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Economics & Finance

Europe’s Power is Waning

Douglas Webber, INSEAD Professor of Political Science |

With its economic and political influence increasingly questioned, can Europe ever hope to become a genuine world power?

As the 21st century opened, a number of observers of international politics were optimistic that the new century would be ‘European’, that a politically more and more integrated Europe would shoulder aside the US, Asia and other possible competitors and become the world’s pre-eminent power.  The last decade, however, has provided more evidence of the EU’s impotence than of its power.  One only has to think of its weak responses to crises such as Russia’s annexation of Crimea, the Arab Spring and now the rise of the ‘Islamic State’ in Iraq and Syria to realise how limited its influence is. In retrospect, the EU probably attained the pinnacle of its international influence when, in the years preceding its enlargement in Central and Eastern Europe in 2004, it played a major role in easing the post-Communist countries’ transformation into fairly stable and peaceful capitalist democracies. 

As I noted in my paper, Declining Power Europe? The Evolution of the European Union’s World Power in the Early 21st Century, Europe was able to wield a great deal of power over its post-Communist neighbourhood because of these countries’ strong aspirations to accede to the EU.  It remains powerful vis-à-vis those countries that still want to become members.  Thus, more recently, it was able to use Serbia’s wish to join the EU to secure a settlement of the conflict over the status of the minority community of Serbs in Kosovo.  Meanwhile, however, the list of serious candidates to join the EU has grown shorter and, as recent events in Ukraine, North Africa and the Middle East have sorely demonstrated, Europe’s effectiveness in shaping political developments beyond its immediate boundaries has been greatly diminished.

Not only the EU’s declining scope for wielding the ‘accession card’ to influence neighbouring states, but also deep divisions among its member states have undermined  its capacity to respond effectively to big security crises. The strongly divergent strategic cultures of the big member states have consistently made it impossible for the EU to exercise military power effectively.  The EU has not come even remotely near to realising the ambition of the EU Security and Defence Policy, signed in 1999, to create a “rapid reaction force” comprising 60,000 troops from the member states to intervene in security crises abroad.  The EU’s military ineffectiveness has naturally been exacerbated by member states’ defence spending cuts over the last decade.

The (Declining) Advantage of the Single Market

Relative economic decline has also taken its toll on the EU’s international role.  Alongside the ‘accession card’, whose impact is limited to its neighbourhood, control over access to the world’s biggest market has been the EU’s greatest power resource in international politics. 

The significance of this resource is most clearly visible in the sphere of regulatory policy. The size and hence attractiveness of the EU’s single market has enabled the EU to export  its technical standards to many other countries and across a range of industries and activities ranging from chemicals, electronic equipment, toys and cosmetics to food, earning Brussels rightfully the title of “regulatory capital of the world”.

As markets in other countries and regions continue to grow faster than in Europe, it will become increasingly difficult for the EU, however, to retain its role as the world’s regulatory superpower.  The same trend is likely to exert itself in this issue-area as in international trade politics. Here, as recently as the first half of the 1990s, the EU was able, in tandem with the US, to dominate the Uruguay Round of international trade negotiations.   Since then, however, with the rise of power of the BRIC nations in particular, the playing field has changed radically. The paralysis of the Doha Round of WTO trade talks, attributable primarily to conflicts between the developed and developing countries over agricultural trade, illustrates very clearly that the days of the old bipolar distribution of power in international trade politics are over and have been replaced by a multipolar order in which the EU’s role and power are more limited.

The Euro: Not a big rival for the dollar

When the euro was conceived and being created, there were also hopes that the single currency would make the EU the world’s great monetary power. Thus, the former French president, Valéry Giscard d’Estaing, for example, predicted that the euro would be the “world’s leading currency”.  But these hopes too have been dashed. Although today it is the currency used by some 334 million Europeans, it has so far failed to pose a serious challenge to the primacy of the US dollar as an international reserve currency reserve: in 2012, the U.S. dollar was still 2.5 times more widely held in global foreign exchange reserves than the euro.  The creation of the euro has hardly enabled the EU to bolster its influence in international monetary and financial affairs. Indeed, in the course of the Eurozone crisis since 2010, the participation of the IMF in the bailouts of several Eurozone members  (Greece, Portugal and Ireland) and the IMF’s involvement in the provision of financial aid to other EU member states  have widened the scope for non-European countries  to exercise power over the EU and its member states rather than vice versa.

Regional “domino effect” unrealised

The EU is certainly not a military, or ‘hard’, power.  It is not a monetary power.  As a trading power it is in decline.  It may have already peaked as a regulatory power.  Could it nonetheless still have a future as a ‘soft’ power, one which, by power of example,  as a zone of economic and political freedom and relative peace and prosperity, can influence the course of events elsewhere in the world? Towards the end of the 20th century countries in numerous other regions were motivated by the EU’s single market project to create regional organisations and accords. There were expectations that European integration would generate a “regional domino effect”, but a decade on, in the wake of the global and Eurozone financial and other crises, the exemplary power of the EU has receded.  With the benefit of hindsight the 1990s look like a golden – but ephemeral – age of regionalism. Any discussion on creating common currencies in other regions of the world has ebbed.  The EU’s ‘soft’ power has not resisted the decline of its ‘hard’ and economic power, but has rather waned in step with these.

If one assumes that the EU’s relative economic decline is inevitable owing to faster economic growth in other regions, the only way in which the EU and its member states can conceivably aspire to be a big power in world affairs in the future is by integrating more closely politically and not only speaking with one voice, but also acting with one will. If anything, however, they are less capable today than they were a decade ago of adopting and implementing common policies.  The rapid rise of ‘anti-European’ political parties across much of Europe in recent years will make it harder than ever for the EU to unite and promote its interests in international politics. The prospects of the 21st century turning out to be ‘European’ are thus receding very quickly. 

Douglas Webber is Professor of Political Science at INSEAD.

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