Originally Published 2004-01-30 09:39:27 Published on Jan 30, 2004
2004 is a significant year for Europe. In May of this year, the European Union (EU) will induct ten new members, eight of which were part of the former Communist regime of the Soviet Union. While four of these East European states (Poland, Hungary, the Czech Republic and Slovakia) are struggling with mounting budget deficits and contemplating awkward spending cuts, France and Germany (the dominant European powers) are immersed in a deep economic crisis.
Can the World Breathe Easy Now?

2004 is a significant year for Europe. In May of this year, the European Union (EU) will induct ten new members, eight of which were part of the former Communist regime of the Soviet Union. While four of these East European states (Poland, Hungary, the Czech Republic and Slovakia) are struggling with mounting budget deficits and contemplating awkward spending cuts, France and Germany (the dominant European powers) are immersed in a deep economic crisis. Albeit migration is welcome, fear is palpable among Western Europeans, that of losing their jobs to immigrants and whether the economy is robust enough to sustain the consequences of the mass exodus. To discuss these issues and the pertinent debates, Divya Srivastava spoke to Jorg Schultz, Deputy Head of Foreign Relations, Rosa Luxemburg Foundation, a Berlin-based think tank. Schultz was in New Delhi, last week, at the invitation of the Observer Research Foundation. A student of Business Management and European Law, Schultz has tremendous experience in project development in Sub-Saharan Africa and Southern Asia, liaison with donors, project control and evaluation and setting-up of regional projects and offices.

Q: Mr. Schultz, you have just returned from the World Social Forum (WSF) in Mumbai, which was witness to myriad critiques of globalization. What is your perception of the debates generated at the WSF?

Jorg Schultz : My perception is that there are two debates in the world: while one is conformist, the other rejects the free market. The problem of those adhering to the latter is that they are not able to provide an alternative to what is going on in the world. But, I think that the World Social Forum is a very good means to those whose voices are not heard very much. With so many people gathered in one place, you simply have to listen to them. The Forum provides a good feeling of solidarity, of belonging together and they feel that they are not alone in this world. And, that there are many people that work along the lines they do.

Q: The Reserve Bank of India recently stated that India had witnessed a GDP growth of 6.5-7% in November 2003. On the basis of your visits to India (and extensive ones around the world), do you believe that part of the growth of the Indian economy could be attributed to globalization?

JS: I don’t know whether India should or should not attribute its magnificent growth to globalization. (Pauses) What strikes me most when I come to India (and I have been here three times now) is the gap between wealth and poverty. I am living in a five-star hotel here, which would cost me US $130 per night, but when I step outside, I meet people who would not earn that amount throughout their lives. I think India should put all the money it can afford into alleviating its poverty.

Q: What does this growth signify for Indo-German relations?

JS: For Indo-German relations, I expect more Indian imports to Germany and would like to see more of India in Germany. India is not very present in Germany. You do not find many Indian products in German shops. People do not know much about India, except for that Indians are brilliant in IT (Information Technology) (laughs). When the Green Card came (two years ago), the government had especially invited Indian IT professionals to Germany to work there. In a way, the gap between India and Germany is widening but it is much better than what it used to be.

Q: Are there any specific products that India should focus aim at exporting to Germany?

JS: Hmm…Certainly not agricultural products. May be IT products, as India’s biggest strength lies in its technological skill? May be India could export some brains to Germany!

Q: As per November 2003, unemployment in Germany stands at a rate of 11.1%. It is believed to have originated at the time of the German unification (1990). Is the German government undertaking any steps to address this staggering rate?

JS: Unemployment in Germany originated not only from the German unification. Actually, West Germany had some severe economic problems back in the 1980s. Moreover, East German economy was suffering from severe economic crisis. If two crises are put together, the result usually is a crisis of massive magnitude. The German government is undertaking a lot of reforms right now, but I do not think that they (reforms) go far enough in a way and that they target the issues that are required to be addressed in Germany. For instance, if you look at the health reform that was undertaken last year, it should bring down the contribution to health insurance in Germany. Now that you have had introduced the reform for almost a month, you could say let’s look at about 300 health insurances in Germany and 11 of them would bring down the rate and another 12 would raise the rate. The outcome is nothing: nothing but more burdens to the ordinary men in the street. We just have to pay more and we get less out of the system. I think the German reforms are very short sighted.

Q: Statistics reveal that unemployment in East Germany (18.9%) is double that of in West Germany (9%). With the impending EU enlargement, do the Germans fear a worsening of the scenario? And that it might take them 50-90 years to catch up with West European living standards?

