The traveller’s guide to European economic sovereignty
Europeans have set out on a journey towards greater economic sovereignty. They will only reach their destination if they learn to navigate an interconnected world.
The past four months have taught Europeans a hard lesson about the value of economic sovereignty. Economy is one of the few areas in which the European Union performs well in ECFR’s recently published European Sovereignty Index. But Russia’s war on Ukraine has exposed some of Europe’s greatest vulnerabilities: an excessive and short-sighted dependence on Russian fossil fuels.
Hopefully, Europeans will draw the right conclusions from this experience. The flipside of their dependence on Russian energy is Russia’s reliance on Western technologies, financial services, and revenues from the commodities trade – all of which have allowed the European Union and its allies to hit President Vladimir Putin’s regime with harsh economic sanctions. Europeans should now recognise that interdependence is not a guarantee of peace but a double-edged sword – and that sovereignty comes from the ability to navigate an interconnected world rather than retreat from it.
As many EU citizens switch to holiday mode, they may be tempted to avoid this harsh reality for now. After all, the shortage of Russian gas might only be felt in six months time. And while higher prices of fuel, flight tickets, and everything else will periodically remind Europeans about the war, the attention they pay to the issue will almost certainly wane during the summer.
Unfortunately, they have no time to lose. This is why some European leaders are already touring the Middle East and North Africa to drum up new energy supplies in time for winter. To ensure that citizens continue to support these efforts to strengthen Europe’s economic sovereignty, they may need a new vocabulary. The travel experience itself could provide just that.
Raincoats and sunscreen
Strengthening economic sovereignty is much like packing a suitcase. Behind each item one brings along is a theory about the scenario in which it might be needed – a raincoat for cloudy days; sunscreen for a heatwave. It would be overly optimistic to take only the latter and reckless to take neither.
In the same way, Europe needs to prepare for all kinds of economic and geopolitical weather. This year is all about Russia and energy. But other interdependencies – especially vis-à-vis China – could prove to be crucial in future. Member states that make the EU vulnerable to China’s economic coercion – by excessively depending on it for trade or investment, or by failing to adequately screen Chinese investments – are not necessarily the same ones that have a toxic relationship with Russia.
Accordingly, when evaluating EU member states’ contributions to economic sovereignty, it is important to look at all sorts of interdependencies – and not only those related to Russia. For instance, while countries such as Austria, Finland, Lithuania, and Germany are excessively dependent on Russia, they make a greater contribution to economic sovereignty in other areas. Conversely, Greece and Portugal are doing much worse overall than if one looked solely at their economic resilience against Russian coercion. European policymakers will need the kind of comprehensive picture provided by the European Sovereignty Index if they are to prepare for the journey ahead.
A network of friends abroad
When travelling to an unfamiliar place, it is best to have friends there to contact in case of an emergency. One might need a place to stay if the hotel closes unexpectedly. It would be tiring and impractical to pack a tent, sleeping bags, camping gas, and a survival kit just in case.
The same goes for economic sovereignty. Today, a country’s attempts to reduce its own vulnerability to economic coercion can be enhanced by cooperation with others. It is not enough to rely on one’s own protections and resources such as a resilient economy, a national industrial base, domestic energy production, or a framework for screening foreign direct investment. This is about building a network of diverse, reliable partners. While European policymakers increasingly talk about the need to reshore production and reindustrialise, one can also argue that the covid-19 pandemic has shown that globalisation can make Europe more resilient.
This explains why the Netherlands – and not France – is a leader of European economic sovereignty in the index. The French might be the loudest advocates of the concept, but they tend to interpret it in a somewhat protectionist way. In contrast, the Dutch not only support initiatives that boost the EU’s economic defences but also strongly engage with international trade and investment – and prudently avoid excessive and disadvantageous asymmetries in this. In other words, they are masters of couch-surfing who have created a network of reliable friends abroad.
Finally, travel companions matter a great deal. It is one thing to go on a trip in a group of, say, 27 students: someone who falls ill can always stay in hospital while the others continue on. But it is a wholly different story when travelling as a family: if anyone forgets their passport, everyone will be forced to stop at the border and return home.
It is debatable whether – in their quest for economic sovereignty – the EU27 are closer to the former or the latter situation. On energy supply, they resemble a group of students who lost their way and are now frantically looking for a place to sleep – sometimes competing with one another as they do so. Italians go to Algeria; Germans visit Qatar and the United Arab Emirates. Of course, the EU is also making laudable efforts in this area, including by reaching out to Middle Eastern countries and developing an energy strategy. But these initiatives coexist with those of individual member states.
At the same time, the EU27 resemble a family in their approach to making and implementing foreign policy decisions. The EU’s economic sovereignty is dependent on member states’ capacity to reach a consensus on key policy issues, such as economic sanctions on Russia and trade relations with China. Therefore, it is worrying that, in ECFR’s index, six member states are doing poorly and two others are failing on economic sovereignty – with Bulgaria, Hungary, and Cyprus the worst performers. The practical implications of this were perhaps clearest when Hungary was blocking the EU’s sanctions on Russian oil. On economic sovereignty, these countries are the black sheep of the family. By exploiting the weaknesses of the EU’s decision-making framework, they can expose the entire bloc to the dark side of interdependence.
Nonetheless, the EU and its member states are now making the journey towards greater economic sovereignty. They will only reach their destination if they prepare well for the trip. One can only hope that they remember the sunscreen, their raincoats, and all the other things they will need. Staying at home is not an option.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.