LOVE-HATE AFFAIR

Talks about a possible collapse of the European Union have been around since its founding, with fears intensifying especially after Britain's exit from the union. The Daily Mail suggested five countries that could leave the EU in the near future: Greece, Italy, France, Hungary and Sweden. Can we expect Grexit or Frexit after Brexit? What is happening to Europe, which in December 2012 was awarded a prize "for its contribution to peace, democracy and human rights in Europe" by the unanimous decision of the Norwegian Nobel Committee, but now faces an almost existential crisis? Is it really a crisis at all?

The pessimists' club

A Eurobarometer survey determined the highest level of Eurosceptics in Greece—53% of the country nationals. In France and Hungary the figure is as high as 50% and 43%, respectively. In Sweden 63% of respondents trust the union, which makes the country the most loyal nation of the EU.

Meanwhile, even in Sweden the leader of the second largest party, Jimmy Akesson, said that "there are good reasons to seriously reassess membership in the union". The leader of the Swedish Democrats, whose anti-immigration party has a major influence on the centre-right government, opined that the country should seek more exemptions from the EU laws. Akesson, however, did not call for an exit from the EU, but stated that the union was heading in the wrong direction. In Italy, the popular mood has been largely affected by the aftermath of the COVID-19 pandemic and the union's reaction to emergency situations, including the provision of necessary assistance. Systematic economic and migration-related problems are also affecting the situation. Italian nationalist leader Giorgia Meloni, who won the last year elections, is known for her anti-European stance, being dubbed "the most dangerous woman in Europe" by the German media. But once in office, Meloni has lowered her Euroscepticism and even declared her support for the EU. Yet some analysts suggested the move was simply a political tactic due to existing financial woes in the country; the Italian prime minister simply waits for the right moment. Indeed, Italy is breaking records by the size of the national debt (€47,400 per capita). Therefore, Rome, which strongly depends on the recovery fund and sustainability of the European Union, has no reason to quarrel with it.

Italy's closest neighbour, France, has always had a difficult relationship with the EU. Although it too is a founding member of the union and its largest economy, and French leaders have traditionally played an instrumental bureaucratic role in Brussels. However, some French politicians remain vocal critics of the EU, as they believe Paris is losing its sovereignty in favour of Brussels. Marine Le Pen, leader of the right-wing populist Front National party, who once made the withdrawal from the EU one of the priorities of her political platform, has been particularly active in criticism. After her defeat in the 2017 elections, Le Pen has completely abandoned her plans for Frexit, but is still an ardent critic of the Eurobureaucrats. She believes that the French will decide whether they want to leave the EU on their own, although she did not specify when or how.

Meanwhile, there is an apparent discontent in the French society. The approval rating of the incumbent French President Emmanuel Macron is at an all-time low after months of mass protests over highly unpopular pension reforms. As for Greece, it has been critical of the EU since the country joined the bloc, when many of the current problems still seemed entirely illusionary. The atmosphere of mistrust and rejection reached its peak in 2009, when amid the debt crisis Athens was strongly urged to adopt extreme austerity measures as a condition for financial assistance. Incidentally, the situation illustrated well the scope of contradictions between the lending and borrowing Eurozone countries.

Hungarian President Viktor Orban, who has been accused of undermining democratic freedoms in the country, also has a special reputation in the EU. The European Commission stated that the country would not receive most of the funds until it changed its stance on human rights, asylum and immigration laws and LGBT rights.

Challenges unite

Indeed, Euroscepticism has become a phenomenon, quite a serious one in some countries. It has been significantly curbed by two factors—COVID-19 and the war in Ukraine—while also fuelling it to some extent in parallel. Like in Italy, the pandemic has considerably damaged the economies of many European countries, making them overly dependent on European recovery funds.

The Ukrainian war has certainly encouraged solidarity sentiments among the EU states in terms of the introduction of collective economic sanctions against Moscow, arming Kiev and accepting refugees. However, according to some experts, it also puts Brussels at an economic disadvantage compared to the US, generally increasing Europe's dependence on Washington in many spheres.  As a result, says German political scientist Joschka Fischer in Project Syndicate, Europe may become the biggest loser in the reorganisation of the world order, because the EU is not yet able to compete with large countries with growing military budgets. In fact, Europe remains essentially a confederation of sovereign nation states that continue to be too different in many aspects.

Analysts claim that Europe will have to figure out how to maintain its economic model amid high energy costs, a growing digital divide, and a transition to green agenda. Other experts claim that the US programmes to rebuild domestic industry receive hundreds of billions of dollars as public investment, thereby actively undermining Europe's major perspective industry—green technology. European companies are simply running to the US, although the EU countries continue to pay to the US a fairly high price for the imported energy. The LNG price has increased four times since before the war in Ukraine and, according to various estimates, the US is likely to become the largest supplier of natural gas to Europe by 2030, which can lead to unemployment and industrial decline in the continent. For example, rising energy prices are hitting the German economy hard - from consumer demand to industrial production.

Cost of decay

What can cause the EU countries to actually start leaving the union? The will of voters. But it is very difficult to realise even for the skilful politicians. There is a system of clear checks and balances in the EU. Moreover, the mechanisms of withdrawal are not that simple, as we saw during the Brexit, even though British resources cannot certainly be compared with those of, say, Hungary or Greece. For example, Prime Minister Orban openly says that Hungary cannot leave the EU because the country is heavily dependent on the bloc economically.

According to the estimate of the Institute for Economic Research in Munich, GDPs of most EU countries will fall by at least 7%, if the EU collapses. Smaller countries will experience the hardest hit. In case of a complete EU break-up, GDPs of Malta and Luxembourg will fall by almost 20%, Estonia, Slovakia and Hungary by 12%, and Slovenia, the Czech Republic and Latvia by about 10%. Larger countries such as Germany, France and Italy will lose relatively less, but still 4-5%. In absolute terms, due to the large size of GDP, losses will amount to hundreds of billions of euros.

Thus, we can conclude that since the cost of EU break-up is exorbitant, nothing will happen to the EU. At least in an organised way. Apparently, only a country as powerful and wealthy as the UK could afford a withdrawal. Unless there are some external factors that can interfere in the situation, thereby exacerbating the above-mentioned problems making the process unmanageable. Like, for example, the escalation of the Ukrainian war into a full-scale war between Russia and the West, with Europe at the forefront of the confrontation. Or the extremely rapid and very negative effects of climate change, leading to severe droughts and floods or a huge influx of refugees from other parts of the world.

But these are radical scenarios. But in general Europe indeed has problems, encouraging some countries, albeit occasionally, to leave the Union. But these will be mainly populist moves targeting domestic audiences. But this does not mean that Europe should stop thinking about its place in a rapidly transforming world.