Wednesday, 27 December 2017

As 2017 ends, are we also coming to the end of the US-EU military alliance?

In this end-of-year podcast, Tyson Barker and I discuss what PESCO means for the future of NATO, and tell you what to watch for as 2018 dawns.

2017 is drawing to a close. It was a year of big political developments in Europe, which saw the defeat of far-right insurgent movements in Europe coupled with uncertainty in Berlin for the future of the German government. 

It was also the first year of the Trump administration in the United States and, as could have been expected, we have seen an enormous rift open up in the Atlantic. Trump's election woke the world, particularly Europe, from the Pax Americana dream. Suddenly, the superpower to which so many countries were willing to outsource their military sovereignty didn't seem so reliable.

NATO, which has struggled to redefine itself since the end of the Cold War, appeared vulnerable. It wasn't just that President Trump himself heaped scorn upon the alliance and suggested the US might not come to the aid of members who were attacked. For many, the election result itself brought to the surface latent concerns about whether the American people could be trusted to guarantee European defense. If they elected Trump, a man who said during the campaign he would not automatically defend US allies if they were attacked, then it shows trust in the American people has been misplaced. Perhaps Trump was right when he described NATO as an anachronism. The problem is it's the only thing protecting Europe from a military invasion.

Though it is billed as an alliance, in reality NATO is a US military protectorate over Europe. The United States has bases and troops stationed in most EU countries including the UK and Germany. It is hard to imagine NATO without the US, given that it is the driving force behind it. 

The US contributes the vast majority of NATO resources. This lack of balance doesn't just irritate Trump, it also irritated his predecessor Barack Obama, whose administration chastised Europeans about this repeatedly, albeit with more diplomatic language.

But while the American answer is for European nations to spend more on defense and contribute more to NATO resources, many in Europe think the basic setup of NATO is flawed. If it is an American military protectorate rather than a real alliance, then what incentive do countries have to spend more? No matter how much Europe spends, it will never be equal to America within NATO because the power is splintered between many European nation-states.
This is why France and others have long dreamed of establishing a Europe-only version of NATO. If EU countries pooled their resources, they could have a military equal in power to the United States. That military structure could then either participate in NATO as an equal partner, or NATO could be abandoned all together. For the first time since World War II, Europe would have the capacity to defend itself without relying on the American protectorate.

That dream took a leap forward this month with the official launch of PESCO, the EU's "permanent structured cooperation" between 25 of the bloc's 28 militaries. All countries have signed up to it except Denmark, Malta and the United Kingdom.

It was UK resistance to the idea of EU military capacity (for fear it would weaken NATO) that has blocked the advancement of this until now. With the UK leaving the EU, France and Germany have been free to move forward with the idea.

The UK isn't the only country uncomfortable with European self-defense. The nations of Eastern Europe trust the United States far more than their Western European neighbors, for obvious historical reasons. They have resisted anything that could weaken NATO, or under which they would have to rely on European defense rather than American. 

French President Emmanuel Macron is well aware of this. So earlier this year he came up with the idea to move forward with EU defense as 'enhanced cooperation' - a mechanism introduced by the Lisbon Treaty in which some EU countries can move forward with a project while others sit it out. It is one of the pillars of the "two speed Europe" idea, in which core EU countries move forward with further integration while peripheral countries hold back.

Macron was envisioning PESCO as having around ten initial participants. Those core countries would move forward, show the benefits of the alliance, and the more reticent countries would join later after it had developed into a strong force. But it didn't work out that way.

As we discuss in the podcast, much to everyone's surprise the nations of Eastern Europe all decided to join. Even constitutionally neutral countries like Ireland and Sweden, who are not in NATO, joined. The result is that PESCO has been greatly weakened from its initial ambition.

The Anglo-Saxon press largely covered the accession of 25 countries as a great success for PESCO. But in France, it was covered as an unwelcome development. Things in the EU often have to go to the lowest common denominator. So a larger group means that more countries need to be appeased, and that means it will have to tread lightly, and slowly. 

So is PESCO the first baby steps toward European self-defense? Or is it a damp squib even before its birth? Tyson and I discussed.

2018 Predictions

We also gave our take on what we're watching in 2018. In Berlin, Tyson will be closely watching continued German coalition formation talks, as well as the big eurozone summit in June which Emmanuel Macron hopes will bring about a true economic and monetary union.

In Brussels, I will be watching the Italian election coming up in the Spring. It is looking highly volatile, with the populist Five Star Movement emerging as possibly the largest party. An unstable political situation could throw Italy into economic chaos. 

The circus of Italian politics is nothing new for Europeans. But as the fourth-largest EU economy, problems in Italy could quickly spread to the rest of the EU. If an economic crisis in Italy develops, it will be a test of whether the structures put in place since the European debt crisis a few years ago can absorb the shocks. Privately, policy makers in Brussels have doubts that the roof has been fixed enough while the sun is shining.

Brexit will probably retreat to the back pages of continental European newspapers for some months, as talks begin on the future trading relationship between the UK and EU. But around midyear, companies are going to need to see some demonstrated progress. If they begin to suspect the UK is going to crash out of the EU without a deal, they will start to panic. 

Companies typically have one year of visibility. So if sufficient progress hasn't been demonstrated by April, we may see businesses start pulling out of the UK.

Then of course there is the Catalonia situation, elections in Russia and the end of Commission President Jean Claude Juncker's term. 2018 will certainly not be a dull year in Europe.

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