Germany’s Constitutional Court Ruling and the European Legal Order

In 2015, the European Central Bank (ECB) launched a massive quantitative easing plan, purchasing government bonds and other securities worth some €2.6 trillion in order to increase money supply, keep inflation at around 2%, encourage private lending and spur economic activity in the midst of the eurozone debt crisis. The largest part of the scheme, known as the Public Sector Purchase Program (PSPP), involved the ECB’s purchase of bonds issued by euro-area governments worth some €2.1 trillion. At the program’s peak in 2016, before it ended in 2018, the ECB was buying up to €80 billion of assets monthly.

On May 5 of this year, the constitutional court of the EU’s largest economy — the German Federal Constitutional Court (BVerfG) — issued a landmark ruling on this stimulus plan. In its judgement, the BVerfG expressed its concern that the PSPP violated the limits set in Article 123 of the Treaty on the Functioning of the EU (TFEU) regarding the purchasing of public debt instruments by the ECB, as well as the principle of conferral in Article 5(1) of the Treaty on EU (TEU), which declares that unless a power is explicitly mentioned in one of the two EU treaties, it should be exercised by national governments rather than an EU institution. Given these facts, the judgment ruled that the ECB’s decision from March 2015 to expand quantitative easing in the form of the PSPP was ultra vires, or beyond the authority of the ECB. It gave the ECB’s Governing Council three months to prove otherwise.

However, the ruling comes as a shock not so much to the ECB, but rather the European Court of Justice (ECJ) — which, under Article 263 of the TFEU, is tasked with interpreting EU law, ensuring is application across EU member states, and reviewing the legality of actions undertaken by the EU institutions. In December 2018, the ECJ issued its own ruling about the ECB’s quantitative easing program in response to similar concerns from Germany. The ECJ found that the ECB’s actions did not infringe EU law, nor did they exceed the ECB’s legal mandate. In the simplest of terms, since the program constituted monetary policy — over which the EU has exclusive competence for eurozone member countries — the ECB acted within its powers. And since the ECJ found that neither decreasing the volume of asset purchasing, nor the program’s duration, would have been able to achieve as effectively and rapidly inflation targets, the ECB’s actions adhered to the principle of proportionality in that they were legitimate, suitable, necessary, and reasonable to achieve the aim of keeping eurozone inflation at around 2%.

The European Court of Justice in Luxembourg (source: Die Zeit)

The BverfG disagreed with this, dismissing the ruling as “incomprehensible” and arbitrary. While acknowledging that the Treaties stipulate that only the ECJ may conduct ultra virus reviews on EU institutions, the German court held that the principle of conferral means that member states can judicially intervene when the threat of an expansion of competencies that has not been codified in one of two EU treaties exists. The ECJ’s failure to consider the fiscal effects of the ECB’s monetary actions and the proportionality of the PSPP justified the BverfG’s decision to rule that the ECJ, just like the ECB, had acted ultra virus.

Federal Constitutional Court in Karlsruhe, Germany (source: karlsruhe-erleben.de)

The ruling is important for several reasons. The first is the potential limits that it sets on actions that the ECB may take to prop up the eurozone during downturns such as the current coronavirus crisis. The ECB is currently engaged in a €1.35 billion Pandemic Emergency Purchase Program (PEPP) which involves the purchase of private and public sector securities to lower the cost of borrowing and prompt economic activity — a scheme that is similar to its response to the debt crisis five years ago. While the ruling explicitly says it doesn’t concern the ECB’s PEPP, it may result in a reduction of the ECB recession toolkit in future and the actions it allows itself to take during downturns. Within the context of Europe’s worst recession downturn, this may put recovery in jeopardy.

The second reason why the BverfG decision is important is the implications it has for the supremacy of EU law and the ECJ’s ability to ensure its uniform application throughout the Union. The May 5 decision is not the first time the German court has challenged the primacy of EU law and the authority of its top court. In 1974, the BverfG ruled that EU law — then known as European Community law — cannot take priority over national law when it comes to inalienable rights. In another case in 2016, the BverfG ruled that national courts must counter actions of EU institutions, including the ECJ, when those actions are ultra vires. Czech and Danish courts have reached similar rulings in the past. Some experts argue that these push-backs from national courts actually strengthen Europe’s legal landscape: given the ECJ’s power to sanction member states when their legislation violates EU law, in a system of checks and balances the ECJ should also be subject to constraints.

