Collapse: Europe After the European Union

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Transcript – COLLAPSE: EUROPE AFTER THE EUROPEAN UNION

Chair James Rodgers:

Okay, good afternoon ladies and gentlemen. It is very fine afternoon with a great view as always. So, this afternoon, we have about an hour, and it is my great pleasure to welcome Dr Ian Kearns, who was working formerly for the European leadership network, as the director which deals with a whole array of issues, dealing with foreign and security policy and defence policy, looking at both from a European and, kind of broader standpoint.

He has published extensively on these issues, and his latest book is this one here, which we are going to discuss – ‘Collapse: Europe after the European Union’ – which looks at the future of Europe without the European union, and wonders what will happen and how we will cope, and if indeed we could cope, and the systematic challenges that would cause. So, we have around 15 to 20 minutes where he will present his central ideas, then we can move into the rest of the time for discussion. So if I hand over to Ian, he will be able to discuss this in more detail. Thank you for coming this afternoon.

Speaker Dr. Ian Kearn:

Thanks you very much James. Well you can’t write a 75,000 word book, then talk about it for 15 minutes, without doing considerable [inaudible] to your own argument, but hopefully we can fill in some of the gaps that I skip over, during the Q and A.

First thing I want to say is that this book is a warning and not a prediction, that is the first sentence of the book, but obviously you don’t issue a warning unless you think they are necessary. So why did I think it necessary to issue this warning now about the collapse of the European Union? Since the European Union has had its ups and downs, its period of crisis before, and many people just assumed that despite its problems, it would just roll on. I wrote this book now for several reasons. The first is that there are many people who are there to kill it frankly, as an institution, and have that as a central element of a political project. Secondly, there are, its friends as an institution, who are too complacent, and who think it’s safe. Some officials even go as far as to say the European Union has the wind back in its sails. I’m not sure about the political judgement of those individuals. Thirdly, it seems to me that only the eurosceptics have actually thought through the implications of the collapse of the European Union, and crucially I argue in the book, they have calculated a Europe after the European Union, is a Europe where their more nationalist form of politics will thrive. It’s therefore a strategic objective of many of the Eurosceptic nationalist parties, to engineer that collapse, in the hope, I argue, that they will actually be the political beneficiaries.

The thesis of the book is fairly straight forward. It’s first that the European Union if fairly vulnerable. Second, that it’s possible to identify a number of plausible trigger scenarios that would leave to the EUs collapse, from where we are today. All too plausible I would argue. Thirdly, the book argues that such a collapse of the European union would be an unmitigated disaster, that would lead to economic chaos, a nationalist fuel form of scapegoating politics, trade protectionism, and, and this is an argument that isn’t often made I think, the destruction of the European Union in my view, would leave to the destruction to NATO, and a return to a multipolar balance of power structure to the international relations of Europe. And therefore I’m arguing in this book, unless we change course, that’s where we are currently headed.

Now let me deal with each of those in turn.

In terms of the vulnerabilities, I won’t dwell on these too much because I think they’re well known but you can easily see and in the book I outline them as challenges from the east, from Putin, who I am convinced is determined to destroy the European Union, because he sees a strategic opportunity for enhances Russian influence, in that eventuality. Challenge from the south, we know in terms of the migration crisis which has become fused in many people’s minds with the challenge and the threat of terrorism unfairly, but nonetheless, that connection has been made due to a few isolated but nonetheless high profile incidents. And you might say staggering, but we all have to stop being staggered now and say the European Union is now threatened in the west, in the form of a Trump Whitehouse, that actually I believe, and I say this explicitly, he is a threat to the European Union, he actually wants to destroy the European Union, and every snippet of information we get where he gets to talk to a major European leader in bilateral leader, he tries to suggest to them in a friendly way, why don’t they leave the European Union to do a deal with the United states on trade. So there are a number of external challenges to the European Union which make it vulnerable, but there are also a number of internal weaknesses.

I could go back, and I do in the book, to talk about the main weaknesses, being the terrible way, which the European Union sought to manage the euro crisis of some years ago. We can pick that up in questions if you like. The main point I make in the book, which makes it relevant today, is that the way the crisis was handled, turned an economic crisis which was really about relationships between debtors and creditors, and turned into a dispute between nations and sates. That left a toxic politics in Europe between creditor and debtor nations which is still there. That dynamic is still there, and can be fuelled by further way of crisis. So, that’s one element of the internal weakness.

The other is that the reforms that the European Union has tried to introduce in the euro crisis, that I detailed in the book, none of them, I argue, have been successful. Macron’s fiscal union isn’t going anywhere, the banking union has stalled, the capital markets union is a very long-term historic project, which is a sensible thing to attempt but it’s not going to change its dynamic on its economic side in the next decade or so. And the point about this is, the attempt of Eurozone reform not having gone far enough, the euro is effectively a sitting duck, waiting for the next crisis to come. All of the same dynamics, if there’s a crisis tomorrow, and we saw this recently in the aftermath of the Italian elections, where we saw spikes in bond yields on Italian government bonds and collapse on share prices in Italian banks. The [inaudible] between banks and governments [inaudible]. The creditor, debtor toxic [inaudible] across Europe still exists. If we had a major euro crisis tomorrow, my argument is that we will be in exactly the same position that we were some years ago. The European Union’s crisis management mechanisms will be overwhelmed if the crisis involved a major euro member country, and as a consequence, will be into late night meetings in Europe, blurry eyed people coming out trying to spin to the media that they have come up with a solution, or at least some incremental progress to manage the crisis and to keep it at bay. But in this case, of course are already at very low interest rates, using the European central bank to the full in terms of liquidity measures and so on. So my argument is that there’s a huge economic weakness at the heart of the European project. That’s perhaps the core issue facing the entire entity.

