December 10, 2012
EU Presidency provides a great opportunity for usPosted in Sunday Business Post · 151 comments ·
Driving past the RDS last week, as the city played host to bigwig foreign ministers, gave me a feel of what Dublin is going to look like for the next six months. The place was, to use the new terminology, ‘locked down’, as is now necessary when someone as important as Hillary Clinton rocks into town.
Get used to it, because Ireland will take over the EU presidency on January 1, and Dublin will be coming down with black Mercs, rushing here and there carrying very important public servants from urgent meeting to urgent meeting.
Obviously, Ireland should take the opportunity to place a debt deal for our citizens squarely on the agenda because, after all, the EU presidency demands that the host country sets the agenda for that crucial six-month period.
This is a great chance for us and, given the deal the Greeks got – yet again – last week, it would be a travesty if we didn’t seize this occasion to advance the cause of our own citizens. However, given past form, it seems that Ireland’s leaders are intent to make sure that our country is the one that never misses an opportunity to miss an opportunity.
The one thing we need to appreciate, which runs counter to much of the received wisdom right now, is that Germany is not strong. It is, in fact, weak. Data published last Friday revealed a German economy – the so-called strongest of the weak – that is in fact more fragile than anyone expected.
The Bundesbank cut its forecasts for the Germany economy next year from growth of 1.6 per cent to a barely noticeable 0.4 per cent. This process reflects the fact that Germany’s amazing industrial strength lies in its exports, and its export buoyancy depends on the rest of Europe buying its goods. If the rest of Europe is not buying German goods because of austerity, then who will Germany sell to? And if Germany can’t sell to anyone, and Germans don’t want to buy the stuff they make themselves, then they are in a bind.
This will be the economic background noise to the next few months. Downside risks to economic consensus forecast are likely to affect investors’ appetites for all sorts of assets. Apart from the economic risks, there are other risks which the high-powered foreign ministers meeting in the RDS tried to obscure, but didn’t.
The tightening security around Ballsbridge the other day, and the presence of so many foreign ministers and strategists, prompted thoughts of what else might dominate the six months of Ireland’s EU presidency, and how these geopolitical events might frame any economic discussions Europe might attempt.
Trouble in the Middle East is likely to kick off again next year, and it may embroil many of the supposed friends that lined up in the RDS last Thursday.
The conflict between Israel and Hamas in Gaza gave us a taster of what could happen in Syria on a much bigger scale. The great powers are increasingly on opposite sides, in the same way as they were nearly 100 years ago in Sarajevo at the beginning of World War I.
Remember, the Austrians dragged the Germans into the conflict, so that the Russians wouldn’t come in on the side of the Serbs. Then the Serbs went and smashed the Austrians unexpectedly – and the Germans were in against the Russians, who then called on the others, the British and the French, and we had a proper conflict where the Germans were alone in a shooting war they didn’t start or want.
We know now that the assassin, Gavrilo Princip, and his Bosnian Serb separatist allies, were acting on their own, but that’s all history. If we look at Syria, we see that the loose alliance against Saddam is fracturing. The Russians are lined up with Syria and Iran, while the Gulf States, the Sunni Arabs of Saudi Arabia and an increasingly belligerent Qatar, together with Turkey and possibly the US, Britain and Europe, line up on the other side.
The Iranians will support the Syrian regime with weapons – perhaps, then, Syria looks less like pre-World War I Bosnia and more like pre-World War II Spain. The Spanish Civil War was the proxy war before the coming enormous conflict, with the fascist regimes supporting Franco. They tested weapons and armies in Iberia that would be later used all over Europe. On the other side, the communists did something similar, using the Spanish Republicans in the process.
In the past few weeks, there has been another wild card thrown into the Middle Eastern mix.
Now that Egypt is run by the Muslim Brotherhood and Gaza is being supplied militarily by Iran, there is a new dispensation in that part of the Middle East – a strained, volatile alliance between Iran and Egypt over Gaza, something the Americans have being trying to avoid for three decades.
So the Middle East is again in turmoil, and the political risks associated with it can’t be underestimated. For Europe it presents a particular dilemma because, for the first time in many years, Europe is impotent in the region.
For the past 200 years, any settlement in the Middle East was in effect a European settlement, whether it was Napoleon in Egypt or Sykes and Picot, for England and France, drawing up new boundaries which now look like arbitrary lines in the sand – because they were. The big change now is that Europe has no power in the Middle East – and precious little power even in north Africa. Without an ability to
project its power, it is impotent in the face of existential challenges in the region.
Israel is in America’s pocket, although often it feels like vice versa, and the big new influencer in the region is, of course, China. It gets almost all its oil imports from the region, unlike America.
Projecting forward, as America’s shale gas production is stepped up, the US looks like being an energy exporter in the not-too-distant future. This will again limit its already waning dependency on the region. In contrast, China will become increasingly tied up in the Middle East.
Is it likely that the world’s new superpower will look on helplessly at its main source of energy without taking sides?
In the next few months, these issues will begin to emerge and will add to the deep sense of unease and risk, triggered by the knowledge that Germany is no longer able to drag everyone in Europe out of the mire. All the while, countries are lining up in accordance with their interests.
Waiting behind a queue at Ballsbridge looking at this faux show of unity among all the foreign ministers of countries with differing interests, it’s not hard to get the feeling that the EU presidency will be more explosive then we imagined. That is all the more reason to push for a good deal for Ireland, while everyone is consumed by other, bigger concerns.
David McWilliams’s new book, The Good Room, is out now