Yet others argue that the recent decision could lead to the erosion of the ECJ’s status as the highest arbitrator of EU law, with serious consequences for the enforcement of the rule of law in the Union. In response to the BverfG judgement, the ECJ issued a statement in which it stressed that it alone holds the power to rule whether an act of an EU institute contravenes EU law, and that “divergences between courts of the Member States as to the validity of such acts would … place in jeopardy the unity of the EU legal order.” Legal experts D. Sarmiento and D. Utrilla agree: they write that the decision “clears the way for the ultra vires test to become an ordinary part of the toolbox of every national court,” which could be leveraged by courts in countries like Poland and Hungary where the executive branch has implemented reforms compromising judicial independence.

The Polish government has previously criticized what it calls ‘EU meddling’ in its judicial system; after the BVerfG decision, Poland’s Deputy Minister for Foreign Affairs said that the judgement was revolutionary “in terms of the effects it could have [on] the competence of national authorities … to verify whether the EU institutions are acting within the powers assigned to them in the Treaties.” Should national courts assume the role of arbitrating the legality of decisions undertaken by EU institutions, any ECJ judgement that finds a member state violating EU law or attacking core EU values like judicial independence could be scrutinized and deemed ultra vires by a politically-controlled national court.

There are several ways to help prevent this scenario from unfolding. The first and most straightforward is the initiation of infringement proceedings, which are a set of actions the Commission undertakes when member states are suspected of violating the Treaties. Commission President Ursula von der Leyen, reacting five days after the BverfG decision, stressed that “the final word on EU law is always spoken in Luxembourg,” and that the Commission was considering such proceedings against Germany. In the long term, further steps proposed by some include the creation of a type of upper chamber within the ECJ to be tasked with reviewing national court judgements that, like the BVerfG ruling, find an EU institution to be overstepping its mandate. In this way, the ECJ would once again be the last arbitrator in all matters concerning EU law.

Europe needs an ECJ whose decisions are respected not only for the sound functioning of the single market, but increasingly for the enforcement of the rule of law in a number of member states. In an era of populism and pandemics, this is increasingly important. The Commission should take all actions necessary in order to maintain the ECJ’s authority — even if this means reforming the ECJ and pursuing an infringement procedure against one of the EU’s most Europhile members.

COVID-19: A Lesson on European Solidarity

The EU promotes solidarity as a fundamental part of policy in a myriad of areas. The term appears 11 times in the Treaty on the EU, which is also one of the bloc’s foundational documents. The European Commission in the past has stated that “solidarity is part of how European society works and how Europe engages with the rest of the world.” But while other cornerstones of the European project like economic integration can be measured by trade flows and cross-border workers, solidarity is harder to quantify. It is thus more difficult to evaluate whether the EU is living up to its promises. This task is nonetheless important, because the EU’s failure to do so could very well spell the end of the Union.

In the early days of the pandemic, EU members were criticized for not standing in solidarity with those harder-hit, like Italy and Spain: Germany issued export bans on medical equipment that was badly needed in Europe’s south while Poland and the Czech Republic closed off borders and temporarily suspended Schengen’s freedom of movement. This further hindered the flow of supplies between member states and stranded thousands of EU citizens trying to return to their home countries.

EU officials condemned these unilateral actions, appealing once again to solidarity: European Parliament President David Sassoli said in mid-March that “the rapid spread of COVID-19 shows that cooperation and solidarity are needed now more than ever” and “attempts to fight [the virus] alone will fail.” In response to the rising death toll in the early days of the crisis, the EU created a medical stockpile mechanism which continues to facilitate the quick delivery of equipment to member states and coordinated the repatriation of some 60,000 EU citizens from abroad, both as part of its Civil Protection Mechanism.

