A Conversation on the EU-Eurozone Divisions
Video Transcript:
Editor’s Note: Transcripts are generated using speech-recognition technology. Therefore, Stratfor cannot guarantee their complete accuracy.
Video Transcript:
Eugene Chausovsky: Hi, I'm Eugene Chausovsky and I'm here with Europe analyst Christoph Helbling to discuss eurozone integration. Christoph, in our analysis we break down the current efforts at integration within the eurozone. How do you see these efforts evolving in the coming months?
Christoph Helbling: I think it's important to highlight that the eurozone will be kind of running on two tracks in the coming months. On the one hand, they'll be managing the financial crisis in the short term with the tools they have created. We'll see social discontent in peripheral states like Spain, Greece and Portugal. And as you point out, the eurozone will be discussing longer-term integration efforts. Now, in October/November they'll be discussing, first, proposals. This does not mean anything concrete is going to be decided, but they will be discussing forming a banking union to have stricter oversight over the banks in the eurozone in order to allow for direct bailouts of troubled banks. They will also be discussing forms of fiscal integration that will take several years, political integration will be proposed by some countries. So those are kind of the three broad themes that the eurozone will be discussing in the coming months.
Eugene: And one of the main trends that we've identified is a growing division between those countries that are in the eurozone and the EU countries that are outside of the currency bloc. Can you address some of those issues for us?
Christoph: As you say, the eurozone is seeing deeper integration and it is currently just a currency union but this will change with these integration efforts, and the countries outside the eurozone have to decide how to position themselves toward this evolving group. Some countries I would pick that are worth highlighting the U.K., Poland and Hungary.
Eugene: The U.K. is one of the most outspoken critics of things like the banking union that's been brought up. What's London's broader strategy towards the eurozone?
Christoph: I think London on the one hand seeks European integration to ensure that there's no strong Continental bloc that could threaten the country. But on the other hand it doesn't want to give up sovereignty in order to be part of this deeper integration effort, and therefore it is being continuously sidelined. We saw this with the fiscal compact last year when the U.K., together with the Czech Republic, stayed out of the fiscal compact while the other 25 EU countries all participated in the strong fiscal integration efforts. So London will become less relevant in the decision-making process regarding eurozone issues, and regarding EU efforts to overcome the crisis in general. And I think we will also see London sometimes trying to block these integration efforts when it sees it is getting too dangerous for the country's, for example, financial sector.
Eugene: Another important country to watch in all of this is Poland, which has actually seen growth throughout the financial crisis -- one of the few European countries to have done so. And, just like the U.K., they are outside of the currency bloc. But in terms of Poland, it's an interest country to watch in that its enthusiasm to join the eurozone has really tampered down in the last couple of years. They were on track previously to join and now we're seeing statements out of the top government officials that they're basically in a wait-and-see mode, that they don't currently feel comfortable with proceeding with accession, as they don't know exactly how the eurozone crisis and how all of these integration efforts like the banking union will play out. And they also, just the U.K., have problems with not having a big voice at the table when it comes to the decision-making on the banking union but still having to abide by its rules. So that's should be a country to watch in the coming years.
Christoph: I guess where I would differentiate a bit though from the U.K. is that with Poland's geographic location it is more inclined to be part of these integration efforts as they go along. It doesn't want to be wedged between a strong power to its west and to its east, so we do see that Poland is less hesitant than the U.K. to be involved in these talks. For example, they've joined the fiscal compact, highlighting how important it is that the EU10 countries are not sidelined in any deeper EU integration efforts.
Eugene: Right, and another interesting country that's in Central/Eastern Europe just like Poland is Hungary, which has seen its fair share of political challenges. And this has also had an impact on the eurozone, its position on the eurozone.
Christoph: Yes it's a country that on a higher level is oriented toward Europe for security reasons. It wants to distance itself from Russia, from Turkey. But where the current political environment has led to some euroskepticism just because Viktor Orban, who's been in power since 2010, gained a two-thirds majority in parliament and is trying to consolidate his power. And in doing so, he is taking measures that the EU opposes and that creates tension and leads Hungary to be more euroskeptic in a sense when it comes to current integration efforts. But we should not forget that Hungary did join the fiscal compact for example, so it is still oriented toward Western Europe.
Eugene: Well thank you Christoph, we'll have to leave it there and thank you for watching.
