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posted on 10 July 2016

Europe: The Nations Are Angry

from LEAP/Europe 2020,

The nations are angry, as anticipated in the GEAB since late 2011, and this is a logical consequence of a crisis without historical precedent, a multi-directional crisis of global dimensions to which the levels of national "democratic" power are structurally unable to respond while governance structures, which are most likely to put solutions into place, i.e. international and transnational structures, have no political legitimacy, knowing plitical legitimacy is acquired in only two ways: by force or democratically...

In 2014, our team anticipated the disintegration of the Eastern European flank following the conflict between the EU and Russia. Two years later, the damage has become visible. If Europe and Russia fail to renew any dialogue, the worst is yet to come in this part of Europe, a region where old demons are in full resurrection (Cold War, European wars, balkanization and empires...) and where the failures of the EU enlargement policy are coming to light.

Figure 1 - Map of Central and Eastern Europe. Source: KKR.

The biggest failure in the past 30 years of European integration is related to the enlargement policy of the ex-Soviet countries. This policy, essentially driven by the greed of Western European companies (and beyond), was carried on at the cost of the continent's political integration as a whole, but particularly of that of the Eastern populations. We have often mentioned the low turnout in the European elections for this Eastern region, once so eager to enter the EU. The Eastern part of the EU is now a patchwork of countries driven by different motivations, integrated to different degrees and crossed by interests of all kinds. The risk of disintegration and conflicts is enormous and threatens the European project, maybe even more so than a Brexit hypothesis.

The Euro-Russian crisis of 2014 created the conditions for a regional dislocation, torn between countless interests and many possible destinies. As we will see later on, the rise of the far right in Central and Eastern Europe also started in 2014. What a coincidence! Awareness of these dangers brings our team to anticipate that the Europeans will finally manage to lift the sanctions against Russia before the end of the year (see our article on this topic later on). In case they fail, the dislocation of this region will go alongside an explosion of regional tension, but also conflicts between Europe and Russia.

The detonator of this explosion might be located in the Balkans, a region which is not mentioned in this article but which is involved in the equation.

Schengen, Euro zone, EU: A multi-speed integration


Figure 2 : UE, Euro zone, Schengen area - Source : Le Monde

Let's have a look at the disparity of this post-Berlin Wall Fall enlargement area. Some countries are members of all European integration levels (EU, Euro zone, Schengen), namely Slovenia, Estonia, Latvia, Lithuania and Slovakia. This list shows a visible aberration, since the three Baltic countries are there instead of Poland or the Czech Republic, which would appear as more obvious full members. Other countries are members of the EU and of the Schengen area, but not the Euro zone: Poland, the Czech Republic, Hungary. Some others are just EU members, perfect second-class members, such as Romania, Bulgaria and Croatia. Of course, the latter are recent arrivals, but the reluctance to see these countries as having the privilege of freedom of movement within Europe (Schengen area) seems quite well established.

Then, there are the candidate states, cut off from any future other than European. They are indefinitely promised to be taken into consideration for immediate membership, but indistinctively mixed between truly potential members and pure fabrications: Balkan countries, the Ukraine, Turkey, Georgia..

The various integration levels, and the different rights from one member to another, manage to create the feeling of castes and real inequalities of treatment in the region. Euro zone member countries appear as lords in the surrounding region. On the opposite, countries like Romania (although being the first country which applied for EU membership in 1995) or Bulgaria, not being inside Schengen at a time when Schengen is strengthening, are at risk of being left on the other side of the wall currently being built by the rest of Europe. Such a development would automatically exclude these two countries, sending them toward the Balkan region, whose fate is a case of concern in case Europe and Russia fail in reigniting their dialogue, as we have seen repeatedly so far.

Big economic disparities

The disparity axis between East-West is a recurrent topic. However Central and Eastern Europe are far from being homogeneous. If we look at the average wages, there is a range between 350 Euros in Bulgaria and 1092 Euros in Slovenia. Slovenia, in terms of wages, is comparable with the poorest countries in Western Europe (Portugal and Greece, slightly above 1000 euro). However, the Bulgarians only receive a third of this amount, less than the Chinese [1].