It’s also the case that we haven’t seen political contagion as a result of Brexit, but we have seen, still, quite powerful and influential Eurosceptic movement in Europe. My argument in the book is that they all learned something from the Brexit campaign, and in my chapter on Brexit in the book, my essential argument, is that yes there were very British reasons for Brexit, particularly the relationship with the UK and the rest of Europe, but it’s also the case that the Brexit campaign was able to thrive on what was perceived as the economic mismanagement of the Eurozone, the way poorer countries were treated, the way some countries were corrupt in the European union. The palpable chaos in the migration crisis, and if one of the main arguments of having the European union is working together we can solve problems we can’t solve alone, seeing the attempt, well not really an attempt to manage the migration crisis. Just a failure to do so, of European countries to work together on that, the Brexit campaign used all that as ammunition very well. At the height of the migration campaign, the Brexit campaign, there is a very clear jump of 5 or 6 points for the leave vote in the UK, and we all know the names of those politicians who sought to really use that issue and twist the knife to maximum effect. So the argument is that the European Union is vulnerable.

Secondly, it’s possible to identify a number of triggers from here that could lead to collapse. Two of these identify as economic, four as political/security triggers.

On the economic side, my argument is that something as straightforward as a recession, will tip the European Union, tip the Eurozone back into crisis. Because we have many countries with high debt to GDP ratios, we have all of the same [inaudible] problems. Equally if you look carefully and closely enough, there are warnings almost every week of a senior figure in the international financial system, warning that the financial system is at risk of a crisis. Whether its shadow banking in Asia, whether it’s what Christie [inaudible] at the IMF calls the ‘rapid growth in over-complex instruments’ by which she means the repeat of the behaviour last time, where people are packaging up assets into very complex instruments so nobody really knows what they’re buying or selling, the effect of which is, when a crisis comes, that nobody really knows who owes what to whom, and you get the credit crunch that we had last time.

In the middle of all of this, Donald trump thinks it’s a great idea to deregulate Wall Street. So all of those things can happen. They are quite plausible, a new financial crisis or a recession that could in this case be triggered by trade wars, or a number of other issues.

On the political side, I identify four issues, or potential triggers.

One is a Eurosceptic breakthrough in the core. Arguably we have seen that in Italy and I believe we are now potentially in the eye of the storm in Italy. We have a quiet period and we will see what type of government it is. We will see how the dynamics develop over time, but there is a strong potential of what’s happened in Italy, to trigger a euro crisis. That would also apply if there was a breakthrough in another major Eurozone economies, by the Eurosceptic.

Secondly though, and less obviously. Something like a succession crisis, could trigger a break of the European Union and here in the book, I use the Catalan example, and although it’s dressed up as a political crisis, it leads back to an economic crisis in the Eurozone. The essential thing here is, in the case of Catalonia, if Catalonia were to leave Spain, the economic damage would be so large and Catalonia being the wealthier part of Spain, the remainder of Spain, wouldn’t actually be in a very good position at all, to service its debt levels, and again, you may see big question marks over the financial viability of the Spanish state in that environment, and that can trigger a loss of confidence, and trigger, essentially a sovereign debt crisis in Spain, triggering a euro crisis on a scale that crisis management instruments are not meant to handle.

Third political trigger scenario I point to, is the decision by Erdogan in turkey just to turn back on the flow on migrants. For the deal with the European Union to fall apart, which would cause all kinds of chaos. It’s not just it causes chaos in terms of borders going back off, it just pours fuel on the fire of Eurosceptic fire on Eurosceptic politics and nationalist politics, and that I feel feeds back in, into the potential likelihood of further Eurosceptic breakthroughs elsewhere.

And the fourth political trigger I identify is related to Macron’s fiscal union. I’m actually a fan of Macron in terms of the way he talks about primary colour terms of the challenges facing Europe and that something needs to be done about them. But, I argue in the book, that his attempt to push the fiscal union in the very high profile way he has pushed it, is counter-productive. All he has done in my view, is shine a light on the fact that the political solidarity required to have a fiscal union, doesn’t exist. The markets have noticed that, and they will have that in mind, come the next crisis. Even if, I argue in the book, he was able to get sufficient support to pursue fiscal union, there’s a reasonable chance that would trigger a Eurosceptic backlash in many countries who would find many of the terms and conditions attached to the fiscal union, difficult. For example in German politics, there will be a price to pay I think, if the German government went all in, on a more fundamental fiscal union, with the instruments and mutualisation of debt, and so that would be associated with some of that move.

The point of these trigger scenarios is that first of all, they are not the only ones we can identify. There are others one can identify and they are all plausible, and secondly, they feed off each other, in the way I was indicating earlier. If you get an Erdogan decision, it feeds into Eurosceptic challenge. If you get Eurosceptic breakthrough, it can trigger a financial crisis, Eurozone crisis. These things fit together.

Think of this as an illustrative example of other things that could happen. But you just have to stop somewhere when you’re writing a book. Were Islamist terrorists to detonate something like a dirty bomb in a major European city, my argument in the book is that that would completely transform European political landscape. Something that big, would lead to massive accusations. How did they get that material in here? The Belgian police are rubbish. Whose border did they cross? We can’t trust any mechanisms across Europe to do this. We are doing this ourselves. My argument is that there would be a strong surge back to national efforts to control the challenges.

