CIAO DATE: 02/02

Prospects for Europe and the Atlantic Alliance at Century's End

William I. Hitchcock
International Security Studies, Yale University

GCSP - ISS at Yale University Workshop Papers: "Old and New Security Issues: Research and Policy Ramifications"
August 1998

The Geneva Centre for Security Policy

Ever since the end of the Cold War, analysts have engaged in long discussions about what sort of international order would replace it. Though these discussions have ranged widely in their assessments, they usually took as their starting point a common assumption: that the Cold War order and the basic structure of international relations it represented, was over and done for. From 1989 until about 1995, this assessment seemed accurate: the alliance was falling apart, war broke out in Europe, the western economies were in a tailspin, and the delicate architecture that bound Germany to the states of Western Europe seemed to be in jeopardy, overburdened by the arrival of a united, powerful Germany. Whatever order we had, it didn't seem like anything we had seen before.

Lately, though, post-Cold War Europe has started to look surprisingly like Cold War Europe, at least in a number of important respects. Ever since the United States decided to press for an expanded NATO alliance, and simultaneously engage its power in the war in the former Yugoslavia, the Atlantic Alliance has been restored to its former hierarchy: the United States is the undisputed leader of the alliance, and once again Europe's sole hegemon. In the past few years, Europe's economies have begun to improve markedly, and the move is on for further steps toward economic integration - the culmination of a process begun in 1950, with the birth of the ECSC. NATO and the EU have, after a good bit of internal debate, decided to keep up their fairly rigorous standards for membership, and so only the nouveau-riche of the European neighborhood are being let in; the poor cousins and awkward relations in southeastern Europe, and the former Soviet republics, are being kept at arms length. Europe's divisions, less glaring perhaps, are still in tact; they've just been pushed eastwards a bit. Above all, Russia remains the chief geo-strategic threat to stability in Europe, or is in any case perceived to be so. If this is the "new world order" we expected to see in 1989, it does seem like déjà vu all over again.

To some hearty Cold Warriors, the parallels between the present situation and the recent past may provide some comfort. The Cold War, after all, gave us balance, stability, and some degree of security, although at the price of many sleepless nights lost to the counting of missile silos. Indeed, John Gaddis' term for the period between 1945 and 1989 has stuck: it was the "long peace."

I would like to suggest, however, that despite a number of outward signs that things are looking up in Europe, both in economic and security terms, and that we seem now to be in a stable "order", there are some serious troubles ahead, many of which are directly related to the two developments in Europe about which there is today so much self-congratulation: the advent of European monetary union, and NATO expansion. The EU and NATO are both products of the Cold War. Yet they are also being touted as the twin pillars for the construction of a new, post-Cold War European security order. Can they serve to shore up stability in two such different periods? Are there risks that perhaps we are overlooking or underestimating in placing such hopes on the EU and NATO? I believe that there are, and while I do not want to appear too gloomy, I do think that the current policies that both the EU and NATO are pursuing will have unexpected and perhaps adverse consequences upon Europe and US-European relations. The creation of the EMU and the expansion of NATO, though designed to encourage stability and prosperity in Europe, may actually create tension and instability and lead, if not to overt conflict in Europe, at least to further clashes of security interests among the United States and its European allies. The message, then, is that despite the appearance of a stable European security and economic system, Europe has not yet found its post-Cold War "order". Indeed, I believe that we are on the brink of a series of what may be radical new developments in the European economic and security order in Europe.

The potential for sudden, sharp, and perhaps unwelcome change in Europe has been largely masked by the recent improvement in the fortunes of Europe economically and the re-establishment of order within the Western Alliance. Europe's polities appear revived and refreshed by new political blood and the return of genuine debate after a period of political sclerosis; the continent is enjoying the beginnings of an economic recovery; and the Western Alliance, standing on the accomplishments in the Balkans, has been revived and renewed largely by American leadership. Let me touch on each of these points briefly.

The Revival of Democracy

It is indisputable that European democracy has been revived in recent years. In the years following the fall of the Berlin Wall, many of the western European states appeared timid, adrift, uncertain of the challenges ahead. Their leaders too seemed ill-equipped to handle the sudden change that had been thrust upon them. President Mitterrand was widely reviled in France, so much so that his long-time political rival, widely considered a lightweight and somewhat comical figure, Jacques Chirac, was elected to the presidency - notwithstanding a sudden last-minute surge by the Socialist Lionel Jospin in the presidential campaign. John Major produced Britain's all-time lowest approval ratings. Helmut Kohl broke Adenauer's record for longest-serving Chancellor and was setting out to challenge Bismarck's record, leading Europeans and Germans alike to wonder at the German penchant for authoritarian and stable rule. Italy was as usual a laughing stock, with corruption and cronyism being exposed, to no one's surprise, at the very upper reaches of the government and administration; indeed, all of southern Europe, Portugal, Italy, Greece, and Spain - or the PIGS, as some wags in Britain have called them - were locked in spiraling inflation and unemployment, and their political structures appeared ill-suited to handle the challenge of being viable members of the EU. In the East, the picture was hardly more encouraging: ex-Communists were climbing back up on their perches all across Eastern Europe, esp. in Poland, Hungary, and Romania; while in Russia, the sad spectacle of dirt-poor, underfed Russian soldiers fighting the even poorer Chechen rebels fueled the sudden rise of ultra-nationalist Alexander Lebed to political prominence, to say nothing of the absurd figure of Vladimir Zhirinovsky-a man even most Russians find silly.

