Beyond New Europe: A Euro Curtain from the Baltic to the Black Sea?

Since 9/11, there has been much talk of the potential clash between Christian and Islamic civilizations. But the author of the clash theory, Samuel P. Huntington, focused as much attention on the potential divide between Orthodox and Western Christians. In his 1996 book, The Clash of Civilizations, he tied Orthodoxy to Islam and against the Catholic and Protestant countries of Western Europe and America.

“Where does Europe end?” he asked. “Europe ends where Western Christianity ends and Islam and Orthodoxy begin.”

Of course, the religious traditions that flowed from the Great Schism between Eastern and Western Christianity do not create hard borders on the order of Communism’s Berlin Wall. Orthodox Greece in a member of the North Atlantic Treaty Organization (NATO) and the European Union (EU). Catholic Croatia is not—yet. But, as the former Soviet satellites of Central and Eastern Europe join major Western institutions, while Russia and the other former Soviet republics do not, a new dividing line is being drawn in Europe, separating a unified Europe from its eastern neighbors. It looks a lot like a map from Professor Huntington’s book. All the new EU members are Protestant or Catholic; all the former Soviet Republics to the east are Orthodox or Muslim.

Historical Divide

Obviously, religion is only one of the factors that divide new Europe from its Western neighbors—so do geography and history. In the less than 15 years since the fall of the Berlin Wall, new Europe (defined as the non-Soviet states, plus the Baltics) and the former Soviet Union have diverged dramatically. Economically, the 15 new European nations have largely recovered from the depression that followed the end of central planning and are on track to lead growth in Europe over the coming decade. Politically all democracies, they are almost entirely at peace. Ten are already in NATO, and the rest conceivably could join in the next decade. Eight have joined the EU, two more are targeted to join in 2007, and the rest have real possibilities to join later. Most will be using the euro as currency within a decade.

In contrast, most of the former Soviet nations have not yet recovered from the economic and political collapses following the break up. From Chechnya to Tajikistan, difficult conflicts remain. By last year, even with strong growth since 1999, Russia had recovered only 71 percent of its output in 1990. Belarus, Turkmenistan and Uzbekistan are still dictatorial states. None are on the road to the European Union. That last point is a big one, both as a cause and as an effect. All of the new European countries are either EU members already or can expect to join, if they meet EU standards. Non-members like Croatia and Albania have a clear road map to Western integration; Ukraine and Armenia do not.

Less than 15 years ago, the Soviet Union and their Central and Eastern European satellites seemed locked in a tight military, political and economic embrace. The Soviet army occupied most of them, they were military allies, their societies were organized around Communist ideology, most of their trade was with each other, and most important, their governments were propped up by Soviet power. There was an Iron Curtain. What we now call new Europe was on the other side of it, along with the Soviet Union. So, when the curtain fell, there was an understandable inclination in the West to see the countries’ strengths and weaknesses through the same lens. These were all countries going through a “post-Communist transition.”

Past Politics

But their experiences were actually quite different. The economic declines were much deeper, and the recoveries much slower, in the former Soviet countries than in Central and Eastern Europe. The gross domestic product (GDP) of new Europe declined by an average of 23 percent over a little less than four years. The Russian and the other former Soviet economies dropped more than twice as much—50 percent over six and a half years. By 2003, most of new Europe had recovered all of its lost ground and more, while the GDP in the former Soviet nations was still 30 percent lower than at the end of Communism. Several countries were in much worse shape. Ukraine’s GDP was 53 percent lower and Georgia’s 62 percent lower than in 1989.

History is one big reason. During the Communist years, the Soviet Union carried the overwhelming burden, in fact 84 percent, of the Warsaw Pact’s defense. In 1988, the eastern European satellites were spending from 1.2 to 4.4 percent of GDP on the military—more or less in line with EU shares. The Soviet Union was spending at least 16 percent, perhaps as much as one fourth, of its output on the military. Whatever their security or political value, these costs clearly distorted the former Soviet economies, while sparing new Europe.

The difference in the longevity of Communist rule had an impact that is generally underestimated. In Russia and the non-Baltic republics, it was 70 years; in new Europe, about 45 years. That 25-year difference is huge. First, in the Soviet space, the institutions of Communism—from the secret police and the court system to the collective farms and “secret” military cities—have deeper and stronger roots than in new Europe. More importantly, the extra 25 years of Communism means that virtually no one alive there today remembers life before Communism. Only those over 100 years old were even teenagers when the Bolsheviks seized power in Russia. In contrast, throughout new Europe, tens of millions of people remember free speech, multi-party politics, and a market economy. Everyone in their seventies today was in their twenties when the Communists took over Eastern Europe in the late 1940s.