So many more triggers exist. I think they are all plausible. They feed off each other, and the European Union in my view, needs an awful lot to go right, and only some of this to go wrong to find itself back in a crisis.

Now, I think that the meat of the book really is on the issue of how does collapse occur, what’s the dynamic, what are its economic, political and security consequences. So obviously ill just run through this very quickly. But, my argument in the book is that, and this is the absolute key assumption of my argument, is that it’s not possible, particularly in terms of the Eurozone, to envisage and manage, unwinding of the project. This will be an unmanaged route when it occurs, and that will lead to all kinds of economic, political and security consequences.

On the economic side, some people like Marine Le Pen in the election in France, liked to use the phrase ‘we’ll leave the euro without breaking the dishes’. The argument they make now, is that they will win the election, will put to the country that they will leave the euro. They will have a referendum, if they win the referendum, they’ll come forward with their plan of how to implement. On a certain given day in the future they will implement. Anybody who watched what happened in Italy, on the markets, knows that none of that’s going to happen. The point at which that looks plausible at all, that one of these countries will leave the euro, all of these events will be condensed by market pressure, because there’ll be capital flight. Why would you leave assets in France or Italy under the Euro, when you know 6 months from now, they are going to be devalued in a new frank. People just move assets out. You see runs on banks, capital flight, rising bond yields in the country concerned, damage to balance sheets because many of the European banks are still big owners of their own government bonds, which help to keep their balance sheets healthy. So we’d see bank closures, the whole dynamic would unfold before us again. And, as I said earlier, the crisis management tools of the Eurozone are just not set up. Greece is one thing, Italy, France, Spain are something entirely different, and they are not set up to do that. They could be contagion to other countries.

One of the things that could happen that very few people touch on is that I think there would be in the scenario of a Eurozone crisis of a major country leaving out of choice, or being pushed there by the markets, what you’d see is a collapse of trade, and the reason for that is that the heart of the trade payment system in Europe, that very few people look at, the so called target 2 payment system, that basically operates entirely on trust. Money doesn’t change hands, so if the central bank in Spain will technically withdraw some euros from an account in Spain, the central bank in Germany releases euros in Spain to pay for the transactions – it’s all operated on trust.

There are imbalances in this system, huge imbalances. If you’re in a situation where people are thinking, hang on in Spain they are not going to be part of the euro in the future, what currency are they going to settle trade bills with, we are not sure what they are going to, they are not going to honour their target two commitments. People will quickly switch to only settling trade bills in hard currency, and the fact is that countries like Spain or France in that eventuality, will not have a bottomless pit of what’s recognised as hard currency to keep trade going. So you’ll see a collapse of trade levels inside the European union at the point at which you see a major country leaving the Eurozone, both because of the individual country, but also because then of the likelihood of contagion of other countries because that’s where markets will look next. Who’s next in the que to leave the Eurozone, so you’ll see that, you’ll see as a consequence of all of that, a major recession if not depression? You’ll see a lot of scapegoating politics, you’ll see trade practices change, you’ll [inaudible] on-tariff barriers introduced, accusations of social dumping, basically the end of the single market is what you will see in that eventuality.

Also, you would see, and we witnessed this over the last few years here in this country, migration flows from the collapse in part of the Eurozone to the [inaudible] of jobs, which would then fuel the whole debate further about free movement, about migrants coming into countries to take jobs and so on, which we will see characterises a number of countries in the European union in terms of politics.

Beyond that, politically, the argument in the book is that the values enshrined in the European Union treaties of the rule of law, respect for minorities, tolerance, pluralist institutions, would come under attacks. That’s the argument I make in the book. That’s because when you’re facing this level of economic chaos, there’s going to be a lot of scapegoating politics. I think you have to imagine Trump rhetoric about global trade being played out in Europe, between European countries, and you also have to , I think, think about what will have happened to the elites who have managed the European union, and have then presided over this chaotic collapse. Not only will the individuals be discredited, but all of the ideas and institutions to which they have nailed the reputations, will be discredited as well.

My argument in the book therefore is that you will see major attacks on pluralist institutions. One of the populist arguments you see time and time again is that existing leaders are too weak to do things, or they have said the governing system doesn’t allow it as powers diffuse, it’s too tricky and [inaudible]. You’ll see a surge beyond strongman politics, where people are simply saying give me the power, ill sort these problems out. You can see the whole dynamic unfolding, and a move to concentration of power in individual leaders. In one of the worst columns I’ve seen in many a year yesterday in the Times, Clair Fogue argued that would be quite a good thing – at least strong men leaders got things done. Well, they do. They get the trains to run on time before they start rounding people up, putting them in prisons, eventually slaughtering them in large numbers. Also you have to understand that the whole environment that would create, would be one in which it’s not possible to organise cooperation on very much a European wide scale. In that political environment, that toxic on economic, that toxic on trade, strong man politics playing to national audiences, you will not have an environment conducive to European-wide operation on a number of things. That will have negative consequences internally, also meaning that Europe’s voice effectively disappears on the global scale with ramifications for the structure of the global order.