In virtually ever country I have mentioned here except Russia, the political situation has markedly improved in the past few years. In France, Chirac has been overshadowed by his Socialist prime minister Lionel Jospin, who remains popular [with over 60% approval ratings] and is reaping the benefits of a gradual economic recovery. Tony Blair's honeymoon is over in Britain, but in the wake of the Northern Ireland settlement, his popularity is immense and his callow rival, William Hague, hopelessly overmatched; Romano Prodi, the prime minister of Italy, has staked out his reputation as the most effective postwar leader Italy has ever known; and in Germany, it appears that for the first time in 16 years, we are on the verge of watching a peaceful transfer of power from the Christian Democrats to the Social Democrats: democracy still has a pulse in Germany. In Poland and Hungary, despite the presence of former Communists in the government, democracy is stronger and more entrenched than three years ago; the Czech Republic is beleaguered economically, but remains stable; even Romania has ousted its former Communist leaders and embraced democracy and the market. Only in Russia has the situation worsened; I'll talk about that a bit later on.

Economic Recovery

Alongside these encouraging political developments comes the good news about the European economy. The economic situation in Europe is today more positive than it has been at any time in this decade. This is in part due to the long-running American economic expansion, but it has also been because of the major institutional changes that the Europeans have undertaken in preparing for the common currency, slated to begin on January 1, 1999. Consider the economic picture of just a few select countries.

In 1990, Italy's budget deficit stood at about 11% of GDP; today its has fallen to 2.7%, comfortably below the Maastricht-required 3% limit. Inflation has dropped from more than 6% in 1991 to 1.7% in 1997. Interest rates stand at 5.4% on 10 year government bonds, down from almost 15% in 1992. ₁ That same year, you will recall that the Italian lira went into a tailspin and was withdrawn from the European exchange rate mechanism. But the devaluation helped Italian exports, and the economy is today growing at about 2.5%.

The French economy is growing at 3% a year, its best performance in the 1990s. Unemployment, which peaked at 12.6 % in 1995, has started to inch downward, now standing at 11.9%. The stock market is booming; long-term interest rates are at their lowest in decades; the unions are relatively quiet.

In Germany, the economic storm triggered by the costs of reunification has been weathered. The German economy is growing at 3.0% and unemployment has dropped a bit since last year, now standing at 11%. And after pumping some $551 billion [1 trillion DM] into the new federal states, that is, the former East Germany, the government is beginning to see results. The rail, road, and telephone systems in the new states are reputed to be as good if not better than in the western part of the country; and the unemployment rate in the East, which crested at 22%, has dropped to 17.2% as of June 1998. The betting is that the eastern German states will by the end of the decade be in full boom conditions, and this explains the high degree of foreign investment being poured into this part of the country. ₂

In light of this good news, stock markets in the western European countries have been buoyed. In Britain, the stock market is up 25% over a year ago; in France, the figure is 44%; in Germany, 53%, and in Italy, the figure is an astonishing 70.6%, as of July 1998. [The drop in the US stock market will surely take a toll on these European numbers eventually].

This improvement is visible not just in the big economies. Two perennial laggards are thriving. Portugal's GDP will grow by 3.6% this year, and Spain's will grow by 3.8%. ₃ Interest rates in Portugal and Spain have dropped to 6% from 11% in 1995. And unemployment, the near-permanent affliction on the Iberian peninsula, has inched downward, in Spain to 19.6% [from 23.7% in 1994, and in Portugal to 6.3% [from 6.9%]. Spain's right-wing government has undertaken serious reforms that would make Milton Friedman happy, aggressively privatizing state-owned companies, cutting taxes on capital gains, and planning to cut income taxes as well. It is also easing employment laws to make the hiring of temporary workers easier - a way for employers to avoid paying the huge benefits packages that full-time employees are granted by law. ₄

Much of this growth, at least for the western states, has to do with the race to monetary union. The advent of the currency union, now scheduled for January 1999, has driven once-hidebound state bureaucracies to take bold steps to bring their budgets into line with the Maastricht criteria, in turn stimulating greater competition and freer markets in Europe. Maastricht too has forced a surprising degree of economic convergence: interest rates are low all across Europe, which is a historic first, and will allow for much faster growth in traditionally weak economies like the PIGS. The establishment of a European Central Bank with a tight-money Dutchman at the helm has given credibility to the common currency. The stock market boom has been driven by the belief that such institutional changes will make Europe an area of significant growth in the coming half-decade. The combination of economic growth, low budget deficits, negligible inflation, and low interest rates make Europe's economy almost a sure bet for investors. ₅

