Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Where Europe Still Lives

Posted by hkarner - 5. Juli 2016

Photo of Erik Berglöf

Erik Berglöf

Erik Berglöf, Director of the Institute of Global Affairs at the London School of Economics, is a former chief economist of the European Bank for Reconstruction and Development.

JUL 4, 2016, Project Syndicate

LVIV – The outcome of the United Kingdom’s Brexit referendum shocked populations across Europe. But watching the response in Lviv, in Western Ukraine – a hub of enthusiasm about the European Union – was particularly jarring.

At a time when irresponsible opportunists and populists in the UK are taking a wrecking ball to their country’s own institutions, and those of Europe, Ukrainian reformers are trying to build something new. Whereas the UK’s “Leave” campaign peddled trumped-up dangers from immigration to make its case, activists in Ukraine are facing very real threats as they work toward a civil-society framework that can stand up to internal pressure from the oligarchs and external influence from Russia.

Historically, Lviv, perhaps more than any city, reminds us of Europe’s capacity to self-destruct. Around its picturesque squares, every cobblestone and ornamental façade has borne silent witness to the bloodletting that accompanied empires’ rise and fall. Yet Lviv is also where one can find hope for the promise of Europe.

Lviv is a deeply anti-Russian and pro-European city; but, for five days each summer, it hosts the Alpha Jazz Festival, sponsored by a Russian bank. At a time when Russia and Ukraine are still very much at war, policymakers, local citizens, members of the Ukrainian diaspora, and even some Russians pack the streets of Lviv to celebrate world-class jazz.

Beyond its vital cultural life and geographical location, Ukraine is strategically important to the West. It is a key front in the global confrontation between democracy and autocracy. For Europe, it represents a unique opportunity to promote the rule of law, transparency, free trade, and good governance beyond its borders.

Ukraine is a large country, with ample human capital, natural resources, and growth potential in many sectors. More important, successful reforms in Ukraine make positive developments in Russia more likely. Still, Ukraine’s economy has shrunk by two-thirds (in dollar terms) since 2006, making it the poorest country in Europe.

After the 2014 ouster of pro-Russian President Viktor Yanukovych, the European dream suddenly seemed less remote for many Ukrainians, who had hoped for visa-free travel and employment opportunities in the EU sometime in the near future. With the Brexit vote, that hope is now diminished, as is a European model that has long inspired societies emerging from the post-Soviet fog. There was a palpable sense of despair and disbelief among Ukrainians enjoying jazz in Lviv as they watched Europe self-destruct once again.

Brexit gives the forces of autocracy an undeserved boost. Europe’s ability to project soft power is weakened, as is its appetite to do so. The benefits of a post-Arab Spring and post-European world are not lost on its dictators, who can now rest easier.

Still, there is reason for hope. Meaningful reforms in Ukraine can still succeed, and more has been achieved in the last two years than was accomplished in the preceding 20. For starters, the economy has at least stabilized, and the fighting in the east has receded.

Ukraine’s current prime minister, Volodymyr Groysman, is committed to pushing through additional reforms to combat corruption, including abolishing energy subsidies and shifting to a more transparent monetary policy (from exchange-rate targeting to inflation targeting).

To the east, Russia’s economy is suffering from low energy prices and Western sanctions, neither of which will change any time soon. Even without these external conditions, Russia’s economy was plagued by rising costs and a lack of productivity growth. But at least some close to the inner circle of Russia’s leadership have hinted at a new willingness to discuss matters of regional or global concern.

To the west, the EU can still regain its composure, provided it moves quickly to resolve the current post-Brexit uncertainty. If it succeeds in this, it can pursue investment opportunities in Ukraine and southeast Europe that stand to replenish its political capital and renew its productivity growth.

The EU should recognize Brexit as an opportunity to move forward with its own fundamental reforms, which have stalled in part because of UK opposition. Opinion polls show that EU citizens understand the need for a Europe-wide framework to control the financial sector (particularly cross-border banking), manage refugee flows, and implement measures to fight climate change and mitigate its effects.

For the citizens of Lviv, the European project provides a model not only for rebuilding their own society, but also for joining something bigger. That larger vision is one the UK’s “Remain” campaign, with the notable exception of former Prime Minister Gordon Brown’s “Lead – Not Leave” speech, did not offer to its own constituency. Even pro-Europeans in the UK questioned if it was worth voting to remain, given such weak engagement by the UK government in leading the EU. What the UK needed – and still needs – is a vision, put to the people, of how to make itself better by making the EU better.

As Ukrainian reformers bravely continue to build new institutions, they are looking to the EU, and especially to the UK, for blueprints. One hopes that we will someday look to Lviv – where every citizen feels a sense of ownership over every stone – for inspiration as well.

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