JS: You cannot discuss this question in terms of periods. But the point is that the standards of living, and the standards of income, are very different between Eastern and Western European countries. East Germany is lying in the middle, between the East and the West. So, if you take the high levels of unemployment in East Germany into account, you may expect that people in East Germany fear EU enlargement in a way that they think that more cheap labour will come in from East European countries and the few jobs available will be taken up by these people. No one can blame people in East Germany for them earning less. But, there is some danger in that for people in East Germany who would lose more chances than they already have lost. For example, in the state of Brandenburg alone, 80% of all jobs were lost within a period of 12-13 years. So, if more jobs are lost, more people will migrate to the West and that will not contribute in any way to solve the problems in East Germany.

Q: East-West migration will be a fact of life in the EU for the next 30 years. Does the German government plan to fine-tune benefit systems to shut out short-stay claimants, like Denmark, and improve incentives to work? How does it plan to deal with this issue?

JS: I don’t know the German government’s plan to deal with that. I simply think that the Government leaves it open. If the labour market is completely open to East Europeans, they will move in and out as freely as they like. I think the German Government believes that the market regulates that and there is no specific mechanism to deal with it.

Q: Now that Ireland has assumed EU presidency, do you think there will be any change or improvement in the handling of affairs (as opposed to the Italian presidency)?

JS: I do not think that improvement depends on which country holds the EU presidency. But, there are problems that have to be dealt with, like the European constitution. The Italian Government cannot be blamed for the failure we had last December at Brussels, though Silvio Berlusconi (of Italy) is not the greatest leader in Europe. (Laughs) With the dominating forces like Germany and France in deep crisis, it is becoming very difficult to achieve more progress in the EU than it was 20 years back, when these countries had flourishing economies and were capable of providing more money for proper European unification.

Q: If France and Germany are allowed to follow the ‘two speed’ expansion strategy (mooted by them), do you believe that it would be unfair to those who are part of the same union, yet would be left behind?

JS: I think this is one of the core problems in the EU. You have a similar problem with the Schengen process, for instance. You can travel freely in some European countries while have to follow more controls in others. But, that is much simpler than this issue. In this, there is a danger of dividing the EU and of making no further progress in integrating Europe, because it does not make sense to have two different approaches to European integration. (Pauses) Though Germany is pushing hard for this ‘two speed’ strategy to integration, I completely disagree with it. Either there is complete European integration, or there is not. Why two? You could have three, four, five different approaches to integration, but then the whole purpose (of European integration) will be defeated.

Q: After the EU summit floundered at Brussels last December, what will happen to the EU Constitution?

JS: That is very difficult to say. People do not know. But I can tell you, in brief, that it is better to have any European constitution than to have none, because any European constitution would mean a step further towards bring Europe together. But, no constitution would mean a backlash for the European integration process, in the long run.

Q: How does the EU plan to go ahead with the process of integration?

JS: At the background of every European country, lies its national interest. You have to draw a balance between the interest of the large and the small countries. It’s a question of the number of countries in the EU. It’s a question of one state, one vote. But, you also have to take in mind the population. Different countries have different population figures. Germany is not only the biggest player in Europe in terms of population, but also in economy. The Germans and the French do not want to use their so dominating influence on EU affairs. But, if you put a country like Poland in the same row and at the same level as Germany, France, Britain and Italy, they fear that the small countries might dominate the big countries, and that the interests of the big countries cannot be realized. Therefore, I think it will take some time to re-balance the whole process (of European integration) and structure.

Q: Do you believe that the threats issued by Paris and Berlin to create their ‘own Europe’ will act as a spur for the EU member states to bury their differences? Or would it result in the disintegration of the EU?

JS: It’s difficult to say. I think no country in the EU has a real interest in disintegration. All of them welcome the new member states, mainly because they want to make the European position stronger against the interests of the US and Japan, and so far, the EU integration process may continue. It’s also about closing the gap between Eastern and Western Europe. Many Eastern European countries expect a lot from the integration process, because, for them, it is like coming home in a way. It should not be forgotten that many of these countries were dominated by the Soviet Union for 40-50 years. And now, they have re-established their contacts in Western Europe. For them, it is very important. For me, personally, the enlargement of the EU is a very important step to maintain peaceful relations within Europe.

Q: In 2004, the US, Japan, China, India, Australia and the ASEAN are predicted to grow faster than France, Germany and the euro zone. While the US economy is predicted to grow by 4.4%, the figure for the euro zone growth is 1.8%. What is your reaction to this?

JS: My reaction is, first of all, you are very right! (Laughs) The West European countries have been in severe economic crisis for quite some years, especially Germany and France. What is important for me is not just economic growth but how you can maintain the basic rights and standards for the population in these countries. We do not lack wealth. There are so many rich people in Europe, and some countries in Europe are generating such large profits. It’s more about re-distributing the wealth and improving the spending power of the population. Over the last few years, the income growth rates in Germany have been at or below the inflation levels. You cannot expect any economic growth if the spending power of the people is not increased properly. So, the European countries should not only liberalise their economies, as they have done that for 20 years and it didn’t help. Instead, they should put more money and effort in educating their people and not lose contact with where the world is headed for, and not just pray to the God of the liberal economy!

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