Dutch Values and Ukraine's Association Agreement with the EU

We Dutch know something about living next to a large, dangerous neighbour that tries to manipulate, conquer or control us. We know something about the importance of being able to trade with the neighbours and the broader world to maintain our independence and standard of living. And we also know something, luckily a little more than most, about the importance of the rule of law, of democracy, of freedom and of human rights. We can rightly be proud of what we've accomplished in our own country and what we stand for. We can be even more proud when others copy us and ask us coach them. There is nothing pie-eyed about this. The Dutch are a sober and realistic bunch. When they set their minds to it, they can accomplish great things. Others can do the same by emulating them. 

The European Union was created to prevent war, promote prosperity, and advance the human condition. It largely does that by copying much of what the Netherlands has already achieved for itself and demands it from its members. The formula resonates so strongly with the human drive for freedom that other countries use it as well. It goes without saying that the EU demands this of its members. But it also seizes opportunities to help neighbouring countries that want to bring themselves up to European levels of democracy, justice and human rights without becoming members. 

This is in the Netherlands' own interest. There has never been a war between democracies. There has never been a civil war in countries where basic human, legal and political rights are respected. The EU has no army and relies primarily on promoting a ring of democracies around it. In rare cases where the neighbouring country wants to really change itself, Association Agreements can be used to help that change along.

Association Agreements like the one that the EU has with Ukraine are like 12 step programs for recovering addicts. They are hard work. They have to admit their problems, they have to make amends to those they have harmed, they must put the ways of the past behind them, and they must live the rest of their lives with courage and integrity. They need help to keep on the right path and to break with the people that would drag them down into the abyss once again. Being a role model and a coach for an addict doesn't mean the addict comes to live with you. Keep that in mind.

The Post-Soviet world--countries like Ukraine that were once part of the Soviet Union and the Russian Empire before it--now have a young generation that has not grown up under Russian rule, does not learn Russian in school, learns English instead, travels west on vacation and looks toward Dutch and European values and standards as what they want for their own futures. A little older than them are the ones who fought the revolutions that brought them their formal independence, and the chance to live in freedom. But political revolution did not put an end to the old politics of economic and political corruption. The Association Agreement is designed to make that corruption a thing of the past. In return for accepting the cost and pain of rooting that corruption--the links to the people that feed the addiction-- we accept each other as trading partners. That is initially painful for Ukraine because our companies are so competitive. Dutch engineers, manufacturers and investors will earn more than they lose from the free trade agreement. But this can only work for them if they can operate in a Ukraine where a contract is a contract, a judge is honest, where politicians don't give jobs to their friends and informal masters, lurking in the shadows, and where judges, bureaucrats and politicians can't be bought.

 All of that is easier said than done. Just like the junkies trying to claw back one their own who has decided to go clean, Russia has reached out with various means to prevent Ukraine from building a new future for itself. The Agreement was negotiated by  a government with a democratic mandate for change--the change initiated by the Orange Revolution. It was halted when Russian president Vladimir Putin bribed the new Ukrainian President to reject the deal and join the Eurasian Union instead. People went to the streets in Maidan Square, and we saw what it meant to fall back into the crack house of Russian influence. Obedience or death instead of democracy and free speech, and a return to corruption instead of an honest chance for  young Ukrainians to build an economy and society that reflects who they are and want to be. I was there in the European Parliament as the first shots fell and the first Ukrainians started dying at the hands of government forces. I listened to leaders from Parliament, Commission and the Council of member states confer directly and join in support of those protesting. In the face of those horrible actions, I felt a sense of hope, as I think many did, that if Europe continued to do the right thing, that Ukraine could overthrow that government and resume its path to reform.

It did, and thankfully the EU and its member states supported that effort with the Association Agreement. As we know, that was not the end of Russia's efforts to reincorporate Ukraine into it's 'rightful sphere of influence' (imagine if Germany did the same thing to the Netherlands today). It invaded and annexed Crimea, it invaded and installed a puppet regime in Luhansk and Donbas, murdered and displaced civilians living there, kidnapped and sentenced the Ukrainian pilot Savchenko to 22 years on bogus charges, and as the Netherlands is all too aware, shot down a civilian airliner with 182 Dutch nationals and others on board to show you they could, and to make it clear whose property the Ukraine was. Nevertheless, Ukraine, with the EU's help, has stayed the course to reforms.

As a result of Ukrainian and European determination, domestic support for reforms has remained strong and Russia's attempt to establish NovoRussia out of a larger invasion of Ukraine was stopped. It will remain a dream rather than a reality as long as Ukraine has the chance to build its own future. Those within Ukraine who want to turn the clock back, with corruption and with arms will not get their chance. That is what the Orange Revolution was about. That is what the Agreement is about. We can be proud that Dutch and European values are what they aspire too. But that will only survive if we vote on April 6th to stand by them as they do that.

Vote on April 6th. And vote Yes

European Semester Officer

The Netherlands proposed an EU Super-Commissioner for Budgetary Discipline in 2011 that would control the budgets of the member states as a way of stabilizing the euro zone, and rules to expel members who didn't implement austerity swiftly and effectively in a downturn. Germany liked it, France and the UK hated it, and the idea went away. Or so it seemed.

