Spain: A Political Risk Analysis

1. Introduction

Spain is in the throes of the worst economic crisis in its recent history. Reeling from the collapse of a debt-driven construction boom, Spain entered recession in the second quarter of 2008 and posted six consecutive quarters of negative growth. Although the economy grew by 0.1 percent during the first quarter of 2010, Spain’s growth prospects are poor and any pick-up could be short lived.

Spanish GDP fell 3.6 percent in 2009, and a package of harsh austerity measures announced since then will undermine any economic recovery during the foreseeable future. The International Monetary Fund (IMF) says there will be no positive GDP growth in Spain until 2011, at which point it will still be below 1 percent. The Spanish Finance Ministry on May 20 said it now predicts a 0.3 percent contraction in 2010. It also cut the forecast for Spanish growth in 2011 to 1.3 percent from 1.8 percent.

Meanwhile, Spain now has the highest unemployment rate in the European Union. More than 20 percent of working-age Spaniards (or 4.6 million people) were without a job during the first quarter of 2010. That compares with an average rate of 10 percent among the 16 countries that use the euro currency. Persistently high unemployment presents an obvious threat to political stability in Spain.

As unemployment soars, Spain is also facing an exploding budget deficit. The collapse of the labor market, which has resulted in a steep drop in tax collections, and the Socialist government’s spendthrift policy response of increasing unproductive public sector stimulus spending skyrocketed the deficit to 11.4 percent of GDP in 2009 (or five times higher than in 2008).

The combination of negative GDP growth, rising unemployment, and a high deficit has raised concerns about the sustainability of Spain’s finances. Indeed, two international ratings agencies, Fitch and Standard & Poor’s, have recently lowered Spain’s long-term sovereign credit rating, citing the risk of a prolonged period of below-par economic growth and persistently high fiscal deficits.

The downgrades will make it more expensive for Spain to finance its debt, and increase concerns over Spain’s overall creditworthiness. Indeed, investors anxious that a debt crisis in Greece could create a domino effect in Spain are already demanding higher interest rates to hold Spanish debt.

Although Spain’s problems have been known for years, concerns about the Spanish economy were thrust into the international spotlight in January 2010, when noted New York University Professor Nouriel Roubini said Spain posed a major threat to the stability of the European single currency. Speaking from the World Economic Forum in Davos, Switzerland, Roubini warned: “If Greece goes under, that’s a problem for the eurozone. If Spain goes under, it’s a disaster.”

A debt crisis in Spain would make the problems in Greece look tame by comparison. At €1.3 trillion, the Spanish economy is more than four times the size of Greece’s. (While Greece represents about 2.5 percent of eurozone GDP, Spain accounts for about 11.5 percent.) Spain is also the fourth-largest economy in the 16-nation euro zone, the eighth-largest in the OECD, and the tenth-largest in the world. Many analysts believe Spain is simply too big to be bailed out, and that a Spanish default would almost certainly lead to the breakup of the euro zone.

Fearing for the future of the euro, the European Union and the IMF have put intense pressure on Spanish Prime Minister José Luis Rodríguez Zapatero to implement a series of austerity measures aimed at bringing the public deficit down to a eurozone limit of three percent of GDP.

The IMF, for example, has called for “urgent” labor and banking reforms in Spain. “Spain’s economy needs far-reaching and comprehensive reforms,” the IMF said in a May 24 report. The IMF described the challenges facing Spain as “severe,” citing a “dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private-sector and external indebtedness, anaemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness.”

But the prospect of draconian cuts in government spending will not sit well with Spanish voters, and growing resistance to reform will pose a continuing threat to the stability of the Zapatero government. In a preview of things to come, the government barely averted collapse on May 27 when the Spanish parliament narrowly passed a €15 billion austerity package with a one-vote majority. A defeat of the bill would have forced new elections and thrown Spanish markets further into instability.

Although Zapatero’s spending cuts have been met with praise from abroad, Spanish trade unions are now calling for nationwide strikes. In a climate of rising social tension, it remains unclear whether the Zapatero government will risk its own survival by actually following through with its pledges to cut government spending. Either way, Spain is facing a prolonged period of economic, social and political instability.

2. Labor Market and Unemployment

Spain suffers from a jobless rate that is by far the highest of the main eurozone economies. At 20 percent, it is almost double the bloc’s average. During the first quarter of 2010, Spain’s unemployment register topped 4.6 million, according to the National Statistics Institute. Roughly 800,000 Spaniards lost their jobs in 2009, on top of nearly a million in 2008. The number of unemployed is forecast to remain well above 4 million until at least 2013.

The recession has hit young workers hardest, with the unemployment rate increasing from 17.5 percent three years ago to over 40 percent today. According to Eurostat, the European Union’s statistics agency, 41.5 percent of people under 25 in Spain were without work during the first quarter of 2010.

Spaniards who do have a job are not faring much better than those who do not. More than 50 percent of the country’s workforce belongs to a new social category popularly known as the mileuristas, those who earn less than €1000 a month. Roughly two in three Spanish workers (63 percent) earn less than €1100 a month, according to the Gestha union of tax inspectors.

The IMF has called for sweeping labor market reforms in Spain. In a May 2010 report, the IMF says: “The [Spanish] labour market is not working. Unemployment is structurally high and excessively cyclical, reflecting the high degree of duality in labor markets. The wage bargaining system, which hamstrings wage and firms’ flexibility, is ill-suited to membership of a currency union.” The IMF has asked for a “radical overhaul” including lowering severance payments, boosting wage flexibility and altering the collective bargaining system.

A recent poll shows that unemployment is the chief concern among Spaniards, ranking far higher than terrorism or immigration. In March 2010, 82.9 percent of Spaniards said unemployment was their main concern, according to the CIS polling institute.

Mindful of its falling popularity, the Zapatero government says that is putting “job creation” at the center of its economic strategy. But efforts to revitalize the job market through fiscal stimulus measures have been unsuccessful to date.

In November 2008, Zapatero announced an €11 billion, two-year stimulus package to boost the flagging economy and cut unemployment. The majority of the cash, €8 billion, was destined for local public works projects, aimed at creating 300,000 low-skilled jobs by the end of 2010. Another €800 million was destined for Spain’s ailing car industry, which accounts for 20 percent of exports. Since then, however, the stimulus has been slashed in half by the government’s subsequent austerity measures.

3. Sovereign Ratings

The main ratings agencies believe Spain is caught in a Catch-22 situation. If the government cuts public spending to the level needed to reduce the deficit, it will drag down economic growth and make it more difficult for Spain to emerge from recession. But if the government fails to reduce spending, the chances increase that Spain will default on its debts.

Fitch Ratings on May 28 removed Spain’s AAA credit rating, dropping it by a notch, on expectations that the moves to cut the nation’s debt will slow its economic growth. The move came just one day after the Spanish Parliament approved the government’s new austerity measures for 2010 and 2011, aiming to cut a budget deficit in the double digits of gross domestic product despite its likely effect of slowing economic growth. The downgrade to AA+ moves Fitch closer in line with Standard & Poor’s Ratings Service.

Standard & Poor’s on April 28 downgraded the country’s credit rating by one notch to AA from AA+, with a negative outlook. S&P believes the Spanish government is underestimating its fiscal problems and overestimating its growth prospects. “Our conclusion is that challenging medium-term economic conditions will further pressure Spain’s public finances, and additional measures are likely to be needed to underpin the government’s fiscal consolidation strategy and planned program of structural reforms,” S&P said. “The negative outlook reflects the possibility of [another] downgrade if Spain’s fiscal position underperforms to a greater extent than we currently anticipate.”

S&P had already stripped Spain of its coveted AAA status in January 2009. Explaining the downgrade, S&P cited the “structural weaknesses in the Spanish economy” and predicted a long recession that will raise public debt by 18 percent of GDP and may entail a huge bank bail-out.

Moody’s Investors Service on June 15, 2009 downgraded the senior unsecured debt and deposit ratings of 25 Spanish banks, 18 by one notch and seven institutions by two notches. Moody’s also ranks Spain at the top of its Misery Index, a metric which adds a country’s fiscal deficit and the unemployment rate to grade how miserable an economy is.

4. Banking Sector

Spain’s worst recession in 60 years has driven up defaults at the country’s banks, which have made loans worth €470 billion to finance activities related to construction and real estate. Loan defaults in Spain have more than tripled since the global financial crisis began in 2007, fuelling concerns that the Spanish banking sector will be the next big problem to hit Europe.

The Bank of Spain on May 22, 2010 was forced to take over the troubled CajaSur, a small regional savings bank crippled by property loan defaults. CajaSur, which is based in the southern Spanish city of Córdoba, has €13 billion in loans and holds 0.6 percent of the total assets in the Spanish financial system. The Bank of Spain provided CajaSur with €500 million in funding to keep it solvent, but the rescue of the bank could end up costing up to €2.7 billion.

CajaSur is the second bank to fail in Spain since the start of the global financial crisis. The Bank of Spain on March 29, 2009 was forced to rescue Caja Castilla-La Mancha with as much as €9 billion to shore up the lender’s finances and to protect depositors.

Spain’s extensive network of 45 cajas de ahorros (quasi public savings banks), has been hit hard by the collapse of the country’s once-robust housing market. The cajas make roughly half of all loans in Spain, and nearly half of the €3 trillion in assets held by cajas are mortgages or other real estate loans. More than 7 percent of their loans could go bad this year, compared with 5.1 percent in 2009, according to the Spanish Confederation of Savings Banks.

The Bank of Spain is now promoting a series of mergers and co-operation agreements to restructure the country’s financial sector. On May 24, four other cajas announced plans to merge. The combination of Caja Mediterraneo, Grupo Cajastur, Caja Extremadura and Caja Cantabria will create Spain’s fifth-largest lender, with more than €135 billion in assets. The new entity will likely take advantage of funds that are available from a government program called Fondo de Reestructuración Ordenada Bancaria (FROB), which has been set up by the Spanish government to support and reorganize struggling savings banks in the country.

But the problems in Spain’s banking sector extend beyond the cajas. In May 2010, BBVA, Spain’s second biggest bank, was squeezed out of the US commercial paper market as a source for funding because of punitive interest rates.

Meanwhile, speculation is rife that Spanish banks are hiding their losses. In a report titled Spain: The Hole in Europe’s Balance Sheet, London-based Variant Perception writes: “The value of outstanding loans to Spanish developers has gone from just €33.5 billion in 2000 to €318 billion in 2008, a rise of 850 percent in 8 years. Adding in construction sector debts, the overall value of outstanding loans to developers and construction companies rises to €470 billion, or nearly 50 percent of Spanish GDP. Most of these loans will go bad.”

Standard & Poor’s on March 15 downgraded its risk assessment level for Spain’s banking sector, warning of “high credit losses” during the country’s recession. “We believe that Spanish financial institutions are likely to operate in a difficult economic environment over a prolonged period,” it said in a statement. “Spain’s financial system is likely to suffer high credit losses during the recession, owing to the corporate sector’s high indebtedness, rapid credit expansion, and financial institutions’ meaningful exposure to the real estate sector.

