Development Prospects of the EU during the Ukraine Crisis
European countries are considered the biggest victims of the Ukraine crisis, which broke out in early 2022 and continues to have a global impact. The European Union (EU) is the most successful case of integration in the world. Its development is not only the result of the evolution of its internal operating logic but is also closely influenced by external impacts, namely, the so-called crisis- driven theory. The Ukraine crisis is the most significant geopolitical event to affect Europe since the Cold War. Will it boost or hurt the future development of the EU? This is not only an important theoretical problem but is also of fundamental practical significance. This paper seeks to make a preliminary analysis of the development prospects of the EU in the next three to five years from three dimensions: the economy, strategic autonomy, and integration.
Economic Development Prospects
The Ukraine crisis has significantly changed the EU’s economic development and operational logics. The short-term effects have been immediate and significant, including soaring energy and food prices and the closely related inflation rate, which has led to a growing cost-of-living crisis. The question is whether the current economic difficulties are short-term and temporary or the beginning of long-term difficulties. If this is a short-term and temporary phenomenon, it will be relatively easy for the EU to overcome because of its economic base and traditions. If the current difficulties become normalized and structured, it could lead to a series of long-term challenges. There has been a debate about this both inside and outside the EU, with mixed assessments and conclusions that are both optimistic and pessimistic. What is certain is that the Ukraine crisis will have a more serious long-term impact on the EU than did the previous debt crisis, and the EU economy will experience extreme difficulties for at least the next three to five years.
First, the EU, especially Germany, is likely to undergo a new round of deindustrialization. Since the 1970s, due to the development of globalization, the rise of domestic production costs, and the shortage of labor, European countries have generally been experiencing the process of deindustrialization. The manufacturing industry, particularly middle- and low-end manufacturing, has been transferred to developing economies in large numbers. The proportion of the service industry in the economy has increased while manufacturing has continued to decline. Currently, manufacturing in the UK, France, and other countries accounts for approximately 10% of their economies. Germany has traditionally been a manufacturing powerhouse. Although Germany has experienced deindustrialization to a certain extent, its manufacturing sector has continued to account for about 20% of its economy. Europe imports 83% of its natural gas needs, and industry, especially in Germany, is largely dependent on stable, relatively cheap gas from Russia. Since the outbreak of the Ukraine crisis, European countries have successively imposed large-scale sanctions on Russia’s coal and oil exports, gradually reducing gas imports from Russia. Russia has taken countermeasures, and Europe’s gas from Russian pipelines now only represents 9% of imports, down from 40% at the start of the war.1 It may decline even further in the future.
This has hit Germany particularly hard. For decades, Germany has had a special energy partnership with Russia, with the Nord Stream 1 gas pipeline linking the two countries directly. The Nord Stream 2 gas pipeline was completed before the Ukrainian crisis erupted. German manufacturing industries not only use natural gas as fuel but also use it as raw material. Russian piped gas has been the “basis for our (Germany) industry’s competitiveness”? The complete ban on Russian natural gas is a massive structural change for the EU and European countries. At present, the decline in Russian gas consumption in Europe is partly due to the forced reduction in natural gas consumption by households and enterprises. In October 2022, the EU’s natural gas consumption decreased by an average of 25% compared with the same period of 2019-2021,3 and the demand for gas in the EU was 24% below the five-year average in November4 The main reason for the decline is that energy-intensive enterprises have reduced consumption. Another explanation for the fall in Russian gas consumption in Europe is that Russian gas has been replaced by more expensive liquefied natural gas (LNG) from the United States, and gas prices remain five times more expensive than in North America? The consequences are obvious. Europe’s major gas-consuming industries一including chemicals, food processing, steel, and paper一generate an economic value of more than US$600 billion a year and employ almost eight million workers. Nowadays, a large number of production cuts or closures, such as the closure of more than half of the production capacity of ammonia (the key raw material of chemical fertilizer), will result in a heavy blow to the EU economy. This is just the tip of the iceberg. The manufacturing industry as a whole is also losing competitiveness due to rising costs as a result of increased energy prices. In 2022, the EU became a net importer of chemical products for the first time. To make matters worse, the price of energy in the United States is low, and because the funds are more abundant than in the EU, the US government can provide more subsidies. For example, according to the Inflation Reduction Act, which came into effect on January 1, 2023, the subsidy scale now reaches US$369 billion, which will create a strong siphon effect on the manufacturing industry in the EU. Some companies in the EU have considered moving to the United States or other more competitive countries. For example, 17% of the auto sector companies reported they were planning to move some of their production abroad. The Swedish battery manufacturer Northvolt announced that it is ready to expand its production in the United States. Almost a quarter of small- and medium-sized companies in Germany are ready to move abroad because of energy problems, according to a survey. The German chemical giant BASF plans to scale back production in Europe as soon as possible, and the reduction is expected to be permanent. If the EU fails to address energy prices effectively in the next three to five years, a new round of emigration, closures, and deindustrialization of European manufacturing will be inevitable. This trend runs completely counter to the recent demands and efforts of the EU to reindustrialize.