The Alliance Restored

Alongside the improvements in Europe's economic fortunes has come a change in the fortunes of the Western Alliance. You will recall that in 1994 and 1995, as the Bosnian war reached its most gruesome stage, Europeans and Americans were at each others' throats over how to handle the crisis; the French went so far as to publicly lambaste the United States for its moral cowardice. But the American decision to get involved in the Bosnian war broke the stalemate in the alliance over what sort of post-Cold War role the United States would play in Europe. In the words of one of the architects of US policy in Europe, Richard Holbrooke, the United States concluded, as it had done in 1917 and 1941, that it is still a European power. A Europe that was unstable, fractious, divided, and beset by ethnic conflict and war would present a serious threat to American national interests, Holbrooke believed. The only way that such afflictions could be avoided was for the United States to renew its commitment to Europe, just as it had done in 1945, and assert the sort of leadership in Europe that the Europeans were unable or unwilling to provide for themselves. The tool for this assertion of American hegemony in Europe was to be the one that had underpinned the US presence in Europe since 1949: NATO. Holbrooke, in a 1995 article in Foreign Affairs, was quite explicit about why he believed that NATO was the right tool for the job. NATO is an American-led, American dominated institution. By taking in new members from the East, the United States would declare its commitment to see a stable and prosperous central Europe, linked strategically and politically to the West. Without such expansion, Holbrooke argued, central European states would feel "progressively more isolated" from the West. They would remain vulnerable to internal squabbles and to regional disputes, and the United States would lose leverage in these countries in guiding their political and economic evolution toward democracy and the market. Of course, the United States wanted Europe to help secure the eastern states, through EU expansion and perhaps a stronger OSCE. But these institutions were a distant second in importance to NATO. Only NATO had the credibility, the strength, and an active American commitment; only NATO could lock the United States into Europe. ₆

NATO expansion was far more than a military-strategic decision; it was a decision about how best to assure stability in central Europe. The answer was that American hegemony was the best way, and that NATO would provide it. The Central Europeans, of course, were thrilled; and in the wake of the Bosnia debacle, the larger Western European states were forced to acknowledge that American power was the crucial ingredient to European stability. The deal was sealed at Madrid in July 1997, when invitations were formally extended to Poland, Hungary, and the Czech Republic; and subsequently, the United States has adopted a position that NATO expansion will continue until all European countries that share its values and standards are invited to join. Madeleine Albright minced no words when speaking to the North Atlantic Council in May 1998: "I mean extending as far as possible a community that upholds and enforces common standards of human rights, a community where borders are open to travel and trade, a community where nations cooperate to make war unthinkable. I mean defining Europe in the broadest and most inclusive way and overcoming barriers that old conflicts and past prejudice have etched in our minds and on our maps." ₇

I will return to the problems created by this line of reasoning, and this policy. But for the moment, let me just point out that NATO expansion has improved alliance relations between the United States and Europe. It is easy to see why. Gone are the confused utterances from the Warren Christopher State Department about asking the Europeans do their share in the collective defense. Bosnia has brought America back into Europe in full force, and persuaded its policy-makers that America is the only country that really matters in building a viable security system in Europe.

Europeans are pleased about this, for the same reason that most of them supported the original NATO agreement in 1949: NATO expansion keeps the Americans in, the Germans down, and the Russians out. This is precisely the same logic informing European attitudes to NATO expansion, as a recent article by the political scientist Robert Art has shown. ₈ In the course of over a hundred interviews of leading European strategists, Art discovered that the single greatest fear was of nationalist backsliding in Europe if the United States diminished its role in the post-Cold War Europe. Without the United States as arbitrator and mutually-agreed upon hegemon, European states would feel obliged to vie for influence and power amongst each other, leading not necessarily to overt conflict, but to a state of tension and rivalry that was inimical to European stability and continued unification. Such a state of affairs would also make central Europe an arena for such rivalries to play out, as Germany, France, and Russia competed for markets and influence in eastern and southeastern Europe. NATO expansion solves this problem nicely: it renews the US commitment to Europe, establishes NATO and its principal state, the United States, as the hegemon in eastern Europe, and removes any temptation for national competition among member states. Of course, there were periodic challenges to this approach, most notably from France. The French spoke a great deal in the early 1990s about a larger and more aggressive European Defense Identity; but in the wake of Bosnia, even the French had to concede the hopelessness of any truly efficient and active European common foreign and security policy. ₉ The alliance has encouraged window-dressing of the sort evident in the creation of a Franco-German Eurocorps, of a strengthened WEU, and even today's Combined Joint Task Force for out-of-area operations; but all members are now agreed that NATO is to remain an American- dominated organization, for the alternative is collapse and confusion. Of course, Europeans like NATO expansion for another reason: it will allow them to delay the accession of new Eastern members into the European Union, a process that is certain to cause havoc just at a time when the EU is undertaking its greatest gamble yet, the introduction of the common currency.

