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Brexit, Populism and Polarised Economies: Dividers or Catalysts for a more United Europe?

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l to r: Stathis Kalyvas, Fivos Karzis and Gideon  Rachman

“Brexit, Populism and Polarised Economies: Dividers or Catalysts for a more United Europe?” – A thought leadership event by Eurobank

Konstantinos Tsiveriotis, CEO of Eurobank Private Bank of Luxembourg and Athos Kaissides, General Manager of the London Branch cordially invited the elite of banking to a thought leadership event, on the 4th of December 2017, at the Ned in London.

In a warm and festively decorated convention room of the Ned, the panel was moderated by Fivos Karzis, Advisor to the CEO of Eurobank Group. The panellists were two exceptional intellectuals, Stathis Kalyvas from Arnold Wolfers, Professor of Political Science and Director, Program on Order, Conflict & Violence at Yale University and Gideon Rachman the Chief Foreign Affairs Commentator at the Financial Times. Dr. Evelyn Stefanaki was there with her camera reporting:

Fivos Karzis, initiated the discussion by mentioning that two months ago, a graph appeared in Bloomberg, which showed the political challenges for Europe, whilst the fact that the economy is doing much better now, masks these political risks.


A slide on aTable about Brexit

“Economists have spent a decade saying that the big risk lies within the economy and the main challenge is the political risk. There are two conflicting trends, one is the trend of “Integration” and the other that of “Disintegration-Division”. Three main frames of thought will be used to display the several aspects of this.
The first one is called “Populism” and it is expressed in practically every country. Examples include separatism in Spain with Catalunya, regionalism in Italy, the rise of the far-right with the alternative party in Germany and radicalism on the rise in Spain, Greece and France. At the same time, we see that the EU states are backing the constituent states and the radical sentiment seems to either adapt as in Greece or faint as in France. We have seen many parties performing well within this challenge, as it happened in the Netherlands and France with Macron.

We also have “Economic Polarisation”, the “no self-divide”. This poses question whether it will be in all of states’ interest to stay within the Eurozone and at the same time, the EU answering this challenge by moving fast-forward towards integration, at least in the economic field and the banking union.

And we have “Brexit”. We do seem very close to an agreement towards moving on to crucial phase of negotiation that will decide what will be the future relationship between the UK and the EU when or if Brexit happens.”

He then asked the expert panellists, if they see behind all these challenges one driving force or is it a juncture of different challenges that happen to move along this line.
Stathis Kalyvas responded first and he said that we certainly see economic, political, cultural and technological changes. “It is very interesting that different researchers, tend to emphasize the kind of change they are most familiar with. For example, the economists emphasize very much the economic changes i.e. the globalisation or the rise of inequality. Political scientists, on the other hand, try to give emphasis to political changes, for example the decline of massive political parties, the disconnect between parties and large constituencies. And then of course, there are the people who study technology, be it in the media or technological changes that drive production and they emphasize those changes as well. Those changes that interact, do so in ways that are not often the same. Generally, one should be suspicious of intergradations and one should emphasize on one process that is predictable because of all these connections.

A view of the audience attending the event

It is always very easy to predict that we are witnessing a secular change and we tend to see patterns even when patterns do not exist. It is clear that a number of very significant changes is happening but what is also clear is, that very often the biggest changes are the changes that we do not observe and very often we see very fundamental and radical changes even though these are not really taking place.”
Gideon Rachman thinks that 2016 was a huge year for global politics with the combination of Trump and Brexit being massive changes. He agreed that there were many causes for these changes. First the financial crisis which triggered the Euro crisis and also stagnation of the living standards which lead to loss of confidence in Europe and the difficulty in keeping the Euro together. “Although the worst phase of the financial crisis is over, we haven’t reached full equilibrium”, Mr. Rachman said. “Many of the big countries in Europe are in crisis. Spain is in its biggest crisis since democratisation with the threat of the break of the country, Britain obviously with Brexit as a huge event, in Poland democracy is slipping backwards and Italy has unresolved economic problems. France kind of “dodged the bullet” with Macron looking like a turning point and Germany has real troubles forming a government. The EU is not stable.”

“The second factor along with the financial crisis that I would look at”, Mr. Rachman pointed out, “is the depth of integration running ahead of popular consent. Is the population prepared to live with the level of integration of the range of European level that led to Brexit?”