And lastly, just on security aspects of all this, that lack of capability to cooperate will I think be translated into a weaker ability to deal with terrorism, to deal with migration, to deal with trafficking of drugs, weapons, people, all of which will have ugly consequences over time on our streets, which itself will enforce the illiberal mood that will be gripping Europe. I argue in the book as I said in the outset, that NATO would be effectively destroyed by this process, because the political solidarity to make it function, would no longer exist and the founders of the treaty understood that. Everyone talks about article 5 of NATO, being the collective security commitment, but Article 2 is where they talk about the economic foundations of peace, and the need for states to cooperate with each other. We couldn’t be in that environment, and I don’t believe politicians can go through this level of visceral, blaming each other on the economic crisis, of targeting Muslims of this kind of diffuse politics, and then sell to their own voters that they should go to war to defend each other in an event of a crisis. Vladimir Putin will be looking on.

So, I think you’d see, and let’s face it, Trumps attitude to NATO, if you had a different President in Washington, who saw it as his or her role to sure up an institution like NATO, you might conceivably see a way of navigating your way through that. What you’ve got in the white house at the moment, is a president who sees NATO as a protectionist racket, in which he offers to defend countries in return for concession on trade, or some other economic deal such as buying large number of American made military equipment. That’s not a context in which the main power of NATO is going to step in and save it. So you’re then in a Europe without a European Union, you’re in a Europe with NATO altogether or where NATO’s credibility has been completely destroyed. I argue in the book that you’re back to a multi-polar balance of power structure to European relations, in which you may have a smaller core of countries working together economically around Germany. You’ll have Britain on one fringe of Europe, Turkey on the other. Russia paying tis traditional role, a kind of open question about whether France tries to leave the club med, whether it still tries to hook its wagons to the Germans – I don’t think this is possible in the scenario. You have this massive structure effectively multi-polar.

Unlike in the cold war where you have clear lines of division, to initially of course but over time there are clear lines of division, and of course post-Cuba when we became very close to Armageddon, we built up the mechanisms of conflict prevention and conflict-diplomacy in order to manage the confrontation that existed in Europe. In this scenario we will have no clear lines of influence, only murky areas an [inaudible] for influence, and all of the conflict prevention mechanisms that we built during the cold war, have no [inaudible]. All of the arms control agreements that we have are all slipping by the waste-side, they are being eroded. Some people might argue specifically by the Russians or by technology, but nonetheless the mechanisms are not in place. And the EU as a pole of attraction, will also disappear. So for many of the countries in the eastern Europe and the Balkans who are still seeing the European Union as their future, that pole of attraction would have disappeared.

Putin would have moved into that vacuum, and he would use all kinds of under-hand mechanisms to do it. He wouldn’t necessarily use a military sense, but corruption of officials, cyber-attacks, dis-information campaigns, effectively state capture, is Putin’s strategy [inaudible]. But also China’s footprint is growing already in that region. In Budapest, their relationship with Beijing is called the eastern opening. All of that would happen, and the introduction of greater influence from Russia and china, would just reinforce illiberal politics in the whole of south-eastern Europe, and Eastern Europe. And we would be in a Europe of, I argue, spheres of influence, essentially, because the only power in Europe, that could stop Russia having a sphere of influence in Eastern Europe is Germany, but to do it, and to control Russian power in Eastern Europe effectively, they’ll try and contest it economically, but to contest it really effectively they’ll need to build nuclear weapons and I don’t believe the Germans will do that, I think they’ll acquiesce. They may not say so but they’ll acquiesce to the Russian sphere of influence, so, European states, men and women at that point will then be faced with the historic challenge with which we are familiar – how do you manage a balance of power, state relationships where there is a completion from influence, no clear boundaries where one countries influence should start and stop and others should start and stop. We don’t have, although we’ve managed to do this for period of time in European history, in the end we have always failed to do that peacefully.

So where as in the Brexit Campaign, David Cameron fleetingly mentioned security and war and peace and was ridiculed for it. Frankly that ridicule is a western-European prerogative. Someone who has been geopolitically shielded from conflicted sides in world war two, but actually if you were to make that point in the Balkans, eastern-Europe, Ukraine, in Georgia, they know too well, that war is highly likely and possible in the Europe of today.

Now, I’ve taken up too much time, so I’ll stop, except to say there are, I do posit ideas in the book about, the way some of these challenges can be addressed. I am also really honest in the book in saying that I actually don’t believe my own recommendations. In the sense that I don’t think its possible, I can’t see intellectually, even though, personally and politically, I would love it to be otherwise, I cannot convince my brain, that what’s required in policy terms, is deliverable politically. And I can’t see the leaders on the scene, who are capable of putting those things together, so I’m afraid, as I said at the outset, although its a warning not a prediction, it really is a warning issued, with a view to saying ‘this is, I’m afraid, going to happen, unless something fundamental happens here, changing the dynamic’.

Thank you.

Chair James Rodgers:

Let’s open up for questions. I’m sure there’s going to be lots, so let’s start.

Question (Unknown):

You said you couldn’t see a way of disentangling the European problem at all really. I’m not sure I disagree with you but it seems to me, the only hope would be if Germany were to leave it, therefore recognising the fact that it’s effectively giving away a trillion euros to southern Europe, but nevertheless the German people may be happy with that. As the new de-mark will be worth 30% more. Somehow the euro, Italy will then devalue, and will economically recover. Isn’t that the only hope?