These are encouraging developments: European democracy has been revived; the economy is surging ahead and currency union is around the corner; and the Western Alliance is more certain of itself now that the United States has re-committed itself to Europe's security problems. But short-term improvements in the economic and security climate must not be used to mask potential pitfalls in the road ahead. Indeed, the structural reforms now under way in NATO and the EU, which have created the basis for an improved US-European relationship of late, may in a rather short time come to act as a major irritant in US-European relations.

Clouds Ahead

There are, I think, a number of potential problems ahead in US-European economic and security relations. They relate to the fact that the two institutions on which Europe's prosperity and security are based, the EU and NATO, are themselves Cold War era answers to Cold War era problems. The major states involved have decided to use the EU and NATO to extend the peace and prosperity of the past forty years into the post-Cold War era. We must recognize that there are risks to this approach. In the Cold War, European integration and prosperity led to increased tensions between the US and Europe, as the continent came increasingly to feel that its economic power was not met by a commensurate degree of respect from the United States. And during the Cold War, the NATO alliance helped define the division of Europe, successfully linking its members into a stable and secure alliance and just as successfully keeping its enemies out of the alliance and on the defensive. Because Europe and America's prosperity and security are today being built upon an architecture that is at its core a product of the Cold War, we must expect that Cold War-era frictions and tensions are also likely to reappear, perhaps in even more serious and acute form, in the coming years. Let me give you some specifics of what I am talking about.

The Risks of European Monetary Union

First, consider the arrival of European Monetary Union. Let us be honest: no one really knows what the impact of EMU is going to be, either on Europe's economies or on the global economy. Analysts disagree, and their positions in some cases are very far apart. On one thing, though, there is consensus: the EMU is a major gamble. The payoff could be huge, but the risks are equally large.

How will the arrival of monetary union in Europe affect the US-European relationship? During the Cold War, Washington initially championed economic integration, seeing in it a means of linking the West European states closely together in a stable political system. In the late 1950s and 1960s, as Europe expanded economically, it became apparent to American planners that a united Europe would be a powerful economic player on the world scene. This would help the overall cause of the West in its competition with the Communist bloc, but might also pose a challenge to American economic and financial dominance of the global economy. Despite persistent friction throughout the 1970s and 1980s over issues such as the "eurodollar," gold holdings, exchange rates, and tariffs, US-European economic rivalry was containable, and in the end not harmful to the overall relationship. The last round of the GATT discussions in 1993, however, showed just how high the stakes have become, as Europeans refused point-blank to accept American dictates on the issue of lowering tariffs to American products.

The arrival of the common currency in 1999, and the elimination of all national currencies in the EU by 2002, is the capstone to almost fifty years of efforts to tie the European economies together and through a collective effort increase the competitiveness of each. How will this affect US-European relations?

Even in the best scenario, the American position in global finance will be challenged. As the economic analyst Fred Bergsten has recently pointed out, the creation of the euro may lead to a shift of some $1 trillion in international investment into euros, most of which will come out of the dollar. With the advent of the euro, the US and the EU are likely to wind up with 80% of world finance, evenly divided between them. The global financial roles of the EU and the United States will become evenly balanced, and the dollar-centered system of the Cold War will be finished. This evening-out of world finance will reflect the productive capacities of the two blocs. Today, the EU already has a larger GDP [$8.4 trillion in 1996] than the United States [$7.2 trillion in 1996]. The EU also has a larger volume of global trade, standing at $1.9 trillion against the US $1.7 trillion in 1996. ₁₀

The euro will be a strong currency from the start; it is the mission of the European Central Bank to see to that. Meanwhile, America's economic position may create some concern: despite the boom conditions visible on Wall Street, the United States has run a trade deficit for the past 15 years, and its net foreign debt exceeds $1 trillion. The EU, by contrast, has run modest trade surpluses in recent years. This underlying weakness of the American economy may make the euro all the more attractive. As the Economist magazine recently pointed out, "the benefits America has enjoyed from the dollar's role as world currency are easy to exaggerate, but the ability to borrow without limit in its own currency has enable the United States to become the world's debtor with equanimity, and to continue to run huge current-account deficits. . . . The arrival of the first plausible postwar challenger to the dollar will certainly make it harder for America to run unlimited current-account deficits, or to exercise unchallenged leadership of the international financial system." ₁₁

The arrival of this new bipolar financial regime will significantly alter the structure of international finance and may face the US and Europe with a new series of challenges that neither bloc has seriously considered. The two blocs will dominate global finance, but they may find themselves in the position of rivals too. So the best scenario suggests a new financial regime which will require new policies for coordinating and stabilizing the relationship between these two currencies. ₁₂ It is worth recalling, in any case, that the last time the global financial system had two major currencies as rivals was when the dollar and the pound sterling were vying for dominance in the 1920s and 1930s - not a time of great economic or political stability.