On May 26, the Bank of Spain initiated a consultation process to force banks to recognize provisions due for past loans faster, and take bigger provisions on real-estate assets they acquire or foreclose on. If implemented, these changes in regulation imply that the Bank of Spain is getting serious about cracking down on non performing loans.

5. Austerity Measures

The Spanish government has come under intense pressure from other EU countries to reduce spending to avoid being dragged deeper into the Greek crisis. The IMF has also warned Spain to enact urgent labour and bank reforms. And as concerns over Europe’s sovereign debt crisis spread to markets in the United States, US President Barack Obama on May 11 called Zapatero and urged him to take “resolute action.”

Bowing to the pressure, the Zapatero government has announced a series of austerity measures designed to help bring its massive public budget deficit down to 3 percent of GDP by 2013, from 11.4 percent currently. The government says the spending cuts, nicknamed the “scissors action” by Spanish media, would cut the budget deficit to 9.8 percent of GDP in 2010, 5.3 percent of GDP by 2012, and eventually fall in line with EU limits of 3 percent by 2013.

On January 29, the Zapatero government said it would cut spending by almost €50 billion over three years. The hastily introduced measures include an increase in Value Added Tax of two percentage points, a gradual increase in the minimum retirement age by two years, to 67 (beginning in 2013), and a near total freeze on hiring new civil servants. The budgets of most government departments are also to be cut.

On May 27, the Spanish Parliament narrowly approved an additional €15 billion in spending cuts over two years. This austerity package aims to freeze pensions and cut the wages of civil servants. According to government estimates, total spending cuts for public employees should amount to a reduction equivalent to 0.3 percent of GDP through 2013, taking into account reduction measures such as hiring freezes.

More specifically, Zapatero will cut public wages by 5 percent in 2010, freeze them in 2011, suspend a pension rise promised during the last election, scrap a €2,500 subsidy for new parents, trim foreign aid assistance, and let public investments fall by €6 billion in 2011. In addition, the cabinet members themselves will see their wages cut by 15 percent to achieve a 6 percent deficit by 2011, down from 11.2 percent in 2009.

In an April 2010 interview with the London-based Financial Times, Zapatero said he will implement the economic austerity measures to cut the budget deficit “whatever the cost”, and will introduce even harsher measures if necessary. “We have a plan, a credible, quantified plan which we have already begun to implement, a plan to reduce the public deficit,” he added.

Such cuts represent a sharp reversal of Spanish government policy, which was previously focused on emergency spending in an ultimately unsuccessful effort to slow the rise of unemployment and stave off depression. In November 2008, the government launched an €11 billion stimulus plan intended to boost the weakening economy and create 300,000 jobs. In October 2009, the government approved an additional €5 billion for public works programs in a new bid to stimulate the recession-hit economy.

Although Zapatero’s spending cuts have been greeted with approval from abroad, Spanish labor unions, a core source of his Socialist Party’s strength, are now calling for nationwide strikes. In a climate of rising social tension, it remains unclear whether the Zapatero government will risk its own survival by actually following through with its pledges to cut government spending.

6. Labor Unions

Spanish labor unions, traditional allies of the Socialist government, are opposed to most of Zapatero’s budget cuts. Union leaders are warning that if the government implements labor reforms without union approval, they will call for a general strike that could paralyze the country and cause further turmoil on global markets.

The Spanish union UGT says the government measures mark a “change in relations with the unions,” a “rupture in the government’s political discourse,” and will result in protests. The CCOO union has also criticized the government’s measures as “unjust” and says the government “is leading the country to disaster.”

On May 21, thousands of public sector workers took to the streets of Spain to protest the government’s austerity plan. Waving flags of the country’s major labor unions, workers demonstrated outside the finance ministry in Madrid, blocking one of the main roads in the center of the capital. Similar protests took place in front of public buildings in other parts of the country.

The UGT and CCOO called a general strike of public service workers on June 8 to protest the austerity cuts. The protests mark the first mass street demonstrations against the Zapatero government organised by trade unions since it came to power in 2004.

Nevertheless, it remains unclear what impact a general strike would have outside the public sector. Only 16 percent of Spanish workers as a whole are represented by a union. According to an opinion poll commissioned by La Sexta television, 47.9 percent of respondents say the unions are justified in calling a general strike. However, exactly the same number those polled, 47.9 percent, say a general strike is inappropriate. More than 80 percent of those polled believe the government will have to make further budget cuts to fight the economic crisis.

Apart from the austerity package, the Zapatero government is also in three-way negotiations with business leaders and unions on a reform of the country’s rigid labor laws. Economists say cutting the cost of hiring and firing is vital if Spain is to regain competitiveness lost during years of relatively high inflation and achieve sustainable growth. Debt markets fear that without labor reform, unemployment, already at 20 percent, will stay high, pushing the government down the path of fiscal unsustainability.

7. Loss of Confidence in Government

Zapatero was re-elected in 2008 on pledges of higher pensions, better welfare and full employment. By implementing highly unpopular austerity measures, which will infuriate his party’s traditional allies among the Spanish labor unions, and lead to massive public protests, Zapatero may be signing his own political death sentence.

Underscoring just how much political authority Zapatero has already lost, the Spanish parliament on May 27 passed a €15 billion austerity package with a one-vote majority, narrowly averting a government collapse. The vote received 169 in favor, 168 against and 13 abstentions. The Socialist government’s 169 seats do not give it an absolutely majority in Spain’s 350-seat lower house, so it relies on support or abstentions from opposition parties to pass measures.

The austerity bill passed after the regional Catalan party, Convergence and Union (CiU), abstained from the vote. CiU said it was opposed to the bill, but did not vote against it for fear of unleashing a Greek-style crisis. However, in a sign of trouble ahead for Zapatero, the CiU said it would not support the 2011 budget bill. Moreover, CiU leader Josep Duran i Lleida told parliament that Zapatero should call early elections for next year, saying the “Zapatero era has come to a close.”

Without an absolute majority in parliament or support from either the PP or the CiU, Zapatero’s only way to avoid a vote of no confidence will be win backing from small parties such as the Basque Nationalist Party (PNV) to pass the budget. But the PNV voted against Zapatero’s austerity plans on May 27. Securing the PNV’s political support will only come at a high cost.

Zapatero says his “responsibility is to think of the future of my country, rather than any political or personal future.” In an apparent bid to shore up public support, Zapatero also says he plans new tax hikes for the rich. He said he expects “an extra effort from those who have the most.” But populism will not be enough to for Zapatero to save his job.

In fact, new opinion polls show Zapatero far behind the opposition. They also show that many voters believe he will have to call early elections as support for a 2011 austerity budget will be hard to muster.

An opinion poll published by El Mundo on May 30 showed that if elections were held today, the conservative opposition Popular Party would take 45.6 percent of the vote, 10.5 percentage points ahead of Zapatero’s Socialists. The same poll shows that half of Spaniards expect general elections to be brought forward from 2012.

Another poll published by El Periódico de Catalunya said the conservative opposition Popular Party would win up to 42 more seats than the Socialists in the 350 member parliament, just short of an overall majority, if elections were held now.

But the opposition remains highly fractured and it remains to be seen whether it will be able to topple Zapatero’s minority government. A major test will be the negotiations over the 2011 austerity budget, which will begin in July. If Zapatero is unable to garner sufficient political support to get the budget through parliament, it is unlikely that he will serve out his full term.

8. Conclusion

Spain’s debt-laden Socialist government is caught in a Catch-22 situation in which it has failed to satisfy conflicting demands to cut its budget and stimulate job creation and economic growth. If the government cuts public spending to the level needed to reduce the deficit, it will drag down economic growth and make it more difficult for Spain to emerge from recession and reduce unemployment. But if the government fails to cut spending, the chances increase that Spain will default on its debts.

Either way, the Zapatero government is facing not only an economic crisis, but also a political crisis. By giving in to pressure from the rest of Europe to reduce public spending, Zapatero’s popularity has plunged amid calls for a general strike.

Zapatero’s most immediate political challenge will be to pass the 2011 austerity budget. Without an absolute majority in parliament, Zapatero’s only way to avoid a vote of no confidence will be to win backing from small parties that have already voted against his austerity plans. If Zapatero fails to secure their support, chances are slim that his government will survive beyond autumn.

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

With the British general election set for May 6, the campaign is now racing in full gear. In recent days, the three front runners – Labour’s Gordon Brown, Conservative David Cameron and Liberal Nick Clegg – have all published their policy manifestos, and for the first time in British history, have participated in a live television debate.

But opinion polls show there still is no outright winner. Most polls have the Conservatives in a small but narrowing lead over Labour, and some surveys are showing a post-debate surge for the Liberals. If current polls are to be believed, there is a good chance that no one party will win a governing majority, an outcome that would pave the way for a coalition government.

In any case, the troubled British economy is the dominant issue in this campaign, and there is very little substantive difference among the three candidates over how to fix it. All three agree that drastic cuts in public spending are needed to draw down a colossal national debt and a bulging budget deficit. The only real difference of opinion revolves around timing: Cameron wants to reduce spending now, but Brown and Clegg say immediate cuts would endanger Britain’s fragile economic recovery.

Although neither candidate has spelled out exactly where the budget axe will fall, military spending will almost certainly take a hit in coming years, regardless of who leads the next government. In fact, all three candidates say the status quo on military spending is unsustainable, and all are calling for a post-election strategic defense review (SDR), one that will sketch out what sort of armed forces Britain can afford in the medium to long-term.

The Royal United Services Institute (RUSI), a British military think tank, has produced one of the most comprehensive estimates of what the military budget might be like during the period covered by the SDR. In a report titled “Preparing for the Lean Years,” RUSI says defense spending in Britain could be slashed by up to 15 percent in real terms during 2010-2016 as the next government enacts austerity measures to tackle massive public debt. RUSI says cuts on this scale could produce significant reductions not only in manpower but also in the acquisition of new weapons systems; they could also affect ongoing operations abroad, such as in Afghanistan.

The House of Commons Public Accounts Committee says the British Ministry of Defense faces a funding shortfall that runs from £36 billion to as high as £80 billion over the coming decade. The report warns that the defense budget is “fundamentally unaffordable.” Matters have become so bad, it says, that the Defense Ministry “will have to take difficult decisions, such as to cancel whole equipment programmes.”

The Labour Party has been questioning whether Britain can afford to retain its full military capabilities. A controversial government green paper titled “Adaptability and Partnership: Issues for the Strategic Defence Review,” says Britain cannot afford to pursue all its current defense activities while supporting operations in Afghanistan and elsewhere and investing in new systems. In a major shift from previous policy, the paper says Britain could offset retrenchment by increasing its dependence on military alliances, especially with France and the European Union.

The Institute for Public Policy Research, a think tank with strong ties to the Labour Party, says the government could save billions by restructuring the British military to focus on specialist capabilities as part of a greater commitment to European defense integration. The IPPR also says Britain should reconsider plans to replace the existing Trident nuclear deterrent, which goes out of service in the 2020s; and it recommends reviewing whether major projects like the Future Aircraft Carrier, the Joint Strike Fighter and the Astute nuclear attack submarine are needed.

The Conservative Party says Britain must retain the capability to act unilaterally and not just as part of an alliance. In a speech outlining Conservative Party plans for the SDR, Liam Fox, the shadow defense secretary, said: “We have unique national interests and have to maintain the capability to act unilaterally if required.”