Another reason for the disparity in economic progress has been the different paces of transformation. By 1999, only 50 percent of the economic activity in the former Soviet countries was in the private sector; in new Europe, 68 percent was. In Hungary and the Czech Republic, it was 80 percent; in Albania, 70 percent. In 1998, the contribution of small businesses to the economy was three to four times as large in Lithuania, Czech Republic, and Hungary as it was in Russia, Kazakhstan and Ukraine. Russia’s banking system is dominated by the state-guaranteed savings bank, while most banking assets in new Europe are now owned by competitive Western institutions.

Overall, new Europe has regularly attracted more than twice as much foreign direct investment (FDI) as the former Soviet states. In the first thirteen years after the fall of Communism, the Czech Republic, with ten million people, has seen more than five times as much FDI as Russia, with 145 million. Most of the FDI that has gone to the former Soviet republics has been devoted to production of energy and other commodities in Russia, Azerbaijan and Kazakhstan. In new Europe, the FDI is much more diversified; manufacturing, information technology and business and consumer services have all benefited.

Reorientation and Rehabilitation

By almost every measure and in markets of all kinds—manufactured goods, capital, labor, tourism and other services—the new Europe has rapidly joined the orbit of old Europe. The International Monetary Fund estimates that over US$3 billion has been sent home by Albanians working abroad in the last decade—and this to a country of a bit over three million people with a GDP of less than US$6 billion. Albania is not the only new European country benefiting from exporting labor to Western European countries. With shrinking birthrates and high wage rates, most Western European countries badly need immigrants, in jobs from waiters and farm workers to software writers and engineers.

In little more than a decade, new European trade has dramatically reoriented itself from the Soviet bloc to old Europe. In 1988, more than half of their trade was with the Soviet Union and the other Comecon countries; less than a third was with the EU. Today, about three fourths of their exports go to the EU.

In the past four years, both Russia and Ukraine have seen rapid economic growth—last year, over six percent in Russia and almost as high in Ukraine. But these improvements have been driven largely by the benefits of Russia’s devaluation after the 1998 financial crisis and the current high price of oil. The benefits are real, but not necessarily sustainable. And they are still left far behind the new European countries.

While Russia, Ukraine and the others are struggling to repair their economies and to integrate with the West, new Europe already has bounced back economically and is largely locked into Western institutions already. For new Europe, convergence with old Europe is going hand in hand with divergence from their eastern neighbors.

Another arena in which new Europe is diverging from its eastern neighbors in the former Soviet Union is democratic political development. On this measure, the new European nations are very close to the old European mainstream. For example, every year Freedom House rates all the countries in the world on their respect for freedom of speech and of the press, free and fair elections and other key elements of a democratic society. In its most recent report, Freedom House gives 11 of the 15 new Europe states its highest rating: “free.” Eight score as well as the United Kingdom, Spain, Italy, Germany, France, and Belgium. They score better than Greece which, along with the other four—Albania, Bosnia, Macedonia, and Yugoslavia—are rated “partly free.” The average ranking for new Europe is 2.3 (on a scale of one to ten), “free,” while the average ranking for the former Soviet republics is 5.9, “partly free.” Russia scores 5.5.

In the former Soviet space, it is hard to find much democracy which US citizens or old Europeans would recognize. Countries such as Belarus, Uzbekistan and several other nations are ruled by true dictators. In Putin’s Russia, speech is free, but the TV is government-dominated and political competition limited.

In 2000, my last year as Ambassador, I spent a good bit of time traveling to towns and villages across Romania, holding open town meetings with ordinary people to listen to their concerns and to explain US interests in Romania. This was within a year after the European Union had extended the invitation for Romania to begin negotiations for accession. And at each town meeting, I would mention that one of the good things that had happened to Romania in the past year was the European Union invitation. From the first village where I mentioned the EU invitation to the last, the crowd broke out in spontaneous applause. These were not the coffee houses of Budapest or the corporate boardrooms of Warsaw. These were poor, middle-aged farmers, as well as pensioners, who voted for the former Communist left in every election from 1990 through 2000. And they were applauding wildly when the US Ambassador said they were going to join the European Union!