Answer (Dr Ian Kearns):

I think you’ve skated over quite a lot there and how this would unfold. I also think Germany would suffer a lot. So I don’t buy your thesis. They would suffer economically in their terms, and I also don’t buy the point that they are given a trillion euros away. For example, in the sovereign debt crisis 2010-12, yes they, all the German newspapers like to say they are giving all their money away to lazy southern Europeans. What they didn’t tell their own voters, is that hundreds of millions, and in some places, billions, are being recycled back into German and French banks who were the ones who lent to the Greeks in the first place. All of the banks went through this period of just forgetting all about moral hazard. Packed money into place it should have been and when the crisis hit, their government stepped up, told their own voters they are bailing out lazy Europeans elsewhere, when all they were doing was bailing out their own banks protecting them from the moral hazard that should have been exposed.

There’s a brilliant book, and I had a chapter on the management of the euro crisis in the book, but there’s a brilliant book by Martin [inaudible] from the financial times, called ‘Europe’s orphan’, which he demolishes that entire argument, with regard to where the money went, what the money used for, and the toxic politics that has subsequently developed around that.

So, I think Germany have got a lot more economic skin in the game, and that it wouldn’t be in their interests. I also think if Germany were to attempt to leave the euro, you will still see all the other [inaudible] I described, total unmanaged chaos unravelling, and some countries in Europe will be real losers, some would be winners, but the impact on politics in each of these countries will be profound. So, I can see the logic of what you are touching on, but as I said, I also didn’t think at the moment, one can see any prospect of that happening, because the German political elite, not just the current elite, wont counter that, because it goes to the heart of whether they see themselves as leading the European project, or whether they are leading a Germany national project. That’s one of the massive issues they’ve tried to finesse in the whole period since the Second World War. My argument would be that it would take a crisis elsewhere in the Eurozone to make a shift happen in Germany that the whole of the structure has fallen apart therefore now we need to do something else.

Question (Euan Grant, Senior fellow at the institute of statecraft):

My question is, you mentioned how the elites, the dangers that they collectively and individually dis-credited, have been nailed in colours to the mast. Do you see any particular science, or particular groups or institutions, in the member states, or in the commission, and collectively, which really are starting to grasp the seriousness of what you outline? Or conversely, are there any who particular seem in an ivory tower. I’ve never worked in the European commission, I’ve worked for it, I’ve worked in a mission in Ukraine, which to put it mildly, was not exactly [inaudible]. I’ve seen the dark side of the commission, and on the terrorism, criminality issue, I would draw everybody in this rooms attention to Mr Wainwright, who recently left Europol after an extended second term. When Mr Wainwright was first brought into, the public interest across Europe had a very narrow scope because one of the candidates towards the end of the campaign, its beggar’s belief that such man can be considered a fit and proper person, so thank heavens Mr Wainwright was appointed. I think that highlights some very serious problems [inaudible] of the European, pan-European project. Thank you.

Question (unknown):

I was enjoying the sun, but the thing is, what you presented, it gave rather the impression, that Europe was kind of, sort of, passive, an angel around the borders, of those, particularly the east of the borders, that there’s an expansionist devil. There’s another way of looking at it. That Putin, a, wont be around forever, and Russia could get someone as kind of, incompetent, as some of Putin’s post-1990 predecessors, so that would take the heat off. But more importantly, you could argue that he was responding to EU expansionism, towards the east. Apparently wanting to rope in, all the former Warsaw pact countries, to bring them into his fold, to put nuclear weapons on the eastern borders. Putin is simply responding to what he perceives as a threat. The other weakness, or not weakness, but the thing that struck me about your presentation, was your, kind of, assumption that Germany is never likely to re-arm, particular, acquire nuclear weapons. Well I can’t see that. If Alternative for Germany, who I don’t think are a neo-fascist party, but certainly are nationalistic, if that trend intensifies with a growing crisis generally, what’s to stop Germany saying ‘now is the time, we must take full responsibility’. Actually Donald Trump, is encouraging countries like Germany.

Answers (Dr Ian Kearns):

Let me take the second one first. On Germany, yeah there’s nothing to stop them absolutely. They are a sovereign country, they can go down that route if they want. I think the debate that will happen in Germany and if the European Union has collapsed, and they are leading a small, if you may call it a ‘Deutsche-mark’ zone, they will see themselves as major players in European politics. Indeed, they will be a crucial anchor of the economy and anchor of power. Their question, and if the Americans have, you know, not offered solid anchors of support. Their question has to be, do they go all in? Nuclear? Much bigger military? Equip themselves and take responsibility of their security like they haven’t had to do in recent decades, and therefore be able to see down the Russians and contest in central and Eastern Europe. That is one potential strategy for that. I’m not saying it’s impossible, they could choose to do that. My hunch is that they would decide to contest Russian influence economically, and politically in eastern Europe and south-eastern Europe, but they won’t go into the whole military confrontation space, which I think guarantees the Russians a sphere of influence in eastern-Europe because there will be no other countervailing power. The real sufferers in that context would be the Baltic States and the others who get [inaudible] on, incredibly hard. But it would still take a big leap in German politics for the public to support a German nuclear weapons programme. As I say it’s not impossible.