But Fox has avoided making commitments on defense spending levels, and says the next government will inherit a grim economic situation from which “defense cannot be immune.” Fox also says the SDR will be carried out “ruthlessly and without sentiment. Tough decisions will be made and there will be winners and losers at the end of the process. … Make no mistake; we need a step change not tinkering.”

George Osborne, the Tory Shadow Chancellor of the Exchequer, has said that three of Britain’s biggest defense projects with a combined value of nearly £30 billion could face the axe if the Conservatives win the election. He cited the £20 billion Eurofighter-Typhoon project, the £4 billion project to build two aircraft carriers and the £3 billion order for 25 A400 transport aircraft as areas ripe for cuts.

For his part, Clegg says the Trident nuclear deterrent should be scrapped, saying it is too expensive and no longer meets Britain’s defense needs. Replacing the Trident would cost an estimated £20 billion. Clegg also rejects the idea that Britain’s diplomatic status as a world power on the UN Security Council would be undermined if it was no longer a nuclear-weapon state. “That is nostalgic, sepia-tinted phooey. The Security Council is a complete anachronism. It does not reflect at all the changed world we live in.”

Meanwhile, with the election less than a month away, Brown is pledging billions in extra defense spending in what the Tories say is a last-minute effort fend off accusations that he has failed to properly equip British troops in Iraq and Afghanistan.

In recent weeks, Brown has promised to proceed with the construction of two 65,000-tonne aircraft carriers at a cost of £5 billion, and to build two more Astute-class nuclear submarines at a cost of £2 billion. He has also announced contracts for armoured fighting vehicles and other equipment totalling more than £2.5 billion.

The contract awards have been sharply criticized by the Conservatives and Fox has compared them to a “bankrupt shopaholic on one last spending binge before jail.” He has pledged to re-examine many of the deals if the Tories win the election.

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

Originally published by the Center for Defense Studies at the American Enterprise Institute

1. Introduction

The future direction of European defense is at a crossroads. On the one hand, the NATO experience in Afghanistan has cast into stark relief the limits of European military capacities, not only at the operational but also at the political levels. On the other hand, the recently enacted Lisbon Treaty offers important new opportunities to improve European defense capabilities, especially at the institutional level. If the European Union is to establish itself as a credible security actor on the global stage, European governments will need to improve the way they work together on defense. But the biggest obstacle they face is overcoming the persistent lack of political will to do so.

2. Afghanistan Highlights European Shortcomings on Defense

In a recent speech about the future of the transatlantic alliance, US Secretary of Defense Robert Gates told an audience filled with military officers from NATO’s 28 member countries: “The demilitarization of Europe — where large swaths of the general public and political class are averse to military force and the risks that go with it — has gone from a blessing in the 20th century to an impediment to achieving real security and lasting peace in the 21st century.”

The unusual public criticism of Europe by a senior American official came just a few weeks after the White House announced, by way of an American newspaper, that US President Barack Obama will not be attending the United States-European Union summit meeting scheduled for Madrid in May.

Many Europeans interpreted Obama’s decision as an insult and were angry and embarrassed by the news. But perceptive Europeans say the Obama administration was signalling its frustration with the unwillingness or inability of European leaders to commit more resources to help the United States solve global security problems, especially in Afghanistan.

With only a very few exceptions, NATO’s European members have under-resourced the UN-mandated International Security Assistance Force (ISAF) in Afghanistan from the very start by providing too few troops with too many restrictions on their deployments. While the United States has nearly 100,000 troops in Afghanistan, the biggest European Continental powers — France, Germany, Italy and Spain — together have just 12,000.

In terms of troop losses, the United States has lost more than 1,000 servicemen and servicewomen in Afghanistan. The United Kingdom has lost 265, which is more than the rest of Europe combined. Many analysts say the disparity is due to the fact that most European troops deployed to Afghanistan are not allowed to fight.

Indeed, the United States might not be asking for more European troops in Afghanistan if the ones already there were not hamstrung by operational restrictions on combat, known as caveats, imposed by their governments or parliaments. At one point, NATO forces in Afghanistan were weighed down by 83 such caveats against fighting. As of late, that number has been reduced slightly to 70.

Some European governments prohibit their troops from operating at night. Others forbid them from operating outside of certain regions or districts. Still others allow their troops to fire only when fired upon. German troops, for example, are restricted to conducting operations in northern Afghanistan before nightfall and never more than two hours away from a hospital. Troops from some southern European countries are barred from fighting in the snow. Only Britain, Denmark, Poland and the Netherlands have been on the front line of combat with their troops operating without any caveats or restrictions.

The proliferation of European caveats has prompted some US soldiers to bitterly joke that ISAF stands for “I Saw Americans Fighting” or “I Stop at Five.” Others say that military forces that cannot be sent into combat are not really military forces at all.

Europe has also been criticized for failing to meet its commitments in soft power specialties, such as training and development, in Afghanistan. For example, in 2007 the EU agreed to take over police training from Germany, after the bloc had come under pressure from NATO to play a greater role in building up Afghan security forces. But three years later, the EU’s police training mission in Afghanistan remains understaffed and underfunded, and lacks adequate security and transportation. Moreover, EU member states prohibit most of their staff from leaving Kabul, the Afghan capital.

In February, the Netherlands became the first NATO ally to announce that it is abandoning the fight in Afghanistan, following the collapse of the center-right government over its involvement in the US-led war against the Taliban. The decision by the Dutch to pull their nearly 2,000 troops out of Afghanistan may provide cover for wavering politicians elsewhere. Canada, for example, is expected to begin withdrawing its 3,000 troops from Afghanistan in 2011. And polls show that the Afghanistan war has grown increasingly unpopular in nearly every European country.

3. A Post-European World?

Up until January 2009, the conventional wisdom was that Europe was not stepping up to the plate in defense-related matters because its leaders did not like George W Bush. However, President Barack Obama, who is far more popular in Europe than was his predecessor, is fighting the same uphill battle to persuade European allies to increase their troop commitments. The problem, however, extends far beyond Afghanistan.

The 27 member states of the European Union collectively spend around $200 billion annually on defence. By comparison, the US defense budget for 2010 rose to $533.8 billion, with additional spending on “overseas contingency operations” bringing the sum to $663.8 billion.

EU member states collectively allocate less than 1.7 percent of their gross national product on defense, far less than the world average, which falls at 2.4 percent of GDP. The United States spends 4.5 percent of its GDP on defense.

EU member states have close to 2 million personnel in their armed forces, but the EU can barely deploy and sustain 100,000 soldiers abroad. Over 70 percent of European land forces are unusable outside national territory because they have not been modernized since the end of the Cold War.

There are many different ways of explaining the erosion of European military capability in recent decades. Some scholars say the low priority Europeans place on defense spending reflects Europe’s reluctance to use military force, which in turn reflects Europe’s strong aversion to risk. Indeed, the EU and its institutions are often characterized by pacifism and the search for cooperative alternatives to war. Moreover, the EU’s security and defense ambitions are anchored in soft power such as diplomacy, development aid and civilian missions. In recent years, the EU has worked tirelessly to present its soft power model as the preferred alternative to the US hard power model, which relies on military force – or the threat of it – to secure national interests.

It remains unclear whether other emerging powers share the EU’s commitment to soft power. But recent trends in defense spending do show that Brazil, China, India and Russia all share the US commitment to military hard power. Unlike Europe, these countries are building up their militaries at a rapid clip, which implies that over the long term the EU’s neglect of military hard power threatens to condemn it to second-class status in any future multipolar international system.

The erosion of European military power, and the growing capability and interoperability gaps between the US military and its European counterparts, also threatens European ambitions to become a more useful partner for the United States. The United States is already cultivating new partners among emerging powers in Asia, for example, that are pro-American and more willing than the Europeans to deploy troops abroad.

The decision by Obama to skip the upcoming EU-US Summit in Madrid has only added to fears that Europe risks becoming “irrelevant” among the people who influence and make American foreign policy.

4. NATO’s New Strategic Concept

The dilemma for Europe is that as long as it refuses to be a military power, it will not be able to guarantee its own security. And that means Europe will continue to rely on NATO and especially the United States to provide that guarantee.

In that vein, US Secretary of State Hillary Clinton recently underscored the Obama administration’s commitment to European security and to the transatlantic alliance. Speaking at the École Militaire in Paris, she said: “European security remains an anchor of US foreign and security policy. A strong Europe is critical to our security and our prosperity. Much of what we hope to accomplish globally depends on working together with Europe.”

She also said that NATO must transform itself in an era when its scope has expanded beyond traditional Cold War boundaries, and when the alliance faces a transformed strategic landscape with new enemies, ideologies and battle tactics that threaten its collective security.

In a separate speech outlining American priorities for NATO’s New Strategic Concept, a strategy document that will guide the alliance in coming years, Clinton said NATO must shift from a defensive alliance aimed at countering the Soviet Union to a forward-deployed multilateral force carrying out counterinsurgency operations in places like Afghanistan.

European leaders are likely to be wary of any Strategic Concept that expands NATO’s out-of-theatre role. But the Obama administration has signalled its willingness to meet European leaders half way in an effort to reach agreement on the Alliance’s underlying transatlantic strategic consensus.

In a change from previous policy, Clinton also said that the NATO alliance should work closely with the European Union on security issues. Clinton stated: “I know that in the past, the United States has been ambivalent about whether NATO should engage in security cooperation with the EU. Well, that time is over. We do not see the EU as a competitor of NATO, but we see a strong Europe as an essential partner with NATO and with the United States.”

5. Lisbon Treaty and European Defense

American policymakers have long been sceptical about the EU’s current Common Security and Defense Policy (CSDP) and its predecessors, fearing that the EU might end up competing with NATO for resources and manpower. Indeed, as NATO was drafting its current Strategic Concept in 1998, for example, then-US Secretary of State Madeleine Albright said the EU’s relationship to NATO should be guided by “the three ‘D’s’ — which is no diminution of NATO, no discrimination and no duplication — because I think that we don’t need any of those three ‘D’s’ to happen. On the other hand, I think it’s very important for the Europeans to carry a fair share and have a sense of their own defense identity.”

Perhaps no issue has a greater potential for generating transatlantic conflict than the question of the future militarization of the EU. Although supporters of the Lisbon Treaty have long denied that the document will lead to the creation of a European army, Article 28 of the treaty clearly establishes the legal basis to do so.

This was acknowledged in an op-ed article by the EU’s former foreign policy chief, Javier Solana, who wrote: “Our capacity to deploy rapid reaction forces also needs strengthening. In the second decade of ESDP, the Lisbon Treaty will put all this within the EU’s grasp.”

The all-important question, then, is how will further European integration in the military realm impact NATO? More specifically, will ESDP be set up to compete with or to complement the alliance?

Article 27 of the Lisbon Treaty does stipulate that for “those States which are members of it,” NATO will remain “the foundation of their collective defense and the forum for its implementation.” But Article 28 A (7) duplicates NATO’s Article 5 commitment, which states that an attack against one member constitutes an attack against all members, by establishing an EU mutual defense clause. Elsewhere, Article 19 of the Treaty restricts the ability of individual EU member states to operate on the international stage on an independent basis.

