Geopolitics

In Europe, Subtle Signs Of A Softening On Putin's Russia

There are still plenty in the European Union taking a hardline against the Kremlin. But a counter bloc is emerging from the corridors of the European Parliament.

Putin in Svtiltsa, Russia, on Jan. 19
Pavel Tarasenko and Yegor Fedorov

MOSCOW — European leaders continue to accuse Russia of spreading disinformation, with a recent European Parliament forum billed as a probe into the "efficiency" of Moscow's propaganda efforts. But the Jan. 17 debate also featured some members of Parliament who defended Russia, blaming Brussels for restricting freedom of speech and accusing Western countries of "paranoia."

In light of evolving positions in Europe about the issue, several Russian experts told Kommersant they do not foresee new restrictions of European policy in regards to Moscow.

The point of view of most of the European deputies has not changed since November 2016, when the European Parliament adopted a resolution charging Russian authorities with using "a wide range of mechanisms and tools, such as think tanks, foreign language channels, pseudo-information agencies and multimedia services, social networks and Internet trolls to attack democratic values, to divide Europe and make it seem like the EU's eastern neighbors have adopted a failing approach."

In the Jan. 17 debate European member of Parliament from Lithuania, Petras Aštryavičius, warned his colleagues: "Bots and trolls factories are at the service of Russian authorities 24-7, so this subject should not only come up in our discussions during presidential campaigns."

Danish Social Democrat Jeppe Kofod added: "Russian interference with elections is becoming the norm," citing Latvia, Lithuania, Estonia, Spain, Hungary, Bulgaria, Italy, Germany and the UK as Russia's "victims."

Most of the false information is not illegal.

There is still no single approach to what is to be considered disinformation. The first meeting of the high-level expert group established by the European Commission was set up in Brussels on Jan. 15 to counter the spread of false information on social media and traditional networks. This group will have two more meetings before publishing a report on disinformation in April. One of the key tasks of the group is to create a definition of "false information."

As explained by the European Commissioner for Digital Economy Maria Gabriel: "most of the false information is not illegal," and therefore its dissemination does not violate the legislation of the European Union.

The Russian authorities have repeatedly denied wrongdoing, or any violation of European norms. For example, the Russian Foreign Minister Sergey Lavrov claimed that leaders of some European countries are using "unfounded rhetoric about Russian propaganda and hybrid threats' in order to justify their actions that violate basic democratic principles. On Jan. 15 at a press conference on the results of the year, Lavrov condemned "the attitude towards RT, Sputnik in the U.S. and France", as well as "the expulsion of Russian journalists and the shutting down of Russian channels in Moldova, Ukraine, Latvia and other countries."

At this month's debate in the European Parliament, such a position got some unexpected backing. Estonian MP Jan Toom said: "In my childhood, asking who is to blame, I always heard one thing: Western capitalism and Ronald Reagan. Now I constantly hear that everything is personally Vladimir Putin"s fault. I cannot agree with such a black-and-white approach."

Do not shift blame.

UK's Gerard Batten urged his colleagues "not to shift the blame for their own mistakes on Russia." He accused European politicians of wanting to distract citizens of their countries from serious problems like uncontrolled migration and the stagnation of the Eurozone. "Putin is not the reason for your unpopularity, you are," said the deputy getting applause from a number of his colleagues.

"People simply repeat the mantra that they have some evidence of Russia supporting Catalan separatists. But do they really? This is half-paranoia, half a political strategy aimed at preventing good relations with Russia," said the Spanish member of the European Parliament, Javier Couso Permuy, who occasionally appears on RT.

Other methods of countering Russian policies such as sanctions were also discussed during the debate. The first sanctions were introduced by the European Union in March 2014 in connection to the referendum in Crimea. Then, as the conflict started in Donbass in eastern Ukraine, a new package of restrictive measures arrived. In December, German Foreign Minister Zigmar Gabriel announced the possibility of lifting sanctions step by step as the Minsk agreements on Donbass were implemented. However, restrictive measures were instead extended again, now until July 31.

George Zakman, an expert on Moscow-European relations, told Kommersant that mutual sanctions of the Western countries and Russia have not caused the EU any serious damage until now. It "only lost 0.03% to 0.05% of GDP." At the same time, the expert warned about the risks associated with a new set of sanctions as it is being actively discussed in Washington. According to Zakman, damages for both sides would be especially significant if new restrictions affect the energy sector.

Business representatives also noted their worry about economic tensions between Russia and the West. "We do not support the idea of ​​imposing further sanctions by the EU and the U.S., as they will only bring new losses to both sides and intensify the confrontation, which in turn will impede with the search for a solution to the conflict," said Michael Harms, managing director of the German Committee on Eastern European Economic Relations.

For now, new anti-Russian sanctions do not appear to be on the EU agenda. Fredrik Veslou, director of the "Greater Europe" program of the European Council for Foreign Relations, argues that the current regime of anti-Russian sanctions "fully reflects the fragile balance of views in the EU towards Russia between the "hawks' and the "doves."" Tipping that balance could ultimately play into the hands of the hawks.

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Economy

Merkel's Legacy: The Rise And Stall Of The German Economy

How have 16 years of Chancellor Angela Merkel changed Germany? The Chancellor accompanied the country's rise to near economic superpower status — and then progress stalled. On technology and beyond, Germany needs real reforms under Merkel's successor.