Yet there is a still more gloomy scenario to consider, one that has been making the round of the principal journals and papers in the United States. ₁₃ It focuses on the adverse impact of EMU within Europe, and the probable increase in political friction between the EU members. This scenario is premised on the following factors:

1. The conflict over the European Central Bank. The last minute struggle between France and Germany over the leadership of the ECB was a harbinger of things to come. The French want a politicized ECB, led by a Frenchman who will be sensitive to French national interests. The Germans wanted a person who would pursue the tight-money policies of the Bundesbank. The Germans' choice, the Dutchman Wim Duisenberg, won the job, but only after a compromise that reduced his eight year term to a four year term, after which he would agree to step down and presumably be replaced by a Frenchman. The debate signals that a major question at the heart of EMU has yet to be resolved: should the Central Bank reflect national or European priorities? ₁₄

2. In parallel to this is the conflict about the proper goals of monetary policy. The Germans want low inflation and a tight-money policy, the same goals they have pursued nationally for years. The French, and some other southern European countries, are more concerned about their high rates of unemployment than about low inflation. They worry that they may need to pursue an expansionary and thus inflationary policy to boost employment: [Jospin's plan for a 35-hour work week comes to mind.] But since the EMU will have removed from national control the tools with which such a policy is implemented - namely devaluation or interest-rate adjustment - countries like France that seek to boost employment will be out of luck. What happens if a sudden decline of exports or a temporary recession strikes? Countries will not have the tools they rely on to prime the pump of their economies. The ECB will be called in to make the adjustments, but in some cases it may not act exactly as each member nation would wish. In short, as long as the European economy continues to grow, the latent conflict over inflation vs. employment will remain dormant; but when times are tough, this is going to be a major cause of conflict.

3. A similar problem concerns the "stability pact" that each member has agreed to: member states must keep their budget deficits to 3% or less of GDP. Once again, the unemployment issue is a potential thorn. What if a country wishes to promote employment, or is obliged to bear the social cost of an increase in unemployment? Since it cannot increase its budget deficit, the EU itself will have to help nations deal with these periodic increases of social costs - and the EU budget is of course made up of national contributions, meaning that member states will have to increase taxes. This will be unpopular and could lead to reaction against the European project.

4. There is another potential problem relating to the employment issue. It is notorious that Europe has a very rigid labor market. Labor costs are very high, and workers' rights are such that once hired, a worker is only with great difficulty fired. The result of this has been a disincentive by employers to hire more workers. If Europe is to continue to expand its economy, it will have to make substantial structural reforms in its labor markets. But will the officials in Brussels be able to impose such changes upon its member states? What reaction can one expect from the labor unions when technocrats in Brussels decide that French railway drivers or German auto-workers ought to have their holidays cut? In short, can the EU bear the political responsibility of making national economies conform to the greater good? What happens if it cannot?

5. Another issue concerns the politics of EMU. Who is really in charge? In NATO, we don't have that problem. American leadership is clear and obvious, and this evident hierarchy has made NATO an immense success as an alliance. The EMU doesn't have a natural leader. The French have supported EMU ardently because it caps a forty year effort to limit German power in Europe: it obliges Germany to vote on monetary policy with a weight equal to that of France, despite the obvious inequalities between the two economies. The Germans, with the largest economy in the Union, have been reluctant to play the role of regional hegemon, for historical reasons. They believe that loyalty to the European idea is their ticket to legitimacy and acceptance in the world. But what happens if this changes? Are all Germans always going to pursue a policy of national self-abnegation?

6. Finally, it should be remembered that there is no legitimate way to exit from the EMU. If a country wants to leave it, such a decision would cause a major crisis within the Union and possibly lead to the collapse of the entire structure. And in times of an economic downturn, when member states will be tempted to resort to national policies like devaluation and protectionism, it is possible that some countries will wish to secede.

One does not have to subscribe to the views of the more alarmist Euro-pessimists, who argue that EMU may lead to a war in Europe, to see that there are problems with the scheme as presently configured that may increase national tensions rather than lead to a withering away of the nation-state, as the EU's most ardent proponents expect. And such tensions do not bode well for the United States. Economic and financial rivalry within Europe will spill over into competition within the security arrangements in which the United States is implicated and could weaken the NATO alliance - an alliance which, as I will now demonstrate, will in the next decade already have enough problems of its own.