It also remains unclear how the Lisbon Treaty will impact some of the structural problems facing European defense. Currently, three states — Britain, France and Germany — contribute almost two-thirds of all military spending within the EU, and the Lisbon Treaty does not address how that burden might be more equally shared.

In a sign that Britain, which has the biggest military in the EU, may be rethinking its long-standing resistance to European military integration, a recent Ministry of Defense discussion paper says that Britain cannot afford to pursue all of its current defense activities, its operations in Afghanistan and elsewhere, and invest in new systems all at the same time. In a shift from previous policy, the paper says greater defense cooperation, including with other European nations, could help make stretched budgets go further. A newfound British openness on European defense could change the political dynamics in Europe and ease the way for greater European defense cooperation.

6. European Defense: A Paper Tiger?

In any case, after decades of debate about European defense, the EU still has little to show for it. Indeed, with the CSDP (previously known as ESDP, but renamed CSDP by the Lisbon Treaty) marking its tenth anniversary, European defense has come nowhere near to meeting the high expectations set for it when it was conceived in 1999.

This is partly because EU member states have been unable to articulate a clear and coherent European strategic interest that is realistic in scope and enjoys the support of European public opinion. Moreover, the debate over the future of European defense has been hamstrung by national rivalries and mutual distrust, especially between Britain, France and Germany, the three biggest military powers in Europe.

Since 2003, the EU has successfully organized 22 crisis-management missions to far flung places such as Chad and Somalia, but only six of these missions have been military operations.

The EU’s anti-piracy mission off the Horn of Africa (EUNAVFOR), also known as Operation Atalanta, has achieved some early successes in warding off pirate attacks along the East African coast. But the operation, which was established in 2008 and is scheduled to run until the end of 2010, is less than half as big as the US-led Combined Task Force 151, which is being coordinated by the US Fifth Fleet. Meanwhile, the European-led United Nations Interim Force in Lebanon (UNIFIL), whose mandate is to enforce an arms embargo in southern Lebanon, has been criticized not only for allowing Hezbollah to rebuild its arsenal, but also for having Hezbollah militants “escort” UNIFIL patrols.

In any case, the EU has not yet carried out a military operation on anything like the scale of the NATO operation in Afghanistan, and CSDP cannot be seen as conferring on Europe anything like the superpower status so many European strategists crave.

With CSDP, as with NATO, Europe suffers from two essential weaknesses: a persistent lack of deployable hard-power defence capability, notably strategic airlift and sealift, and a debilitating lack of unity of purpose. For example, the EU is not even close to establishing the 60,000-strong Rapid Reaction Force that has been a “Headline Goal” for nearly a decade. The EU currently is having a hard time deploying even one battlegroup of 1,500 troops, to be drawn from the same troops currently committed to NATO.

EU defense cooperation has not fared much better. Europe’s two biggest common defense projects, the A400M military cargo plane and the Eurofighter Typhoon, have been riddled with technical problems, cost overruns and disputes between the European partners. The long-term viability of both projects is in serious doubt. Meanwhile, the European Defense Agency, which was created in 2004 to improve European defense capabilities, remains understaffed.

Britain, France and Germany have also been at odds over French proposals create the EU’s first permanent operational headquarters in Brussels for planning military missions abroad. Britain and Germany have resisted the idea, seeing it as a French ploy to undermine NATO.

7. Conclusion

The 2008 French White Paper on Defense and Security states: “The European ambition stands as a priority. Making the European Union a major player in crisis management and international security is one of the central tenets of our security policy. France wants Europe to be equipped with the corresponding military and civilian capability.”

But in these times of severe economic downturn and rapidly shrinking defense budgets, CSDP is unlikely to emerge as a serious competitor to NATO anytime soon. In the meantime, NATO, despite its many shortcomings, will continue to be indispensible for European and transatlantic security.

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

Originally published by World Politics Review on May 9, 2010

1. Introduction

Spain has responsibility for the six-month rotating presidency of the 27-member European Union from January through June 2010. The government of Spanish Prime Minister José Luis Rodríguez Zapatero has identified a number of key policy areas on which it plans to focus during its half-year at the helm of the EU.

Specifically, the Spanish EU presidency hopes to pursue four key priorities: 1) shepherding the bloc’s tentative economic recovery; 2) boosting the bloc’s international influence; 3) expanding the rights and freedoms of European citizens; and 4) overseeing implementation of the recently passed Lisbon Treaty.

At the same time, the Spanish EU presidency will be hamstrung by two important factors: 1) a severe economic crisis in Spain that has undermined the credibility of the Zapatero government, not only at home, but also across the EU; and 2) the entering into force of the Lisbon Treaty, which establishes a permanent EU president and foreign minister, and thus reduces the traditional role of the rotating presidency.

The following analysis explains the domestic political and economic context facing the Zapatero government during Spain’s EU presidency. It then examines in greater detail several of the Zapatero government’s stated priorities for Spain’s EU presidency, and then closes with an assessment of what Spain may realistically expect to accomplish before it hands the EU presidency over to Belgium on July 1, 2010.

2. Spain’s EU Presidency: Domestic Political and Economic Context

As Spain takes over the reigns of the EU presidency, the country is in the midst its worst economic downturn since it joined the European Union in 1986. The crisis, which has been accompanied by record-high unemployment rates in which more than 4.3 million Spaniards are without work, has seriously undermined domestic support for Zapatero, whose approval ratings are at an all-time low.

Zapatero and his advisors are hoping that Spain’s EU presidency will draw voter attention away from the domestic economy as the prime minister is seen attending to foreign policy matters. They also hope Zapatero will be able to raise his profile abroad, as he takes the media spotlight while focusing on the international diplomacy associated with the EU presidency. Spain’s economic crisis has reached such a critical level, however, that Zapatero is unlikely to enjoy much credibility, either at home or abroad, unless and/or until the domestic economy improves markedly.

Spain, which is Europe’s fifth-largest economy, faces a host of daunting economic problems. It plunged into a recession at the end of 2008, from which it has failed to recover. Spain’s economy has been especially vulnerable to the global credit crunch because growth relied heavily on credit-fuelled domestic demand and a property boom boosted by easy access to loans that has collapsed.

The country’s jobless rate soared to almost 19 percent in the fourth quarter of 2009; the unemployment rate has doubled in just the past two years. The official rate of 18.83 percent is one of the highest in the EU, and far above the average of 10 percent for the 16 countries that share the eurozone.

A total of 4.326 million people were out of work in Spain at the end of December 2009, up 1.12 million from a year ago, according to the National Statistics Institute.[1] A total of 1.22 million households now have all their working-age members out of work. The government says that the jobless rate could exceed 20 percent during 2010. (In Spain, the unemployment rate for young people exceeds 40 percent.)

The Spanish economy contracted 0.3 percent in the third quarter 2009, its fifth straight quarterly decline, even as the entire eurozone officially joined the US and Japan in emerging from recession during the same period. The International Monetary Fund says Spain’s economy will continue to contract (by 0.6 percent) throughout 2010.[2]

On January 30, 2010 the Zapatero government admitted that the budget deficit for 2009 would be larger than expected (€71.5 billion — five times the 2008 figure) and it unveiled a hastily produced plan to narrow its deficits by €50 billion over the next four years. Finance Minister Elena Salgado said the aim was to cut the deficit from a higher-than-predicted 11.4 percent of gross domestic product in 2009 to 3 percent in 2013, in line with Spain’s promises to meet European Union budget rules.

As recently as 2007, the Spanish budget was in surplus by 1.9 percent of GDP, but the global economic crisis and €8 billion in emergency state spending measures to save jobs have led to one of the most pronounced reversals in history.

Salgado said that nearly a third of the 8.4 percentage points of deficit reduction required by 2013 would come from a cyclical return to economic growth and the withdrawal of temporary fiscal stimulus measures. Of the remainder, 1.1 percentage points will be derived from higher taxes and a drive against tax evaders, and only 4.1 percentage points from reduced spending, including a near-freeze on hiring for the civil service this year.

Even after the announcement, however, doubts remain about Spain’s ability to control its budget spending, especially since one fifth of the proposed adjustment is expected to come from the autonomous regions and local authorities that account for more than half of spending. The central government, furthermore, specifically ruled out cuts in social security payments, education spending, research and development or foreign aid.

Compounding Spain’s near- to mid-term economic problems, the country is facing a long-term demographic crisis, marked by a rapidly aging population. The Zapatero government recently announced plans to raise the retirement age from 65 to 67.[3] The new retirement age would be introduced in phases beginning in 2013, and would become fully effective in 2025.

Government demographers forecast that the number of Spaniards over the age of 64 will double over the next 40 years, constituting nearly 32 percent of the total population.[4] By 2049, there will be as many people aged 65 and over in Spain as there are people of working age.

Most European countries are debating how far to raise the minimum retirement age, to prevent pension costs exploding as the ranks of the retired swell compared to the working age population. But the problem is especially acute in Spain, which has one of the lowest birth rates in the world.

All of these factors have combined in recent months to put the Zapatero government on the defensive. Indeed, bad economic news has become a feature of daily life in Spain, and it has cast serious doubt on the Zapatero government’s credibility, especially in the area of economic crisis management.

3. Spain’s EU Presidency: Calls for Binding EU Economic Goals

Given the magnitude of Spain’s economic problems, the Spanish government is trying to shore up its credibility both at home and abroad. In this context, Spain has made the fight against unemployment one of the main planks of its EU presidency.

Just ahead of the formal inauguration of Spain’s EU presidency, Zapatero announced a new 10-year plan to promote economic growth in the EU.[5] Details of what is known as the 2020 Economic Strategy will be unveiled at an EU summit in Brussels on February 11.

Spain hopes the EU can agree on a replacement for the bloc’s long-term growth strategy known as the Lisbon Agenda, which was supposed to make Europe the world’s most competitive economy by 2010 but never achieved its aims as governments were under no obligation to conform.

With this in mind, Zapatero has proposed setting binding goals for all EU member states in order to improve the bloc’s competitiveness on the world economic stage. Zapatero said: “Our main aim is to introduce a qualitative leap in our economic union by means of new common policies. It is absolutely necessary for the 2020 Economic Strategy … to take on a new nature, a binding nature.”

Spain says the idea would be to reward countries with EU aid when they meet the binding targets, and to sanction those that do not. Indeed, Zapatero has called for penalties for non-compliance, in the form of cutbacks in EU subsidies for offending members.

This would imply that the EU would have the right to oversee national budgetary priorities, in addition to the existing Stability Pact which imposes limits on public deficits for eurozone members.

Zapatero says that “a certain number of countries back greater economic unity, France for example.” Indeed, Paris has for some years has pushed for an “economic government,” at least within those nations that share the euro single currency, despite resistance from Germany which sees it as a threat to the independence of the European Central Bank on interest rates.

Herman Van Rompuy, the EU’s new permanent president, has given tacit support to Zapatero’s ideas after warning that much of Western Europe faces the prospect of “de-industrialisation” coming out of the recession.[6] He has argued that a series of recent events would be seen as game changers, spurring the EU to converge in order to compete. Van Rompuy has said that the “European way of life” was imperilled by the prospect of protracted low structural growth, while the financial crisis and recession as well as the failure of Copenhagen climate talks had shown how the balance of global power was tilting away from Europe which had been put on the defensive.