Two and a half months since Italy became the world’s first country to impose a nationwide lockdown, countries across the continent have begun to lift restrictions and reopen borders. Yet as life returns to the so-called “new normal,” it is clear that the pandemic’s “second wave” may not necessarily be a repeat tide of infections, but rather political and economic crises of monumental scale. Economists predict the EU’s GDP will contract -7.7% GDP this year (the downturn of the Great Recession in 2009 was ‘just’ -4.3%). Should this materialize, the European project may face a crisis of legitimacy greater than Brexit and the Eurozone crisis; the only way to circumvent this is for European leaders to agree on policies that put the ideals of solidarity encoded in the EU treaties to practice.

Actions in recent days across EU capitals give reasons to be hopeful. On May 18, German Chancellor Merkel and French President Macron, the leaders of the EU’s two largest economies, unveiled via videolink an ambitious proposal for the creation of a €500 bn EU “recovery fund” to facilitate economic rebuilding in a post-COVID Europe. Under this plan, the European Commission will borrow money and distribute it over three years to those countries hardest hit by COVID-19. Common borrowing in response to the crisis is the first step towards the greater fiscal integration that comes with raising common EU debt. Merkel herself acknowledged that the proposal was a “short-term response” and that “long-term solutions” included institutional reform at the EU-level.

President Macron (left) and Chancellor Merkel unveil their €500 bn EU “recovery fund” last week (source: Andreas Gora)

On May 27, the European Commission unveiled its own proposal echoing the Franco-German plan. In the €750 bn so-called Recovery Fund, which is equivalent to 5.3% of the EU’s GDP, the Commission is to borrow on the market — backed by the €1 trillion 2021-2027 EU budget — and then distribute the funds to those hardest hit. €500 bn of the promised €750 bn will be grants, while the other €250 bn are expected to be loans. The grants will need not be repaid, and the debt raised will be paid by EU members over decades, in proportion to their contribution towards the EU budget. Thus, a country like Spain which will be the EU’s 4th largest donor in the 2021-2027 EU budget, but which was hard-hit by COVID-19, should expect to receive significantly more from the EU’s Recovery Fund than it contributes.

Interestingly, another mechanism through which the Recovery Fund will be financed is the creation of new revenue streams for the Commission, including environmental taxes or levies on multinationals. The Recovery Fund comes on top of €540 bn pledged by the Commission in April as part of the European Stability Mechanism. These funds are conditional on macroeconomic reforms and investments aligned with EU priorities, such as green energy or digitization.

Commission President von der Leyen unveils Europe’s €1 trillion recovery plan at the European Parliament in Strasbourg on May 27 (source: Euroactiv)

The stimulus package proposed last Wednesday requires unanimous approval from the EU’s 27 member states. Several have already expressed reservations: Austria, the Netherlands, Denmark, and Sweden publicly announced their opposition to mutualized debt, and instead are pushing for aid exclusively in the form of loans and conditional on investment in certain sectors, similar to the European Stability Mechanism. Other EU members like the Czech Republic and Hungary are also reportedly in favor of loans rather than grants for Europe’s recovery. Negotiations will inevitably water down the current proposal.

But the gravity of the current situation means that now is not the time for financial frugality. The Corona crisis threatens to drive a further wedge between Europe’s north and south. Southern European states have been harder hit by the pandemic and will be more affected by the economic downturn. Spain and Italy have had the highest infection and death toll numbers, while border closures and quarantine measures will mean a dramatic fall in revenues from tourism — an important component of their economies. Their industries have also been harder hit, with factory closures lasting longer than in most northern nations.

At the same time, Europe’s south has the weakest fiscal instruments to tackle the economic fallout, with some of the highest debt-to-GDP ratios and costs to borrowing. The inability of these countries to enact domestic stimuli that increase consumer confidence will increase the intensity of the economic downturn. As a result, it is expected that Spain and Italy’s GDP in Q4 of 2021 will be 7.7% and 9.2% lower than in Q4 of 2019, respectively; the corresponding value for Germany is lower, at 2.5%.