NATO Expansion: Unintended Consequences

The debate over NATO expansion is for the time being over: the "expanders" have won, and it is now US and European policy to push for the prompt integration of the Czech Republic, Poland, and Hungary into the NATO alliance. The arguments in favor have been made clear: it extends the American security guarantee, thereby heading off regional alliances and alliances; it promotes civilian control of the military; and it promotes democracy and stability in an unstable area of Europe where democracy still has a weak foothold.

For all of these advantages, it is worth recalling that the United States took quite some time to settle on a policy of NATO expansion. Indeed, in 1989, at the US-Soviet Malta Conference during which the Cold War was officially pronounced over, President Bush made implicit guarantees to Mikhail Gorbachev that NATO would not be pushed eastwards. In subsequent years, as the Soviet Union imploded and Eastern European states rallied to democracy, American leaders considered that NATO was not an appropriate tool for encouraging democracy: it was an old-school, Cold War military alliance, hardly suited for the tasks of building democracy, promoting human rights, encouraging the fledgling market economies of the East. The UN, the EU, the OSCE, these were to be the central institutions that would guide Europe's post-Cold War transformation. Of course, these hopes were swiftly dispelled by the Bosnian crisis which broke out in 1991. The Europeans were uncertain how to act without American leadership; the OSCE was quickly seen to be a mere talking shop; and the much-heralded "European pillar" of the security alliance proved unable to handle the challenge of the breakup of Yugoslavia. In this environment, East Europeans began to press the United States for the one thing they felt would be sure to guarantee them security and stability in an unstable transitional environment: membership in NATO.

The Partnership for Peace, launched in early 1994, was Washington's clever answer. It offered a delaying tactic, a kind of holding tank for states that wished to deepen security contacts with the West but were still unsuitable militarily, economically, or politically, to become alliance members. The PFP encouraged the transition to civilian control of the military, and offered strategies on how to bring military establishments up to NATO standards. Some Eastern European leaders could see through this approach as a way to lock them in to a second-class status, and bridled at the scheme. In return, they received assurances that the PFP would evolve into something more than a junior varsity alliance, and that NATO membership was not being ruled out.

It has been difficult for analysts to pinpoint the moment when the United States shifted from its subtle strategy of delay to one of embracing a prompt and wide expansion of the NATO alliance. Some writers have suggested that in was in March 1993, when Vaclav Havel met with newly-elected President Clinton, that he made a strong case for NATO expansion, and that Clinton, under similar pressure from Poland's President Lech Walensa, came around to support the idea. In any case, by January 1994, when Clinton traveled to Europe in his first trip to the continent as president, he declared to the NATO Council that the PFP was in fact going to be a stage on the road toward NATO membership. In Prague, on the same trip, Clinton declared that Czech membership was no longer a question of "if" but "when." Within a few months, Richard Holbrooke, who had come back into government as assistant secretary of state for European affairs, made NATO expansion his first priority. ₁₅ At a time when the Europeans were declaring the United States to be morally bankrupt for its unwillingness to engage itself in solving the war in the Balkans, the United States decided to opt for a strategy of commitment that would in the end lead to a renewed American security commitment in Europe.

In coming to this policy choice, the Americans had the support of the most important state in Europe, Germany. The Germans believed that eastern Europe was a security vacuum, and feared that without NATO, these states would be tempted either to come to some sort of modus vivendi with Russia, or undertake regional security alliances that might encourage division and acrimony in the region as was so painfully evident in the 1930s: Poles against Russians, Czechs and Poles wary to Germany, Slovakia and Romania in conflict with Hungary, etc.

It is difficult to disagree with the stated objectives of NATO expansion: peace, security, stability, and prosperity in Eastern Europe are to be heartily welcomed. And for those of us who are internationalists, there is some comfort in knowing that our leaders have re-dedicated themselves to European security. But as in the case of the introduction of the single currency, might there not be unintended consequences of the current policy? Is NATO expansion the best way of achieving stability in Europe? Consider just three problems raised by NATO expansion:

1. New Dividing Lines

What will NATO look like when the enlargement has been completed? Who are the long-term prospective members? NATO made it clear that the only states let in would be those that met its criteria: they would have to be democratic, market economies with clear civilian control over the military and a stable political order. In 1995, these criteria neatly described only the countries that NATO really cared about letting in: Poland, the Czech Republic, and Hungary. Slovakia and Slovenia, early candidates, were eased out of the running because of internal turmoil in the first and proximity to the Balkan War in the second. Since this time, however, NATO has been hung by its own petard: for today these criteria, thankfully, and with no help from NATO one might add, now apply to a number of other countries in the region, like Romania and the plucky Baltic states. Indeed, Romania came on strong as a potential first-round entrant into the alliance when France, Italy, Spain, Portugal and others took up its case in NATO. The case that was made appeared iron-clad in its logic: Europe needed security and stability on its periphery, especially in south-eastern Europe: Romania ought to have been first in line. Suddenly, it seemed obvious that the Baltic states, too, who really needed security from Russia, also ought to have been placed at the very top of the list. The backward thinking of NATO expansion quickly became evident in this debate about the new members: NATO claimed it wanted to bring security and stability to the region, but it would not let those countries that needed it most into the alliance. The reasons for this were clear: Russia would not allow the Baltic states in, and the United States, Britain, and Germany simply didn't think Romania important enough to worry about in the first round. Also, a too-wide enlargement might scare off US Senators from approving enlargement. The notion of a set of impartial criteria was therefore simply discarded. Instead, Romania and Slovenia were told that their cases would be first on the list for the next round of enlargement, though that is unlikely to happen any time soon.

