As a tenuous ceasefire crumbles in Ukraine, there have been expectations that the region's most serious security crisis since the Cold War would inspire political solidarity across Europe.
Yet these hopes not only remain unfulfilled, but are being inverted by reality. The impact of recent sanctions skirmishes with Russia has revealed the deep fissures in the region's international outlook, deepened by the political and economic wounds suffered during the eurozone crisis. The costs of this disunity will be borne, not only by regional states, but by the global partners that have traditionally relied on Europe as a source of strategic and economic stability.
Efforts over the last two decades to accelerate the integration of Europe through monetary union have had a dual face. Peripheral states saw adoption of the euro as a way of bootstrapping themselves to the financial credit afforded to the Western European core. Germany and France, the region's dominant economies, saw the incorporation of the periphery into the eurozone as a means of advancing the political cause of a united Europe.
The GFC challenged both rationales. When financial largesse collapsed, the periphery found itself in an straitjacket, constrained to the monetary preferences of the core, lacking the ability to use currency devaluation to bridge productivity gaps, and thus forced into a combination of fiscal austerity, mass unemployment, and achingly slow wage equilibration. While German unemployment hovers under 5%, Greece and Spain suffer at 25% and 10% respectively.
What of the political aspirations of the European project? It has been argued that the economic costs were the price European leaders chose to pay to protect the political prize of the eurozone. Indeed, what little risk there was of euro-defection has faded rapidly in recent years. Yet it is also increasingly clear that the combined effects of enforced austerity and tight monetary policy are contributing to a broader political crisis over the future of a unified Europe. [fold]
France and Italy are looking to challenge the Berlin Consensus by loosening fiscal settings to offset economic woe. Within many European societies there is an increasing scepticism, if not outright hostility, towards continued European integration. This was reflected in this year's elections to the European parliament. Amid lacklustre turnout, the euro-sceptic left and right undercut established parties.
The failure to confront the underlying contradictions in Europe's approach towards regional integration has sown internal political and social divisions that Moscow has exploited throughout the Ukrainian crisis.
As European states become suspicious of the collective European project, and particularly of Germany's self-serving role at its apex, they have become more susceptible to external manipulation. Russian state media plays up the responsibility of Germany for the economic woes of the region. As nativist sentiment has surged across the region, Moscow has developed cozy relationships with many far-right parties, most notably the French Front National, for whom Russia under Vladimir Putin provides a role model for synthesizing unitary conservative power and economic nationalism (as well as an alleged source of funding). For Russia, Europe's economic woes represent a unique opportunity to do lasting damage to integration, and thus a chance to gain strategic depth against what would otherwise be a political and economic leviathan at its gates.
In turn, the Ukraine crisis threatens to further erode regional economic conditions, raising a further challenge to European political solidarity. While trade and investment between European states and Russia represents only a fraction of overall economic activity, those ties possess a salience beyond their size. Imports of Russian oil, gas and solid fuel have surged over the past decade due to their competitiveness relative to domestic energy generation. A change in energy prices due to politically-motivated disruptions could have deep ramifications across Europe's already fragile economy: a one-third reduction in Russian oil exports could reduce European GDP growth by 1 to 1.5%. After years of unfulfilled promises of economic revitalisation, such an outcome would be a further body blow to political confidence in Brussels and Frankfurt.
Moreover, Russia's agricultural counter-sanctions will generate pain for conservative rural constituencies, which hold outsized political influence in many eurozone countries, especially in peripheral economies in which farming plays a substantial role. More generally, the crisis has undermined consumer and investor confidence in Europe, exacerbating underlying economic weakness and hence scepticism about regional integration.
While there are plenty of legitimate concerns regarding the trajectory of the European project, from the flaws of its execution to the lack of democratic control over a process many see as beholden to an aloof class of Brussels bureaucrats, the risks of greater disunity are substantial. A Europe divided, suspicious of neighbours and susceptible to the influence of a revanchist Russia, threatens not merely the benefits promised by a reformed program of integration but the interests of Europe's security partners.
The inability of the continent to both manage its economic affairs and maintain political coordination places greater burdens on the US and others to pick up the pieces, from the Ukraine to the Middle East. Economic woes and geopolitical pressure are thus interacting to reduce the salience of Europe as an agent of international stability at a time when such agents are few and far between.
Photo by Flickr user photosteve101.