VISEGRAD: Brexit puts Central Europe on the spot

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By Robert Anderson in Prague June 24, 2016

For Central Europe, Brexit may not be an economic calamity, but UK Prime Minister David Cameron’s needless referendum has accelerated trends in the EU that will be deeply negative for the new member states.

Brexit will be politically damaging because Emerging Europe’s member states have always regarded Britain as their strongest ally in the EU. Now the UK’s loss of international standing and its growing introversion leave Central Europe without a strong ally to counterbalance Germany and France.

The new member states had always appreciated the UK’s commitment to further enlargement and its relentless effort to make the bloc focus on improving the single market, rather than yet more institutional integration.

Britain was also a good ally to have in the bloc. Though neither were avowed EU enthusiasts, Labour premiers Tony Blair and Gordon Brown had finally made the UK a respected big player in the EU; Blair because of his star quality, and Brown because of his key role in helping the bloc steer through the global financial crisis.

In Central Europe, the UK was also seen as economically successful and “cool” compared to the older EU members – an impression underlined by Blair’s courageous decision to allow citizens of the new member states immediate access to the British labour market.

Under Cameron, Britain has suffered a catastrophic loss of standing in Europe, starting from his decision to leave the European People’s Party (EPP) grouping before he became premier and now culminating in the referendum fiasco.

By demanding and winning concessions on social benefits for EU migrant workers, and by threatening to veto further enlargements of the EU, the Conservatives had also thrown away the goodwill that Britain had built up in Central Europe.

Britain’s example is also likely to encourage other countries now to demand their own concessions, potentially leading to an “a la carte Europe” or even further referenda on leaving the bloc, which is likely to be very damaging for Central Europe.

None of the new member states from Central and Eastern Europe are likely to follow the UK in holding referenda. Even habitual whingers such as Hungary’s Viktor Orban realise that the EU is an invaluable source of funding (and kickbacks), and that leaving the bloc would leave them both too exposed to Russian influence and without a useful whipping boy to divert blame.

However, some CEE states may try to demand concessions if there is a free for all, the most likely being Poland on energy and climate change. Unlike the preceding Civic Platform government, which wanted EU climate change rules eased in more gradually, Law and Justice seems to object to the principle itself.

Yet any move to an “a la carte Europe”, to a Europe with less solidarity, would be one even more dominated by big states carving out their own deals, and would be bound to damage the small countries of Central Europe. The new members have often relied on the Commission or patrons such as the UK to protect their interests. As the Commission’s influence fades and Britain withdraws, the region could be left on its own.

This could have an impact on the generosity of structural and cohesion funds in the next budget round. Other Western European states may also follow the UK in demanding cuts in social benefits for migrant workers. Further enlargement of the bloc would become even more of a rhetorical fiction.

As Europe becomes more fissiparous, it is very likely that some core Western Europe members may eventually push for more integration, to re-create the EU’s original vision over a more manageable area, leaving a periphery to progress at its own pace or not at all. Such an “inner core” would inevitably be German dominated.

This “two-speed Europe” would pose a serious challenge for Central Europe, which for the most part until now has been content to occupy a grey zone – one where they are committed to adopt the euro but not obliged to fix a date.

Only Slovakia, Slovenia and the Baltic states have so far joined the Eurozone; the Czech Republic lacks the political will, while the current Polish and Hungarian governments are firmly opposed. Central Europe now faces the choice of whether to try to join the inner core or become a new eastern periphery.

This also raises the question of the future of the Visegrad Group. The grouping achieved greater unity over the past year, mainly because of opposition to compulsory refugee quotas, but has long been stymied by divisions over Russia. Poland has traditionally taken a harder line on confronting Russia militarily and reducing the region’s energy dependence on Moscow, while Hungary was the most relaxed. If half of the group now becomes part of the inner core and part stays outside, would it still be viable?

In Poland, which becomes the new rotating head of the Visegrad Group on July 1, there is already discussion about squaring this circle by expanding the Visegrad Group into an “Inter Marium” grouping between the Baltic, Black and Adriatic Seas. This new eastern periphery led by Poland would, it is argued, enable the region to counterbalance the rise of an inner core led by Germany.

The only problem with this is that the region is neither prepared to be led by Poland, nor to square off against Germany. As Estonian President Toomas Hendrik Ilves has said, if forced to choose between Warsaw and Berlin, he would reluctantly choose Berlin.

For its part, Hungary would not be allowed to enter the inner core even if it wanted to – according to Commission President Jean-Claude Junker it would not be granted EU membership now because of the way Orban has hollowed out the country’s democratic institutions – but Budapest would still be reluctant to become a new periphery. Orban wants to maintain his Fidesz party’s good relations with the EPP grouping, including Chancellor Angela Merkel’s CDU, who help to defend his back against criticism by the Commission and the European Parliament.

Slovakia, which takes over the EU’s rotating presidency on July 1, is close to Poland and Hungary on migration, but is already a member of the Eurozone and as Finance Minister Peter Kazimir told bne IntelliNews earlier this year, it already sees itself as part of the inner core.

The dilemma is perhaps most acute for the Czech Republic, which is a natural member of the inner core because of its relative wealth and its close economic ties with Germany, but which is hamstrung from joining it because of popular disillusionment with the EU and a lack of political leadership.

The Czechs were desperate to maintain Visegrad unity during their presidency of the group, though Prime Minister Bohuslav Sobotka felt it necessary sometimes to distance himself from the anti-Islamic rhetoric of his fellow premiers and his own president. Under the new Polish presidency, the Czech government may feel freer to mark out an even more distinctive position, but Sobotka is probably too cautious and too weak politically to chart a new vision for the country as a member of the inner core.

The risk for the Czechs and the new member states is that if they do not make push to join the inner core, they may find out too late that the door is shut and it could be very difficult to force it open again.