Second, the Eurozone and Germany could enter an era of trade deficits. Germany is the world5s third-largest exporter and runs a huge surplus. In 2020, Germ any5 s current account surplus declined again, falling to 7% of GDP, yet remained the highest ratio in the world (second in nominal terms, after China). The Eurozone has been running trade surpluses for years thanks to the performance of countries such as Germany. However, the Ukraine crisis could change that. Germany’s trade surplus was €9 billion in September 2022, compared with €16.1 billion in the same period in 2021. The Eurozone posted a trade deficit of €34.4 billion in September and €266.6 billion in the first three quarters of 2022, compared with a surplus of €129.2 billion in the first three quarters of 2021. The year 2022 is likely to mark the start of an era in which the Eurozone and Germany are likely to face chronic trade deficits.
One reason is that the price of energy imports will remain high. A move away from cheap Russian gas in favor of the more expensive US LNG would necessarily translate into a higher import bill. The second reason is that the market is smaller, leading to a decrease in exports. Russia has long been an important market for EU products, especially those made in Germany. Due to the sanctions, Germany recorded a 34% drop in exports to Russia in the first half of 2022 compared with the same period in the previous year,2 and exports are expected to fall even more in the second half of the year. In July 2022, EU exports to Russia fell by 46.9%, and European exports to Russia declined by 46.9%, down to €4.3 billion.3 Given the current animosity between the EU and Russia and their respective policies toward the other, the future looks even less promising. In the case of the EU, the foreseeable future will be largely deprived of a big market such as Russia’s. Markets are scarce resources, and high-quality markets are even more scarce. Losing a market as large as Russia’s means a decrease in sales revenue, which will result in a long-term decline in the R&D power and competitiveness of EU manufacturing enterprises, causing serious damage to global exporters such as Germany. The third reason is that manufacturing industry exports are reduced due to the decline in competitiveness. A fourth reason for the trade deficit is that the depreciation of the euro has led to a decline in purchasing power. In 2022, the euro continued to depreciate against the dollar, at one point falling below the parity level of 1:1, resulting in an increase in the dollar-denominated energy import bill.
Of course, trade deficits are not necessarily bad, but they can be problematic for a currency like the euro that does not have central government backing, meaning more external financing is needed. On the other hand, the Eurozone is more susceptible to the market forces due to its internal difierentiation, lack of central financing, and other structural problems. That is, it is easier for external funds to flee when there is a disturbance, which will inevitably increase the financial risks in the euro area.
Third, spill-over effects of German risks are emerging. Germany is particularly exposed to the short-term and long-term effects of the Ukraine crisis. Its economy has already started to decline and may shrink by 7.9% in 2023 and 4.2% in 2024, and it could become worse, sliding into a recession never seen before in German history. An economic contraction will affect all sectors, especially manufacturing, which is expected to decline by 26.6% in 2023. With the energy restructuring and deindustrialization brought about by the Ukraine crisis, coupled with structural problems such as the shrinking labor force due to aging, lagging digitalization, and the impact of electrification of the auto industry, the German economy may face a long, painful transition, resulting in either success or failure, with great risks. Germany’s excellent economic performance over the past two decades has also contributed to social and political stability. Society will inevitably become more divided and politically fragmented if the economy falters. The current German government, the first three-party coalition since World War II, has shown a trend toward social and political fragmentation. Germany is the Eurozone’s backbone and the EU’s economic locomotive. If the German economy falters, the impact will spread to neighboring countries, such as Poland, the Czech Republic, Hungary, and Slovakia, which have been deeply integrated into Germany’s industrial chain. The stability of the Eurozone is also at stake; the Italianization of Germany (economic stagnation, rising debt, and political instability would spell the end of the Eurozone.