Thus, contrary to the stated intentions of the Administration, the United States has created new dividing lines in Europe. NATO has been pushed East, but south-eastern Europe and the Baltics remain excluded. Since Romania and Slovakia are also not likely to be let into the EU any time soon, they appear to be two states declared "beyond the pale" of the new Europe. And of course, since it is apparent that the chief argument for NATO expansion in the first place was to provide security in eastern Europe not only from regional instability and rivalry but from Russia, it is evident that the dividing line between Russia and the West still stands in tact - blurred, perhaps, but still present. This business of NATO expansion as a unifying force in Europe is patent nonsense.

2. The Baltic Snare

How will NATO deal with the issue of the Baltics? If the American public pronouncements of including in NATO every democratic and market-oriented country in Europe, then Estonia, Latvia, and Lithuania surely qualify. These three countries are part of a Baltic revolution that is underway, in which the economic life and trade links that made the Hanseatic League so successful are being rebuilt. Out from under the shadow of Soviet domination, these three small states are building strong economic and political links to Finland, Denmark, and Sweden. The Balts are ardently pro-NATO, anti-Communist, hostile to Russia, and in need of security guarantees. So why not bring them in too? Because the Russians have made it very clear that they will oppose any former Soviet Republic entering into NATO. NATO faces a tough challenge here: does it acknowledge that Russia has a veto over NATO membership, something the US government has steadfastly denied? Or does it stick its finger in Russia's eye and bring the popular Balts into the alliance, thereby assuring the West that Russia will increase its truculent, obstructionist ways?

3. The Russian Puzzle

These questions lead us inexorably to the heart of the European security debate: what to do about Russia. Oh, for a "long telegram" from George Kennan today! No such luck. On Russia, Europeans and Americans are muddled in their thinking about what stance to adopt toward our old adversary. On the one hand, NATO expansion is manifestly an anti-Russian policy. No one except a few Clinton administration officials would dispute that. On the other hand, the international community, led by the US, has bent over backwards to use massive IMF loans to prop up the rouble and stave off the collapse of the Russian economy. And NATO Council has established new institutional links to insure that the Alliance is in close dialogue with Russia. Assuming that Western elites have a clear idea of what they are doing, one can only conclude that they are engaged in a waiting game, hoping Russia will stabilize, but preparing a new security architecture in case Russia's position markedly worsens.

This cautious stance toward Russia, it seems to me, is a big mistake. It reflects an effort on Washington's part to please everybody - a criticism that has been frequently made of the Clinton presidency with respect to domestic politics as well. It shows a distinct lack of courage, creativity, and above all, a lack of vision - which is what John Gaddis' discussion of grand strategy is getting at as well. The fact is, we cannot have a divided Europe and a united Europe at the same time. The United States must commit itself either to engaging Russia fully in the new European security and economic order, or acknowledging that Russia will not be brought into the new system, but will be kept at arms length, and seen as the chief geo-strategic threat to Europe.

To clarify my point, let me suggest two scenarios. One I shall call the Bonn scenario; the other the Weimar scenario. In the former scenario, the United States and Europe would engage Russia far more fully through their shared economic and security institutions, perhaps asking Russia to join NATO. After all, what state is more in need of security and stability than Russia? Then, Russia and the EU would deepen their relationship, going beyond the present system of large German handouts, and beginning a political, economic, and financial reconstruction of the country along the lines of the German recovery of the post-WWII era. While "liberal Russia" is still intact, and still has a leader who is receptive to such engagement, the Western powers can still be proactive, using its economic leverage as a tool to help Russia help itself.

The Weimar scenario is of course far less encouraging. In this scenario, Russia is hemmed in by hostile powers; it is locked in an economic crisis which even its sympathetic western neighbors can do little to remedy; it's already-weak political system is up-ended, either through the ballot box or through force, and a new era of nationalist, corporatist, government is ushered in. In this scenario, a Lebed, a Zyuganov, or a Luzhkov puts an end to "liberal Russia" by curtailing the powers of the Duma, ending partisan politics with which Russians appear ill at ease, and re-asserting state control over the economy. But as any good student of social imperialism knows, legitimacy at home can only be won by an assertion of power and resolve in the international arena. As such, just at a time when the western states, alarmed by Russia's declining fortunes, decide to bring the Baltics into NATO, Russia decides to use force to stop it. ₁₆

What is shocking is that Western policy today is far more likely to bring about the Weimar scenario than the Bonn scenario. To be sure, we must not overstate the power of the West to determine Russia's future. But we should ask ourselves: are we doing everything within our power to enhance Russian security and stability? For it is only when Russia is stable that Eastern Europe is stable. The path to European security travels through Moscow, not Prague, Warsaw, or Budapest.