“On the other hand we see that the EU is still is a scheme of states of different people and this is nothing new”, Mr. Karzis argued.

l to r: Kalyvas, Karzis (m) and Rachman

Mr. Rachman said that the initial steps of the EU in the 50’s, were relatively technocratic. When you start merging currencies in quite a short space of time, then it begins to affect people in a variety of ways. One of the lessons we also learned however, is the resilience of the EU project. The way Brexit has caused the EU to rally around itself and to say that this is such an existential threat that we have to firstly be very firm with our response to Britain and secondly take on some of these very fundamental issues of the organisation of the EU because if we don’t then the whole thing will fall apart and we will lose a lot in the process.

“Why do you think Europe has been so unpopular?”, asked Mr. Karzis.

“Well I am not so sure that it is”, said Mr. Kalyvas, “the latest Eurobarometer showed that there is still a majority in favour of European integration (40-60%), which is quite significant given the nature of the project. Probably one of the most radical experiments in that the EU project is based on, is the idea of challenging the fundamental way in which the European states have been organised as nature states and no sovereign state is about to applicate its sovereignty willingly. As a result, this is a scheme that in a sense seeks to achieve something which in the past has only been achieved with war, that is the concatenation of sovereign units into something different. The main driving force is to create factors that will generate crisis and lead decision makers in front of dilemmas of which the cost of moving out would be too important to consider. In a sense you can say that the natural state of the European integration process is crisis. Only crisis allows the process to move forward. It is very risky but there is no other way to do it peacefully.”

“I think the Franco-German desire to avoid a third world war is still absolutely critical to the whole thing and in a way the Franco-German engine has become even more important than Britain leaving” Mr. Rachman said. ”Germany has once again re-emerged as the dominant part of Europe and this was clear particularly during the Greek crisis and to the refugee crisis that really decisions are made in Berlin. Barroso said, that Germany needs France to disguise how strong it is and France needs Germany to disguise how weak it is. The question is, how do the other countries fit around this. Although, I think people have mixed feelings about Britain leaving, some thinking British are a pain in the neck but I think it does balance out the power in Europe because some of the Nordic countries and the people that were not quite happy with whatever direction the Franco-Germans were deciding, might have looked in the past to Britain as a way to balancing it out.”

“We tend to assume”, said Mr. Kalyvas “that the default situation is stability and every perturbation is an anomaly and in actual fact the opposite is the case, the actual default is the flux and the fact we are having significant pushback into the flux is an indicator that perhaps being managed more effectively. Certainly we have the rise of Populism but I don’t see a kind of radical agenda.”

Mr. Rachman pointed out that we do not know how Brexit will play out. There is a strong possibility that either Britain will follow a much more moderate form of Brexit than what they initially wanted because they get frightened by the potential economic consequences of going through the full Brexit and there is a small possibility but not negligible that the whole thing just gets derailed.

“Studying the Eurobarometer one of the peak moment of pessimism was 2012, with the most pressing problem for the EU being the economic situation, whilst today number one problem is terrorism and the second is immigration”, Mr Kalyvas said.

“What does Populism mean?”, asked Mr. Karzis.

“There is always disagreement when defining Populism and the populists themselves never accept the term for themselves. There are 2 forms of Populism, left and right. Combined the two forms of Populism although having differences are united in the rejection of the current system. “

Mr Kalyvas pointed out, “Generally speaking people do not use this term in a positive way and certainly not in Europe. The best way to think of it is the idea of a very big divide between the people who tend to be “pure” and the elite who tend to be corrupt or working for foreign forces. Underlying the division between the elite and the people, is an understanding of insiders and outsiders, (who belongs to the nation and who doesn’t). Five elements are found between the Populists of the right and the left. The first one is Antagonistic Repoliticisation, the idea that certain topics that somehow became topics of consensus have now to be questioned. The second is a belief in Majoritarians, the belief that whatever the majority thinks is the right thing and there should be no protection to minorities. The third point is the idea of Anti-institutionalism where decisions have to be made in a way that is direct and abrupt. The fourth point is Generalised Protectionism- protectionism in economics lets mitigate the effects of the market but also protection in terms of culture. The fifth idea, is the idea of Style, which is raw and adulterated (lets behave in a way that is provocative, i.e. let’s dress without ties, as a signal that we are not like the “other guys”).

The panellists were warmly applauded and questions from the audience were then answered. The evening concluded with a reception of warm and cold canapes and drinks. The event was immaculately organised by Rivet Event Management and Mrs Christine Fotinelli. For sure, Nikolas Karamouzis the Chairman of the Eurobank Group, must feel more than content following this unique event’s success!

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