March 03, 2009 (the date of publication in Russian)

Alexander Rublev


Germany rejects the proposal to disburse an emergency loan for Eastern Europe

Former countries of the Soviet bloc who hoped that membership in the European Union would solve their economic problems for decades ahead, have encountered the moment of truth. Quite recently, their well-being seemed to be guaranteed, while patronage from the founding members promised steady economic growth. However, the global financial crisis muddled the things: new Europeans are today explained that the golden shower is over, and that the wind has changed for a long time.

The initiative to curtail "investment donorship" was first raised by France. Since the first stage of EU expansion, the French majority had been watching the integrationist activity of Brussels with suspicion. Not accidentally, the draft European Constitution was not supported by the French population at the national referendum. Today, President Nicolas Sarkozy emphasizes that at the face of crisis, his priority task is to secure employment in his country. French auto producers were explained that they will be granted support from the state only in case they invest in productive facilities in the mother country and not in Eastern Europe, "Czech Republic and so on". Mirek Topolanek, Prime Minister of Czech Republic that today chairs the EU, complained to the European Commission, exposing Sarkozy of protectionism.

This remark was supposed to sound as a serious ideological reproach, as due to efforts of international media syndicates the term "protectionism" had lately acquired an emotional and psychological purport akin to definitions of "terrorism", "extremism", or "fascism". On the conceptual level, protectionism had been analogized to xenophobia and interpreted as a projection of ethnic intolerance on the level of economic relations. Not surprisingly, criticism of protectionist policies had been most frequently heard from British PM Gordon Brown.

Though the implications of the global crisis for Britain, where financial speculation had long replaced most of the productive economy, slashed Mr. Brown's personal rating by 20% within two months, he continued to position himself as the most influential mastermind of European integration, though his own country had not entered the eurozone. In accord with the EC leadership, he insisted that Germany and France take up the whole burden of European problems.

Meanwhile, France had been reluctant to serve as a "locomotive" for the weaker East European members from the beginning. The German leadership tended to be not so adamant on the issue. Months ago, General Chancellor Angela Merkel echoes Brown's rhetoric, expressing surprise that "certain countries" were supporting national corporations by means of protectionist measures.

This difference in approach was explained with the fact that Sarkozy's France viewed rather the Mediterranean Union than the EU as a priority project. Therefore, France was ready to assist rather old members like Spain and especially Italy (today's weak link of the eurozone) than Eastern members.

Meanwhile, Germany, despite the immense costs it had paid for the "European integration process", sacrificing the D-Mark in favor of the euro, was still expressing commitment to follow the same line, though East European states, especially Poland, often displayed arrogance and practiced political blackmail. Berlin hoped that in a long run, the construction of the "common European home" would favor German economic interests.

Today, however, Berlin's patience has snapped. At the emergency summit of the European Union on February 26, Germany rejected EC's proposal to issue a €190 billion loan to East European states. The governments of Czech Republic, Poland, Slovakia, Hungary, Bulgaria, Romania, Latvia, Lithuania, and Estonia were pleading need for propping up their banking systems as well as (in the latter six cases) their currency rates.

The European Commission that had just refused to authorize the plan of immediate entry of the near-bankrupt Bulgaria and Baltic States in the eurozone, regarded the injection of 190 billion euro in the East European economies as a compromise option. The summit was supposed to ostracize the ambitious Sarkozy for protectionist habits and for continuing to posture as the "President of Europe" after the EU chairmanship was conveyed to Prague. Germany was expected to serve as a referee in the debate between France and the "new Europeans".

For the United States and Britain that had been successfully playing upon French-German contradictions, implementation of this scenario was preferable. However, the German leadership decided that in the current situation, it did not make sense to carry the whole burden of the East European "kolkhoz" and to continue quarreling with France. Ms. Merkel declared at the summit that the financial problems of each particular East European economy should be assessed separately, as they are too diverse to administer a universal remedy.

In Ms. Merkel's view, urgent measures should be undertaken only for support of Hungary (that did not behave in such a scandalous manner as Poland and Czech Republic), while the problems of other states are not as tragic as they are described. In this way, Berlin tells its East European neighbors: the cash office is closed; please come another day.

On the one hand, the German establishment realizes that this approach may only consolidate Euroskepticism in neighbor countries (personified especially by Czech President Vaclav Klaus). On the other hand, the Germans have obviously realized that support of East European economies is not worth the integration costs that had been demanded from Germany, starting from the provisions of the Maastricht Treaty.

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