What inspires youannus horribilis that we have just lived?
Nicolas Baverez The year 2022 will go down in history. It marks a change of era. The great confrontation between democracies and authoritarian empires was expected in Asia and was to be tied around Taiwan; it opened in Ukraine, with a high-intensity conflict led by Russia and, beyond that, a hybrid war against Europe which results in strikes on critical infrastructures – such as North Stream or the cables of telecommunications -, cyberattacks (targeting hospitals in particular), disinformation operations, support for extremist parties and the destabilization of sub-Saharan Africa.
At the same time, conflict is exploding all over the world. The war in Ukraine dismantled the institutions and rules that had been put in place to limit violence. Today, most treaties are violated or not applied. All that remains is an arms control treaty, Start, which will end in 2026. This war has uninhibited many leaders – not only Russians – in the use of armed force, as seen in the Caucasus, in the Middle East, Asia or Africa. These strategic changes are accompanied by an economic upheaval, with the end of globalization in its liberal version and the cycle of disinflation. Globalization is reconfiguring itself around ideological, commercial, technological, financial and legal blocs. Inflation is back, and with it rising interest rates that put an end to unlimited free money. Geopolitics takes precedence over the economy, and states over markets.
And Europe, in all this?
Europe is very vulnerable, it is one of the big losers in this new situation. She is on the front line against Vladimir Putin’s Russia. Economically, the energy shock represents a levy of 3 to 3.5% of European GDP, i.e. the equivalent of the oil shock of the 1970s. Financially, many States are over-indebted, like France, which is heading straight into the wall of debt (now more than 3,000 billion euros). Socially, the middle classes are being hit hard by inflation and the explosion in energy prices, which are eroding their standard of living, which is encouraging populism – largely financed by Moscow, which has invested more than 300 million in the support of extremist parties since 2014. Militarily, Europe finds itself disarmed in the face of Russia and has no choice but to rely on the United States, while having to assume the reception of more than 8 million Ukrainian refugees. The model based on dependence on cheap Russian gas, Chinese imports of essential goods, technology and security guarantees from the United States is dead. The questioning is also historical and moral: after the fall of the USSR, Europeans under the influence of Germany thought that war was impossible, and peace perpetual. It all came crashing down on February 24, 2022.
What structural problems can Europe solve?
The fundamental problem of Europe is to redefine itself as an actor and not as a spectator of the history of the 21st century. And to be an actor you have to have control of your destiny on the political as well as on the economic level. When it comes to economic sovereignty, energy is the key. However, we are still waiting for the reform of the electricity markets, which are seriously dysfunctional. Capping the price of gas is practically inapplicable, and the Commission is pursuing its strategy of eradicating nuclear power against all reason. Autonomy is also food, while the EU is planning with its “Farm to Fork” strategy a 12% drop in agricultural production.
In this world of blocks, you also have to position yourself in front of others. Against the United States, which mobilizes 370 billion dollars for American companies and risks liquidating European industry. Facing China, which wants to boost its growth through exports. The plan to make the state aid regime more flexible is not commensurate with the problem. We must rebuild a European production apparatus. The creation of a sovereign wealth fund endowed with 2% of European GDP, ie 300 to 350 billion euros, is positive. But it is disputed, and there is talk of fueling it by redirecting the 750 billion euros of the recovery plan, which have only been deployed up to 20%. It is ineffective and absurd!
In addition, the ecological transition has been transformed into a weapon of destruction for European companies. The border carbon tax is counter-productive because it is based on raw products, not finished products. Thus, the Chinese electric car will not be subject to this tax, unlike European manufacturers! Same thing for the European taxonomy which prohibits the financing of the defense industry in the middle of the Ukrainian war. It is high time that in Europe actions stop clashing with words.
On the strategic level, Russia has again become central, with the war in Ukraine but also the return of an existential threat to Europe. Russia cannot and must not win this war. But the goal of war is peace. However, Europeans are divided. On the one hand, Central and Eastern Europe and the countries of the North refuse any form of “Russian peace”, which would validate Vladimir Putin’s imperial expansion strategy and encourage new aggressions. And all the more so since Vladimir Putin has never respected any agreement. On the other, France, Germany and Italy believe that the conflict must be stopped and diplomacy given a chance. In addition, the risk of opinion fatigue increases as the electoral deadlines approach, particularly in the United States.
What can Europe do to find its place in this new chessboard?
First, we must focus our efforts on certain strategic sectors for sovereignty where Europe has let itself be marginalized: energy, health, agriculture, technology and armaments. Then, let’s learn the lessons of the change in the world. The United States have demonstrated the power of the dollar, their financial centre, the extraterritoriality of their law. The giants of the South are empowering themselves and seeking to reduce their dependence on the West. China launches the petro-yuan and continues the dedollarization of its economy. Brazil and Argentina are trying to create a common currency. Let’s promote and protect our assets: the single market, the euro, the European rule of law. Let’s put them back in the service of growth and employment, the stabilization of the middle class and the defense of freedom.
Sovereignty, like the sustainability of the welfare state and our ways of life, depends on the emergence of a European capitalism backed by a currency, a large capital market and a system of standards which must emancipate itself from the domination of UNITED STATES. The survival of freedom depends on an alliance between the democracies of North America, Europe and Asia. But we are no longer in 1945. This alliance will be all the stronger if Europe constitutes an independent pillar. And there is no lasting freedom without the ability to defend it. We must therefore rearm ourselves, on the military level, but even more so on the economic, intellectual, moral and legal levels.
What role, precisely, can the law play in this polarized world?
In the Ukrainian conflict, the law plays a leading role with the question of the sanction of war crimes committed by Russia, but also the sanctions. Russia has underestimated the will of the Ukrainians to defend their homeland as the legal and financial power of the United States. Even China, which does not apply the sanctions, avoids violating them openly.
Within companies too, the law is becoming more and more strategic, adapting to the fragmentation of globalization. Global companies, which used to deploy universal models, procedures and standards, are over. The future belongs to multi-local groups, in an increasingly complex and conflictual environment. This is why the law must be integrated very upstream in the strategic decisions of companies. This is why we are rediscovering that the law is the first lever of sovereignty, as well as the principle of action that connects the international system, States and societies.
Nicolas Baverez is a historian, editorial writer, and partner in the law firm August Debouzy.