On the, I agree with some of what you said… I wouldn’t go as far as saying Putin is merely responding to what the West has done. But mistakes were done in western policy after the cold war I think that’s true. But I think Putin is about much more than that, and actually I don’t accept that post-Putin, Russian policy is going to be very different. In fact i think Russian concerns with the nature of the emerging European security order, pre-date Putin. They go back to the Yugoslav confrontation, you can see all the way back in 1991 to significant Russian military and political leaders, talking about the fact that NATO was acting irresponsibly and there was going to be trouble. Not only that, we can look further back into Russia foreign policy over the last century or two, and see similarities in terms of perceived interests. The essential core of the entire Russian policy making, is not Putin, but all of them, political, military, is that Russia is a great power, it is certainly a great power in European terms. A great power’s status comes with certain rights to have ones interests taken into account, and that the European Union disregarded and NATO disregarded those interests when Russia was weak. Russia is not quite as weak anymore, therefore, that is a [inaudible]. That is the Russia narrative. It is believed by many in Moscow not just Putin, so I think that will stay irrespective of when he goes. But I do think that if there is anybody still fantasizing about the European Union expanding to the east, I think they just need to stop. I mean, really, you can’t get a further expansion to a major country in the east, past the current members. It would end in an institution more unworkable, and the trend everybody should be worried about isn’t institutions in the west such as the European Union, but the east moving west. It’s the combination of Russia and china influence into Eastern Russian, which I think is the [inaudible] and coming trend.

On the issue, Euan on your point, on the politics of this. I think few people are calling it like it is, more than president Macron. Whether you agree with his policy agenda, either domestically or across Europe as the solution, if you read his speeches and his statements he makes, it’s absolutely clear, he has used the expression ‘civil war’, that Europe is in a kind of civil war. He is absolutely crystal clear in his speeches, that the future of the European union is at stake, that people are trying to destroy it, and they are going to succeed if we don defend it in first principle terms. What his message is to the rest of Europe, is that, if in your own countries politics, you scapegoat the European union, and blame it for all of your domestic problems, don’t be surprised if when the crisis comes, the European union has no friends, no friends to save it. That’s his political views that I believe deserves credit. On the other side of the ledge you have Orban, who takes European taxpayers money from elsewhere, spends it in Hungary whilst knifing the European Union in the back, every conceivable opportunity he gets domestically. You see some of that going on in parliament, so I think Macron is showing the way politically, in which you have to argue for the European Union if you believe in it. This is much much better than what will come after it. We have to defend it, it is at stake, and there is a risk it’s going to collapse.

Elsewhere, I think the main battle politically, for the future of Europe, is actually happening between economists, it’s happening between the so called Germany order, liberal economists who think about economists in certain way, and more Keynesian economists around Europe. But if you look at how the Eurozone has managed the last decade, I would argue that it’s managed it very very dogmatically. I’ll give you an example. In the case of Greece and Italy, the European central bank threatened to turn off liquidity to Italian and Greek banks, unless the Italians and the Greeks bailed out, agreed to bail out all of the banks. A year and a half later in Cyprus, the European central bank threatened to cut off liquidity to Cyprus, unless they bailed in all of the banks. What had been previously said as no alternative to dealing with a crisis, had 18 months been turned into ‘we want a bail in, we aren’t doing this anymore’. In that, just demonstrated that there were choices, there were different choices. There’s a kind of dogma at the heart of Europe, and anybody who is anybody who doesn’t agree with them, is treated as an economy illiterate. Seriously, someone like Paul Krugman, who writes for the New York Times, has been making alternative arguments on how to manage the Eurozone for years. But everybody who seems to disagree with this standard Eurozone line, is kind of portrayed as Yanis Varoufakis wearing a t-shirt on a motorbike on a street of Athens.

For me, that was crystallised some weeks ago in Italy, when the Italian issue was at the forefront of people’s attention. All of the attention was ‘what will the Italian government do? Will they break from the Eurozone’s rules and push to leave the Eurozone?’ and not thinking on how can the Eurozone respond to a very significant member state, whose people have just elected a new government, that’s demanding change, in which, the two populist parties, represent about 60% of the electorate. How can we work with that new government to increase flexibility, to give them something to be able to deal with the anger that exists in Italy? That question didn’t even flicker across the minds of many policy makers in Brussels. But that can be the whole ball-game right there.

Question (unknown):

Can I invite you to talk a little bit more about the V4 groups of countries and where you think the future lies? Whether the EU may take any punitive action against them, or whether you think they may be able to [inaudible] such action, against the EU.

Question (unknown):

Can I say, congratulations on the book. I’m half way through, it’s a wonderful read, and you had an excellent summary with a clear presentation. What is obviously, taking close friendly cooperation between the European states as an act of good and necessity, what you seem to be describing is an organisation that is making a fundamental mess of it. Granted, a lot of things the European Union has done is successful. But you use words such as ‘believe’, ‘believe in it’, and I think that’s, and its a suggestion, that’s one of the problems. It’s treated as a name itself, a cult that has to be believed in. Can I suggest, given that [inaudible] the trouble, isn’t it time for the European governments to say ‘somethings going wrong here, we’ve got to remove the golden images of [inaudible] out the [inaudible], and think about how we can retreat back to something that’s going to get general consensus amongst [inaudible] people’. Because even your view is so negative, that we are looking forward to a collapsed, rather than a managed, sensible to what is democratically acceptable to nations with which have good feelings towards each other, pre-Maastricht.

Answers (Dr Ian Kearns):

I’m not sure I would talk about the V4 as a group actually. I think there are slightly different things going on in different parts of that. But on the essential part of that of the illiberal politics that is on show, and the Eurosceptic attitudes that are on show in parts of the show. I would personally like to see the European union take a much tougher stance, because I think the values laid out in the treaty have been violated by Orban, and by the Polish government as well. Having said that, the institutional machinery makes it very difficult to faction work and actually, the unanimity principle around some of this, means the Hungarians and Poles can cover each other’s backs for much of the time. So, I think that Franz Timmermans is working hard to get support for a robust response but I think it’s going to be limited, and nothing significantly will change as a consequence. I think what we have to try and do is to get those countries to think more about their own interests in a different way.

