In two
months, at a summit in Prague on May 7th, the European Union will
launch a new policy for Eastern Europe – an 'eastern partnership'. It
will increase EU assistance to the region, open the EU’s markets to the
neighbours’ goods and gradually remove visa requirements, among other
things. The idea is to give the neighbouring countries stronger
incentives to adopt European norms and rules, to integrate their
economies with the EU's, and thus to make the region more prosperous
and stable. The concept is sound – but the initiative as well as the
EU’s overall policy for Eastern Europe will suffer unless the EU takes
more visible steps to assist its neighbours through the economic
crisis.
In two months, at a summit in
Prague on May 7th,
the European Union will launch a new policy for
Eastern
Europe – an 'eastern partnership'. It will increase EU assistance
to the region, open the EU’s markets to the neighbours’ goods and gradually
remove visa requirements, among other things. The idea is to give the
neighbouring countries stronger incentives to adopt European norms and rules,
to integrate their economies with the EU's, and thus to make the region more
prosperous and stable. The concept is sound – but the initiative as well as the
EU’s overall policy for
Eastern Europe will
suffer unless the EU takes more visible steps to assist its neighbours through
the economic crisis.
The crisis hit
Eastern Europe hard.
Ukraine’s
currency, the hryvnia, lost over 50 per cent of its value, and economists warn
of a possible default.
Belarus,
too, is in trouble. Much of the economy is driven by exports of machinery to
Russia, where
demand has collapsed.
Armenia,
another member of the eastern partnership, is in equal difficulty, and will
probably need an IMF emergency loan soon.
The economic crisis poses a three-fold challenge to the EU's eastern policy. The
first risk is that of rising nationalism and protectionism on both sides of the
EU’s borders, which is hampering economic integration. The European Union and
Ukraine are negotiating a new free trade
agreement but senior EU officials say that
Ukraine has become more
protectionist since the crisis broke out. It insists on keeping a number of
controversial tariffs, which has caused the talks to stall. The EU, too, is far
less open to eastern workers and visitors these days. The member-states are
unwilling to ease visa requirements for the partner states, fearing an influx
of illegal workers. If the EU and its partners fail to deepen economic
integration and make travel to the EU easier, the eastern partnership’s main
goal – a gradual alignment of the partner states with the EU – will be in
trouble.
The second risk stems from the perception that the EU is not doing enough to
help the eastern partners through the crisis. President Vladimir Voronin of
Moldova
recently dismissed the eastern partnership-related grants as “candy”,
suggesting they were not serious enough to warrant attention. He is unfair to
the EU: it is not the eastern partnership's purpose to bail out the partners'
economies. It has only a modest financial component; its grants amount to a few
hundred million euro, and are meant mainly to help improve governance and
expand people-to-people contacts. There are other tools the EU can use to
assist its eastern neighbours through the crisis, like the International
Monetary Fund, which recently made a $15 billion emergency loan to
Ukraine. But
Voronin’s words signal a broader problem for the EU’s eastern policy: the EU is
not perceived to be helping its eastern neighbours; they see the IMF but not
Europe. And perceptions are important: if the EU’s
eastern partners think that the EU is failing them at the time of their
greatest need, most of the goals of the eastern partnership will come to
nought.
The third risk relates to the economic weakness of many new EU member-states in
Central Europe. It is they who, along with
Sweden, have
most strongly advocated greater EU engagement with its eastern neighbours. And
in the EU, which has many diverse members and interests, an initiative only
succeeds when a strong state or a group of states devote serious time and
attention to winning EU-wide support for it. But will the new member-states
push for more financial assistance for
Eastern Europe?
It could mean keeping less of the much-needed money for themselves, and that is
a tough political decision to make. Will they have the energy to fight the
political battles in
Brussels with EU
governments less interested in
Eastern Europe?