Fourth, debt risks are more prominent. In the wake of the EU’s sovereign debt crisis, relatively vulnerable members of the bloc have accumulated unsustainable amounts of debt. During the COVID-19 pandemic, European countries launched huge rescue packages to rescue companies and avoid mass layoffs, most of which were funded by new debt. In 2019, Eurozone government debt-to-GDP was 83.8%. In 2020, it shot up to 97.2% after the lockdown bailouts were unveiled. Germany alone is spending €264 billion. The EU’s total expenditure is equivalent to almost €3,000 for every European household, which is nearly the annual level of its education spending and is largely financed by unsustainable debt. For heavily indebted countries such as Italy, Spain, Greece, and France, their energy-support schemes will add 3-6 percentage points to their current debt.2 In addition, European countries have generally increased their military spending, partly from debt. In contrast to expanding the scale of spending and borrowing, the EU economy is experiencing a new decline and recession. It will be difficult for EU countries to reduce their debt levels through economic growth in the future, and the most vulnerable countries in the region will be particularly hard-pressed to bear the debt burden. Former UK Prime Minister Liz Truss became the most short-lived prime minister in British history with only 44 days in office, because her massive tax cuts and spending increases did not have a solid financial foundation. Relying more on the market to raise funds resulted in market distrust and triggered the financial crisis. The UK’s fiscal position and debt level are better than many EU countries. The possibility of the EU facing similar difficulties in the future cannot be ruled out. Since the sovereign debt crisis, the EU has established a corresponding mechanism, but its economic situation, especially the economic and financial situation of its main member, Germany, is also deteriorating, which will seriously restrict the EU’s ability to deal with a new round of debt crisis.
The weight of the EU has declined significantly, from 26.5% of the world5s GDP in 2000 to 17.9% in 2021. Although some of this shift is explained by the relative rise of emerging countries, it is also directly related to the decline of EU competitiveness, such as the aging of the population, the structural defects of the euro, the rigidity of the welfare and labor markets, and the decline of R&D expenditure. The Ukraine crisis has exacerbated the EU’s economic woes and reduced its policy options. For example, higher energy prices, which in theory should have pushed the EU to accelerate its transition to digital and greener economies, are backsliding, as countries such as Germany are switching back to coal power and spending billions building LNG terminals, cementing their dependence on LNG. The economic downturn will also reduce the EU’s investment in digital and green technologies, which, in a vicious circle, will further reduce the competitiveness of the EU economy.
Prospects of Strategic Autonomy
The so-called strategic autonomy, for the EU, essentially means getting rid of US control and obtaining the power to make strategic decisions independently. Before the outbreak of the Ukraine crisis, strategic autonomy was a frequent and hot word in discussions within the EU. The Ukraine crisis should have made this hot word even hotter because the rapid deterioration of the security situation in Europe requires the EU to have strategic autonomy. In contrast, since the outbreak of the Ukraine crisis, the frequency of the issue of strategic autonomy in the EU’s internal discussions has significantly decreased and almost disappeared. Indeed, the prospect of EU strategic autonomy, already unpromising, has become even dimmer.
In the field of defense, the EU’s willingness to assert strategic autonomy has declined significantly. The most important manifestation of the EU’s lack of strategic autonomy is its lack of defense autonomy. In the past few years, the EU has tried to strengthen its military capabilities, launched “permanent structured coopération/5 established the European Defense Fund, and launched the European peace mechanism. Countries have gradually increased their military budgets, but with little success. They are powerless in the face of Russia, and nearly all European countries have turned their eyes to NATO and the United States on defense matters. After the outbreak of the Ukraine crisis, the so-called military containment of Russia mainly depended on the United States, which increased its military presence in Europe to more than 100,000 troops for the first time since 2015. American weapons account for the majority of Western supplies to Ukraine. Since the crisis began, the United States has provided Ukraine with US$15.2 billion in weapons, while the EU has provided only about US$8 billion. The Central and Eastern European countries, especially Poland and the Baltic States, rely more heavily on the United States and NATO and have requested that the United States establish permanent military bases and increase its military presence in their countries. Finland and Sweden, longstanding neutral countries in Northern Europe, have even applied to join NATO. Sanna Marin, Finland’s prime minister, said: “I’ll be brutally honest with you, Europe isn’t strong enough. We would be in trouble without the United States?52 French President Emmanuel Macron, who once called NATO “brain dead,” admitted that the Ukraine crisis is “electroshock” for NATO.