However, the compulsory nature of Spain’s plan risks antagonising Britain and other countries with more liberal economies, which fear a loss of sovereignty on economic issues. Germany has also reacted coolly to the idea of binding economic goals because it fears political interference in the operations of the European Central Bank.

Indeed, far from increasing Spain’s international credibility, Zapatero’s aggressive proposals have unleashed a wave of incredulity. Commentators across Europe have asked how a country facing an ongoing recession — its worst in 60 years — can be trusted to manage economic recovery of the EU.

In London, the Economist magazine published a scathing column that declared, “Spain now leads the European Union, but not by example. . . . If you want your advice to be heeded, you need something credible to say.”[7]

Also in London, the Financial Times ran a story titled, “A Stumbling Spain Must Guide Europe,” which described a cyberattack by computer hackers against the Web site of Spain’s EU presidency.[8] “On its first day, Web-surfers navigating to the special presidency Web site found themselves staring at photos of Mr. Bean, the hapless British comedy character who (some claim) bears a resemblance to José Luis Rodríguez Zapatero, the Spanish prime minister. Mr. Bean is famous for his stumbles and mishaps — and Spain is also looking accident-prone at the moment.”

Elsewhere in Europe, editorials in France, Germany, Italy and the Netherlands have likewise mocked the idea of Zapatero advising Europe on economic recovery. The negative reaction to Zapatero’s proposals implies that they have almost no chance of being approved in the coming months without being considerably watered down.

4. Spain’s EU Presidency: Middle East

Spain says it will pay special attention to the Middle East and the Islamic world during its EU presidency. Indeed, the Zapatero government can be expected to focus on several key themes: 1) The Union for the Mediterranean; 2) Turkey; and 3) the Arab-Israeli conflict. But as with its economic proposals, the Zapatero government’s plans for the Middle East will also run into resistance from other EU member states.

The least controversial proposals involve the Euro-Mediterranean Partnership, formerly known as the Barcelona Process, which was re-launched in 2008 as the Union for the Mediterranean at the Paris Summit for the Mediterranean.[9] The Partnership now includes all 27 member states of the European Union, along with 16 partners across the Southern Mediterranean and the Middle East.

Spanish Foreign Minister Miguel Ángel Moratinos recently said the nascent Mediterranean Union would soon be naming its first secretary general, who will be from an Arab country. He said an announcement would come ahead of the second planned Mediterranean Union summit, which is scheduled for Barcelona in June as part of Spain’s six-month EU presidency.

Far more controversially, however, Spain has also strongly advocated Turkey’s entry into the European Union.[10] “Turkey is part of the European family of nations. It’s better to have it inside the EU than to leave it standing before the door,” Moratinos said.

Moratinos endorsed Turkish accession on strategic grounds. “Turkish diplomacy is very well connected in the Middle East and Central Asia where it is taking on an important mediating role. Turkey is also an important partner in the dialogue of civilisations between East and West,” he said. “This is our challenge in dealing with the Islamic world: We must show that interfaces exist between Muslim societies and between universal values, which are represented by the EU, that co-existence and consensus are possible.”

Spain has promised to try and open four more negotiating chapters in Turkish-EU accession talks during its six-month EU presidency. The talks began in 2005 but just 12 out of 35 chapters have been opened so far due, in part, to opposition by EU member Cyprus, which is locked in conflict with Turkey over the northern part of the island.

But Spain’s proposal is sure to meet opposition from other EU member states. Germany and Austria, for example, are two of the EU countries that are most staunchly opposed to Turkish accession. Meanwhile, a new survey of opinion[11] in five EU countries by the Bogazici University in Istanbul and the Granada University and Autonomous University of Madrid in Spain shows that 64 percent of people in France and 62 percent of Germans would say ‘No’ to Turkey if a referendum was held.

Moratinos has also said that Madrid sees the foundation of a Palestinian state alongside Israel as one of its main priorities under its six-month leadership of the EU.[12] “My idea, and my dream, and my engagement, is to work for having in 2010, finally, a Palestinian state that could live in peace and security with Israel. We are all in the international community defending the two-state solution. Why should we wait for a Palestinian state? We have Israel as a state, we want its neighbour, the Palestinians, to have the same status,” he said.

The comments by Moratinos have been met with incredulity in other European capitals, not to mention Washington and Jerusalem.

Meanwhile, Spain assumed command of the European-led United Nations Interim Forces in Southern Lebanon (UNIFIL) from Italy on January 28.[13] In an official ceremony at UNIFIL Headquarters in Naqoura, southern Lebanon, Italy’s Major-General Claudio Graziano handed over command to Major-General Alberto Asarta Cuevas of Spain.

In November 2009, Israeli Defense Minister Ehud Barak cancelled a visit to Spain amid a dispute over the command of UNIFIL.[14] The visit was called off after reports surfaced that Israeli Prime Minister Benjamin Netanyahu had secretly asked Italian Prime Minister Silvio Berlusconi to keep Italy in command of the 13,000-strong force for six months longer than planned, instead of allowing Spain to take over.

But Spanish officials, who worried that a six-month delay in taking over the UNIFIL command would deprive Zapatero of an opportunity to help him raise his profile in the region, insisted on the timely transfer.

It remains unclear how Spain’s EU presidency will affect the EU’s relations with Israel. The Zapatero government (as well as the previous EU rotating presidency, which was held by Sweden) has often raised eyebrows over its consistently antagonistic attitude toward the Jewish state.

During the Swedish EU presidency (July 1, 2009 to December 31, 2009) the EU adopted a resolution that for the first time explicitly calls for Jerusalem to become the future capital of both a Palestinian state and Israel.[15] Backing away only slightly from a more controversial Swedish proposal to officially call for the division of Jerusalem, the EU declared: “If there is to be a genuine peace, a way must be found through negotiations to resolve the status of Jerusalem as the future capital of two states.”

The original proposal drafted by Swedish Foreign Minister Carl Bildt, a well-known pro-Palestinian activist, had called for the creation of a “State of Palestine with East Jerusalem as its capital.” That proposal had the backing of the Zapatero government. Israeli officials, angry over EU efforts to prejudge the outcome of issues reserved for permanent status negotiations, persuaded French diplomats to remove the offending text, as well as other references to a Palestinian state that would comprise “the West Bank, including East Jerusalem, and Gaza.”

Israel has always maintained that Jerusalem will remain its undivided capital, regardless of any future peace settlement with the Palestinians. This has been the declared policy of all Israeli governments, both left and right.

The EU statement, which came just days after Israeli Prime Minister Benjamin Netanyahu announced a 10-month freeze on construction in West Bank settlements, was viewed by many as a European attempt to pre-empt any possible resumption of Middle East peace talks by helping the Palestinians improve their negotiating position vis-à-vis Israel.

Although the 27-member EU has limited clout as a diplomatic player in the Arab-Israel conflict, the EU is the biggest donor of financial assistance to Palestinian Authority, which has been accused of diverting the money to promote terror against Israel. The EU statement could end up disincentivizing a new round of negotiations: the Palestinians may well be emboldened by the EU’s tacit acceptance of their key positions and be led to believe that if they hold out longer, the EU will support them on other core issues as well.

5. Spain’s EU Presidency: Latin America

Zapatero has said that the Spanish EU presidency will be characterised by being “a Euro-American presidency,” paying special attention to the relationships between the EU, Latin America and the Caribbean.[16]

The Zapatero government can be expected to give special attention to the EU’s relationship with Cuba. More specifically, Moratinos hopes to modify the EU’s 1996 common position on Cuba, which calls for conditioning normal relations with the EU on respect for human rights and progress towards democracy.

But previous efforts by the Zapatero government to de-link political dialogue with Cuba from the issue of human rights on the island have failed, due to resistance from other EU members — notably former communist countries like Poland and the Czech Republic, which insist that the EU should not fully normalize its ties with Cuba until civil and political freedoms are granted to all citizens.[17]

For his part, EU President Herman Van Rompuy says he has had “little time to think about Cuba” since taking office on January. 4.

6. Spain’s EU President: New Institutional Dynamics

In launching a series of controversial initiatives, the Zapatero government appears to be signalling its desire to play a leading role in European affairs during its six months at the helm. But the Lisbon reform treaty has created a new leadership dynamic, under which Belgium’s Herman Van Rompuy has become the EU’s first permanent president, and Britain’s Catherine Ashton has become the EU’s first permanent foreign minister.

As a result, Spain’s biggest challenge will be to navigate the EU’s new post-Lisbon institutional structure, which now bestows the EU with four titular presidents — Zapatero, Van Rompuy, José Manuel Barroso (the president of the European Commission), and Jerzy Buzek (the president of the European Parliament) — as well as two foreign ministers, Moratinos and Ashton.

Zapatero says that if anyone wants to “call Europe” they should still call Van Rompuy. But Van Rompuy says that in the EU “there is not one man or one woman who decides. We each have a role.”

The Lisbon Treaty was sold on the promise that it would streamline decision-making within the EU, and thus give Europe a bigger voice on the world stage. Spain’s EU presidency will be an early indication of whether it ends up doing exactly the opposite.

7. Conclusion

Spain’s six-month rotating presidency of the European Union, which began on January 1, 2010, is off to a bumpy start. With the Lisbon Treaty now in effect, the traditional role of the EU rotating presidency has been downgraded. Responsibility for many issues which were once the domain of the rotating presidency now falls to the newly named permanent EU president, Herman Van Rompuy, and EU foreign minister, Catherine Ashton — who together are supposed to comprise the new “public face” of the EU.

Nevertheless, Spanish Prime Minister José Luis Rodríguez Zapatero has announced a series of ambitious initiatives involving EU economic and foreign policy, many of which have been met with skepticism, if not ridicule, by Spain’s EU partners. In short, during a six-month period that will test how well the EU’s new institutional architecture works in practice, Spain’s leadership has been seriously questions and its role at the helm of the union is unclear.

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

[2] World Economic Outlook. International Monetary Fund. January 26, 2010.

