VISEGRAD: Brexit puts Central Europe on the spot

VISEGRAD: Brexit puts Central Europe on the spot
By Robert Anderson in Prague June 24, 2016

For Emerging Europe, Brexit may not be an economic calamity, but UK Prime Minister David Cameron’s needless referendum has accelerated trends in the EU that will be deeply negative for the new member states.

Brexit will be politically damaging because CEE member states have always regarded Britain as their strongest ally in the EU.  Brexit now leaves the region without a counterweight to Germany and France. Paradoxically, Eurosceptic governments such as Poland and Hungary may have lost most from the UK’s Euroscepticism, as they are now left without the one big power that would have made their independent stance credible.

“If the UK leaves Warsaw will struggle to make its voice heard,” Agata Gostynkska-Jakubska of the Centre for European Reform told a panel at the Prague European Summit in early June.

The new member states had always appreciated the UK’s emphasis on security against Russia, its commitment to further enlargement, and its relentless efforts to make the bloc focus on improving the single market, rather than yet more navel-gazing institutional integration.

Britain was also a good ally to have in the bloc. Though neither were avowed EU enthusiasts, Labour premiers Tony Blair and Gordon Brown had finally made the UK a respected big player in the EU; Blair because of his star quality, and Brown because of his key role in steering the bloc through the global financial crisis.

In Central Europe, the UK was also seen as economically successful and “cool” compared to the older EU members – an impression underlined by Blair’s courageous decision to allow citizens of the new member states immediate access to the British labour market.

Under Cameron, Britain has suffered a catastrophic loss of standing in Europe, starting from his decision to leave the European People’s Party (EPP) grouping before he became premier and now culminating in the referendum fiasco. By demanding concessions on social benefits for EU migrant workers, and by threatening to veto further enlargements of the EU, the Conservatives had already thrown away the goodwill that Britain had built up in Central Europe. 

A la carte Europe

Britain’s example is also likely to encourage other countries now to demand their own exceptions, potentially leading to an “a la carte Europe” or even further referenda on leaving the bloc, which is likely to be very damaging for Emerging Europe.

“Contagion has already started,” Christophe Hillion of the Swedish Institute for European Studies told the Prague European Summit. “The cat is out of the bag,” he added.

Eurosceptics are already rubbing their hands across the bloc but none of the new CEE member states are likely to follow the UK in holding referenda. Even awkward customers such as Hungary’s Viktor Orban and Poland’s Jaroslav Kaczynski realise that the EU is an invaluable source of funding (and kickbacks), and that leaving the bloc would leave them both too exposed to Russian influence and without a useful whipping boy to divert blame. Their countries also have some of the strongest support for the EU in the whole bloc.

“They don’t like the EU telling them how to run their own countries,” says Sean Hanley,  lecturer at London University. "But they want to stay in the EU and get away with what they are doing. They are the last people who want to leave.”

However, Hungary and Poland will be emboldened to pursue even more populist policymaking and will also try to demand their own exceptions if there is a free for all. Coal-dependent Poland, for example, could push for an opt-out on energy and climate change.

Yet any move to an “a la carte Europe” would create a Europe with less solidarity, one that is even more dominated by big states carving out their own deals, which would be bound to damage the small countries of the region. The new members have often relied on the Commission or patrons such as the UK to protect their interests. As the Commission’s influence fades and Britain withdraws, the region could be left on its own.

This could have an impact on the generosity of structural and cohesion funds in the next budget round. Other Western European states may also follow the UK in demanding cuts in social benefits for migrant workers. Meanwhile, further enlargement of the bloc would become even more of a rhetorical fiction

Two-speed Europe

As Europe becomes more fissiparous, it is very likely that some core Western Europe members may eventually push for more integration, to re-create the EU’s original vision over a more manageable area, leaving a periphery to progress at its own pace or not at all. Such an “inner core” would inevitably be German dominated.

This “two-speed Europe” would pose a serious challenge for Central Europe, which for the most part until now has been content to occupy a grey zone – one where they are committed to enter the Eurozone but are not obliged to fix a date. 