European countries have vowed to increase military spending in the wake of the Ukraine crisis. Germany has set up an €100 billion military modernization fund, mainly to buy weapons, and plans to raise annual spending to 2% of GDP. Poland, which already spends 2.5% of GDP on military spending, intends to increase it to 5%. France plans to increase military spending by 7.4% a year. These increases are not the result of EU coordination but individual member states5 decisions. In other words, the EU has not solved the problem of defense fragmentation. In terms of military expenditure alone, EU states spent nearly €200 billion ($225 billion) on defense in 2020, the most since records began to be kept in 2006; however, joint investment by governments fell, as reported by the European Defense Agency (EDA)
Much of the increased military spending in Europe is still likely to go to US defense industries rather than those of Europe. Germany’s €100 bn military modernization fund is spending an initial €10 bn on 35 US F-35 fighter jets. This is certainly not a good sign for strategic autonomy. Most members of the EU still see the purchase of US weapons as a sign of loyalty to and a way to win favor with Washington rather than to build EU defense autonomy, especially in the face of the alleged Russian threat. This trend will further strengthen the US military industry and contribute to deepening the monopolization of the European market. In the future, the US military industry can expand its scale of production and improve the research and development level with the help of European countries’ funds and will have greater competitive advantages over the European military industry. This vicious circle will be difficult for the EU to change. One notable trend is that in the EU’s 2016 Global Strategy, there are eight references to strategic autonomy.1 Nevertheless, in the EU’s report of A Strategic Compass for Security and Defence, published in 2022, the idea of strategic autonomy had been significantly diluted.
In the economic sphere, the EU’s strategic autonomy is also on the decline. Europe and the United States have long been roughly equal in economic size, and the EU can be considered a rival of the United States. Boeing and Airbus have been locked in a decades-long battle. The United States does not dare to impose trade restrictions on the EU at will. If the EU is economically dependent on the United States, this is a two-way dependence; for example, the United States is the EU’s largest export market but also dependent on the EU market. Over the past few decades, however, as the US economy has grown faster, that dependence has been shifting in America’s favor. In 1995, the GDP of the EU was US$8.3 trillion, accounting for 26.9% of the world economy, while that of the United States was US$7.64 trillion, accounting for 24.7% of the world economy. In 2020, the EU’s GDP was US$15.19 trillion, accounting for 17.9% of the world5s total. At US$20.95 trillion, the United States still accounts for 24.7% of the world’s GDP. As can be seen, the economic gap between the EU and the United States is widening.
The crisis in Ukraine will do far more damage to the EU economy than to the US economy and will accelerate the change in the balance of economic power and two-way dependence between Europe and the United States. The EU’s dependence on the United States will deepen, whereas the United States will weaken its dependence on the EU. Similar to the field of security and defense, the economic relationship between the United States and Europe will also become increasingly unequal.
United States was relatively limited; there was little energy dependence because most of the EU’s energy needs were met by Russia. However, after Russia’s invasion of Ukraine, due to the deterioration of bilateral relations, especially mutual sanctions, the EU accelerated its energy independence from Russia and turned to the large-scale purchase of LNG. Liquefied gas is also more seaborne and competitive than Russia’s stable pipeline gas, making it less reliable. Furthermore, US LNG is also susceptible to the influence of US domestic politics. For example, under the America First principle, a future populist administration in the United States may require US natural gas producers to give priority to domestic consumption rather than exports.
The second aspect is the decline in autonomy in market choice. The EU has basically lost the Russian market and has recently sought to weaken China-EU trade and investment relations by imposing more obstacles due to geopolitical and ideological reasons. Therefore, the EU will rely more heavily on the US market in the long run.
Third, the autonomy in the financial sector has declined. The EU has long been subject to America’s long-arm jurisdiction. In particular, under the Trump administration, the United States withdrew from the Iranian nuclear deal and threatened to impose sanctions on European companies that dealt with Iran, forcing European companies to withdraw from Iran and making it impossible for the EU to fulfill its commitments to Iran. The EU took pains to launch the Trade INSTEX vehicle, a tool that would accelerate the internationalization of the euro as a counterweight to the dollar’s hegemony. However, from the perspective of future trends, due to the economic development of the EU and the widening of the deficit, the euro will be weaker relative to the US dollar, and the check and balance effect on the US dollar will also be feebler. That is, in the future, it will be more difficult for the EU to resist the long-arm jurisdiction of the United States using the hegemony of the dollar.