So, I cannot understand for the life of me, and James, you’ve spent time in this region so you probably have you own views. I, for the life of me, cannot understand, which foreign policy genius is driving Polish foreign policy. They seem to have Russia on one side and want a scrap with Germany on the other, and I’ve read a bit about Poland’s history and that doesn’t seem to me to be the best. [Inaudible] made the point some years ago, that Poland wanted to be a key part of Europe because it wanted to be a player, not a playing field. And, it is going to be a playing field if it carries on where’s it’s going and I think these conversations need to keep happening as to why you think what you think you’re doing is in your long term strategic interest. Personally I’d like to see some threatening of changes to the economic relationships if values of the treaty aren’t being fulfilled, which might mean less money going to these countries. The danger as always, is you trigger a backlash. But if you don’t do this, all you have is this institution which then appears to say ‘all that matters is we exist, all that matters is we survive. It doesn’t matter if you’re a government in Europe’. And I’m sorry but some of what the Hungarian government is doing is borderline fascist. I’m sorry, it just is. If we’re saying ’it doesn’t matter, you can do that in the European Union, we don’t care as long as we exist, then I think there is not much chance for that institution to command loyalty of anybody, at the end of the day. Except for the economic interests that it serves, so that’s what I’d say about the V4.

I think, on this other point about the institution and belief and so on. I think, probably where we can agree, is the, and this for me is one of the downsides of Brexit, because we have kind of side-lined ourselves from this, but there needs to be a completely different conversation of how to reform the institution. It has to be taken away from the bureaucrats in Brussels. It does need to be political leaders. Again, I think Macron is trying to do that, he is trying to stimulate that political conversation, but isn’t getting much back from other key leaders in Europe. I think that’s where it needs to go. How do we collectively try to turn this into something different, from what it is now? Because if we don’t, then it just isn’t workable. It becomes more and more unworkable. As you say, crucially, the situation that it got itself into, it appears now, and it’s a good example, European people can go to the ballot box, cast a vote, then find themselves in this strange dynamic, where this other institution in Brussels is telling them they can’t have what they voted for because its inconsistent with European rules. It may well be true but previously democratically elected government signed up to those rules, but, as has been said in the Brexit debate, it’s not just one person, one vote, once. The day a democracy stops and decides to change its mind, is the day it stops becoming a democracy. And if the Italian people decide they don’t want these rules anymore, and the European Union can’t accommodate that, it’s finished.

Question (unknown):

Is it possible that Trumps’ games less of racketeering, but one of strong-arming NATO members like Germany, who have failed to fulfil their commitment to spend at least 2% of their budget on defence? Trying to look at this optimistically.

Question (unknown):

So far as this countries concerned, in your mind, is it a shame that we are leaving, because if we stay we could maybe slow this collapse down or even prevent it? Or is it a question of thank god we’re leaving, let’s get out quick and savage ourselves.

Question (unknown):

If you had to place a bet, what would you personally put as the odds of complete collapse vs partial collapse vs pretty much carrying on with what the situation is? Whatever time frame you want. If you want one, ten years.

Answers (Dr Ian Kearns):

Okay, let me start with that one. I think I’m not sure there’s really a distinction to be drawn between partial collapse and collapse. If by partial collapse you mean some countries stick together and share a currency around Germany, if that’s partial collapse, I don’t know. You know there are some countries where I’ve had conversations with leading figures in other parts of Europe, who I can imagine would stay close to Germany in a collapse scenario and they’ve said no way. In the context where the whole structure will change, no way will we they be dominated by Germany, it wouldn’t work. So, you know, I think in the next ten years, I think there’s a, probably I would think 75% chance the European Union collapses. It could come much sooner than that I really do mean what I said, that the euro is a sitting duck. It’s just waiting there sitting for the next deep recession or financial crisis. What’s changed from last time is not the high debt to GDP ratio and all that, I think what happened in the migration debate in Germany, I think was quite informative, where Merkel was almost brought down by the migration issue from within her own movement. See I think that if you get a Euro crisis and she sits up till 5am comes out blurry eyes in the commission building, saying ‘we are committed to do XYZ to save the euro’, I don’t think that her own side will be fully supporting her before she got off the plane. I think leading members of the CDU will say she doesn’t have our authority to do that. That’s because of the rise of the AFD, and the change of political environment, and I don’t think now,  even when there’s a crisis, when they reach for what they know needs to be done, I don’t believe anymore that they can carry their voters with them, I feel that ship has failed. So again, it’s another reason for my pessimism.

