The Future of the EU and its Strategic Autonomy by CICIR Analyst Zhang Jian

"The crisis in Ukraine ... will further weaken the EU's strength and international influence and accelerate its marginalisation in the global geopolitical landscape."

Dear Everyone,

It has been a year since war first broke out in Ukraine. Much like in other parts of the world, this unfortunate anniversary was marked by a flurry of commentaries in China. Today’s edition of Sinification looks at a piece focusing on the war’s impact on the EU as viewed from China. Its author, Zhang Jian (张健), is the director of the Institute of European Studies at China Institutes of Contemporary International Relations (CICIR) – an influential think tank linked to China’s Ministry of State Security. A long-form version of this article was first published last December and has recently been followed by an abridged edition, a translation of which you will find below.

Zhang’s assessment of the EU’s economic and political prospects is perhaps more pessimistic than some, but several of his arguments are in line with those made by other Chinese analysts. One recurring theme in China has been the negative impact that the war has had on the EU’s push for strategic autonomy. Chinese experts tend to agree that Russia’s invasion of Ukraine may have initially created a certain amount of unity among EU member states and increased their desire for greater strategic autonomy. But as the war has unfolded various factors have been preventing this quest from moving forward. Two oft-cited factors have been: on the one hand, the EU's greater dependence on the US; and on the other, the increased influence that US-leaning countries have now acquired within the EU since the outbreak of the war. The general understanding in China appears to be that so long as the Russo-Ukrainian war hasn't been resolved, the EU's dependence on the US will continue and the short- to medium-term prospects for greater EU strategic autonomy will remain bleak. In other words, this is bad news for China.

Today’s abridged text was translated with the kind help of Sophia Leonard Buisson. I have interspersed it with additional arguments made by Zhang in the long-form version of his article.

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Summary:

• On the EU’s economy:

  1. Prospects are bleak, de-industrialisation is set to continue and protectionist policies are expected to increase.

  2. Germany’s economic woes and their potential spill-over effect on the eurozone are particularly worrying.

  3. Debt levels within the EU are rising and are becoming increasingly unsustainable.

• On the EU’s strategic autonomy:

  1. Dependence on the US (militarily, economically and with regards to energy) has increased and will probably continue to increase for the foreseeable future.

  2. “Strategic autonomy” is no longer a buzzword in Brussels.

  3. The emergence of a third pole within the EU consisting of pro-US countries from eastern and northern Europe will continue to hamper the EU’s quest for strategic autonomy.

• On EU integration:

  1. Economic tensions between northern and southern European countries combined with political tensions between eastern and western European countries are set to increase.

  2. Such rifts, economic difficulties, rising populism and a weakened Franco-German tandem are weakening cohesion among member states and hindering further integration.

  3. With a weaker economy, Germany is expected to become more focused on its own national interests and less willing to support France in its efforts to reform the EU.

• On the EU internationally:

  1. The EU’s image and influence are declining.

  2. The EU is losing its balancing role in international affairs and risks becoming a mere follower of US policies.

  3. Geopolitically, the EU and its member states are set to remain focused on their neighbourhood and their ability to project power globally will continue to decline. This also applies to the Indo-Pacific which is increasingly becoming a mere “bargaining chip” for the EU in its relationship with the US.

POLL
I remember there being disagreement last year on whom of pro-EU Emmanuel Macron or EU-sceptic Marine Le Pen Beijing would have preferred to have as France’s president. I would be interested to hear your views on the following question:

Introduction

“The Ukraine crisis is the biggest geopolitical event to hit Europe since the Cold War. Will it accelerate or undermine the future development of the EU? This is both an important theoretical and practical question. This paper will attempt a preliminary analysis of the EU’s future development prospects over the next 3-5 years using three dimensions: the economy, strategic autonomy and integration.”

I. Prospects for economic development

“In view of the relevant development trends, the Ukraine crisis will have a more serious long-term effect on the EU than previous crises, such as the debt crisis.”

Long version: Zhang predicts that “economic development in the EU will be extremely difficult for the next 3 to 5 years at the very least.”

“First, the EU, and especially Germany, may experience a new round of de-industrialisation. The complete rejection [完全排斥] of Russian gas has meant a huge, structural change for the EU and European countries. The consequences are obvious: not only are a large number of energy-intensive companies cutting production or closing down, but the whole manufacturing sector is also experiencing higher production costs and reduced competitiveness due to higher energy prices. To make matters worse, the US not only has low[er] energy prices, but it is also able to provide more subsidies than the EU thanks to a greater availability of capital. This will have a strong siphoning effect [虹吸效应] on the EU manufacturing industry.”