Additionally, the changing power pattern within the EU is not conducive to building strategic autonomy. The Central and Eastern European and Northern European members of the EU have traditionally been more pro-American, enthusiastically embracing NATO and being suspicious or even opposed to the EU’s strategic autonomy for fear of provoking Washington. Due to geographical proximity and historical enmity, these countries are more hostile to Russia. Within the EU, there are hardliners against Russia, believing that the pragmatic engagement policies of France, Germany, and other countries toward Russia serve only to appease Russia. Poland and the Baltic states strongly oppose the Nord Stream gas pipeline linking Germany and Russia and France’s diplomatic efforts to draw Russia toward Europe. After years of insisting on the threat from Russia, the untrustworthiness of Russia, the need for tough measures against Russia, and, in particular, the need to drastically reduce their dependence on Russian gas, the Ukraine crisis has given these countries the moral high ground. Russia’s special military operation against Ukraine has convinced them that they are right and that France and Germany are wrong, and, thus, they are justified in blaming France and Germany, among other countries. ccWe were right and you were wrong when it comes to Russian policy,” declared Polish Prime Minister Mateusz Morawiecki. “Ik, in recent years, Europe had always acted as Germany wanted—would we be in a better or worse situation today?’*
Presently, the voices of the EU’s Central and Eastern European and Northern European countries are increasing, and their policies, such as taking a pro-American stance to contain Russia, are becoming mainstream EU positions. As long as the Ukraine crisis continues and the standoff between Europe and Russia remains unchanged (which will likely not change in the next three to five years), the hard-liner policy of Central and Eastern European and Northern European countries toward Russia will remain the mainstream EU policy toward Russia. The United States and NATO will continue to dominate the foreign and security policy of the EU, and the idea of EU strategic autonomy will lose ground. In contrast to the rise of Central and Eastern European and Northern European, France, and Germany have been criticized for their moral legitimacy due to their “mistakes” in their Russian policies, resulting in a decline of their influence in the EU. The two countries are also extremely dissatisfied with Russia’s actions against Ukraine, but concerned for the long-term security of the EU, they are not willing to push Russia into a corner. French President Emmanuel Macron once said, “Russia must not be humiliated”
However, due to the consideration of political correctness and the pressure of allies, France and Germany have led the implementation of policies similar to those of Poland, Finland, and other countries toward Russia. This shift has objectively deepened the hostility between Europe and Russia and strengthened the influence and control of the United States and NATO on European security policies. France actively advocates and supports EU strategic autonomy yet has limited national strength. It is difficult for France to lead EU strategic independence alone when its public debt exceeds 113% of GDP; thus, the EU is counting on German support in particular. After the end of the Merkel era, Germany entered a multi-party coalition, with smaller parties such as the Greens and the Liberal Democratic Party traditionally more pro-American and focused on the role of NATO. Moreover, unlike France, Germany attaches more importance to the position of Central and Eastern European countries such as Poland and the Northern European countries, especially after the outbreak of the Ukraine crisis, and feels the need to support these small countries. For example, Germany’s “European Sky Shield” missile-defense initiative would involve 15 countries from Central and Eastern Europe but exclude Southern Europe, and would rely on American and Israeli rather than French military technology. Furthermore, France and Germany themselves have a struggle for dominance in their mutual defense cooperation; thus, future Franco-German cooperation is expected to be more difficult.
Of course, the changes in the current power dynamic within the EU are more about influence than comprehensive national strength. The comprehensive strength of France and Germany still far exceeds that of Central and Eastern European countries and Northern European countries. However, the Central and Eastern European and Northern European countries have a numerical advantage, and their position on Russia and European strategic autonomy has been further solidified. At the same time, doubts about France and Germany have deepened. As a result, it will be more difficult to garner support from Central and Eastern Europe, Northern Europe, and the EU as a whole for the European strategic autonomy promoted by France and, to some extent, Germany.
Integration Prospect
Much of the EU’s development depends on the depth and breadth of integration. Throughout the history of European integration, there has been a crisis-driven saying that integration will inevitably encounter crises, and the resolution of each crisis will drive forward the progress of integration. The greater the crisis, the greater the progress. Of course, this is an optimistic perspective. Crises bring progress, but they also have negative effects. For example, after the outbreak of the sovereign debt crisis, the EU set up the European Stability Mechanism, the banking union, and other coping mechanisms. This is a type of progress that contributes to the financial integration of the EU. However, the debt crisis also deepened the conflicts among member countries, leaving many after-effects. As the most serious external crisis to hit the EU since the Cold War, the Ukraine crisis will also have a major impact on European integration.