Chancellor Angela Merkel looks at the presentation of the current 2 Euro commemorative coin ''Brandenburg''

Daniel Eckert

BERLIN — Germans are doing better than ever. By many standards, the economy broke records during the reign of outgoing Chancellor Angela Merkel: private households' financial assets have climbed to a peak; the number of jobs recorded a historic high before the pandemic hit at the beginning of 2020; the GDP — the sum of all goods and services produced in a period — also reached an all-time high.

And still, while the economic balance sheet of Merkel's 16 years is outstanding if taken at face value, on closer inspection one thing catches the eye: against the backdrop of globalization, Europe's largest economy no longer has the clout it had at the beginning of the century. Germany has fallen behind in key sectors that will shape the future of the world, and even the competitiveness of its manufacturing industries shows unmistakable signs of fatigue.

In 2004, a year before Merkel was first elected Chancellor, the British magazine The Economist branded Germany the "sick man of Europe." Ironically, the previous government, a coalition of center-left and green parties, had already laid the foundations for recovery with some reforms. Facing the threat of high unemployment, unions had held back on wage demands.

"Up until the Covid-19 crisis, Germany had achieved strong economic growth with both high and low unemployment," says Michael Holstein, chief economist at DZ Bank. However, it never made important decisions for its future.

Another economist, Jens Südekum of Heinrich Heine University in Düsseldorf, offers a different perspective: "Angela Merkel profited greatly from the preparatory work of her predecessor. This is particularly true regarding the extreme wage restraint practiced in Germany in the early 2000s."

Above all, Germany was helped in the first half of the Merkel era by global economic upheaval. Between the turn of the millennium and the 2011-2012 debt crisis, emerging countries, led by China, experienced unprecedented growth. With many German companies specializing in manufacturing industrial machines and systems, the rise of rapidly industrializing countries was a boon for the country's economy.

Germany dismissed Google as an over-hyped tech company.

Digital competitiveness, on the other hand, was not a big problem in 2005 when Merkel became chancellor. Google went public the year before, but was dismissed as an over-hyped tech company in Germany. Apple's iPhone was not due to hit the market until 2007, then quickly achieved cult status and ushered in a new phase of the global economy.

Germany struggled with the digital economy, partly because of the slow expansion of internet infrastructure in the country. Regulation, lengthy start-up processes and in some cases high taxation contributed to how the former economic wonderland became marginalized in some of the most innovative sectors of the 21st century.

Volkswagen's press plant in Zwickau, Germany — Photo: Jan Woitas/dpa/ZUMA

"When it comes to digitization today, Germany has a lot of catching up to do with the relevant infrastructure, such as the expansion of fiber optics, but also with digital administration," says Stefan Kooths, Director of the Economic and Growth Research Center at the Kiel Institute for the World Economy (IfW Kiel).

For a long time now, the country has made no adjustments to its pension system to ward off the imminent demographic problems caused by an increasingly aging population. "The social security system is not future-proof," says Kooths. The most recent changes have come at the expense of future generations and taxpayers, the economist says.

Low euro exchange rates favored German exports

Nevertheless, things seemed to go well for the German economy at the start of the Merkel era. In part, this can be explained by the economic downturn caused by the euro debt crisis of 2011-2012. Unlike in the previous decade, the low euro exchange rate favored German exports and made money flow into German coffers. And since then-European Central Bank president Mario Draghi's decision to save the euro "whatever it takes" in 2012, this money has become cheaper and cheaper.

In the long run, these factors inflated the prices of real estate and other sectors but failed to contribute to the future viability of the country. "With the financial crisis and the national debt crisis that followed, economic policy got into crisis mode, and it never emerged from it again," says DZ chief economist Holstein. Policy, he explains, was geared towards countering crises and maintaining the status quo. "The goal of remaining competitive fell to the background, as did issues concerning the future."

In the traditional field of manufacturing, the situation deteriorated significantly. The Institut der Deutschen Wirtschaft (IW), which regularly measures and compares the competitiveness of industries in different countries, recently concluded that German companies have lost many of the advantages they had gained. The high level of productivity, which used to be one of the country's strengths, faltered in the years before the pandemic.

Kooths, of IfW Kiel, points out that private investment in the German economy has declined in recent years, while the "government quota" in the economy, which describes the amount of government expenditure against the GDP, grew significantly during Merkel's tenure, from 43.5% in 2005 to 46.5% in 2019. Kooths concludes that: "Overall, the state's influence on economic activity has increased significantly."

Another very crucial aspect of competitiveness, at least from the point of view of skilled workers and companies, has been neglected by German politics for years: taxes and social contributions. The country has among the highest taxes on income in Europe, and corporate taxes are also hardly as high as in Germany anywhere in the industrialized world. "In the long run, high tax rates always come at the expense of economic dynamism and can even prevent new companies from being set up," warns Kooths.

Startups can renew an economy and lay the foundation for future prosperity. Between the year 2000 and the Covid-19 crisis, fewer and fewer new companies were created every year. Economists from left to right are unanimous: Angela Merkel is leaving behind a country with considerable need for reform.

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