My colleagues at my political risk firm are forced to endure my earlier incarnation as a college professor, as I cannot help but try to instruct them.
One of my favourite lectures concerns the absolutely necessary need for a world-class political risk analyst to connect the dots, to clearly link together geopolitical data points that on their surface have seemingly little to do with one another.
Or, as I always sum up, in the words of the great novelist E.M. Forster in Howard’s End, the ultimate goal of our profession is to, ‘Only connect.’
This past week two seemingly unrelated—by actually intertwined– incidents occurred which put together clearly indicate just how found out the European Union has been over its hapless response to the coronavirus.
Recently, the Chinese have taken to overtly bullying EU diplomatic representatives. In this case, Beijing forced the 27 European ambassadors based in their country to self-censor a letter they had written in China Daily, gutlessly omitting the obvious historical point that the virus originated in China.
Given Beijing’s tetchiness over accusations – entirely on the money – that in the crucial months of December 2018-January 2019, they downplayed and obfuscated the extent and danger of COVID-19, this is perhaps to be expected of a brutal, totalitarian regime. What is not to be countenanced is that sheep-like, the ambassadors meekly complied.
Nor is this little diplomatic vignette unique. Just a week before, the EU watered down one of its own reports about the spread of Chinese disinformation regarding the virus, again at Beijing’s request. With the 75th anniversary of VE Day upon us, it seems the baseline lesson of appeasement needs relearning.
Seemingly unrelated but entirely pertinent events have been unfolding at the same time, centred around the lovely little German spa town of Karlsruhe. Here the German Federal Constitutional Court just threw a major spanner into the European Central Bank’s (ECB’s) works.
The Court ruled that the ECB’s mass $2 trillion bond-buying programme of the past five years contravenes German law. The programme was deemed illegal by the Court for the express reason there is not enough German political oversight of such extraordinary measures.
Suspicious that the ECB programme violates EU law itself, as it is presently forbidden for one Eurozone member to subsidise the debts of another (a law the ECB has long been dancing around), the court gave the ECB three months to prove the scheme was both necessary and proportional.
Failure to do so would cause the Constitutional Court to force the Bundesbank to no longer participate in the programme or make any further asset purchases, rendering it utterly ineffective.
However, and in true EU fashion, don’t expect the worst to happen, as the legal ruling will be gotten around, most likely by that obfuscator-in-chief, Chancellor Angela Merkel.
However, avoiding the apocalypse should not be cause for celebration from Brussels’ many cheerleaders in the commentariat. Avoiding the direst calamity does not mean the European project itself is not in a tailspin.
First, whatever the outcome, this is the first time a national court declared a judgment of the European Court of Justice—which in 2018 upheld the ECB’s bond buying programme—itself illegal. To put it mildly, this is hardly the sign of the coherence of European rule of law.
Even if the old bond buying programme limps on, there will surely be another German legal challenge to the even-looser rules surrounding the recent ECB plan to buy a further $750 billion worth of bonds, mitigating the worst of the virus’ effects on a devastated continent. It is likely the German Court will rule against this as well, thereby throwing the entire European rescue operation into chaos.
Finally, the obvious and pressing need for even further post-crisis stimulus, desperately necessary in rebuilding a continent on its knees from the worst economic crisis since the Great Depression, will be met with the greatest uncertainty.
Unlike the Fed, the Bank of Japan, and the Bank of England, the simple answer is that as of today we simply don’t know what the ECB’s actual powers–and crucially the limits of those powers-are.
Herein lies the Forsterain link. For the Chinese can read the newspapers as well as I can, and crises clarify. Like the global shark that they are, China can smell the EU’s blood in the water.
Beijing has decided there is little cost in bullying it, bending it to its wishes. And this is a terrible outcome, both for the continent itself and those of us who care about the democratic world order of which it is an integral part.