On the positive side, the Ukraine crisis has brought new momentum to European integration. First, there is greater awareness of a community with a shared future. Since the end of the Cold War, the EU once again shares a common enemy. The EU declared that Russia posed “a long-term and direct threat for European security, which we will continue to face resolutely.” In the face of a common threat and enemy, EU member states have shown unprecedented unity. The EU has introduced eight rounds of sanctions against Russia, including economic sanctions and diplomatic sanctions.
Second, the awareness of military construction is enhanced. The 2014 Ukraine crisis had an impact on the EU, but it did not prompt the EU to make fundamental adjustments on security and defense issues; in contrast, the 2022 crisis has undoubtedly had such an effect. For the first time, the EU sent offensive weapons to Ukraine under the framework of its common security and defense policy, and Germany has broken a longstanding taboo by sending offensive weapons to Ukraine. EU member states have decided to increase their military spending. Although the increase in military expenditure is largely a sovereign act of individual member states rather than a coordinated action within the framework of the EU’s common defense policy, it leaves more room for future EU defense cooperation.
Third, there is a palpable urgency to act together. The Ukraine crisis, combined with the impact of the pandemic, has resulted in the EU facing unprecedented difficulties. The risks of energy transition, supply chain security, cost-of-living crisis, illegal immigration, the rise of far-right forces, war, and the marginalization of its international status are more prominent than ever before. It is difficult for any member state to deal with such challenges alone. There is a recognition of the need for more concerted action at the EU level, such as joint gas procurement, joint arms procurement, a common industrial policy, and a common refugee policy.
Therefore, stimulated by the Ukraine crisis, European integration has received a strong internal impetus to move forward. However, it is uncertain whether the new growth drivers will translate into a new reality of European integration. One possibility is that current EU unity begins to collapse, with differences and disputes returning to dominate EU affairs, making integration difficult. Another possibility is that the EU accelerates its development and makes a breakthrough in integration. At present, the prospect of integration is not optimistic; while the Ukraine crisis has brought new momentum to the European integration, it also has strengthened those factors that hinder the development of EU integration.
First, internal disputes will become increasingly prominent. The first problem is the dispute between the Northern and Southern European countries. The EU has maintained temporary unity on sanctions against Russia, but cracks are already showing and could widen further.
Since the EU sovereign debt crisis outbreak in early 2010, the division and disputes between the northern and southern member states of the EU have been growing. Southern European countries such as Italy, under the pressure of heavy debt and prolonged austerity, were more affected by the pandemic than Northern European countries such as Germany, the Netherlands, and Austria because of their particular economic structure (such as over-reliance on services such as tourism). Southern European countries, especially Italy, have been hit hard again by the surge in energy prices caused by the outbreak of the war in Ukraine. With their finances generally stretched, they cannot afford to spend more money on the cost-of-living crisis. Richer Northern European countries have more resources to protect their people and businesses. Germany, for example, has launched a €200 billion rescue fund. This means that the energy cost for German companies will be much lower than in Italy and France, making German companies more competitive than firms in France and other Southern European countries. This will further divide the economies of Northern European countries from those of Southern European countries, which will inevitably provoke resentment in southern member states. Italy’s then-prime minister, Mario Draghi, accused Germany of distorting the EU single market and called for Europe to be united once again in the face of an emergency. France and Italy have suggested that the EU should once again deal with the economic consequences of the Ukraine crisis in the form of a joint bond issue, as it did during the pandemic when it set up a recovery fund. However, Germany, the Netherlands, and other countries have flatly refused.
A second problem relates to the difierences between Eastern and Western European countries. Regarding their policies toward Russia, Poland and the Baltic countries are pushing a policy of Russian containment, advocating for the complete weakening of Russia, and opposing negotiations between Ukraine and Russia without considering the long-term consequences. France, Germany, and other countries are more concerned about the long term.
to the conflict on the other. French President Emmanuel Macron even offered to give Russia “security guarantees as part of future negotiations to end the war in Ukraine551 to allay Russia’s fears about NATO’s presence on Russia’s border. Therefore, although Eastern and Western EU countries have reached an agreement on short-term policies toward Russia, there are major differences in long-term strategic goals, which will become more prominent in time. On the question of values, Poland and Hungary attach more importance to national sovereignty and have carried out a series of reforms in media regulation, justice, and other fields in recent years, regarded by France and Germany as violating EU values. The European Commission and the European Parliament have repeatedly criticized the two countries, demanded corrections, and threatened to refuse to release EU funds, deepening the two countries5 resentment toward Western European powers and EU institutions. Poland also claims that its own laws take precedence over EU law. On the issue of refugees and illegal immigration, Poland and other Central and Eastern European countries welcome Ukrainian refugees, but resolutely refuse to accept refugees from the Middle East and Africa. In the first six months of 2022, the EU registered 84% more irregular entries than in the previous year’s period.2 With the continuous influx of illegal immigrants, the dispute between Eastern and Western Europe on this issue will continue to deepen.