[3] El Gobierno aprueba medidas para reducir el déficit público y propone la reforma de las pensiones. Palacio de la Moncloa. January 29, 2010

[4] Proyección de la Poblacion de España a Largo Plazo, 2009-2049. Instituto Nacional de Estadísticas. January 28, 2010

[5] Speech of Prime Minister José Luis Rodríguez Zapatero with President of the European Parliament, Palacio de El Pardo, Madrid, December 3, 2009

[6] Remarks by Herman Van Rompuy, Launch of the Spanish Presidency, Madrid, January 8, 2010

[7] Spain Leads the European Union, But Not By Example, The Economist, January 7, 2010

[8] A Stumbling Spain Must Guide Europe, Financial Times, January 5, 2010

[9] Joint Declaration of the Paris Summit for the Mediterranean, Paris, July 13, 2008

[10] “Die Türkei gehört zu Europa,” Interview with Miguel Ángel Moratinos, Die Welt, January 24, 2010

[11] European Perceptions of Turkey as a Future Member State: Results of an Opinion Poll in France, Germany, Poland, Spain and United Kingdom. Bogazici University, Granada University and Autonomous University of Madrid. January 24, 2010

[12] Spanish EU presidency wants Palestinian state in 2010. EU Observer. December 21, 2009

[13] UNIFIL Force Commander Transfer of Authority. UNIFIL, January 28, 2010

[14] Barak Cancels Spain Trip Amid UNIFIL Leadership Crisis. Haaretz. October 30, 2009

[15] Council Conclusions on the Middle East Peace Process. European Council, December 8, 2009

[16] Speech and subsequent colloquium by the President of the Government to present the goals of the Spanish Presidency of the European Union during an event organized by the Association of European Journalists. February 12, 2009

[17] European Parliament Resolution on Cuba, June 21, 2007

Nevertheless, Spanish Prime Minister José Luis Rodríguez Zapatero has announced a series of ambitious initiatives involving EU economic and foreign policy, many of which have been met with skepticism, if not ridicule, by Spain’s EU partners. In short, during a six-month period that will test how well the EU’s new institutional architecture works in practice, Spain’s role at the helm of the union is unclear and its leadership has been seriously questioned.

Zapatero announced several priorities for Spain’s EU presidency, the most ambitious of which involves drawing up a new 10-year plan, called the 2020 Economic Strategy, to boost growth and competiveness within the EU. The initiative, which the Spanish government plans to launch at an EU summit in Brussels on Feb. 11, is meant to be a follow-up to the failed Lisbon Agenda, a 10-year economic plan drafted in 2000 that attempted make the EU “the most competitive economy in the world and achieving full employment by 2010.”

The most controversial aspect of Zapatero’s 2020 strategy is the proposal to establish binding economic objectives for each of the 27 EU members, with sanctions and/or financial penalties levied on countries that refuse to cooperate.

Speaking ahead of the formal inauguration of Spain’s EU presidency, Zapatero said, “Our main aim is to introduce a qualitative leap in our economic union by means of new common policies. It is absolutely necessary for the 2020 Economic Strategy . . . to take on a new nature, a binding nature.”

Zapatero’s comments have raised alarm in Britain and other EU countries with more liberal economies, which are worried about the further loss of sovereignty on economic issues. But Zapatero’s supporters say his ideas are largely based on recent calls by French President Nicolas Sarkozy for the creation of an “economic government” for the Eurozone countries that share the common currency.

In any case, Zapatero’s calls for aggressive economic action have provoked widespread skepticism at home and abroad, not least because the Spanish economy is still in contraction and Spanish unemployment is expected to reach 20 percent in 2010 (or double the EU average). Across Spain, even newspapers normally friendly to the Zapatero government have asked how a country facing its worst economic crisis in 60 years can be trusted to manage the economic recovery of the 27-member EU.

In London, the Economist magazine published a scathing column that declared, “Spain now leads the European Union, but not by example. . . . If you want your advice to be heeded, you need something credible to say.”

Also in London, the Financial Times ran a story titled, “A Stumbling Spain Must Guide Europe,” which described a cyberattack by computer hackers against the Web site of Spain’s EU presidency. “On its first day, Web-surfers navigating to the special presidency Web site found themselves staring at photos of Mr. Bean, the hapless British comedy character who (some claim) bears a resemblance to José Luis Rodríguez Zapatero, the Spanish prime minister. Mr. Bean is famous for his stumbles and mishaps — and Spain is also looking accident-prone at the moment.”

Elsewhere in Europe, editorials in France, Germany, Italy and the Netherlands have likewise mocked the idea of Zapatero advising Europe on economic recovery.

Other Spanish priorities may also to run into resistance from various EU member states. For example, Spanish Foreign Minister Miguel Ángel Moratinos has said Spain will work toward the establishment of a Palestinian state by 2010. “My idea, and my dream, and my engagement, is to work for having in 2010, finally, a Palestinian state that could live in peace and security with Israel,” Moratinos said. EU leaders recently watered down an initiative by Sweden that called on the EU to declare East Jerusalem the capital of a future Palestinian state.

Moratinos also hopes to modify the EU’s 1996 common position on Cuba, which calls for conditioning normal relations with the EU on respect for human rights and progress towards democracy. But previous efforts by the Zapatero government to de-link political dialogue with Cuba from the issue of human rights on the island have failed, due to resistance from other EU members — notably former communist countries like Poland and the Czech Republic, which insist that the EU should not fully normalize its ties with Cuba until civil and political freedoms are granted to all citizens. For his part, EU President Herman Van Rompuy says he has had “little time to think about Cuba” since taking office on Jan. 4.

Overall, however, Spain’s biggest challenge will be to navigate the EU’s new post-Lisbon institutional structure, which now bestows the EU with four titular presidents — Zapatero, Van Rompuy, José Manuel Barroso (the president of the European Commission), and Jerzy Buzek (the president of the European Parliament) — as well as two foreign ministers, Moratinos and Ashton.

Zapatero says that if anyone wants to “call Europe” they should call Van Rompuy. But Van Rompuy says that in the EU “there is not one man or one woman who decides. We each have a role.” The Lisbon Treaty was sold on the promise that it would streamline decision-making within the EU, and thus give Europe a bigger voice on the world stage. Spain’s EU presidency will be an early indication of whether it ends up doing exactly the opposite.

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

Originally published by World Politics Review on January 12, 2010

The initiative was sponsored by the conservative Swiss People’s Party (SVP), which argues that a minaret is a symbol of Islamic intolerance. The SVP, which also happens to be the biggest political party in Switzerland, says the minaret is really an emblem of war. It describes the minaret as a “symbol of a religious-political claim to power and dominance which threatens – in the name of alleged freedom of religion – the constitutional rights of others.”

The SVP backs its claim by citing a famous remark by Turkish Prime Minister Recep Tayyip Erdogan, who once implied that the construction of mosques and minarets is part of a strategy for the Islamization of Europe. The pro-Islamist Erdogan said: “The minarets are our bayonets, the domes our helmets, the mosques our barracks and the faithful our army.”

The current controversy dates back to 2005, when the Turkish cultural association in Wangen bei Olten, a small town of some 4,500 people in northern Switzerland, applied for a permit to erect a 6-meter (20 feet) high minaret on the roof of its Islamic community center. The project to build the minaret, which was opposed by the majority of local residents, was roundly rejected by the town’s building and planning commission. But the Turkish cultural association appealed the decision, claiming that the local building authorities were motivated by religious bias. The case eventually made its way to the Swiss Federal Supreme Court, which in 2007 ruled that the project could proceed apace. The minaret was finally erected in July 2009.

Up until recently, Muslims living in Switzerland had mostly been keeping a low profile, preferring to practice their religion discretely in nondescript mosques. But over the past several years the number of mosques has mushroomed; there now are some 200 mosques and up to 1,000 prayer rooms dotted across the country. And although only four of those have minarets (plans to build a half-dozen more minarets will now be scrapped), observers say the minarets symbolize the growing self-confidence of Switzerland’s Muslim community.

Indeed, the Muslim population in Switzerland has more than quintupled since 1980, and now numbers about 400,000, or roughly 5 percent of the population. Most Muslims living in Switzerland are of Turkish or Balkan origin, with a smaller minority from the Arab world. Many of them are second and third generation immigrants who are now firmly establishing themselves in Switzerland.

The new Muslim demographic reality is raising tensions across large parts of Swiss society, especially as conservative Muslims become more assertive in their demands for greater recognition of their faith.

In one case, for example, Muslim parents recently won a lawsuit demanding that they be allowed to dress their children in full-body bathing suits dubbed ‘burkinis’ during co-ed swimming lessons. In another case, a group of Swiss supermarkets created a stir by banning Muslim employees from wearing headscarves. And in August 2009, the Swiss basketball association told a Muslim player she could not wear a headscarf during league games.

Similar controversies over the role of Islam in European society and how to reconcile Western values with a growing immigrant population are playing themselves out with increasing frequency in towns and cities across the continent.

But the disputes over mosque- and minaret-building, which are currently raging in Austria, Britain, Germany, Italy, the Netherlands and Switzerland, are far more polemical.

Critics fear that mosques, which are becoming an increasingly prominent feature of the European landscape, are facilitating the establishment of a completely parallel Muslim society, one that is especially welcoming to Islamic fundamentalists. Even some voices on the political left, which has viewed the construction of mosques as symbols of Europe’s post-Christian sophistication and open-mindedness, are beginning to voice concerns that their proliferation is a sign of failing integration.

But left-wing elites in Switzerland and elsewhere accuse groups like the SVP of going too far. As part of its campaign, for example, the SVP published a controversial poster showing the Swiss flag with a woman veiled in black and surrounded by minarets that resemble missiles. Some Swiss cities refused to permit distribution of the posters on the grounds that they incited racism and hatred of Muslims, while others allowed them on freedom-of-speech grounds.

Fearful of a radicalization of Muslims at home and reprisals against Swiss interests abroad, the Swiss government had come out strongly against the minaret referendum. Swiss Justice Minister Eveline Widmer-Schlumpf, a former member of SVP, said the ban would violate the Swiss constitution, which guarantees the freedom of belief and worship for all citizens without exception. And Foreign Minister Micheline Calmy-Rey said a ‘yes’ vote “could make Switzerland a target for Islamic terrorism.”

Swiss businesses, many with large interests in Muslim countries, also came out against the referendum. They are now hoping to avoid a Muslim boycott similar to the one that hit Denmark in 2005 following a controversy over newspaper cartoons depicting the prophet Muhammad.

As a result, the Swiss political establishment can be expected to try to find a way to overturn the referendum, possibly by taking a page from the EU playbook, and forcing another referendum until Swiss voters produce the “correct” answer.

In any case, critics say the decision to ban minarets will have little practical effect in the sense that it does not prohibit the construction of new mosques. Nor does it require that existing minarets be torn down. Moreover, the new measure does nothing to improve the integration of Muslims into Swiss society, which lies at the heart of the problem.

But supporters say that’s not the point. They say the SVP’s main achievement has really been to draw the public’s attention to the limits of European multiculturalism, especially amid a growing perception that Islam poses a threat to traditional Swiss identity. Indeed, Swiss voters across the political spectrum seem to agree that Muslim immigrants need to be much better assimilated and socially integrated.

In the final analysis, however, the anti-minaret referendum may end up having its greatest impact outside of Switzerland, as conservatives in other European countries will now be emboldened to more forcefully question previously sacrosanct policies on Muslim immigration. If this happens, the Swiss vote will turn out to be the first salvo in a long overdue debate about the role of Islam in Europe.

Published by Hudson New York on December 3, 2009

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

Spain is reeling from the collapse of a housing bubble that for 15 years enabled the notoriously uncompetitive economy to post some of the highest growth rates in the European Union. Spaniards are now waking up to the reality that the construction boom lulled them into a false sense of never-ending prosperity. Spanish GDP is expected to shrink by more than 4 percent this year. Spain also has Europe’s worst jobless rate, at 18 percent and climbing. Meanwhile, the budget deficit is spiralling out of control.

Indeed, Zapatero’s current woes stem largely from his inability to inspire confidence as an economic manager. As the economy began to deteriorate in 2007, for example, Zapatero doggedly refused to utter the word “crisis” because “pessimism does not create jobs.” He was finally badgered into using the word one year later in a late-night television interview, after a journalist read him the word’s dictionary definition.