“Second, the eurozone and Germany could enter into an era of deficits. In the first three quarters of 2022, the eurozone recorded a trade deficit of 266.6 billion euros, compared with a surplus of 129.2 billion euros over the same period in 2021. It is very likely that 2022 will be the start of an era in which Germany and [the rest of] the eurozone will most likely face a new situation of long-term trade deficits. The first reason for this is that the price of energy imports will remain high. The second is a shrinking market after the loss of [its trade relationship with] Russia. The third is the depreciation of the euro and a decline in manufacturing competitiveness. A trade deficit is not necessarily a negative phenomenon but for a currency like the euro, which is not backed by a central government, it will inevitably increase financial risk in the eurozone.”

“Third, the spill-over effect of the [aforementioned] risks in Germany will gradually appear. The short and long-term impact of the crisis in Ukraine on Germany is very pronounced. Its economy is already on a downward trend. Germany's economic problems will first affect neighbouring countries such as Poland, the Czech Republic, Hungary and Slovakia, which are deeply enmeshed in Germany’s supply chain. When one suffers, the rest suffer too; when one triumphs, the rest triumph too [一损俱损，一荣俱荣]. They will also affect the eurozone’s stability. If Germany were to follow Italy’s path (economic stagnation, rising debt, political instability), this would mean the end of the eurozone.”

“Fourth, debt risks will become more pronounced. Even before the outbreak of the Ukraine crisis, European countries’ debt-to-GDP ratios had increased significantly. After the Ukraine crisis broke out, European countries introduced huge subsidies for businesses and the [broader] population. Much of the financing came from unsustainable debt. Paradoxically, [despite] the expansion of spending and borrowing, the EU economy is experiencing a new downturn or even recession. In other words, it will be difficult in future for EU countries to reduce their debt levels through economic growth. The debt burden of EU countries, especially for more vulnerable countries, will become even more difficult to sustain.”

II. The prospect of strategic autonomy

“The crisis in Ukraine has rendered the already unpromising prospects of the EU's strategic autonomy even bleaker.”

“In the field of defence, the EU's aspiration [意愿] for strategic autonomy has clearly declined. Central and Eastern European countries, especially Poland and the Baltic states, have become more dependent on the United States and NATO. They have asked the US to establish permanent military bases and to increase its military presence on their soil. The neutral countries of Northern Europe, Finland and Sweden, have [now] applied to become NATO members.”

Long version: Zhang defines EU strategic autonomy as “breaking away from US control and gaining the power to make strategic decisions on its own.” He continues by expressing surprise at the fact that since the outbreak of the Ukraine crisis the buzzword “strategic autonomy” rather than increasing in frequency has actually “almost disappeared from internal discussions within the EU.”

“Most of the increased military spending by European countries is still likely to go to the US rather than European countries’ [own] military industries. The first outlay of Germany's 100-billion-euro military modernisation fund was for the acquisition of 80 US F-35 fighter jets. This is clearly not a good sign for [European] strategic autonomy. Most EU member states, which still purchase American weapons in order to express their loyalty to the US, aim to win US goodwill rather than build the EU’s defence autonomy.”

Long version: Zhang talks about the risk of this becoming a “vicious circle” in which rising US weapons sales to Europe will end up strengthening the US’s defence industry at the expense of Europe’s.

“In the economic sphere, the EU's capacity for strategic autonomy is also trending downwards in the long term. Over the past few decades, the contrast in economic power between Europe and the US has been moving in favour of the US In 1995, the EU's GDP was $8.3 trillion, accounting for 26.9% of the world economy, while the GDP of the United States was $7.64 trillion, accounting for 24.7%; in 2020, the EU's GDP was $15.19 trillion, accounting for 17.9% of the world [economy], and the GDP of the United States was $20.95 trillion, still accounting for 24.7% of the world economy. The economic disparity between the EU and the United States is widening.”

“The damage of the Ukraine crisis on the EU economy far exceeds the damage done to the US economy. This will accelerate the difference in economic power and the two-way dependence between Europe and the US The EU will become more and more dependent on the US, while the US will become less and less dependent on the EU, such as in the fields of security and defence. The economic relationship between the US and Europe will become [increasingly] unequal.”

