Sofia view: the end of New Europe?

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So Petr Nečas, the Czech Republic’s premier, has ultimately decided not to sign the Fiscal Compact aimed at tackling the festering Eurozone crisis.  He quoted constitutional impediments, although everyone is mindful of the real problem: President Václav Klaus’ intransigent views on ceding powers to Brussels. (Remember those cliff-hanger days in November 2009 when the master of the Prague Castle was baulking whether to sign or not the Lisbon Treaty?)  Now the Czechs are in the same cohort with the UK – keeping at an arm’s length from the new fiscal rules proposed by Frau Merkel.  While Nečas left the door ajar (and it might well turn out that the Czech Republic ultimately joins the 25 signatories) Prague’s reluctance brings home, yet again, a point: the New Europe we got to know over the past decade is largely over.

It was the EU’s current malaise that dealt the fatal blow to New Europe. Countries such as Poland and Estonia are now striving to rebrand themselves as part of northern Europe. Estonians boast their commitment to fiscal discipline and do not shy away from the odd reference to Protestantism as the underlying force at play. Poland, for its part, feels comfortable in the company of countries like Sweden – economically dynamic and in favour of open borders. Meanwhile, Romania, true to its Latin pedigree perhaps, is drifting to the kind of political polarisation seen across Club Med. OrbánViktor’s Hungary is in a category of its own: oscillating between FIDESZ's omnipotent fiat and the disciplining influence of the EU and IMF, linked to Budapest’s financial vulnerability.

In the early 1990s the collapse of communism brought an end to the idea of a uniform, grey Eastern Europe. Central Europe was all the rage, with the dissidents-turned-political leaders as the principal advocates. Rather than the periphery of the Old Continent, the likes of Poland, (then) Czechoslovakia and Hungary would map themselves at its very heart and thereby claim their rightful place in (then) unifying EU. Ten years later, with the accession to the Union on the horizon, Secretary of Defence Donald Rumsfeld praised “new Europe’s” firm support for the US war in Iraq. Back then this new Europe looked pretty cohesive: pro-American, economically liberal and a shining example of the inexorable forward march of Western-friendly democratisation. But could it be that the withdrawal from the Middle Eastern country would also coincide with the long overdue expiration of the grouping itself?

Yes and no. There is surely a distinction between those inside the Eurozone (Estonia, Slovakia and Slovenia) and those outside. In the latter group there are countries which are tied to the single currency (Latvia, Lithuania, Bulgaria) and those who apply an floating exchange rate. There are also the high growers (Estonia at a staggering 8% in 2011; Lithuania 6.1%; Latvia 4.5%; Poland 4%; and even Slovakia 2.9%) versus the ones muddling through (Bulgaria 2.2%; Czech Republic 1.8%; Romania 1.7%; Hungary 1.4%; Slovenia 1.1%). And then there are those like Romania and Bulgaria who are exposed to the debt crisis in Greece because of the heavy presence of Greek-owned banks on the local markets. And, don't forget, there are countries like Poland and the Czech Republic who can afford to play ball with Berlin and Paris, and there are those which have next to no room for manoeuvre.

But despite all this diversity New Europe might hang around a bit more for several reasons. Most of the countries in question are excluded from the Eurozone, which acts as an incentive for “speaking with one voice” (in most cases in the Polish language). Witness how Donald Tusk fought for some sort of arrangement allowing “easterners” a seat at the table during the euro area-only gatherings. Second, the economic fortunes of all these “new” member-states are reliant on demand from the core markets in western Europe (principally Germany). Last but not least, they have a collective interest to tap into the EU budget. The closer the battle over the structural and cohesion funds for the 2013-20 period draws, the more unified the eastern front. Expect slow disintegration of the bloc, not a sudden death.

 

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