Western Balkans Futures
Simulating Five Scenarios for the Western Balkans
13 May 2022
It is clear today that Europe’s tomorrow will be defined more by the fact of belonging to the euro area than by the conference on its future.
The report of the Conference on the Future of Europe, published on 9 May, tells us what fears and hopes Europeans have for the Union. Let us note, however, that the voice of the Poles and several other nationalities will be a marginal addition to that of the Germans, the French and the Hungarians. It appears that the citizens of several countries have missed an opportunity to express their voice in the Union.
In a way, the topics of common concern were already known from Eurobarometer opinion polls — climate change, inflation, cyber-security, cryptocurrencies, pandemics and their effects, and most recently the war in Ukraine. However, it was only through the Conference process — citizen parliamentarianism — which was launched a year ago, that the door was opened for the formulation of new, bottom-up demands for the Union.
Tens of thousands of suggestions submitted in citizens’ panels and online consultations over two years were used to develop dozens of recommendations — the future framework for debate in the EU.
It is quite worrying though that the subject of the future of the euro area was not signalled as a challenge even once, even though it is so important especially from the perspective of the countries in our region.
Meanwhile, with the re-election of Emmanuel Macron as President of France — a proponent of deepening European integration on the basis of the eurozone and the originator of the Conference on the Future of Europe — it is to be expected that a policy initiative oriented exclusively towards eurozone countries will return with redoubled force, leaving non-eurozone countries as mere recipients of European policy rather than co-determiners.
The absence of the euro theme from the debates and ideas raised during the months of the Conference can be explained in two ways.
Firstly, ‘the euro as a currency is already obvious for the new generation,’ as Joanna Tyrowicz, professor of economics and co-founder of the think tank GRAPE, said ‘When the euro was created, there was no Twitter or many important journalistic outlets yet,’ Tyrowicz recalled. ‘People no longer understand a world without the euro. Especially since the initiative for the future belongs mostly to younger rather than older Europeans.’
On the other hand, interest in the European conference in many countries that have not yet joined the euro was very low. Poles ranked last in terms of the number of proposals per capita (21 proposals per million inhabitants, as of February 2022), just behind Romania and Sweden. Both countries that are currently furthest from meeting their obligations under the treaty, either for objective reasons (convergence criteria) or due to strong opposition on the part of public opinion, but with ten times fewer proposals than Hungary, which ranked second in the EU (243 proposals per million inhabitants).
Even the Eurosceptic Czechs submitted three times more proposals per capita than the Poles, and Eurozone member Slovakia five times more. We wrote more about this with Anna Wojciuk in the Polish daily Rzeczpospolita on the eve of the Russian invasion.
One can blame the Polish government, for example, which unlike many others (including Germany, France but also Hungary) has failed to mobilise its citizens to speak out. But let us also admit that despite their Euro-enthusiasm, Poles have never been in a hurry to accept new EU solutions, especially the experimental formula for European participation on such a scale.
Although there are also justified criticisms within the Union as a whole of the process of the Conference itself has nevertheless been condemned to succeed by European institutions, which are struggling for legitimacy for their own competencies and increasingly ambitious plans.
‘The Conference will create expectations and pressure on the European institutions,’ said Guy Verhofstadt, Belgian politician and President of the Conference, because they will no longer be able to hide behind the excuse of not knowing what Europeans think about their common future during debates.
In fact, it is to be expected that from now on the conference will be a point of reference or outright source of arguments in the battle for competencies and budgets, which will be used by politicians from Parliament to the Council of the European Union.
Given such dynamics, the Poles collectively committed another sin by failing to take a stand for their own future and security in a united Europe. The first was not to make serious preparations for accession to the euro, and the second was to skip the Conference on the Future of Europe.
At the same time, Russian aggression made it abundantly clear that further European integration and issues of military and economic security were needed.
Paradoxically, Putin made us realise that we are still Poles, Czechs and Romanians simply because we are Europeans, part of a community of democracies built for security in opposition to imperialistic grand designs.
It is not surprising, therefore, that today there is a re-evaluation of positions on the further unification of Europe. The debate on the future of Europe continues, only it is not treated as an experimental form of democratic participation, but as a vitally important decision to preserve security and peace, both needs which are at the heart of European integration.
This also applies to changes in attitudes towards the eurozone — even in circles that until recently were sceptical of further integration and the common currency.
It is not only Ukraine that has accelerated its efforts to join the EU. Across the continent, countries are looking for ways to strengthen economic, political and also defence cooperation — such as the recent decisions by Finland and Sweden.