In terms of unemployment, the maximum amplitude is between the Czech Republic (4.5% unemployment rate) - corresponding to the level of Germany - and Croatia (15.1%) - with Slovakia next on the list (10.3%), corresponding to the average of the Euro zone (including 20% Spanish unemployment and 24% Greek unemployment [2]).

Regarding growth, Central and Eastern Europe is doing well as a whole, which is normal given the EU's economic area converging process. Nevertheless, we can distinguish real EU champions such as Romania (3.8%) followed by Poland and Slovakia (3.6%) ... but also slower countries such as Croatia (1.6%). Estonia, meanwhile, has reported only 1.1% growth - but here we have previously noticed its high wage levels, suggesting a Western European-style development level, thus probably in a stabilization phase [3].

These data show that there is no coherence when it comes to the assets of each of these countries: Romania, for example, is growing faster than Bulgaria, while its salary levels are well above Bulgaria's; or Slovakia, with its difficult 10.3% unemployment rate, for identical wage levels to those of Poland which reported only a 6.8% unemployment rate...

The countries which are most affected by poverty are on a different list: Bulgaria, Romania, Latvia and Hungary are the most affected [4], being in very different categories on unemployment, wage and growth indicators. Hungary in particular seems an unbalanced country if we compare its quite good economic performance to its risks of high precarity.

All this reveals a failure of economic convergence, which was the main motivation for joining the EU, after all. These disparities are equally glaring in Western Europe, but the economic motivation when joining the EU concerned mainly three countries (Portugal, Spain and Greece), whereas it concerned all of the Central and Eastern European countries. Thus, the feeling of disappointment is much stronger in these countries. Western Europe sold them the idea of integration based on promises of quick returns, something which is not yet happening evenly. The economic convergence meant to result from the integration into the common economic zone turns out to be a lie.

Armies and churches: Eastern Europe as a conquering land

The failure of the EU integration and the Euro-Russian crisis have transformed Central and Eastern Europe into a real rat race. The foreign interests confronting each other are, of course, the EU, Russia and the United States. All Central and Eastern Europe want to stay in the EU, but some see Europe as a simple extension of America, from which they require protection (the Baltic states, Poland), while others claim that their participation in the EU does not cut them off from their big Russian neighbour (such as Hungary, Slovakia, Bulgaria...). Hostilities are triggered and major powers use all their tools of influence: NATO for the US, propaganda for Russia... but also the West, since NATO spends its time talking about counter-propaganda [5], while religion is on both sides, too.

This last point is particularly interesting, even though being rarely mentioned. In fact, ever since the end of communism, the religious feeling, restrained during the Soviet decades, has exploded in Russia and CEE countries. Behind an authentic return to faith, as soon as the Wall fell, evangelical sects started coming from across the Atlantic to settle in the Eastern European countryside of Romania and elsewhere [6], with heaps of money and social programmes turning the attention of those 'white' sheep away from their historical religions (Catholicism and Orthodoxy).

The Russian Orthodoxy took a little longer to return, but it is there again now. For example, Romania is currently being covered with Orthodox monasteries and churches [7] (much faster than with hospitals), including in Western areas which are historically Catholic [8] (as in Transylvania)... Read the entire GEAB 106


[1] Average wages in the EU in 2015. Source: Reinisfischer, 2015

[2] Source: Statista, February 2016

[3] Source: Growth in Europe, Toute l'Europe, 11/05/2016

[4] Source: Euractiv, 20/02/2015

[5] « NATO looks to combat Russia's 'information weapon': document » (is counter-propaganda anything else than propaganda?). Source: Reuters, 27/01/2016

[6] Jehovah's Witnesses in Slovakia (source: CultNews, 28/08/2002); Evangelists in Romania (source: The Independent, 13/12/1993) are just a couple of them...

[7] « Romania's costly passion for building churches ». Source : BBC, 07/08/2013

[8] This situation goes back to the communist times, during which Ceausescu's atheism combined with the strong faith of the country, imposed one single religion, orthodoxy, for the obvious reason of turning Eastward.

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