“The EU is going through a big test” - interview with Pat Cox

Pat Cox, a former president of the European Parliament and a recent EU Special Envoy to Ukraine, discusses the face-off the West is now having with Russia over Kiev’s future, the radicalization of the political climate in Europe in the context of upcoming EP elections and whether the euro zone crisis is truly over Interview by Remi Adekoya What were your first impressions upon arriving in Ukraine for your mission? Myself and former Polish president Aleksander Kwaśniewski arrived in Ukraine for our mission pre-Maidan. The mission was the result of a meeting between former Ukrainian prime minister Mykola Azarov and the president of the European Parliament Martin Schulz in Brussels. At the time, Ukraine was completely isolated because of the selective justice applied in the Yulia Tymoshenko case. It was decided the EU should choose people who would visit Ukraine, follow the case, meet prisoners, prosecutors and politicians. And so Kwaśniewki and myself spent 80 days on 27 different trips to Ukraine. We met the prime minister each time we were there and we met then-president Viktor Yanukovych during at least half our visits. However, the mission later morphed into something much larger as we became a key point of exchange between not only Brussels and Kiev, but also between the Ukrainian government and the opposition, who basically were not speaking to each other at the time but would each speak to us. Just before the Vilnius summit last year, President Yanukovych informed us he was pressing the pause button on Ukraine’s Association Agreement with the EU. Then came the Vilnius summit at which nothing was signed and then Maidan started. It did not start with fascists and anti-Semites as the Russian side is now claiming, but with ordinary Ukrainians who simply said “no more.” People were first annoyed with their government for not signing the agreement with the EU, and then later grew increasingly furious with their own polity and its actions in recent years. Whether this would have lasted long I don’t know, but Yanukovych made some bad decisions to have people beaten up and the situation went from a contained non-aggressive mass protest into a revolution. Ukraine has a very weakened economy, a fragile state and it will need tender loving care for rather a long time. Does the economic and political situation risk getting much worse in Ukraine before it potentially gets any better? Yes, it does. We are seeing an increasingly hard-line energy policy from Moscow, meaning higher gas prices. Ukraine does some 40 percent of its trade with Russia. Moreover, it has no economic buffers per se, such as sizeable foreign reserves, nor does it have a strong currency. When people start having to pay more for gas or food, those who feel they’re losing will blame the new government headed by Prime MinisterArseniuk. Add to that the situation whereby for the first time since Saddam Hussein invaded Kuwait in 1990, one UN member has annexed the territory of another UN member. This despite the fact that when you join the UN, one of the first things you agree to do is respect other members’ territorial integrity. Then you have some 40,000 soldiers on the border with Ukraine, yet Russia says they are not there to invade; well I tell you, they are hardly there to reassure either. This reminds me of Bismarck’s saying that something is a political fact only after it has been officially denied. At a minimum, Russia wants to destabilize Ukraine; at a maximum force federalization on the country. All these factors you mentioned, plus the inevitably painful economic reforms the West will demand from Ukraine before loaning it money, seem the perfect storm to usher in a counter-revolution in Kiev in the near future. What do EU leaders have in mind to prevent such a scenario? You’re of course correct about the conditionality of any funds received, especially from the IMF. Sometimes we take medicine: we don’t like it, but if it cures us, then it’s better than the disease. Let me give you an example: Ukraine has one of worst ratios of energy efficiency in the world. Its energy consumption is a disaster. Ukraine consumes gas like a junkie does heroin. And that’s a place you don’t want to be, especially when you are currently paying one of the highest prices for gas in Europe. When our mission was there, we had a lot of dealings with Andriy Kluyev, who at the time was head of national security. Curiously enough, he was also the one who decided when the government would switch on the heating. Most government offices have no thermostat, so it’s all on or all off. One week we were there and the weather was summer-like, boys were in T-shirts, girls were wearing summer dresses. But the heating was switched on all over the city. We went to Kluyev’s office, it was too warm, the windows were open to release the heat while the air conditioner was straining itself to work within the excessive heat and open windows. This is a serious waste of energy and this has to stop. It is in Ukraine’s own interest to stop this kind of practice and collective failure to do so has proven to be a disaster. So yes, there is danger of another revolution. The Russian revolution came in two parts, first in March then in November. So could we have a March bourgeois revolution and then an November proletariat revolution? Anything is possible, but the EU now understands that Ukraine needs some quick transfusions of money. Do you see any potential long-term solution to the Ukraine crisis? Ukraine should be discussed as a bridge between East and West and not as a border between East and West. This should be working to its advantage. We could look at other models like we have in Austria or Finland. In these cases, the non-involvement of the