Why does the European Union generate such enthusiasm, while the International Monetary Fund (IMF) or even the World Bank, which are pushing policies quite similar to the European Union, generate at best indifference and at worst fear and hostility? I think the answer is the difference between a bank and a family. To most of us, a bank is controlled by someone else and is looking out for its own interests. We want to take advantage of its loans, but we want to be out of debt as soon as we can. We are happiest when we have paid off the loan and are out from under their restrictions. That is the way people look at the IMF and World Bank.

In contrast, when we marry, we are joining a family as a partner, not as a supplicant. We see the relationship as permanent, rather than transitory. And we see it primarily as a social transaction, not an economic one, even though it has substantial economic components. That is the EU. It is a family, and a prosperous one at that.

The Psychological Impact of EU Accession

The EU accession process is both a result and a cause of the new Europe’s relative success in making the political and economic transition from the Soviet bloc. Part of the reason they have been invited to join the EU is that they have done well creating democratic states and re-orienting their economies to the marketplace. But, equally, part of the reason they have done as well as they have is their expectation of EU membership.

There are many practical aspects to the prospect of EU membership: increased trade links, encouragement of foreign investment, a common currency, legal access to Western labor markets, common rules and substantial financial aid. But they probably are not as important as the psychological impact of EU accession. Hope and fear are among the most powerful motivators of human behavior. Both are speculations about the future that affect action in the present. That’s what makes the EU such a powerful motivator for people—at all levels of society—in aspirant countries. The invitation to join increases hope and decreases fear of the future.

Every country invited to join the European Union has been admitted. Every country that has joined has prospered. Thus, the invitation itself creates a powerful sense of security for people who, for most of the 20^th century, had little security. That is why the debate about when each country will be admitted is less than it seems. In the heads of most people, the speed of the journey is much less important than the destination. And that is known as soon as a country is invited to join.

Facing the East

So the new Europeans are generally pleased with their new status in the Western orbit. But where does that leave their neighbors to the east? They have mixed emotions. Russian nationalists fear creeping Westernism on their borders, but history shows few examples of nations that suffer because their neighbors are peaceful and prosperous. And for countries such as Ukraine and Georgia, which have applied for EU membership, it’s getting at least geographically closer.

In the near term, however, EU membership for countries such as Poland means closing their borders to easy access by Ukrainians and Belarussians for trade and work. “Hardening” the borders is a key requirement for new members since free movement is provided within the European Union. Granted, requiring visas for Russians to visit Latvia is not the same as shooting dissidents scaling the Berlin Wall. But it marks concretely where political Europe ends at the eastern edge of the European Union. Not coincidentally, it also marks the edge of NATO’s security guarantee.

Is that border good for Europe or for the United States? Will hardening it make EU and NATO members safer by keeping people out or make us less safe by isolating the former Soviet states from the West? Will it create a new “Euro curtain” separating an authoritarian, Orthodox, poor east from a democratic, increasingly prosperous, mostly Catholic and Protestant west? Will it encourage, if not a clash of civilizations, at least a zone of conflict instead of harmony?

Eliminating that border, even if desirable, could be very difficult. There is dictatorship in Belarus, extraordinary economic and political problems in Ukraine, Russian troops in Moldova, Armenia and Georgia, and Putinism in Russia. Expanding NATO to include a democratic Moldova or Ukraine is one set of problems and opportunities. Inviting Russia to join is mind-bending for Russians, Americans and most Europeans, new and old. Expanding the European Union to the east is somewhat easier to envisage—if democracy takes firm hold in these countries. That is possible, but by no means certain. Russia’s experience in recent years is not an encouraging omen. And the EU has not found it easy to add ten new members, even though most are relatively small countries. Ukraine is bigger than Poland; Russia is bigger than all the new members combined.

Turkey’s candidacy for EU membership is generally painted as a difficult and defining challenge to Europe’s future. It’s big, its population is growing fast, and it’s Muslim. But in many ways it’s already quite integrated with the West. Turkey has been a NATO member and a market economy for decades. It has long had close trade and labor ties with Europe. And the US supports EU membership for Turkey, as do many Europeans.

What to do about Russia and the other former Soviet states is really much more challenging—and probably much more important. Continuing, and even accelerated, political and economic divergence from new Europe cannot be good for those on either side of the “Euro curtain.” How it can be staunched is not obvious.

Expansion of the European Union and NATO clearly made a big, positive impact in new Europe. Expansion to the former Soviet states may not be possible or even desirable. But what is the alternative? Now that new Europe and old Europe have ended their Cold War division, it’s the next big question for the continent.*