingly rejecting. And it seems to me that we’re storing up problems for ourselves in the future that way.

ZELENKO: Interesting. Yes, over here.

Q: Hi. David Preiser, Houlihan Lokey.

Yeah. I asked this question to last night’s panel as well, but you’ve sort of triggered a further thought. So, you’ve got Europe with low population growth in lots of countries, and you’re talking about the future demographic explosion in North Africa. You know, this whole thought that nature abhors a vacuum and demography’s destiny, how will Europe—even assuming the most, you know, thoughtful policies, stand there with a big wall where prosperity, but an empty Europe, stands between this population explosion in North Africa and a potential future that’s more desirable than what they’ve got? I just don’t see how that can be squared unless Europe is robustly reproducing itself and occupying its territory.

ZELENKO: Does Europe need the refugees more than not to bolster the economy?

MENON: Well, talk to any pensions expert and they’ll tell you yes, our populations are getting too old and we can’t afford our welfare state. But two things that politics isn’t is rational and long term. (Laughter.) And it seems to me that you need to be both to think in that way. You know, politicians think through to the end of their term. We have a pension crisis in 20 years, that’s not the kind of thing that democratic politics is very good of thinking about at all.

Q: How about the military aspect? How can you keep out a gigantic wave of people who want to come in?

CREBO-REDIKER: So I think, you know, the refugees and migrants that are pouring into Europe right now are not pouring in because there’s a vacuum of young people. They’re pouring because they’re desperate and they want either a better economic life or they’re fleeing conflict. And it’s a massive humanitarian tragedy. The thing that I think—you know, there are multiple ways to look at, you know, in the future what do we have to be prepared for, not only because of the population explosion that is—that is going to come from sub-Sahara Africa, but also—you know, when I get—when I get a little too optimistic friends of mine from the climate sphere say, yeah, but they’re not just going to be coming because of the population explosion. They’re going to come because they’re going to run out of water and arable land. And so that better life is not just, you know, a want, it’s a need.

So you know, yes, there’s a need to actually get mechanisms in place that the EU and individual countries, and particularly Germany, is thinking about right now. How do you return people who are economic migrants? How do you flesh out who is—you know, who is feeling for safety, who at some point will be going back to their home country? And in the meantime, what do you do with the people that are—that are here? So it’s really not easy. And I think that the task at hand is really dealing with the immediate challenge and the fact that, as we get into the warmer months, the numbers are going to go up. But down the road, this is probably—you know, if you want to look at glass half full, a really good dry run for coming up with systems for managing flows of people in and out, because you do want immigration to happen.

You want people to come in and fill those demographic holes, for pension systems to pay—you know, to be able to pay back debt. You want taxes. You want—there are a lot of good economic reasons to want young people to be working in an economy. But you also want to be able to not have it overwhelm the system. And remember, Europe has a very robust social safety net system that they’re very proud of. And how do you maintain that in an environment where you have people coming in who don’t speak the language, they don’t have skills. You know, you’ve got to—you’ve got to make sure that you don’t have populations feeling like they’re losing not only their identity, but that they’re losing the very social safety nets and systems that Europe has built up over the years. So it’s a very complicated problem, but this is something where it’s better that the EU figures this out now than waits until there are many greater waves in the coming decades.

ZELENKO: So we need to end here, on a semi-optimistic note. Thank you very much. Thank you to the panel. Thank you to the Hauser Foundation. (Applause.) The third session begins promptly at 11:00. And we invite you outside for a little coffee reception in the meantime. Thank you. Thank you.

(END)

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