A correction for the ‘two-speed’ European recovery in the form of grants is needed if Europe is to remain committed to its promise of solidarity. However, this does not mean that countries should be given complete free rein in their use of the recovery funds. Some level of oversight and coordination must be undertaken in order to ensure that money spent is aligned with the strategic goals outlined in Commission President von der Leyen’s Agenda for Europe, including furthering Europe’s Green New Deal and its push for digitalization and technological innovation.

Funds should also be conditional on rule of law adherence. Many countries implemented states of emergency to combat coronavirus in the early days of the pandemic. For example, the Hungarian parliament approved legislation allowing its Prime Minister Viktor Orban to rule by decree indefinitely. The European Parliament in April issued a statement saying such actions were “incompatible with European values” of democracy, while Commission President von der Leyen expressed “concern.” Recovery funds may therefore act as a powerful mechanism towards enforcing adherence to democratic principles — something that the EU has lacked so far.

The leader of the Socialists and Democrats in the European Parliament, Iraxte Garcia Perez, said last week that recovery “is not only a matter of solidarity,” but a matter of “survival.” With support for the EU falling in states that have traditionally been pro-European, bold action in aiding the Corona recovery will not only ensure that Europe survives, but will also galvanize enthusiasm for the European project and set it on a course towards a future that is greener, more democratic, and more integrated than ever before. And that is something worth fighting for.

John Mourmouras, Deputy Governor of the Central Bank of Greece, Talks Euro and the North-South Divide

Written by Lyubomir Hadjiyski

John (Iannis) Mourmouras is Deputy Governor of the Bank of Greece with responsibilities pertaining to the implementation of monetary policy, global capital markets, payment and settlement systems, and bank resolution. He is also Chairman of the Bank’s Financial Asset Management Committee.  He served as Deputy Finance Minister of Greece (2011-2012) and was Chief Economic Advisor to the Greek Prime Minister, as well as Head of the Prime Minister’s Economic Office (2012-2014). He is Professor of Macroeconomics at the Department of Economics, University of Macedonia – Thessaloniki, Greece, and has previously held academic positions at a number of British universities. He holds a PhD from the University of London and is a graduate of the London School of Economics (LSE).

John Mourmouras spoke to Princeton students and faculty today on the topic of the Euro — the common currency of the European Union. He highlighted the currency’s achievements and drawbacks in the 21 years since its implementation, and his predictions for the opportunities and challenges that lie ahead.

The two decades of the Euro can roughly be split into two, each with its own distinct characteristics. The first, from the introduction of the currency in 1999, ended in 2008 with the global financial crisis. During this time, the Euro emerged as the world’s second reserve currency behind the US Dollar — a position it still holds today. The second period, from 2009 to 2019, was marked by ten years of European economic turmoil that hit Southern countries particularily hard. During this time, four EU member countries participated in EU bailout programs — included Greece, Portugal and Cyprus — while the European Central Bank (ECB) engaged in unconventional monetary policy like setting negative interest rates and engaging in quantitative easing.

However, the North-South divergence existed far before the Eurozone crisis. In the ten years after the 1999 introduction of the Euro, North European countries saw, on average, a 30% increase in their GDPs. For Southern Europe, this number was closer to 10%. Indeed, the split between the North and South appears to be chronic, and largely due to three reasons. The first is historic differences in unemployment rates: while some countries like Spain have a long-term unemployment rate of 12%, most Scandinavian countries hover around 5%. This means that potential output is lost in Southern European countries. Second, labor and total factor productivity is significantly lower in the South. Third, asymmetries in incomes have arisen due to lower wages and stricter austerity measures in the South, which has also impacted consumption. All in all, the North-South divide has widened since 2009, which poses a substantial challenge to the unity of the EU.

There are several lessons to be learned from the Eurozone crisis, the most important of which is that the sovereign debt crisis was not inevitable: the existence of a common fiscal authority (in addition to the common monetary authority in the face of the ECB) would have lessened the impact of the crisis by formulating a common fiscal response in both prior and after the Eurozone crisis. National governments failed to use fiscal and other policies to manage the credit boom of the early 2000s, and subsequently relied on excessive austerity to manage the crisis. Further, the ECB was too slow in moving towards unconventional policies like quantitative easing, all of which prolonged recession.