Let me finish on Brexit, since that involves our country. Coming to Trump, you know, I personally think Trump is not a multi-literalist. Period. I don’t think he’s interested in NATO. I don’t think he’s interested in the European Union. I think he’s a nationalist President, a [inaudible] President, who sees international politics as a zero-sum game, and that he just wants to maximise, well he wants America first. And, actually, I honestly think if he calculates that he can sell more weapons into Europe, by breaking NATO, and then doing bilateral deals with a lot of countries that makes them intensely worried about their defence by selling them loads of American military equipment, and keeping some American troops in Europe, then it’s possible to see some patchwork of American bilateral relationships and influence. So I don’t believe there’s just a grand strategy of European defence spending. He might be able to argue that if he wasn’t already saying what he’s been saying about the European Union. That the European Union was a foe. He wasn’t trying to persuade Macron in private meeting that France should leave the EU and do a trade deal with the Americans. What all that tells me, and I’m just a guy whose written a book, but I thought through some of these issues, and I’m serious when I say that I don’t believe NATO can survive the collapse of the European Union, and I’m serious about my belief that I don’t think you can identity, managed processes of unravelling the whole thing. So if a crisis comes it’s going to be an unmanaged route. Therefore I don’t believe Trump has thought any of this through, in terms of where it leads. So, I just don’t think there’s a grand strategy, I don’t think it’s about strong-arming Europeans to get defence spending up. Well you saw it at the summit – if they all got in and said they’ll hit 2% in 2 years’ time he would have said I wants 4%. I don’t think that’s what he’s about.

On Brexit, see, I think you, you have to start from the assumption that our countries history and fortunes have been inextricably linked to events on the continent of Europe for centuries. That is not going to change. So, for me, it would have been better for us to be in, and trying to argue strongly for reform of this institution, and to find these mechanisms, to sort of, loosen the relationships, roll back a little bit from these issues for national flexibility, whilst maintaining all the good co-operation that exists. I think that would be optimal. Because irrespective of what one thinks of the issue of Global Britain and whether we can do better outside the union, if the union is in chaos, and Europe is in chaos, that’s going to have devastating consequences for our economy. We will not be able to prepare new trade deals with India. Maybe over several decades, but, you know, thats not the time frame in which politics operates. So, I strongly believe, and I worked with some other people at the beginning of the Brexit process to get this message into the machine, that it was in our interests for the European Union to be strong and successful, because it is. I honestly think if collapse happens, it’s going to make the financial crisis of 2008, Eurozone crisis of 2010/2012, a minor footnote of Europe’s accounts. And that cannot be in our countries interests. I would really love to meet people in this country, whether Brexit goes ahead or not, that think, what is our national strategy to influence events on continental Europe after Brexit? Which capital should we be building relationships with? Which networks are the most important to us? What other institutions exist that we can work with? Because at the moment, I can’t see anybody thinking seriously about what Britain’s strategy is going to be, what Britain’s European strategy is going to be?

Question (Chair James Rodgers):

Okay, well we’re now at 2 o’clock. We’ve ended maybe on a slightly negative note as opposed to a [inaudible] note. Maybe therefore I can put the last question in as Charmian. That is, if we are assuming, as you said you think yourself that there is a 75% chance that the EU will seize to exist in 10 years. If that is increasingly likely, and the wide geopolitics are changing, and I completely agree with you that Europe has been central to the UK and what happens in European mainland effects the UK, that’s without question. It affects us deeply and pervasively. But, if Europe is becoming, itself, less important in the world 100 years ago, 50 years ago, the world was Eurocentric. In 50 years’ time, if not now, it’s no longer Eurocentric. What role could the UK play, if it, if we assume it leaves the European union, and we assume the European union is no longer fit for purpose as it stands, then what role can the UK actually play in trying to prevent this destabilisation of Europe, that the EU itself, may be calling, or may lead to, because itself collapses?

Answer (Dr Ian Kearns):

There is a stronger chance of influencing it if we were staying inside the institution and working, but you know, we can try through our security presence in NATO, through bilateral, we can try stronger bilateral cooperation, militarily with the French. We can see these, which make a lot of sense. But let’s face it, we are in a national crisis, not just in a sense that we’ve got the whole Brexit politics going on, but we’ve had this for seven decades or more, had this intense security relationship with the United States, which is effectively secret dependence on the United States, which we have never really explained to our public. What do we do if that’s changing? The fundamental foundation stone of our national security statue is wobbly now and may not be there. People are imagining that the United States will flip back to what it used to be like, but I personally don’t buy that, so that’s one thing.

Then we might have turned to Europe, and you know, strengthened relationships there. Leaving the European Union we cannot do that in a multilateral context, so we will do as much bilateral work as possible to influence events. But fundamentally, we can’t do much, is the answer to your question. I mean, I don’t understand, how when Theresa May says we are going to be a leading global trade power, I mean we represent 3% of global trade. We aren’t shaping the global trade order, we are at the dinner discussing what global trade regime is going to be, but we are on the menu. People need to understand that. A European union of 500 million people is actually capable of influencing the international global settlement. The same is true for climate change as it is for [inaudible], as it is for data politics – the GDPR is the only measure introduced at scale at public jurisdiction, which basically says the public’s rights on data control, which is the new oil as people say, is absolutely pivotal. And in the European Union you obey by these rules. And what are all these global tech companies doing? They’re abiding by these rules. Why? Because 500 million people, it matters to them. 50, 60, 70 million people, we don’t get lucky. So, we’ll be takers of regimes, not shapers of regimes after Brexit, and that’s just a reality we’re going to have to live with, and what Paddy Ashdown said to me “the only thing that matters in that context, is not what you can do alone, but what you can do with others”, so we are just going to be looking for allies. Or to use a different quote, from Winston Churchill, “the only thing worse than having to work with allies, is not having any”.

Chair James Rodgers:

Okay. Thank you for your comments and overview of the book. The book of course is outside on sale for a special price I think, so please feel free to go over. We accept card and cash as always. And thank you for attending. It’s gone a bit cloudier, which [inaudible]. And thank you everyone for coming. Thanks.

HJS



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