Second, there is a lack of leadership. European integration is mainly driven by major countries. France and Germany, the two largest countries in Europe, have traditionally played a leading role in European integration, but the Ukraine crisis has weakened this. The fisst aspect is that both countries have experienced a decline in moral authority, especially in Central and Eastern Europe. Since their past policies toward Russia were “wrong,” any suggestion of a EU policy is likely to provoke suspicion and even opposition in Central and Eastern Europe.
The “German problem” is another aspect of the declining role of traditional EU leadership. Much of European integration stems from the solution to the German problem. Germany has been a good student of European integration for many years. Its main contribution has been money. Germany is the largest net contributor to the EU budget. However, Germany is the country most affected by the Ukraine crisis, and its economic development is full of uncertainties. Its past leadership in the EU, based largely on its long-term economic performance and being a role model, will inevitably decline once its economic glow is gone.
The third is the fact that the axis effect of France and Germany may change. France and Germany have been unable to lead the EU even when united, much less apart. In the future, Franco-German relations will face new uncertainties. France’s political strength, especially its military power, has long been dominant, while Germany’s dominance depended on its economic strength. There are already concerns in France about the prospect of a massive German military investment to build the strongest conventional force in the European Union, which could challenge France’s military and even political dominance. In addition, France’s ideal of European fiscal integration, such as the establishment of a larger Eurozone budget, common deposit guarantee for the banking sector, common debt and common bonds, etc., all need the support of Germany. However, with a declining economy, Germany will pay more attention to its own interests and have no interest or ability to support integration projects that put its finances at risk. Since the Ukraine crisis began, France and Germany have clashed as never before on the construction of energy pipelines, energy subsidies, and military cooperation and even postponed a joint cabinet meeting scheduled for November.
Third, the constraints of populism. The populism of the for right and the far left is an old problem in the EU, but it has taken on new dimensions in the wake of both the sovereign debt crisis and the refugee crisis. One of the most striking commonalities of populism in the EU is its anti-system, anti-EU, and anti-integration posture. The economic changes and cost-of-living crisis brought by the Ukraine crisis to the EU will be far more than the impact of the sovereign debt crisis and refugee crisis. Economic problems will inevitably spill over into the social and political fields, and there will be further pressure on the development of extremism, nationalism, and populism within the EU.
elections in June, far-right and for-left parties surged in seats, forcing the ruling party to form a minority government. In Sweden’s parliamentary elections in September, the far-right Democratic Party became the second-largest party in the parliament and joined the government. On September 26, 2022, Italy elected the most right-wing government in its history. The new prime minister, Roberto Meloni, is the leader of the far-right Brothers of Italy party, which has fascist roots. The polarization and fragmentation of politics will increase the difficulty of coordination and compromise among EU member states and hinder the development of deep integration. Sweden once received the largest number of refugees in proportion to population in the EU, but the rise in far-right populism has brought its refugee policy in line with that of Poland and other Central and Eastern European countries, making it harder for the EU to coordinate refugee resettlements.
All in all, there is still much momentum for future European integration, but it will be difficult to achieve breakthroughs in the crucial areas of finance, foreign affairs and defense, migration, and institutional reform due to significant obstacles, where tinkering with the status quo is likely. In the financial field, it is unlikely that the EU will establish a true fiscal union and unify member states’ economic and social policies, such as taxation, employment, and welfare. However, it is possible that a certain degree of consensus will be reached on amending the Stability and Growth Pact, or jointly issuing a certain scale of bonds. In foreign policy and defense, EU member states will continue to strive to speak with one voice and promote military research, development, and common procurement. Fundamental changes are unlikely, including the impossibility of adopting a majority voting decision-making model, and coordination rather than integration will continue to dominate EU foreign and defense policy. In the field of immigration, it is still difficult for the EU to introduce a common refugee policy, and the management of refugees and illegal immigrants will continue to be in a crisis management mode of passive response. In the field of institutions, the European Parliament still lacks real representation and democratic legitimacy. The European Commission cannot become a real EU government; it will be hampered by its lack of a popular mandate, and it is viewed as increasingly out of touch with the elite public bureaucracy. The High Representative for the Common Foreign and Security Policy cannot become a real EU foreign minister, nor is the External Action Service likely to become a proper foreign ministry. It is highly unlikely that the EU will create formal finance and defense ministries. The fundamental reason is that all these major reforms must be achieved through changes to the EU’s underlying treaties. But now, behind the apparent unity of the EU, interests are further divided, cracks are widening, and cohesion is declining. The conditions for significant treaty change are not expected to be in place for at least the next three to five years, and may remain so for a long time.