Some new member-states like
Latvia
are reducing diplomatic staffs across
Europe,
and they will find it difficult to pursue multiple foreign policy goals
simultaneously. Also at risk are the myriad of small grants which the new
member-states' governments give to non-governmental groups in the neighbouring
countries, and the training programmes they organise for East European
administrators or journalists. These programmes are just as important as the
eastern partnership itself: they expand the circle of people in the
Eastern Europe who have a vested interest in closer relationship
with the EU. So it matters that these activities are now at risk because of
recession-related budget cuts.
The economic crisis represents a crisis of sorts for the EU's eastern policy. But
there are ways of minimising the damage or even turning a problem into an
opportunity.
Some EU government-financed initiatives for eastern neighbours will no doubt
fall victim to the economic crisis. But instead of all Central European
governments cutting all their training or advisory programmes, they should pool
some of the initiatives. For example, rather than recalling advisors who are
helping to reform key Ukrainian ministries, the new member-states could agree
to withdraw some and co-finance the remaining ones. The same should apply to
training programmes in the EU for East European administrators and to the very
useful conferences organised in
Latvia
and
Estonia
to raise the profile of the EU’s eastern initiatives: some will be cut but
there ought to be ways to share resources to save the remaining ones.
The top priority for the EU’s eastern policy, however, must be to take steps to
more visibly help its eastern neighbours through the economic crisis. It is
simply not true, as president Voronin suggested, that European aid to the east
is peanuts – the IMF, in which EU member-states play a strong role, gave a $15
billion loan to
Ukraine, and
a further $2 billion loan to
Belarus.
The trouble is that the EU as such is not getting the credit. And in the eyes
of the Eastern Europeans, the EU’s perceived stinginess compares unfavourably
with the far greater amounts which
Russia
is willing to spend on bailing out
Eastern Europe
(it set aside $7.5 billion for the task).
The situation calls for creative solutions. The EU should not compete with the
IMF in providing balance-of-payment loans directly to governments: the IMF has
a better capacity to raise the necessary funds and to oversee the reforms,
which the recipient states undertake in order to qualify for IMF loans. But the
EU could expand its ?25 billion emergency fund for the new member-states to
include the eastern neighbours as well. And it should use the money to
co-finance IMF assistance with targeted loans or grants to soften the social
impact of the economic crisis. For example, it could finance job retraining
programmes in
Belarus or
Ukraine.
The EU should also speed up the payment of its eastern partnership grants. They
are small compared to the amounts disbursed through loans but if targeted well,
could have real impact. The EU should direct them towards helping the most
vulnerable parts of East European societies and towards regions hardest hit by
the crisis. There is a real risk that some of the money could be misdirected or
stolen – the ability of East European government to properly ‘absorb’ EU aid is
in question. But EU officials have worked with the eastern neighbours for many
years now; they have a good idea which parts of their administrations are
competent and which are corrupt, and can reduce the risk of theft by targeting
the aid carefully.
Building EU-wide support for these proposals will not be easy. All EU
governments, including the most prosperous ones, are going to run up massive
debt in the coming years. Money will be in very short supply, so the
member-states will be reluctant to expand assistance to
Eastern
Europe. Also, the EU is getting fed up with
Ukraine in
particular, because the leadership is so weak and divided – the IMF even halted
the disbursement of its loan because the government in Kyiv failed to agree the
necessary reforms. And because
Ukraine
has been at the heart of the eastern partnership, its woes undermine support
among EU member-states for the whole region.
But the EU has no choice but work with
Ukraine; it is the largest and most
important country in the eastern partnership. And while the economic crisis
will consume most European effort and attention; the EU must be able to pursue
different objectives simultaneously. The economic crisis creates an opportunity
for the EU's eastern policy.
Ukraine
and other neighbours will be looking for help to stave off the crisis and
lessen the social tensions it will create. The EU should become 'the friend in
need', and built lasting loyalties.
Tomas Valasek, director of foreign policy and defence at the Centre for
European Reform.