Only Slovakia, Slovenia and the Baltic states have so far adopted the euro; the Czech Republic lacks the political will, while the current Polish and Hungarian governments are firmly opposed. Central Europe now faces the choice of whether to rush to join what could become the new inner core, or to become a new eastern periphery based on the Visegrad Group that could become exposed to Russia.

The Visegrad Group of the Czech Republic, Slovakia, Poland and Hungary has managed to achieve greater unity over the past year, but for a short-term, negative reason: its opposition to compulsory refugee quotas, a stance that has simultaneously damaged its image in Western Europe.

Yet over the longer term, the bloc – which is celebrating its 25th anniversary this year – has been hamstrung by its divisions over Russia. Poland has traditionally taken a harder line on confronting Russia militarily and reducing the region’s energy dependence on Moscow, while Hungary was the most relaxed. Would the group still be viable if some of its members became part of the inner core? Would some countries anyway start to drift even closer to Moscow? 

“For Central Europe if there is a choice between the inner core and the periphery it would have to be the inner core,” argues Hanley. “This region’s whole drive has been to overcome the sense of being on the edge. Central Europe wants to be in a different place. If the choice was that stark they would would bite the bullet, they would join the inner core. On their own on the periphery they would be very politically and economically vulnerable. A multi-speed Europe is a very bad place for these countries to be in the long term.”

However, in Poland, which becomes the new rotating head of the Visegrad Group on July 1, there is already discussion about squaring this circle by dusting off the concept of an “Intermarium” grouping of all the countries between the Baltic, Black and Adriatic Seas that was favoured by its interwar dictator Józef Piłsudski. This new eastern periphery led by Poland would, it is argued, enable the region to counterbalance the rise of an inner core led by Germany.

The only problem with this is that the region is not keen on either being led by Poland, or on uniting against Germany. As Estonian President Toomas Hendrik Ilves has said, if forced to choose between Warsaw and Berlin, he would reluctantly choose Berlin. 

“They don’t want to be part of some Visegrad compact that is aimed at balancing Germany,” says Marcin Zaborowski of the CEPA think-tank in Warsaw.

“Czechs and Slovaks are not enthusiastic about going back to the 1930s,” one Visegrad ambassador sniffs, referring to the region’s failed attempts to manoeuvre between the threat from Hitler’s Germany and Stalin’s Russia. As in the 1930s, without the backing of a big power such as the UK, the region lacks critical weight.

For his part, Orban would not want to join the inner core even if Hungary were invited, which is highly unlikely. “There is a real danger that some governments would not like to make use of that EU opportunity but prefer to go back to the ‘Eastern model’ of [Russia’s Vladimir] Putin,” says Peter Balazs, a former Hungarian foreign minister who is now professor at Central European University in Budapest.

But Budapest would still be reluctant to become isolated in a new periphery. Orban wants to maintain his Fidesz party’s good relations with the EPP grouping, including Chancellor Angela Merkel’s CDU, who help to defend his back against criticism by the Commission and the European Parliament.

Slovakia, which takes over the EU’s rotating presidency on July 1, is close to Poland and Hungary on migration, but is already a member of the Eurozone and, as Finance Minister Peter Kazimir told bne IntelliNews last year, it already sees itself as a natural member of the inner core.

The dilemma is perhaps most acute for the Czech Republic, which is also an obvious candidate for the inner core because of its relative wealth and its close economic ties with Germany, but which is held back from joining it because of popular disillusionment with the EU and a lack of political leadership.

The Czechs were desperate to maintain Visegrad unity during their presidency of the group – though Prime Minister Bohuslav Sobotka felt it necessary sometimes to distance himself from the anti-Islamic rhetoric of his fellow premiers and his own president. Under the new Polish presidency, the Czech government may feel freer to mark out a more distinctive position, but Sobotka is probably too cautious and too weak politically to chart a new vision for the country as a member of the inner core.

The risk for the Czechs and the new member states is that if they do not make a push to join the inner core now, they may be too late. “If we don’t do it before the door is closed it will be much more difficult for us to join,” says one Czech foreign ministry official.