Short-term economic interests often trump long-term strategic ones. One man’s food is another man’s poison. These two phrases sum up European policy on a multitude of matters, including its foreign affairs and most domestic issues too.
Last week, just days before Chinese President Xi Jinping set foot in Italy to mark the beginning of his second European tour in the space of a few months, EU leaders, who were gathered in Brussels, issued a surprisingly strong statement outlining their new strategy toward China. Not known for its plain-speaking, the EU statement on Beijing was rather direct: China had to be dealt with differently. While acknowledging it as a major business partner, the EU also said that the Asian giant’s investments in the EU needed to be vetted closely to “safeguard the EU’s strategic interests.”
If Beijing was perturbed over such straight-talking, it did not show any signs of it. But the EU’s desire to put up a strong and united front against what it perceives to be Chinese “economic invasion” was a shambles. The bloc’s third-largest economy, Italy, became the latest EU member and the first G7 nation to sign up to the Chinese Belt and Road Initiative (BRI), by far the biggest and boldest Chinese economic initiative ever.
Italy had two reasons to break ranks with the rest of the community and join the Chinese bandwagon. Firstly, the current coalition government in Rome is one of the most strident critics of Brussels in Europe. The second and more pertinent factor behind Italy’s decision relates to the poor health of its economy. With a rapidly aging population, Italy has struggled terribly since the 2008 global financial meltdown. Its banking industry is in a mess, with several large bailouts already carried out in the last few months. Its recovery has been made more difficult by the stringent fiscal discipline imposed by Germany and other Northern European nations, while the country’s economy has long needed a looser fiscal policy to boost growth.
Italy’s ties with Germany have long suffered over this, as Rome blames Berlin for pushing its medicine down the unwilling throats of Southern European nations that have borne the brunt of the tight monetary policy. Adding to Italy’s woes is the migrant crisis that has swamped the EU due to the Libyan and Syrian civil wars. While many of those fleeing Africa and the Middle East entered Europe through Greece and Turkey, Italy has been on the receiving end of hundreds of thousands of migrants, especially those crossing the Mediterranean from Libya.
Even though Brussels is worried about getting swamped by Chinese behemoths, Europe has been unable to do much due to its own internal contradictions.
Ranvir Nayar
With a fair amount of justification, Italy feels that it has been abandoned by its fellow EU members and left to deal with the migrants on its own. France closed its Italian borders to migrants and pushed back the few who managed to cross the Alps. The French refusal to share the migrant burden has soured relations between Paris and Rome, and it has been all downhill since the formation of the latter’s stridently anti-EU coalition government last year.
Hence the Italian decision to hitch up to the BRI does not really come as a big surprise, even though it attracted a sharp rebuke from Germany. But, at the end of the day, each country’s perceived national interests take priority over what may be in the EU’s best interests. This means the Chinese have been able to advance their agenda in Europe, as Italy became only the latest, not the first, EU member to endorse the BRI, even though so far the big nations — Germany, France and the UK — have managed to stay away from the Chinese embrace.
As if to prize open the EU further, the Chinese very smartly catered to French economic sensibilities with a series of large commercial deals, notably a $34 billion order for Airbus aircraft, one of the proudest French exports. China has several such lucrative deals up its sleeve and will definitely use them to soften the opposition to its moves within the EU. Even though Brussels is worried about getting swamped by Chinese behemoths and the supposedly unfair treatment that China accords to foreign investors in its market, while seeking totally open markets for its own champions, Europe has been unable to do much due to its own internal contradictions.
A case in point is the decision by the European Commission’s Commissioner for Competition to block a merger between transportation giants Alstom and Siemens Mobility on the grounds of distortion of the EU’s internal market. Both the German and the French governments seethed with anger over the move as, for them, only by merging larger European firms can the EU prepare its own economic champions to take on Chinese and, in some businesses, American rivals. This is just one example. The EU abounds with numerous cases where, not just Brussels, but even member states keep their domestic markets closed to even other European firms, making a complete mockery of the single market. A stellar example has been the French opposition to opening its utility markets to Italian and other EU firms, despite having been penalized repeatedly by the European Commission for breaking the common market’s rules.
Moreover, the EU’s opposition to the BRI and the supposed Chinese economic hegemony stems from its own pecuniary interests rather than a general principled opposition. The French were clear, in their meeting with Xi, that they would not be so opposed to the BRI in Africa if French companies could also get a piece of the action. Xi is far too smart to be oblivious to this and will exploit the EU’s weaknesses to advance his agenda.
- Ranvir S. Nayar is managing editor of Media India Group, a global platform based in Europe and India, which encompasses publishing, communication, and consultation services.
