The recession triggers East-West divide in the EU
Civitas, 2 March 2009
Following Eastern and Central EU Member States’ recent mini-summit to discuss fears of protectionism, an informal summit of the leaders of all 27 EU Member States took place on Sunday, writes Kyial Arabaeva. The ambition was to construct concrete solutions to tackle the crisis and to expel worries about protectionism, unequal bail-outs and a feared East-West divide within the EU.
As wealthier western EU members started making national efforts to tackle the crisis, Eastern and Central European members have called for the EU to show “universal solidarity” to avoid “economic nationalism”. France’s plan to spend 6 billion Euros for its major car companies, which has been approved by the European Commission, caused particular concern in this regard. The Eastern EU members feel disadvantaged by being outside the 16 nation eurozone and have asked for the rules governing their joining the euro to be sped up. However, Mr. Jean-Claude Juncker, eurogroup chairman and therefore in charge of the eurozone, declined this request referring to the rule that countries have to wait for two years after they meet strict financial criteria.
Eastern Member States that are outside the Euro fear that only the Eurozone members might benefit from bank bail-outs, although the summit assured them that “parent banks should not imply any restrictions on the activities of subsidiaries in the EU host countries”. Hungary’s proposal to create a fund of about €160 – 190 billion for Central and Eastern EU members has also been rebuffed and no new EU aid has been announced to help the failing Eastern European economies. However Poland’s Europe minister, Mikolaj Dowgielewicz, stated that Eastern Europe did not need any specific plans. He stressed that “help should address the real conditions on the ground and “not try to raise a barrier or a new wall between new and old member states”.
Meanwhile, the recession is likely to cause political, economic and social tensions in Eastern and Central Europe; approximately 5 million jobs are at risk in the region and it has been estimated that Central Europe’s refinancing requires €300 billion for 2009. There is a danger that the growing economic crisis is likely to re-create an all-too-familiar divide between the East and West in Europe. The Hungarian Prime Minister Ferenc Gyurcsany noted, “We should not allow a new Iron Curtain to be set up and divide Europe in two parts. This is the biggest challenge for Europe in 20 years. At the beginning of the 90s we reunified Europe. Now it is another challenge – whether we can unify Europe in terms of financing and its economy”. As, David Charter argues in the Times, the danger is that the “lack of EU leadership and direction…threatens to wrench apart both the euro and the EU itself”.
The summit made efforts to avoid protectionist measures and to stop speculation about the East-West divide; Czech Prime Minister Topolanek stated that “…the EU is going to leave nobody in the lurch”. British Prime Minister Gordon Brown, also warned the EU members against protectionism because it is a “road to ruin” and, heading to Washington today to meet President Obama, he called for bold global action. Mr. Brown will host a G20 meeting next month in London, when he hopes that world leaders will take necessary decisions for a secure economic future. However, according to the Business group Eurochambres, the summit of the 27 EU Member States’ leaders did not really bring any tangible results. It showed division between its rich members wanting to protect their own economies and the poor that cannot afford it. Therefore, as Secretary General Arnaldo Abruzzini noted: “This summit was yet another rather unproductive political showpiece, bringing no concrete solutions to the dramatic economic situation and showing a worrying lack of economic co-ordination among member states. We deeply hope that the spring European Council will do better in a couple weeks time”.