Under fire from members of the conservative opposition Popular Party (PP), who accused the prime minister of inaction and of refusing to face reality, the Zapatero government replaced its strategy of denial with Plan B, which consisted of blaming Spain’s economic problems on “the neo-cons” and on “radical liberalism.” Later, Plan C included a global advertising campaign in the world financial press designed to highlight Zapatero’s economic management skills. Plan D saw the naming of a new economics minister who has no experience in economics.

Plan E involved an €8 billion public-works stimulus (this on top of €22 billion – a whopping 2.1 percent of Spain’s GDP – worth of campaign promises). Moreover, next year’s budget promises billions more for regional governments and the long-term unemployed. Profligate spending, coupled with a dramatic fall in government revenues, has created a ballooning budget deficit, which is expected to reach 10 percent of GDP this year.

Anxious to balance the books, the Zapatero government in September unveiled Plan F, which calls for (surprise, surprise) raising taxes. “I am going to ask for a share of people’s incomes out of solidarity and to meet the demands of the most needy,” Zapatero announced. Economists on both sides of the political aisle say tax hikes during the middle of a recession are foolhardy.

A survey recently published by the leftwing El País newspaper, which is friendly to the Zapatero government, found that 61 percent of Spaniards disapprove of the way Zapatero is handling the economic crisis. The poll found that 76 percent of Spaniards believe the government’s economic measures are too late; 81 percent believe the prime minister has no economic plan and is “improvising.”

While some of the larger European economies will post a return to growth in 2009, the Spanish economy is not expected to recover anytime soon.

All this is bad news for Zapatero, who is working overtime to shift the focus of political debate away from the economy towards social proposals such as liberalizing laws on euthanasia and abortion.

Indeed, Zapatero appears determined to continue his quest to transform what was once one of Europe’s most conservative societies into a permissive post-modern Socialist utopia, where traditional Judeo-Christian values are cast into the trash bin of history. Since coming to power in April 2004, Zapatero has rallied his political base (and enraged traditionalists) by legalising gay marriage and adoption, instituting fast-track divorce, pushing stem-cell research, and reducing the role of the Catholic Church in education. In a pointed attack on the sanctity of human life, the Spanish parliament has even granted “human rights” to apes.

But now Zapatero appears to have reached too far. A new law that liberalizes abortion gives girls aged 16 the right to abort without consulting their parents. The initiative has hit a raw nerve with voters on both sides of the political aisle, who are tiring of Zapatero’s social re-engineering projects at a time of economic crisis. Recent polls show that if elections were held today, Zapatero would be handily defeated by his conservative rival.

For many Spaniards, including his supporters, Zapatero is an accidental political leader who was thrust into the prime minister’s office by the Islamic terrorists who set off a series of train bombs in Madrid that killed 191 people only three days before the 2004 general elections. Although the incumbent PP was widely expected to win another term in office, Zapatero benefited from the hysteria fomented by Spain’s left-leaning mass media in the hours before voters went to the polls. With the aid of a motley hodgepodge of leftist and nationalist parties, Zapatero, who failed to win an absolute majority, was able to cobble together a coalition government.

Just days into his first term in office, Zapatero earned himself lasting enmity with the Bush administration for the ham-fisted withdrawal of Spanish troops from Iraq. Moreover, in his desire to become the standard bearer of the European left, Zapatero compounded the problem by spewing a steady flow of anti-American rhetoric that had the effect of alienating the United States even further.

Over time, Zapatero’s permanent non-relationship with the most powerful leader in the free world turned into a media obsession in Spain, with the issue consuming many liters of ink in newspapers across the country. The prime minister was one of the only leaders in Europe not to have been invited to the White House for a visit with an American president. Indeed, between 2004 and 2008, Bush and Zapatero exchanged a grand total of only 18 words, each of which were meticulously analyzed by the Spanish media for possible indications of an impending rapprochement. But with the Bush administration it was just not meant to be.

Not surprisingly, Zapatero was euphoric over Obama’s election victory. He sent the president-elect a congratulatory letter on November 5. Four days later, at exactly 11pm local Spanish time (with all the details carefully analyzed by the Spanish media, which dubbed the event Spain’s D-Day because Spain now matters in the world), Obama perfunctorily returned Zapatero’s favor and the two had a ten-minute telephone conversation.

As it turns out, Zapatero and Obama are not only ideological soul mates, they are also best friends. The two were born the same day, albeit one year apart; they are both parents of two daughters; and their favorite sport is basketball. As far as matters of state are concerned, they discussed how Spain might help solve the international financial crisis (Spain is in economic free-fall), and ways in which the two countries can cooperate in fighting climate change (Spain is the source of the biggest increase in so-called greenhouse gas emissions in Europe since 1990). Then, just before hanging up the phone, Zapatero told Obama: “Hey, just call me José Luis.”

Now, after five long years, Zapatero has finally got an invitation to visit the Oval Office, which is being portrayed by some as his shining foreign policy achievement. In the logic of Spanish politics, a photo opportunity with Obama should earn Zapatero a promotion from provincial politician to international statesman. Unfortunately for Zapatero, however, Spain’s economic situation is now so dire that most Spaniards would prefer that he fix problems at home before doing photo-ops abroad.

Published by The Weekly Standard on October 9, 2009

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

For many people, that conclusion seems perfectly reasonable. But coming from Europe’s sycophantic media establishment, which has spent the last two years worshiping Obama as a messianic figure, such a reaction represents a sea change in sentiment toward Obama. Is Obama’s European star finally falling to earth?

What follows is a brief review of what some of the major European newspapers are saying about Obama’s Nobel.

In Britain, the London-based Economist magazine, which endorsed Obama for president, writes: “But is the award premature? Although the prize may be given in the spirit of encouraging Mr Obama’s government, it might have been better to wait for more solid achievements. With so many good intentions, and so many initiatives scattered around the world (and an immensely busy domestic agenda, including health-care reform and averting economic collapse), Mr Obama appears to be racing around trying everything without yet achieving much.”

The leftwing Guardian, in an analysis titled “Barack Obama’s Nobel Prize: Why Now?,” writes: “The reality is that the prize appears to have been awarded to Barack Obama for what he is not. For not being George W Bush. Or rather being less like the last president. The question now is whether having being anointed perhaps too early by the committee, a Nobel prize earned so cheaply and at so little cost will help him in his efforts on the international stage or rather be an albatross around his neck. Something against which all his future efforts will be judged – and perhaps found wanting.”

Elsewhere at the Guardian, an informal online opinion poll asks: “Did President Obama deserve the 2009 Nobel peace prize?” More than 70 percent of respondents say “no.”

The leftwing Indpendent, in a commentary titled “This award is premature – and potentially very foolish,” writes that Obama “should have refused the award, politely saying that he was flattered and, while appreciating the motivation, was as yet unworthy of such distinction. Instead, he is once again lauded for his symbolism and potential rather than his actual deeds. One day, he might be a worthy winner. But not today.”

Elsewhere, the Independent, in an article titled “The real world has little time for prizes,” writes “” Yes, he’s made those fancy speeches … But, as they say in American politics, where’s the beef? … Obama’s prize is a final, gratuitous shot at George W Bush (remember him?).”

The center-right Times of London, in an article titled “Prize Fools,” writes that “the Norwegian Nobel Committee is in danger of putting the entire comedy industry out of business.” Elsewhere, in a commentary titled “Pointless Nobel prize reveals how President Obama is lost in his own mystique,” the Times advises: “Scrap the Nobel Peace Prize. It’s an embarrassment and even an impediment to peace.”

The Financial Times, in an editorial titled “Urgency of Now?,” argues that the Nobel committee is “trapped in an adolescent adulation of Mr Obama that, if once shared by many, most have put behind them. Its continuing desire to flatter a particular tendency in US politics – Al Gore and Jimmy Carter are recent laureates – risks painting it as an annex to the left wing of the US Democratic party.”

In France, the center-right Le Figaro, in a commentary titled “Disservice to Obama,” writes: “Should we abolish the Nobel Peace Prize? We ask the question after Barack Obama was awarded the prize on Friday. This decision, which oozes political correctness, was a very bad idea.”

The center-left Le Monde, in a commentary titled “The Meaning of the Nobel,” writes that the Nobel committee “justified their choice in language worthy of worst-UN diplomatic rhetoric.” It argues that the prize should have gone to “brave Russians or Chinese who are fighting for liberty in their own countries.”

The intellectual, left-leaning weekly magazine L’Express, in an article titled “Obama, the Nobel of the Ridiculous,” writes: “Republican Ronald Reagan contributed to the liberation of Europe and the collapse of the ‘evil empire’ that was the Soviet totalitarianism. And Democrat Bill Clinton has worked hard to create the conditions for an honorable peace between Palestinians and Israelis. They are both more worthy recipients of the Nobel Peace Prize. It would be honourable for Barack Obama to refuse the prize. He might merit it someday. But not this year.”

In Germany, the leftwing magazine Der Spiegel, in an article titled “More Burden than Honor,” writes that bestowing the Nobel Prize to Obama now is like “awarding a medal to a marathon runner who has just completed the first mile. … Who has grabbed Obama’s unclenched fist? Ahmadinejad? The Taliban? Kim Jong Il? Putin or Medvedev? Netanyahu or Abbas? No one. No success in sight, nowhere.”

The Düsseldorf-based business newspaper Handesblatt says “The Nobel Prize for Obama is a Mistake.” The Financial Times Deutschland, in a commentary titled “Obama’s You-Are-Not-George Bush-Prize,” writes: “Many will regard the premature award as exaggerated Obama hype.”

The center-left Frankfurter Rundschau, in an interview titled “The Obama Effect is Pure Religion,” writes: “World public opinion has concentrated the age-old anti-Americanism in one person, George W. Bush – the ultimate evil. The perfect embodiment of evil of all time. Now we invoke the complementary figure: Obama, the saviour, the fighter against evil. These figures are now set directly against each other. They are ideal constructs, usually only seen in movies.”

In Italy, the center-left Corriere della Sera, in a commentary titled “A Prize Against (Bush),” writes about the “irresistible rush that seems to have gripped the jury of Oslo.” It argues that “all [of Obama’s] innovations are still in the launch pad” and thus the prize is premature, “unless the prize awarded to Obama is meant to be a Nobel against against George Bush.”

The center-left La Repubblica writes: “This award is simply a ‘call to action.’ In sporting parlance, Obama has made the goal and now he has to earn it.” In an online poll, the center-left La Stampa asks: “Nobel Prize for Obama: Just or Hasty?.” About 55 percent of respondents say it was premature, 45 percent say it was just.”

In Spain, the leftwing Público, which normally exhibits a sycophantic affection for Obama, believes he should share the Nobel Prize with George W Bush. The paper writes that without Bush, it would be “impossible to imagine that a new president could win the Nobel only for his speeches, his spirit and his smile, but without any tangible achievements to sell.”

The center-right ABC, in an editorial titled “A Premature Nobel,” writes: “Not so long ago the common view in the West was that our values were being threatened by a war that was declared upon us by terrorism … One wonders what the members of the prize committee understand by the word “peace.” Are they thinking about a peace in which free societies can continue to be free? Or is their peace one of appeasement and making a pact with those who want to destroy the liberal democratic order?”