This morning, the new head of the euro group, Dutch Finance Minister Jeroen Dijsselbloem, announced that the European Commission will install a so-called European Semester Officer in The Hague. The Semester Officer is intended to act as a watchdog over the national governments, without the status of a Commissioner. Legislation and treaty changes are not required. At the moment this post was written, news had not been reflected in the English speaking press. Jean-Luc Annaert, a Belgian, is said to be the first appointee.

Officially, the European Semester is part of an attempt to more strongly link economic policies in the fields of structural adjustment (competitiveness policy, known as Europe 2020) and euro zone commitments, for all member states) with tougher oversight and sanctioning mechanisms.

Helping Greece Default

The EU governments, if they want to avert disaster, need to assist Greece, and other countries as well, in an orderly default of their debt. A default is never easy to propose, but as I indicated in my last post when referring to the assistance of the United States government to Mexico in defaulting through Brady Bonds, this assistance makes all the difference between making the debt load manageable and total collapse.

There will be a lot of bellyaching from Northern Europe. Indeed, the finance minister of the Netherlands' right-wing government, Jan-Kees de Jager, has declared he takes pride in taking the toughest stand of all European countries on the terms that Greece will have to meet. That could be a costly position to maintain.

There is a difference between rebuilding on terms everyone can figure out, and terms that no one can figure out because the plan won't be kept. Creditors in Europe may look at a 100% repayment plan as only fair, whilst Greek critics will look at it as imposing unrealistic demands. The only part that is important though is: can Greece really pay 100%? If it can't, then an orderly default is better than a European shit storm. 

Europe's new economic constitution

France and Germany, with the support of the Netherlands, have agreed on the price for supporting the euro zone's weaker economies. It will be a stronger economic constitution devoted to a supply-side competitiveness policy for the euro zone, and indeed for the entire EU. The agreement will form the centrepiece of the EU's Spring Council on 24-25 March.

What does this mean? It means that national governments must do everything in their power to make their economies attractive for private investment capital. This means limiting government spending and  borrowing, and restructuring the economy to promote economic renewal in new economic activity. Subsidies must be cut, job protections removed and unemployment insurance modified so that capital--financial, industrial and human--can be re-allocated to more productive endeavours. Government spending and market intervention is allowed to the extent that it encourages businesses and individuals to shift from sunset industries, where emerging markets are on an equal footing with the advanced economies of Western Europe, to sunrise industries where first-mover advantages are hopefully still to be had.

France and Germany's demands will likely be a reform of an existing instrument, the Integrated Guidelines. These Guidelines are decided collectively by the European Council under the advice of the European Commission and are used to set the standard that national governments are supposed to strive for in economic, and increasingly social policy. National governments are then required to prepare National Action Plans each year, which the Commission reports on and their colleagues in the Council then evaluate--with approval or disapproval--and if they feel it is required, recommend changes to the government in question.

Once upon a time, the Integrated Guidelines were limited to macroeconomic policy and known as the  Broad Economic Policy Guidelines (BEPG). They were designed to coordinate economic policy for the euro zone members, but also for non-member states, as the idea was that they would join the euro sooner rather than later. That process started after 1992, once the political agreement to launch the euro had been made. The Integrated Guidelines added similar benchmarking, reporting and peer review for labour market policy (which covers certain aspects of skills development, education,  unemployment insurance and measures to promote work by older. minority and female residents) from 1997 onward, and competitiveness policy more broadly from 2005 onward. That was the year that the EU reformed and strengthened its goal to become the world's most competitive economic zone by 2010.

The Integrated Guidelines were a great idea, but they had very little impact on national policies, and now Germany and France have agreed that they should be granted more importance than they have had before. The Guidelines are part of what is known in Europe as the Open Method of Coordination, which stresses that governments should view the benchmarks as voluntary and that strict demands contradict the spirit of the arrangement, which is to let 1000 flowers bloom.

The Franco-German deal will install a much more extensive economic constitution for Europe, if the Council adopts it. The question is: how many obligations will a successfully agreed-upon reform of Europe's economic constitution place on EU member states? All must agree. France and Germany will not gain everything they want. Now that they have decided what they will strive toward, the next three weeks will be surely be devoted to various combinations of coalition-building, sweet-talking, side-deals, arm-twisting and brow-beating to make an agreement possible.

France and Germany must consider more strongly than they have in their press statements to date what their narrative of success and appropriate policy actually entails.  Messages from Berlin argue that Germany must be the standard for the new economic constitution. Parts of that are right, but parts of that are also surely wrong and inappropriate for Europe. Germany is a highly conservative country in which privilege, class and gender biases are institutionally reinforced. That is hostile to some understandings of how the state should govern society, and of what a good society should strive towards. Economic policy only survives intact if it is embedded in social acceptance. German ideas of what is right are not European ideas, nor should they be. In the time to come, France may prove to be crucial in determining the final outcome. It is not as dogmatic as Berlin, and it has a stronger tradition of state intervention in the economy and social justice as part of the public good that resonates well in many other parts of Europe.

Germany will not only have to make demands; it will have to listen as well and consider alternative visions in good faith of what the state is there to do.

A constitution is a political compromise, and it must reflect everyone to be legitimate and not do harm.