Long version: Zhang highlights the EU’s loss of the Russian market, the weakening of the euro and Europe’s growing dependence on American gas as further increasing the EU’s dependence on the US. He worries that rifts in the Franco-German relationship may also hamper the EU’s push towards greater strategic autonomy.

“The changing power landscape within the EU is also not conducive to building strategic autonomy. The Central and Eastern European [hereafter CEE] as well as Nordic EU member states have traditionally been more pro-US and [more] enthusiastic in their embrace of NATO. They are suspicious of or even opposed to the EU’s strategic autonomy for fear of angering the United States. The outbreak of the Ukraine crisis has allowed these countries to occupy the moral high ground. In their view, the crisis proves that their way of seeing things was correct and that France and Germany’s approach was wrong. That is why these countries [now feel] more justified [理直气壮) in criticising France, Germany and others.”

“At present, the voices of the CEE and Nordic countries in the EU have become significantly louder. Their political stance [政策主张], such as being pro-US and anti-Russia [亲美遏俄] is becoming the mainstream in the EU. As long as the crisis in Ukraine continues and the confrontation between Europe and Russia remains unchanged, the hard-line policies of the CEE and Nordic countries will remain the prevailing EU policy towards Russia. The US and NATO will therefore continue to guide the EU’s foreign and security policies, thus making it difficult for the EU's idea of strategic autonomy to become the mainstream.”

Long version: Zhang sees France and Germany as having a more pragmatic stance towards Russia but unable to impose their views due to “political correctness” (政治正确).

III. Prospects for integration

“On the positive side, the Ukraine crisis has brought new momentum to European integration: first, a greater sense of [belonging to] a community of common destiny [命运共同体); second, a heightened awareness of geopolitics; and third, an increased [sense of] urgency to act collectively. At the same time, however, the crisis in Ukraine has reinforced those negative factors that already existed within the EU and that have been hindering integration.”

“First, internal conflicts [within the EU] will become increasingly prominent:

1. Tensions between north and south. As the southern European countries are generally strapped for cash [捉襟见肘], they cannot afford to spend more on the cost-of-living crisis. The richer northern countries, on the other hand, are able to allocate more resources to protect their citizens and businesses. This means that German companies, relative to companies in France and southern European countries, will become more competitive. This will further increase the economic divide between countries such as Germany and those in southern European. This will naturally lead to resentment by these countries.

2. Tensions between east and west. Although both eastern and western [European countries] agree on their short-term policies towards Russia, there are major differences in long-term strategic goals. Over time, these differences will become more pronounced.”

“Second, lack of leadership. European integration is mainly driven by its big powers. France and Germany, the two largest countries, have traditionally played the role of leaders of European integration. However, the crisis in Ukraine has weakened this role. First, the moral authority of both countries has declined, especially in the eyes of the CEE and Scandinavian countries. Since France and Germany’s past policies towards Russia have been "wrong", any EU-related policy proposals coming from them could instinctively trigger suspicion and even opposition from the CEE and Scandinavian countries.”

Long version: Zhang adds that, “European integration depends to a large extent on resolving the ‘German problem’ [德国问题]. Germany has long been a good student when it comes to European integration and its most important input has been its financial contribution … However, Germany has been the country hardest hit by the crisis in Ukraine and its economic development is fraught with uncertainty. Its authority within the EU has largely been based on its long history of outstanding economic performance and its influence as a role model. [However,] once the aura of [Germany’s] economic success disappears, its authority will inevitably decline.” Zhang continues by anticipating that with a weak economy, Germany will become more focused on its own national interests and will be even less willing to support France in its push for greater EU financial integration.

“Third, the constraints of populism. This trend has been demonstrated by elections in EU countries since the outbreak of the crisis in Ukraine. In the French presidential election of May 2020, the far-right National Front leader Marine Le Pen won a record share of the vote; and in parliamentary elections in June [2020], the far-right and far-left parties secured a significant increase in seats, forcing the ruling party to form a minority government. In Sweden’s parliamentary elections in September [last year], the far-right Democrats became the second largest party in parliament and took part in ruling the country [Comment: the Democrats are not actually part of Sweden’s coalition government]. The Italian elections on September 26 produced the most right-wing government in Italy's history. Meloni, the new Prime Minister, is the leader of the Brothers of Itlay, a far-right party with fascist roots. The polarisation and fragmentation of politics will make it more difficult for EU member states to coordinate and compromise, hindering the deepening of [European] integration.”