Soviet Union in their affairs was connected to non-alignment in the two states. Austria and Finland are in the EU but not in NATO. But you cannot have such a discussion when someone is standing over you with a big stick and threatening to beat you. So right now, the preconditions do not exist for such a solution. Even though all the other options are suboptimal, you work with what you have. This seems to be a conflict between values and brutal economic reality. Russia is willing to pay an economic price for a political victory. What price is Europe’s elite ready to pay to defend its professed values? The honest answer is an educated “don’t know.” But doing nothing is not an option. The person who asserts values but then stands for everything, stands for nothing. This is a big question you ask, not a little one, and it is a big testing moment for the EU, not a little one. Words of solidarity are important but second to acts of solidarity. Action speaks louder than words. Timing is also key. With Europe’s storage facilities currently full of gas, it is now easier to plan what to do next than, say, next November when it’ll be cold. I was a journalist when British labor unionist Arthur Scargill took on Thatcher in the coal strikes. The odd thing is, he took her on in the springtime, whereas the UK would only run out of energy supplies in the winter. Thatcher had six months to lock him down, lock him out and knock him out. And she did just that. The Russian budget receives some 28 percent of its revenue from taxes on energy sales. If it’s not selling, it’s not getting revenue and hitting its own budget. What goes around comes around, in every direction in this case. This month will see elections to the European Parliament. How do you think the rising popularity of anti-immigrant, euro-skeptic and, in some cases, far-right parties in countries like France, the UK, and the Netherlands will help shape out the pan-European polity in the coming years? Such parties exist, including in Poland: they are not new. The difference is we are after several years of a great recession. We have seen a rise in unemployment, a fall in investment, limited access to credit for SMEs, growing income inequality, growing numbers at risk of poverty and a growing distrust of banks and politicians. If ever there were fertile ground for such parties, it is now. Having looked at some election simulations, I believe the number of radical MEPs will be much higher after this month’s poll but not as high as some seem to expect. The non-attached group, which includes most euro-skeptics, could grow from 30 to 90 MEPs. The British UKIP will not be in that group nor will the British Tories or MEPs from Poland’s Law and Justice, who are all quite critical of Brussels. In effect, the squeezed middle will shrink from more than 80 percent to some 70 percent of the EP. And this 70 percent will somehow have to find it in itself to provide a qualified majority, meaning 50 percent plus 1 vote, on several major issues. Now while this 70 percent is broadly pro-European, there are differences between left and right. So after the elections, the challenge will be to mobilize a steady majority or settle for one legislation by legislation. We are definitely entering an intensely political period with intense bargaining, unchartered territory in a sense. You are a former journalist yourself, so how do you think we went from headlines proclaiming bankers had caused the crisis to “oh it’s the fault of the immigrants and all those bureaucrats in Brussels”? Regarding immigrants, it is a classic general rule that when people are down, they look for someone to kick lower down the food chain. If you can’t get an immigrant then you get a dog. Regarding bankers they were in the target-line in 2009 and 2010, and a lot has been done to address problematic issues in their industry. Regarding why the blame shifted to Brussels, it all first started in Europe with the Greek crisis, then the peripheral countries came into play, then we started wondering if the core wouldn’t be affected as well, countries like Italy. And so the problems seemed to emanate from the euro zone itself. However, we shouldn’t forget that it was the euro zone member countries which decided they wanted one currency but no singular fiscal policy. We created a big bird with one strong wing and one weak wing, and then we crash landed on the weak one. Has the euro zone crisis been resolved? The euro zone crisis has been contained but not resolved. We are still facing discussions over whether to introduce Quantitative Easing in the EU and if yes, what kind. One thing we can’t afford is to avoid structural reform. OECD studies show that if the EU were to adopt labor taxes at the lowest level in the G20 states, the EU as a whole could add 3.5 percent to its GDP. If you took best practice from EU countries which have adopted them, and apply across the board, you would add 6 percent to the euro zone’s output over a decade. Then there are the potential benefits of an EU-US trade agreement being reached. The way to grow is more likely in structural reform, QE is not sustainable. What we need are short to medium term lifts that are sustainable in the way pumping money is not. There is a schizophrenic attitude towards the EU in Europe. On the one hand, Europeans want it to act fast and decisively during a crisis. On the other hand, they do not want to give its institutions the powers it would need to do so. How does one resolve this paradox? That’s a very interesting point. Also when things go wrong in particular countries, national politicians blame it on Brussels, but when something works, then it’s a result of their native genius. But European institutions are only allowed to do what treaties agreed upon have given them power to do.