There are several challenges that lie ahead. Among the greatest are what role, if any, the ECB will take with regards to Climate Change. While some, including ECB President Lagarde, argue for an active role, the question remains whether this is within the purview of the institution. Second, the emerge of digital currencies will bring multiple difficulties and opportunities, and Central Banks all over the world will have to contend with tech giants and corporations that control these alternative currencies. Finally, Europe’s populist wave may threaten both the unity of the bloc and the ability of the ECB to make independent, technocratic decisions; the prospect of politicizing the institution is real and dangerous.

The Euro’s 21-year history has been eventful. However, Mourmouras argued that this is the natural evolution of monetary unions — after all, the United States only established its Federal Reserve more than 100 years after independence. The Euro is a global currency: it remained strong throughout the debt crisis and is here to stay. Whether it will overtake the US dollar, continue to be the world’s second reserve currency, or lose this title to the Yuan depends on political will and smart policy.

The EU and Turkey: event with Mario Zucconi, author of ‘EU Influence Beyond Conditionality’

Written by Riccardo Talini Lapi

Mario Zucconi studied at the universities of Perugia and Palermo, Italy. In 1968-1970 was a postdoctoral fellow at Princeton University with a Harkness Fellowship. He then taught or was a guest/research fellow, among other places, at Naples University, Urbino University, Johns Hopkins’ SAIS (Bologna Center), NATO Defense College, Columbia University, University of Maryland (College Park), Woodrow Wilson International Center for Scholars. He taught (as visiting professor and later lecturer) at Princeton’s Woodrow Wilson School of Public and International Affairs first in 1987 and then regularly from 2003-04 to 2017-18. He led research projects for the Italian Ministries of Defense and Foreign Affairs and was, on several occasions, expert witness at hearings of the European Parliament and at UN’s consultations. His research has focused on transatlantic relations, East-West relations, the Balkans, Turkey and the Middle East and, most recently, on democratic transition.

Professor Zucconi came to present his new book “EU Influence Beyond Conditionality: Turkey Plus/Minus the EU.”  Professor Zucconi tries to fill the gap in the literature on EU conditionality, which rarely looks at what happens within the target country and focuses too often on normative problems, rather than political conditions. His research centered on analyzing the difference in Turkish domestic politics before and after the start of the accession talks to the EU.  Professor Zucconi’s thesis is that EU enlargement can bring peace and stability, and the case of Turkey proves it.

Turkey became candidate country to the EU in 1999, after years of political instability and military rule. In 1995 there were a dozen parties in Turkey, of which 6 represented in parliament. The Welfare party, the Islamist party, became the leader of government, but in 1997 the secularist military staged a coup and took over. By the turn of the century, the EU had become the “substitute authority” Turkish people looked upon for hope and direction. The Islamist AKP, born from the ashes of the Welfare and the Virtue parties, the party still ruling today, adopted EU conditions as their official political platform at the 2002 elections. In 2002, the AKP won over 2/3 of seats in parliament, and was thus able to govern without coalition partners. This victory did not only come about because of the mass migration of the rural population to the cities, but mainly because Islamist was the first alternative to authoritarianism. The periphery was, in fact, emancipating itself through the process of migration and political participation in the cities. By 2001, over 75% of the Turkish population favored being part of the EU. The popularity of the EU could not even be stopped by the military, whose chief of staff declared in 2003 that the military would respect the people’s democratic decisions. This positive cycle was reinforced in 2004, when formal negotiations to enter the EU began.

