international analysis and commentary

The EU and the G2: third pole or afterthought?

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The EU has suffered three major blows over the past two years. Firstly, the consolidation of the G2 and the G20 has moved the center of global decision-making towards the US and China. Secondly, the election of Barack Obama has accelerated a shift of American foreign policy priorities from the Atlantic to the Pacific. Thirdly, the indecisive and uncoordinated response of European leaders to the global financial crisis has reduced confidence in the EU’s leadership ability. Can the EU recover and become a key player in world affairs? The good news is that the EU still retains the potential to be a significant voice when it comes to dealing with global issues. The bad news is that Brussels is running out of time to fulfill this potential, and it is far from certain whether China and the US are willing to wait much longer.

The results of the recent China-US Strategic and Economic Dialogue in Beijing made clear that the relationship between the two countries is getting stronger. Over 200 senior American officials met with an equally large number of Chinese counterparts, nailing down concrete agreements on a wide range of issues from trade and financial reform to nuclear safety and energy cooperation. In contrast, the last EU-China Summit, held in Nanjing rather than Beijing, resulted in a mostly rhetorical joint statement. At least the meeting was not cancelled, as was the case with the EU-US Summit originally scheduled for May in Madrid. Obama made it clear that he was not willing to fly over the Atlantic just to take a picture with European leaders. Since who would be standing next to the American president when this picture was taken seemed to be one of the major concerns in Brussels, the summit was finally cancelled.

However, the weakening of the EU’s relationship with the US and China is not irreversible. Washington and Beijing are not unwilling to deal with Brussels. Rather, they do not see the point in dealing with a Brussels that holds no real power when it comes to making important decisions. When the US wants EU NATO members to send more troops to Afghanistan, it has to convince individual governments. If China asks for the EU arms trade embargo to be lifted, it needs to persuade all 27 members one by one. Washington and Beijing also need to talk to different European leaders when they want to discuss intelligence sharing or counterterrorism, often getting conflicting messages from Brussels, Berlin, London and Paris. China and the US will continue to prioritize working with each other instead of the EU as long as this state of affairs continues.

The Lisbon Treaty was supposed to simplify and streamline decision-making procedures in the EU. Nevertheless, the first few months following its entry into force have not looked promising. The formation of a European External Action Service to provide the EU with a common diplomatic representation has been dominated by a turf war between the Council, the Commission and the Parliament. Furthermore, German officials have accused the High Representative for Foreign Affairs and Security Policy, Catherine Ashton, of favoring British nationals for senior posts in the Service, which could end up reproducing intra-EU bureaucratic and national divisions rather than bridging them. Meanwhile, EU summits with third countries and regional groupings have not been simplified. Ashton has often delegated representation of the EU on the Minister of Foreign Affairs of the country holding the rotating presidency, Spain’s Miguel Angel Moratinos. Therefore, the question of who answers the phone in Brussels still seems to have multiple answers.

More importantly, the response to the current financial crisis and, especially, the problems with eurozone members’ debt has damaged the EU’s credibility precisely in the area in which it had a better reputation: economic management. When the crisis began European leaders were slower to react than their counterparts in Asia and the US. They have repeated this mistake during the ongoing sovereign debt crisis afflicting some euro members. It took weeks to approve a suitable rescue package for Greece, even as the cost for Athens to sell its bonds escalated rapidly. Now governments of other member states with debt problems such as Spain and Portugal, and even those of relatively healthy economies such as Germany and the UK, have overreacted by introducing austerity packages which have the potential to halt recovery from the crisis before it has been consolidated. Nobel Prize laureate Paul Krugman has already warned that the US should try to isolate itself from what he labels “austerity mania” in Europe.

Similarly to Krugman, reaction from the American government to the EU’s handling of the sovereign debt crisis has been rather negative. Treasury Secretary Timothy Geithner urged Germany to lead Europe out of the crisis instead of expecting American consumers to buy the EU out of it. He has also accused Brussels of seeking to implement financial reforms that would discriminate against American corporations. Meanwhile, Obama reportedly urged Spain’s Prime Minister Jose Luis Rodriguez Zapatero to tackle the crisis more seriously during a telephone call in early May. It is clear that the US is unhappy with the way the EU is handling the crisis.  

China has refrained from criticizing the way in which European leaders have dealt with the sovereign debt crisis. However, Chinese qualms regarding the reaction of the EU to the crisis have become clear with the approval of a set of bilateral agreements with Greek companies worth billions of euros. Rather than waiting for the EU to boost the economy of its own member states, the Chinese government has decided to invest in propping up the most battered euro economy to avoid the risk of contagion.

So what can the EU do to regain the confidence of American and Chinese leaders and transform the G2 into a G3? Quite simply, the EU needs to become more European in its approach to global problems. The announcement of the consolidation of a European Financial Stabilization mechanism, together with the decision by the European Central Bank to intervene in the markets to improve liquidity and reduce volatility did more to calm investors and governments than any unilateral rescue package announced before. If the EU is able to produce this type of joint responses regularly, the US and China will start to perceive strong leadership from European institutions. Both countries would welcome this development, since Washington and Beijing are aware that their bilateral relationship could deteriorate in the future, however unlikely this may seem at present. A European External Action Service truly representative of the interests of the EU would be a major step in this direction.

In spite of the growing influence of the G2 and problems linked to the global financial crisis and a regional sovereign debt crisis, the EU still has an opportunity to become the third leg of the G3 that former UK Foreign Secretary David Miliband proposed a year ago. However, China and the US are not willing to wait much longer for the EU to become a third pole. European leaders have to act decisively to make sure that key policies in the EU are truly Europeanized. Otherwise the EU will simply not be on an equal footing with the US and China.