In Switzerland, the Basler Zeitung, in an editorial titled “Nobel Prize: For What?,” writes: “It is quite bizarre. President Barack Obama has just won the Nobel Prize. It is not clear why. Because he has made peace, a kind of peace, with Hillary Clinton? … Strictly speaking, the whole thing is really postmodern: A person can now win the Nobel Peace Prize when he says he hopes for peace sometime in the future. But he is not obligated to do it. The intent is sufficient. Great.”

Published by Pajamas Media on October 11, 2009

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

According to the final results, 67.1 percent of Irish voters approved the treaty, while 32.9 percent voted “no.” Turnout in the three-million electorate was 58 percent.

During the past year, the Irish government has faced intense pressure from an irate European political establishment, which demanded a second referendum that would produce the “correct” answer. Dublin achieved the desired result by playing on public fears over Ireland’s faltering economy, which is expected to contract by a shocking 10 percent this year. It also warned that Ireland would be “pushed out” or “left behind” in Europe in the event of another “no” vote, a disconcerting prospect for a country traumatized by the second-highest unemployment rate in the EU.

Ireland, which accounts for 1 percent of the Union’s 500 million population, was the only one of the EU’s 27 member states to put the Lisbon Treaty to a public referendum. Twenty-four other EU countries quietly rubber-stamped the treaty in their parliaments, which has proved to be a far less risky route than direct democracy to get the document ratified. The leaders of Poland and the Czech Republic, the only two remaining holdouts, will now be induced to ratify the treaty as quickly as possible (the parliaments of both countries have already approved the treaty) so that the grand European project can proceed apace.

The Lisbon Treaty, also known as the Reform Treaty, is nearly identical to the European Constitution, a document that was soundly rejected by French and Dutch voters in 2005. Among many other innovations, the 250-plus page Lisbon Treaty will establish a permanent EU president (Tony Blair?), a European foreign minister and a European Union diplomatic service. The agreement also paves the way for the covert creation of a European army by way of a mutual defense clause called Permanent Structured Cooperation.

Moreover, the Lisbon Treaty obligates EU nations to surrender their sovereignty in many areas to centralized decision-making; and it reduces national veto rights to allow more decisions to be made by majority voting instead of by unanimous consent.

The Lisbon Treaty is the stunning culmination of more than 50 years of European economic and political integration, a process that has resulted in the systematic erosion of democracy and democratic accountability in Europe.

The EU has its origins in the Treaty of Rome (1957), which gave birth to the European Economic Community (EEC). The EEC, also known as the “Common Market,” was a customs union. EEC member countries agreed to dismantle all tariff barriers over a 12-year transitional period, and over time a common tariff was also established for all products coming in from third countries.

The Single European Act (1987) extended the scope of the EEC to include not only the free circulation of goods, but also the free movement of persons, capital and services. The Act established a genuine common market, but it also codified European Political Cooperation, which was the forerunner of the EU’s Common Foreign and Security Policy (CFSP).

The fall of the Berlin Wall (1989) and the reunification of Germany (1990) led French President François Mitterrand, who feared a return of German hegemony, to search for a way to permanently anchor Germany within European institutions. Together with German Chancellor Helmut Kohl, who was keen to relieve misgivings in Paris and London about a reunified Germany, Mitterrand worked to transform the whole of Europe into an all-encompassing union.

In 1989, an Intergovernmental Conference (IGC) established monetary and economic union. In 1990, another IGC was called to study the constitution of a political union. Then, in 1992, following three years of closed-door debate which ignored public demands for more transparency, the Treaty of the European Union (also known as the Treaty of Maastricht) came into being.

The Maastricht Treaty modified the Treaty of Rome and the Single European Act by moving far beyond the limits of a common market toward political union. The Maastricht Treaty also changed the official name of the EEC to the European Union.

The Maastricht Treaty created three pillars, one of which enables joint actions in foreign policy and military matters, and another one which enhances co-operation in the fight against crime. The Maastricht Treaty also established a European Central Bank (ECB), fixed exchange rates and introduced a single currency called the euro.

In 1998, the Treaty of Amsterdam modified parts of the Maastricht Treaty, again with no public participation. The main change introduced by the Amsterdam Treaty was the creation of a new position called the High Representative for Common Foreign and Security Policy. The treaty also provided the EU with a common security policy, including the gradual formulation of a common defence policy.

In 2001, the Treaty of Nice was designed (once again without public input) to reform the institutional structure of the EU, with a view toward eastward expansion.

Fast forward to 2009, and the stated aim of the Lisbon Treaty is to “complete the process started by the Treaty of Amsterdam and by the Treaty of Nice with a view to enhancing the efficiency and democratic legitimacy of the Union and to improving the coherence of its action.”

Supporters of the Lisbon Treaty say its purpose is to cement European integration by “streamlining” decision making. But in its essence, the Lisbon Treaty, which has been called a “slow motion coup d’état,” is all about the centralization of political power by an unelected ruling clique in Brussels who desire to rule Europe free from the constraints of democracy.

The Lisbon Treaty also promotes European aspirations far beyond Europe, which is why Americans should take notice. Indeed, European globalists hope the Lisbon Treaty will transform the EU into a superpower capable of counter-balancing the United States in global affairs.

European strategists have long been frustrated by Europe’s inability to speak with one voice, a debilitating weakness that often neuters Europe’s economic and political weight on the global stage, especially vis-à-vis the United States. The Lisbon Treaty is designed to remedy this deficiency by imposing a European president and foreign minister at the top of the European edifice.

More specifically, the Lisbon Treaty is meant to avoid a repeat of European divisions in the lead up to the Iraq War, when France and Germany were frustrated in their attempts to present a unified European front to block the American invasion. At the time, a fair number of European countries broke ranks with France and Germany and joined the United States in a “coalition of the willing,” much to the anger of the Brussels elite.

By giving unelected EU bureaucrats jurisdiction over questions of war and peace, the Lisbon Treaty will usurp the national prerogatives of its member states on the use of military force. This will make it far more difficult for European allies to support the United States in unpopular wars in the future.

The Lisbon Treaty will push the EU in a direction that should be deeply disconcerting to Americans and Europeans alike. The Lisbon Treaty will make Europe more centralized and far less democratic than it already is. For transatlantic relations, this means that many foreign policy decisions that directly affect the United States, ranging from economics and trade to transatlantic cooperation on Islamic counter-terrorism, will increasingly be made by unelected (and often pathologically anti-American) bureaucrats in Brussels rather than by national governments.

The history of European integration is a textbook case in how a simple economic treaty can be gradually transformed into an all-encompassing non-democratic supranational federal leviathan. Indeed, the Lisbon Treaty should be a warning to Americans who dream of remaking the United States in Europe’s image.

Published by Pajamas Media on October 4, 2009

Also published by Brussels Journal on October 10, 2009

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group

Merkel’s conservative Christian Democratic Union (CDU) and its sister party, the Bavarian Christian Social Union (CSU), won nearly 34 percent of the votes, according to preliminary returns. At the same time, the classical liberal FDP won nearly 15 percent of the votes, the party’s best showing ever.

With a combined total of around 49 percent, the CDU/CSU and the FDP won a stable majority in Germany’s multiparty system. This will give Merkel the green light to ditch the awkward four-year-old “grand coalition” between the CDU/CSU and her party’s main rival, the center-left Social Democratic Party (SPD), and replace it with a center-right CDU/CSU-FDP coalition.

In fact, the SPD was by far the biggest loser on Sunday, winning only 23.5 percent of the votes, its worst performance since World War II. The result will cast the SPD into the opposition for the first time in 11 years. It will now work to rebuild itself and probably choose new leaders.

During the campaign, Merkel repeatedly stressed that she wanted to govern with the business-friendly FDP, which has been out of power since 1998, in order to cut taxes in a bid to further revitalize a German economy that has been hit hard by the global recession.

In the weeks leading up to the election, the SPD had registered a slight but significant uptick in its poll numbers, due in large measure to the exploitation of fears among German voters that the tax cuts promised by a CDU/CSU-FDP coalition would ultimately lead to a cut in social welfare benefits.

The SPD also tried, unsuccessfully, to boost its poll numbers by exploiting voter unease about the war in Afghanistan. In recent weeks, Steinmeier (as well as Germany’s sycophantic leftwing news media) had repeatedly raised the issue of Afghanistan, at one point going so far as to present a plan for completely withdrawing German troops from the country.

Moreover, and in stark contrast to Spain in March 2004, German voters were not intimidated by Islamist terrorists. Just one week before the election, Al Qaeda threatened the German electorate by demanding an end to Germany’s military mission in Afghanistan.

Nevertheless, arguably one of the most disturbing results of Sunday’s voting was the strong performance registered by the far-left Left Party, an alliance of former communists and disgruntled Social Democrats. In a sign of increasing polarization in German politics, the Left Party crossed the politically important threshold of 10 percent, by winning 12.1 percent of the votes, an increase of more than 3 points. The result will give the Left Party some 80 seats in the next parliament, an increase of almost 30 seats.

Under the blustery leadership of former SPD chancellor candidate Oskar Lafontaine (aka Red Oskar), who was once denounced as “the most dangerous man in Europe” by a British newspaper, the Left Party has established itself as one of the most notorious opposition groups in Germany.

Because of its strident and often anti-capitalist rhetoric, including its stated desire to bring about a return to East German socialism, the Left Party has been monitored by a German domestic intelligence agency, as well as by at least four German states. But that has not prevented the Left Party from enjoying a huge surge in popularity across the country.

In the eastern German state of Brandenburg, the Left Party nearly outperformed the SPD, winning 29.5 percent, compared with 30.8 percent for the SPD. In the western German state of Saarland (Lafontaine’s home state), the Left Party has also achieved near parity with the SPD.

In the final analysis, German voters have said they are happy with Merkel’s pragmatic, steady and low-key governing style, which is unlikely to change very much during the next four years.

Under a center-right coalition, economic policymaking will shift to the right, but not radically. Merkel’s new government will try to get control over a surging budget deficit (set to hit 6 percent of GDP in 2010) and cope with rising unemployment (which is hovering at around 8.3 percent).

During the campaign, Merkel promised to spur economic growth by simplifying the tax code, reforming the inheritance tax system, and providing across-the-board income tax cuts totaling 15 billion euros ($22 billion) over four years.

She also wants to extend the lifespan of Germany’s 17 nuclear power plants, which the government of former chancellor Gerhard Schroeder, caving in to demands from the environmentalist Green Party, ordered closed by 2021.

A CDU/CSU-FDP centre-right government, which last ruled Germany between 1982 and 1998 under Chancellor Helmut Kohl, will also seek to reduce the role of the state in the economy and pursue privatizations, such as that of rail operator Deutsche Bahn.

In foreign policy, a centre-right coalition will probably be more vocal in trying to block Turkey’s bid to join the European Union. Merkel says she favours a “privileged partnership” for Ankara that stops short of full membership. Merkel has also said she will keep German troops in Afghanistan.

Published by Pajamas Media on September 27, 2009

Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group