Long version: Zhang predicts that “breakthroughs in the crucial areas of finance, foreign affairs and defence, immigration and structural reforms will be very difficult to achieve.” He concludes this section by stating: “At the moment, behind the apparent unity of the EU, interests have been further fragmented, rifts have widened and cohesion has been declining. For the next three to five years at least, the EU will not be in a position to amend its treaties significantly. This may even remain the case for a very long time to come.”

IV. Conclusion

“The crisis in Ukraine will affect the development prospects of the EU significantly. It is an historic event of decisive importance in the history of the EU's development, which will further weaken the EU's strength and international influence and accelerate its marginalisation in the global geopolitical landscape. The EU was born during the Cold War. Its development and strengthening has contributed to the world's multipolarisation and has helped to balance against the hegemony of the United States. The Ukraine crisis is a tragic event for the EU. It has not only disrupted its normal development process but may also kill its geopolitical dream of becoming one of the world’s major poles. This is not conducive to the world’s multipolarisation nor the containment of hegemonism and power politics. Of course, none of this is inevitable. If the EU is able to reflect properly on the lessons of the Ukraine crisis, unite and adopt a more open and tolerant attitude towards the world, then the EU may [still] have a better future.”

Concluding remarks in the the long-form version of Zhang’s article:

• “First, the EU’s share in the global economy will continue to decline. In the next three to five years, the EU’s economy will remain in the doldrums and will find it difficult to extricate itself from the shadows of high debt, large deficits, high inflation, a weak currency and low or even negative growth. At the same time, the EU's ‘Europe first’ mentality will increase, barriers will continue to be raised [堡垒化进程将继续发展] and its protectionist tendencies will strengthen. This will further weaken the EU’s [economic] competitiveness as well as its ability to play a leading role in such areas as global economic rule- and standard-setting. The so-called ‘Brussels effect’, on which the EU so prides itself, will also gradually wane.”

• “Second, the EU's international image has been further damaged. No matter how much the EU and the West blame Russia, the fact that a conflict has once again erupted in Europe is in itself indicative of the failure of the EU's strategy towards Russia. The EU has not found a way to coexist with Russia on the same continent since the end of the Cold War. Additionally, the EU has long been engaged in aggressive values-based diplomacy, promoting colour revolutions in former Soviet countries such as Ukraine. But the crisis in Ukraine has underscored the hypocrisy of its double standards and values in international affairs. For example, it welcomes Ukrainian refugees but has the exact opposite attitude towards refugees from the Middle East, Africa and other regions. It provides substantial aid to Ukraine but largely ignores humanitarian disasters in Afghanistan, Syria, Somalia, and elsewhere.”

• “Third, the EU's role as an international balancing power is weakening. The EU hopes to pursue a ‘third way’ in the context of great power competition, play a balancing role [in global affairs] and formulate foreign policies based on its own interests, rather than simply following the US blindly. However, as the power gap between Europe and the US widens, the EU may become more like the UK or Canada [英国化或加拿大化] in future. In other words, the EU could gradually lose its independent international character and become more of a subordinate and follower of the US, incapable of defending its own interests or formulating an independent foreign policy.”

• “Fourth, the EU's strategic contraction is accelerating and its foreign policy is becoming increasingly regionalised. On the one hand, whether the EU is united or not, as its strength declines, it will be difficult for it to become an independent pole in the world’s constellation of powers. And whether it wants to or not, it will also be difficult for it to play a global role [全球性角色]. On the other hand, even if the crisis in Ukraine were to end, the hostility between Europe and Russia will continue for a long time to come. This means that the diplomatic focus of CEE and northern European countries will remain to a great extent the EU’s diplomatic focus. In the EU's wider neighbourhood, the south, in addition to the east, is also beset with crises: nuclear proliferation and war in the Middle East, unrest in Africa, climate disasters, terrorism, etc. This will use up a great deal of the EU's energy as well. Although the EU has launched its own Indo-Pacific strategy, this increasingly important region will be largely relegated to being a bargaining chip with the US: either through [the EU’s] symbolic involvement there to please the US or through necessary posturing [in the region] in order to bring the US back to Europe (this holds especially true for some CEE countries). It will be very difficult for the EU to commit [proper] resources and project power both globally and in the so-called ‘Indo-Pacific’ region as an independent force.”

Zhang Jian (张健)
Director of CICIR’s Institute of European Studies