A staff adjusts European Union and Turkish (L) flags ahead of the arrival of Turkey’s Prime Minister Tayyip Erdogan (not pictured) at the EU Commission headquarters in Brussels January 21, 2014. REUTERS/Francois Lenoir

However, in the same year, Cyprus joined the EU thanks to Greek pressures and the Cypriot question became the scapegoat to suspend the accession talks in 2006. As Professor Zucconi noted, perhaps Europe was not ready to accept a majority Islamic country in the Union and to have borders with Iran and Syria. Yet, he thinks that Turkey would have been a strategic member for the EU, as much if not more than the UK as he was once told in Brussels. In 2006, Europe disappeared from Turkish domestic politics, while the AKP has remained in power under Erogan’s leadership. Without the EU, Turkish politics went back to the polarization between secularism and Islamism, with the latter succeeding in the creation of an authoritarian regime under Erdogan’s leadership. The Islamists used the military’s own methods to construct a regime where the links with Europe would progressively disappear.

Today, Turkey is still ruled by Erdogan’s AKP and it has redirected most of its trade and political network from the EU to the Middle East. It is playing an aggressive role in the eastern Mediterranean and is far from the stabilizing Middle Eastern power it used to be in the 1990s and early 2000s. The case of Turkey teaches us that the EU enlargement process should be reformed, and conditionality should be tailored to the domestic politics of the target country to ensure successful entry into the EU.

Pipeline Politics: Europe, Russia, and Energy

Written by Lyubomir Hadjiyski

This article originally appeared in Business Today on December 10, 2018.

One doesn’t have to read the news to know that relations between Russia and the West are the frostiest they’ve been since the Cold War. Disagreements over Crimea, Ukraine, Syria, nuclear missile treaties, and a myriad of other topics have increasingly strained ties between Moscow on one side, and Washington and Brussels on the other. While it is usually easy to distinguish where Russia and the West stand on many issues, the line becomes blurred when addressing the energy market. The reason is simple: basic economics take precedence over complicated geopolitics.

Europe relies on Russia for its natural gas and oil needs. The European Union imports 67% of its natural gas from abroad, and Russia makes close to 40% of those imports. In 2016, around 30% of the EU’s total oil imports came from Russia. The share of imported Russian crude oil and gas imports are even higher in certain countries. A network of intricate gas pipelines ensure a constant flow of Russian gas from the northern and eastern parts of the country to consumers and businesses in Europe. While the EU has been importing gas from Russia for decades, it is the construction of yet another pipeline that is causing controversy.

The new pipeline is called Nord Stream 2. It will pump natural gas from the world’s largest reserves, located in Russia, to the EU through a pipe network under the Baltic Sea connecting Russia directly with Germany. Running parallel to the existing Nord Stream pipeline, which was built in 2011, Nord Stream 2 can double its existing capacity. Further, Europe’s gas production, which is currently concentrated in the Netherlands, Norway, and the United Kingdom, is expected to decrease in future as North Sea gas runs out; Nord Sea 2 aims to fill the gap between decreasing supply and steady demand by supplying Russian gas in a cost-efficient way. Indeed, the shorter route of Nord Stream 2 provides for cheaper transportation costs, and the promoters of the pipeline predict that it will lower European gas prices by some 32%.

Existing and planned pipelines. Source: The Economist

“Critics worry that expanding the combined capacity of the two Nord Stream pipelines to 110 billion cubic meters of gas per year will only increase Europe’s reliance on Russia for its energy needs.”

Most importantly, the project would bypass Ukraine as a transit country for Russian gas. The political relationship between the two countries has been difficult in recent years, to say the least, but their energy partnership has been strained for, arguably, an even longer time. A substantial portion of Russian gas flowing to Europe—around 80% in 2009—travels through Ukraine first. When Russia stopped the flow of gas over price disputes and Ukraine’s outstanding debts in the winters of 2006, 2007, and 2009, European consumers were affected, too. A pipeline like Nord Stream 2 circumvents this problem, and, in theory, ensures non-stop access to Russian gas without having to rely on cooperation and agreement between Russia and Ukraine.

But that’s not the end of the story; there are other reasons why Nord Stream 2 remains controversial. Critics worry that expanding the combined capacity of the two Nord Stream pipelines to 110 billion cubic meters of gas per year will only increase Europe’s reliance on Russia for its energy needs; this dependency, they argue, is dangerous in a time when relations between Russia and the West are especially heated. President Trump, in July 2018, criticized the paradox of Germany being “captive to Russia” by importing too much energy from Russia while also participating in the NATO alliance—the aim of which is to counter threats from that very same country.

