By Elisabeth Hellenbroich
At the eve of the upcoming G- 20 meeting in Hamburg July 7/8th, it is worthwhile to reflect about an official ceremony which took place at the occasion of 40th Years anniversary of the Bonn Mid Atlantic Club (MAC). On a regular basis, strategic experts from the field of defense, security, economic, culture, churches and media meet privately – usually at a luncheon – in order to have a frank, informal discussion and exchange of views. In the past, this author had herself several times the chance to participate as guest at some of the events. The celebration took place in the Bonn City Hall, being introduced by greetings from the Bonn Mayor, by addresses from a top US as well as French diplomat, a speech by former State Secretary Dr. Friedhelm Ost, since 15 years chairman of the Bonn MAC, his vice Chairman and founder of the MAC (1977) and by Dr. Krüger-Sprengel. It was attended by strategic experts from Germany, US and UK. The main debate centered upon the need to reinforce the “transatlantic dialogue” in the midst of a period of geostrategic “disruption” as well reflecting about the consequences which Brexit will have in the future for the EU.
A constructive keynote was given by Dr. Werner Hoyer, President of the European Investment Bank (EIB), an institution of the EU, which is the largest multilateral borrower and lender of the world. Having served as minister of state in some of the former governments, Dr Hoyer from 1995-1999 was chairman of the Bonn MAC. His speech was entitled “Vision-Courage-Commitment – transatlantic relations in the 21rst century”.
What will happen after Brexit
At the event, preoccupation was articulated from the side of some of the British participants who attended as representatives of the MAC London. As one high level British defense strategist put it: “I have always been a devout European, yet on the basis of Art 50 we got to leave the EU.” He made reference to Art 50 in the Lisbon treaty, which allows a member state to leave the EU and which in March 2017 was invoked by British PM Teresa May, in order to open negotiations between UK and EU, with the aim to finalize the British exit from the EU by 2019. “There is no turning back to the European continent, whether it’s a soft or hard Brexit,” the British representative said, while at the same time he strongly emphasized that such a future perspective will by no means imply the “end of the friendship with Germany.” He also emphasized in respect to security policy a view which is common among many British and French security experts, stating that with a “nuclear deterrent” there is not going to be a “gloom or doom” situation . There are problems with President Trump who “once put the viability of NATO into question,” but Trump does have some good advisors and he demanded that NATO members should fully engage in “burden sharing.”
During the discussion, one British guest asked Hoyer what he thought about the principle of “subsidiarity”, underlining that if the UK had some years ago followed this principle – which as Hoyer complemented at one point, “is a concept of the Catholic Social Doctrine” (allowing dues and payments to be administered by local/national authorities rather than overregulating this bureaucratically by supranational institutions) things in the UK would have developed differently. Hoyer signaled with his speech that he wishes a calm and rational discussion about Brexit, while he also warned in his speech that the EU and Germany should not be too “complacent.”
The EIB has been instrumental in the financing of multibillion Euros trans-European investments and infrastructure projects in the past. (In March 2017 there was a meeting between Hoyer and Indian President Modi who discussed plans how to enlarge India’s electricity production including renewable energies to 175 Gigawatt, as well as to improve waste disposal and water supply in more than 500 cities. The same goes for plans in respect to Africa- as was discussed between 12 African Heads of State and EU officials in June).
In his speech, Hoyer reflected about the “common values” which “we share in the West.” While in times of global upheaval the new administration in Washington has put into question some of the “foundations,” the “primary idea of the West is the concept of a community based on rule of law as shared democracy,” Hoyer stated. In light of the new challenges which we are facing today, which include geopolitical, climate and technological changes, Hoyer qualified the present period as one of “disruption.” He noted that there is an increasing number of people who seem to reject “common values.” Europe however would be obliged to transform the EU into a better place and cooperate constructively with the British. The Brexit vote and the election of Trump have led to a “reawakening” of Europe, expressed by French President Eduard Macron, who recently stated that the European governments must work together.
The keynote speaker mentioned several aspects which will be crucial for the shaping of the future EU: One such aspect is “Trade.” He underlined that the “EU and US are the largest trade partners.” There is however the real possibility that the US builds trade walls around the US and that it leaves from many important trade agreements.