In Poland, such a turnaround was made, among others, by Robert Gwiazdowski — one of the leading representatives of libertarian thought and a former presidential candidate. For many years he has subscribed to Milton Friedman’s 1997 prediction that the common currency would divide the Union instead of uniting it.
Meanwhile, at the end of April 2022, Gwiazdowski said that although there were no methods of verifying what the eurozone meant in the event of an attack on one of the countries in the zone, ‘such an analysis has already been carried out by Putin. For he showed that [as a result of the war] the value of the hryvnia has fallen to zero’ and the currency’s liquidity is only possible thanks to external help from central banks.
So, although the euro is not a deterrent it protects against the loss of assets of citizens and the economy — ‘from the point of view of the security of these people it is better to have the euro in case Russia attacks’ – he asserted.
Polish public opinion last faced the topic of joining the eurozone during the 2019 parliamentary elections, when Jaroslaw Kaczynski decided to defend the symbol of the zloty against the euro like independence. Opinion polls show high volatility in Poland, with nearly 56 per cent in favour in the summer of 2021 and as many opponents in February 2022.
However, this is a very superficial question. Because in times of double-digit inflation, if you ask people whether they want (1) stable prices, (2) well-funded public services, (3) stable exchange rates and (4) stable interest rates, they will answer four times in the affirmative. Yet these four questions are the very criteria for adopting the euro. It seems that, in the meantime, the adoption of the euro has turned from a purely economic issue into an almost entirely political, if not ideological, question of our choice of global membership.
‘The world is no longer opening up, there is increasing emphasis on building failsafe. And the Euro is one of the best failsafes in a dangerous world’ — comments Andrzej Olechowski, former foreign minister.
Witold Orłowski, professor of economics and long-term advisor to Polish presidents, also views the decision to adopt the euro purely in terms of political ideology, because from the point of view of economics, ‘the euro is not a magic formula; it is a certain balance sheet, something is gained, something is lost, both by having the euro and by not having it.’
The political dimension of this cooperation is the Eurogroup — a group of 19 states united in protecting common interests much more strongly than the Visegrad Group.
It is clear today that Europe’s tomorrow will be defined more by the fact of belonging to the euro area than by the conference on its future. This seemingly economic choice allows you to determine, above all, your political strength, that is, whether you are just a passive recipient of the policies that the euro area will define for others, or a co-creator within an increasingly well-functioning decision-making mechanism.
Some of the Central European countries have already chosen.
Croatia is already in the corridor to the euro by fulfilling the ERM 2 criteria and being subject to the European Central Bank’s protective measures. It took the decision in November 2020, so still in the midst of the pandemic, and will probably also take decisions within the Eurogroup countries on 1 January 2023.
Bulgaria is also in ERM 2 — since July 2020 — and plans to implement the single currency one year later — on 1 January 2024.
Romania, which loudly declared its desire to join, announced last December that it was postponing the date to 2029, mainly because, despite its ambitions, it is still unable to meet the convergence criteria.
Meanwhile, all parties in the ruling coalition in the Czech Republic since last year, except for the leading ODS, are in favour of fulfilling their treaty obligations and adopting the euro. The previous government had already signalled its readiness to do so, looking slightly at its neighbours, but the economic successes of the friendly Slovakia (in the eurozone since 2009) are still not enough for the Czechs, although the Euroscepticism of past decades is gradually and inevitably eroding in opinion polls.
Even the Hungarian government could have embarked on a path towards the euro had it not been for the resistance of central bank governor György Matolcsy, internationally known for his journalism opposing his country’s adoption of the euro. Interestingly, Matolcsy has also openly criticised the government’s financial policy since the autumn. Could it be so that the adoption of the euro was a bone of contention here?
It is obvious that if Poland were on the path to adopting the euro, others in Central Europe would quickly follow.
At the same time, the V4 group would regain its cohesion and new instruments of influence, but this is unlikely to happen during the PiS government, although not because of the constitution’s provisions on the zloty, as the PiS’s creativity in interpreting the law could even be helpful here.
For countries such as Poland or Hungary, adopting the euro is ultimately one of the stages of rebuilding credibility — honouring commitments — and it will inevitably be linked to a change of government.
Only that in a wartime situation in Europe, party strategy changes faster than governments, as Germany has shown, but also Ukraine’s accession process.
Co-financed by the European Parliament this article is part of an ongoing project organised by Visegrad Insight, involving Hospodářské noviny, Res Publica Nowa, SME, and HVG, and discussing the Conference on the Future of Europe. The European Parliament was not involved in the preparation of the materials and shall not be liable for information or positions expressed by the authors. To see more articles from this project, click here.
Picture: © European Union 2022 – Source : EP
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