The United States has been the most vocal critic of the project. Its logic is that by possessing such a key stake in Europe’s energy market, Russia could hold the continent hostage and cut off supplies if it wishes to do so. Further, Nord Stream 2 would circumvent Ukraine and therefore deprive it of $2 billion in valuable transit fees each year; this money is a valuable income source for the Ukrainian government—a US and EU ally. It is apparent that Nord Stream 2 is deeply divisive and is creating disagreements not only between Russia and the West, but also between the US and its partners in Europe.

So what does the United States propose? First is legislative action. A bill introduced in Congress back in July 2018 aims to impose sanctions on Russian firms and individuals involved with large-scale energy projects. The bill would also target firms partnering with Russia, such as those involved in Nord Stream 2. This course of action would affect Western companies based in key US allies like Germany, which would no doubt worsen relations between the US and the EU at a time when the Trump Administration has already put this relationship under significant stress. It would also alienate Europeans, and would increase the perception that the United States is opposing Nord Stream 2 because it wants to push its own energy agenda.

This introduces the second proposed American course of action: exporting more of its own LNG—or liquified natural gas—to the European Union. LNG is gas that has been cooled down to liquid form for easier transportation and handling before it is reheated for consumption. This process is both tedious and expensive, but countries like Poland and Lithuania have already constructed LNG terminals on their coasts to receive shipments of gas from the United States, thereby diversifying their energy supply. While critics of the US agenda argue it is only pursuing its own interests, proponents assert that the EU also stands to gain from diversifying where it gets its natural gas from.

Simple economics, rather than complicated geopolitical maneuvering, reveal that American LNG is not a viable solution to Europe’s energy needs. Pipeline gas is some 25% cheaper than LNG imports, making the latter economically inferior to the former. The US argues that a steeper price tag is justifiable given the potential for Russia to blackmail the EU by cutting off its gas supplies. However, Moscow needs Western payments as much as the West needs Russian gas, and stopping, or even reducing, the gas flow towards Europe would harm Russia financially. Further, since LNG is still a relatively new US export, America doesn’t yet have the production and export facilities required to meet Europe’s large demand of over 120 billion cubic metres a year by 2035. Even if the EU did move in the direction of American gas, it would face severe supply shortages.

The topic of the EU’s imports of Russian gas and oil will continue to remain an issue in the future. The German government has maintained that energy policy must be “entirely left to commercial actors,” thereby stripping Nord Stream 2 of any political significance and prioritizing economic considerations over political ones. The United States takes the reversed stance, urging EU countries to prioritize politics over economics (even if it means buying more expensive American gas). It is clear that energy has become a point of major contention not only between Russia and the West, but among Western nations, too. It is also evident that a new theater of disagreement and competition has opened up, alongside an already long list of points of contestation. For the time being, however, no other viable solutions are on the table; the gas must keep flowing.

Meet the team

Academic Year 2020-2021

PRESIDENT

Angela Maria De Santis is a sophomore from Italy and a Political Economy major. She is pursuing Certificates in Statistics and Machine Learning, Finance and European Politics. Angela is deeply engaged with EU challenges and transatlantic relations, with a particular focus on EU-US trade agreements, human rights and social justice.

Lyubomir Hadjiyski is a senior from Sofia, Bulgaria concentrating in the Woodrow Wilson School with a certificate in Russian, East European, and Eurasian Studies. He enjoys writing about all things Europe, especially EU foreign policy and energy issues.

Riccardo Talini Lapi is a senior from Italy studying Economics with certificates in Finance and Political Economy. He follows closely EU economic policy and industrial policy. 

Alexandra Veyne is a senior from France but living in Nevada, majoring in Near Eastern Studies with a concentration in Security Studies. She is interested in EU foreign and security policy as it pertains to the Greater Middle East. 