The other aspect is “migration.” Hoyer referred to a Mc Kinsey study, according to which migration would boost the world economy by 3 trillion (a statistic which implies the question, what is concretely done with the several millions of migrants – E.H.). What is needed however is a change in the pattern of development which means a boosting of the economic development on the ground in Africa.
A third aspect involves “investment.” Hoyer spoke about the existing EU “investments gaps” especially in the field of digitalization, which annually amounts to several hundred billion Euros. He emphasized the need to engage in more investments, particularly including investments that help overcome the economic gap which still exists in Southern Europe, accompanied by a high youth unemployment.
In the newly edited book “Wirken in Wendezeiten” which was published in Dr.Kovač Publishing House June 2017 by its editor Dr. Martina Timmermann, vice secretary of the MAC Bonn, the EIB president published an article entitled “Populism and protectionism- A reawakening of Europe” which includes a more detailed outline about to trade, migration and investment policy.
Concerning the issue of “trade” Hoyer underlined that the EU and the United Stated are two of the three largest beneficiaries of international trade. In 2015 total EU trade amounted to € 3,5 trillion while total US trade amounted to € 3 trillion. “The EU is the United States largest trade partner. And the United States is the EU’s largest trading partner. In 2015 EU trade in goods with the US stood at € 620 billion, of which € 371 billion were exports to the USA and € 249 billion were imports from the US. This trade supports a lot of jobs on both sides of the Atlantic.”
Concerning “investment” and Europe’s competitiveness and long-term growth potential, Hoyer underlined that Europe suffers from history of “underinvestment and structural weaknesses, exacerbated by years of crisis and inertia.” He particularly urged that we must overcome the “structural investment gap” which according to an EIB analysis involves an annual investment gap in the EU of about 600 billion Euros consisting of:
* 100 billion € to upgrade energy networks to integrate renewables, improve efficiency and ensure security of supply.
* 80 billion € to upgrade transport networks to reduce congestion costs and trade bottlenecks as well as
* 65 billion € to reach the EU’s Digital Agenda standards in broadband, data center capacity, and cyber security.
* 10 billion € for state-of-the-art education facilities in addition to
* 90 billion € increased operational spending, to reach US standard, mostly in higher education.
* 90 billion € to rehabilitate environmental services and ensure water security in the face of climate change.
* an additional 130 billion € a year needs to be invested in R& D to meet the EU target of 3% GDP,
* and lastly, around 35 billion € a year in additional venture capital activity in the EU to match US levels.
Hoyer had particular appreciation for Germany’s efforts to launch a Marshall Plan with Africa: “Development policy must truly shift to improving economic perspectives. We must give people everywhere hope for their future in the regions and countries. I welcome ongoing discussions on how the EU can mitigate the root causes of migration.”
Options for Brexit negotiations
In an article published in Der Spiegel (Nr 26. June 2017) “Intertwined interests” an illustration was given, on how complicated the Brexit negotiations are, as the case of the EIB illustrates. According to Der Spiegel, a “divorce” (UK from EU) would be “expensive” for both sides. As the magazine underlines “now the EIB is under pressure because of Brexit, and this will involve a lot of mutual intertwined interests.” The British are for example the largest shareholders of EIB and in the case of Brexit, the shareholders of the EIB would have to “recompensate” the British. Nominally, the UK has made payment obligations in the dimension of 39,2 billion Euro. After Brexit, the British could demand to be paid back double the amount of their payed in capital share. Hoyer however thinks that it’s not in the interest of the British to get out of the EIB, Der Spiegel commented. A lot of funding capital is invested by the EIB in UK projects such as in the Olympic village in London, wind energy installations or technology firms in Northern England. In addition British commercial banks like to transfer parts of the risks in terms of “long term financing projects” to the EIB which is a very a solvent credit institution capable to refinance itself. In the UK, credits amounting to 50 billion € were invested in long term projects. Hence there are people in the EU – Der Spiegel notes – who reflect about how the UK despite Brexit could cooperate with the EIB. One of the ideas tossed around is to rely on “subsidiaries” like the “European Investment Fund” in which the British could operate further as shareholder.
Wiesbaden June 2017