Conclusion
The crisis in Ukraine will greatly affect the EU’s development prospects. This is a decisive historic event in the history of the EU. It will further weaken the strength and international influence of the EU and accelerate its marginalization from global geopolitics.
The first reason for this outcome is that the EU’s share of the global economy will continue to decline. In the next three to five years, the EU economy will remain sluggish and it will be difficult to emerge from the shadow of high levels of debt, high deficits, high inflation, a weak currency, and low or even negative growth. At the same time, the “Europe first” ideology of the EU (the era of Europe First may be about to begin) will rise, resulting in a continuation of fbrtressing and the trend toward protectionism. These developments will, in turn, further weaken the competitiveness of the EU and gradually erode the EU’s leadership in the formulation of global economic rules and standards with a concomitant gradual decline in the Brussels effect, of which the EU is so proud.
Second, the EU’s international image has been damaged. Whatever blame the EU and the West may have for Russia, the fact that conflict has flared up again in Europe speaks to the failure of the EU’s strategy toward Russia, which has not found a way to coexist with Russia since the end of the Cold War. In addition, the EU has long pursued offensive value diplomacy, promoting a color revolution in Ukraine and other former Soviet countries, but the Ukraine crisis highlights its double standards and false values in international affairs. For example, the EU welcomes Ukrainian refugees, in sharp contrast to its attitude toward refugees from the Middle East and Africa. The EU has heavily aided Ukraine, but has largely turned a blind eye to humanitarian disasters in Afghanistan, Syria, Somalia, and so on.
Third, the EU’s role as an international balancer has been weakened. The EU wants to take a “third way” in the great power competition, play a balancing role, and develop a foreign policy based on its own interests, not just blindly follow the United States. However, with the further widening of the power gap between Europe and the United States, the EU may become Anglicized or Canadianized in the future; namely, the EU may gradually lose its independent international identity and become more of a subsidiary and follower of the United States, unable to defend its own interests or develop autonomous foreign policies. For example, the Inflation Reduction Act of the United States takes no account of Europe’s interests and blatantly violates the rules of the World Trade Organization. It provides massive subsidies to its own electric car, wind turbine, and green hydrogen industries, discriminating against European companies and creating unfair competition. “A large number of European companies are reallocating their strategic plans and investments to North America”? The EU is very dissatisfied with this and has made protests and representations several times. French President Macron also raised the issue loudly during his visit to the United States but was largely ignored.
Fourth, the process of EU strategic contraction has been accelerated and foreign policy has been further regionalized. On the one hand, whether the EU is united or not, as its strength declines, it will be difficult to become a single pole in global power dynamics and play a global role. On the other hand, even after the Ukraine crisis is resolved, EU-Russia hostilities will likely continue for a long time, meaning the diplomatic priorities of Central and Eastern Europe and Northern Europe will remain very much EU’s diplomatic priorities. In the EU’s big neighborhood, the crisis is not only in the east but also in the south. Nuclear proliferation, war in the Middle East, turmoil in Africa, climate disasters, and terrorism will greatly consume the EU’s time and energy. While the EU has its own Indo-Pacific strategy, this increasingly important region will largely be used as a bargaining chip with the United States, either as a token engagement to please Washington or as a gesture (especially for some Central and Eastern European countries) to draw the United States back into Europe. It is difficult for the EU as an independent power to truly invest resources and project power around the world, including in the Indo-Pacific region.
The EU was born during the Cold War. Its development and expansion promoted global multipolarization and played a role in counterb al anci ng the hegemony of the United States. The Ukraine crisis is a tragic event for the EU; not only has it disrupted its normal development process, but it may also kill its geopolitical dream of becoming a world pole, which is not conducive to global multipolarization and the containment of hegemonism and power politics. Of course, none of this is inevitable, and the EU may have a better future if it reflects properly on the lessons of the Ukraine crisis, if it is united, and if it views the world in a more open and inclusive way.