The Futures of Nuclear Europe: event with Dr. Sebastien Philippe (Princeton University, Program on Science & Global Security)

Written by Lyubomir Hadjiyski

Dr. Sébastien Philippe is an Associate Research Scholar at the Woodrow Wilson School of Public and International Affairs where he is a core member of the Program on Science and Global Security. His research focuses on the negotiation, monitoring and verification of nuclear arms control and non-proliferation agreements, the reconstruction of past nuclear weapon activities, and the impact of emerging technologies on the safety, security, and vulnerability of strategic nuclear forces. Dr. Philippe spoke to students and scholars about the security challenges Europe faces –particularly in relation to nuclear weapons.

Two recent events on the international scene have caused European leaders to reevaluate their strategic security. In 2018, the United States withdrew from the Joint Comprehensive Plan of Action and imposed sanctions on companies–including European ones–who dealt with Iran. This year, the United States also withdrew from the Intermediate-Range Nuclear Forces Treaty with Russia, which was signed during the Cold War and banned the two countries from developing and deploying short- to medium-range nuclear warheads. With these two pillars of European nuclear security eroded, EU leaders have started to re-evaluate their perception of the United States as a predictable power dedicated to European security, and are beginning to seek alternative options.

We may be experiencing the “erosion and near collapse of arms control,” said Dr. Philippe in reference to recent US withdrawals from nuclear treaties.

Dr. Philippe laid out several scenarios for the future of European nuclear security. The first and most obvious is a “business as usual” scenario, whereby European countries continue relying on the US for their security, accept their inherent nuclear vulnerability, and rely on change in the current administration and its policy towards Europe in 2020.

The second option is what he calls “pursuing strategic autonomy,” which is also what French President Emmanuel Macron hinted at in his widely-circulated ‘The Economist’ interview in which he called the US-backed NATO security alliance “brain-dead.” What this option entails is building up joint military capabilities within the European Union, as opposed to NATO. Two EU members, France and Britain, possess a nuclear arsenal, but in a post-Brexit Europe, France will remain the only nuclear power. Strategic autonomy may mean that that French nuclear weapons will be stationed in EU member states and be shared by the bloc. This scenario, Dr. Philippe, says is currently unlikely due to three reasons: the French nuclear weapon is highly dependent on the United States’, such a deployment may have too little democratic legitimacy, and it is unclear who will foot this bill.

The third option is somewhere in between, but nonetheless involves re-evaluating the EU-US relationship. What is perhaps most worrying is that current US foreign policy and security decisions seem to be less of an anomaly connected to the current US President Donald Trump and more of a tendency among wider political circles. Regardless of where European security heads in the future, one thing is certain: EU citizens must be consulted, or else the bloc risks loosing even more of its democratic credibility.

About Us

We set up European Horizons at Princeton because there was a niche on campus that needed to be filled. Students with academic interests in the European Union could pursue them through their studies, but not through extracurriculars. European Horizons bridges that gap, and allows students to critically engage with EU policy that is relevant to its citizens, but also to the United States and the world at large.

The European Union is undoubtedly the United States’ most important economic, military, and diplomatic partner. Together the two make up some 60% of global GDP, and trade between them constitutes 33% of world trade in goods and 42% of world trade in services. All but six EU member states, as well as the US, are part of the North Atlantic Treaty Organization, which is the world’s largest military alliance  founded with the aim of safeguarding democratic values through security cooperation. In today’s world, the US and the EU are the most vocal advocates of democracy, freedom, and rule of law.

European Horizons at Princeton aims to strengthen this “special relationship.” We are part of the wider European Horizons family–a global, student-led policy incubator whose mission is to give young people a voice in shaping the future of Europe and of transatlantic relations. Fundamentally, we believe in two things:

    1. Good relations and close cooperation between the EU and the US are in the common interest of both parties;
    2. A strong and unified Europe–one that is ready and willing to act as a global leader–is in the interest of the entire world.

Our mission is thus dedicated to critically analyzing EU policy, its implications, and its effects on ​the European Union itself, but also on its relations with the US and the rest of the world. We will be publishing articles pertaining to the EU, as well as coverage of events organized by Princeton’s European Union Program. We’re excited to see where this will go, and we’re so glad you’ve joined us on this journey!