Plus ça change?

During the past decade, and indeed here at this conference, there has been an understandable emphasis placed on the fluidity of the international system since the end of the Cold War. There has also been much discussion of what sort of order would emerge from this period of flux. For a time, indeed, it did seem as if US-European relations were headed for a period of dramatic change, brought about by the evaporation of the Russian threat and the arrival of Germany as a new, united, and powerful state in the heart of Europe, surrounded by the young and untested democracies of the East. But upon considering the survey I have just made here, one can notice strong continuities between the Cold War order and our present circumstances. Russia is again emerging as the West's chief geo-strategic rival in Europe; the NATO alliance is intact and is in the process of limited expansion, thereby shifting old dividing lines but not eradicating them; the Europeans are moving further ahead with monetary union, in the hopes of crafting new financial instruments that will allow the rich to get richer; Europe remains divided, albeit in a loose and transparent way, between the EU and NATO members on the one hand, and the Balkans, Baltics and the states of the former Soviet Union on the other; and the United States is still, after some hemming and hawing, the recognized hegemon in Europe, the sine qua non of European security, directing a security system that including a military-strategic commitment that now runs from Reykjavik to Gdansk to Athens. As we near the end of the first post-Cold War decade, one might say as the French often do, "plus ça change, plus c'est la même chose."

But it seems to me, and this paper has made the argument, that these continuities, with which many Americans and West Europeans are quite comfortable, mask a number of potential crises on the horizon, and reveal an absence of creative strategic thinking on the part of our leaders. Instead of crafting a "new world order" in the wake of the post-1989 changes, we have been muddling through, content to use the Cold War tools to attempt to perpetuate stability in post-Cold War Europe. It may yet work; but we need to realize that there are serious problems ahead if we fail, and that if we do fail, the subsequent crisis may be as grave as anything we have seen in Europe since 1945.

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Notes:

Note 1: John Tagliabue, "Cinderella, Italy Preps for Euro Ball," New York Times, May 15, 1998, C1. Back.

Note 2: "Germany's East: Is It Catching Up?" The Economist, July 11, 1998, p. 52-3.  Back.

Note 3: On financial indicators, see The Economist, July 4, 1998, p. 101, and July 11, 1998, p. 98. Back.

Note 4: Edmund L. Andrews, "Europe's Clunkers Shift to Fast Lane," New York Times, July 9, 1998, D1. Back.

Note 5: See special report on business in Europe in New York Times, Sunday, June 14, 1998, Section 3. Back.

Note 6: Richard Holbrooke, "America, A European Power," Foreign Affairs, March/April 1995 (vol. 74, no. 2), pp. 38-51. Zbigniew Brzezinski, whose views had reportedly influenced Holbrooke and the administration, authored a piece that made many of the same arguments for NATO expansion. "A Plan for Europe," Foreign Affairs, January/February 1995 (vol. 74, no. 1), pp. 26-42. Back.

Note 7: "North Atlantic Treaty Organization: Collective Defense against Threat of Aggression," address by Madeleine K. Albright, United States Secretary of State, delivered to the North Atlantic Council, Luxembourg City, Luxembourg, May 28, 1998, in Vital Speeches of the Day, June 15, 1998 (vol. LXIV, no. 17), pp. 518-20. Back.

Note 8: Robert J. Art, "Why Western Europe Needs the United States and NATO," Political Science Quarterly (vol. 111, no. 1), 1996, pp. 1-39.  Back.

Note 9: For an excellent review of the obstacles to a common foreign policy in Europe, see Philip H. Gordon, "Europe's Uncommon Foreign Policy," International Security 22, no. 3, (Winter 1997/1998), 74-100. Back.

Note 10: C. Fred Bergsten, "The Dollar and the Euro," Foreign Affairs, July/August 1997 (vol. 76, no. 4), pp. 83-95.  Back.

Note 11: John Peet, "An Awfully Big Adenture: A Survey of EMU," The Economist, April 11, 1998, p. 17. Back.

Note 12: On the degree to which U.S. policy-makers have overlooked the implications of the euro, see C. Randall henning, "Europe's Monetary Union and the United States," Foreign Policy 102 (Spring 1996), pp. 83-100. Back.

Note 13: This analysis is drawn from Martin Feldstein, "EMU and International Conflict," Foreign Affairs, November/December 1997 (vol. 76, no. 6), pp. 60-73. For other gloomy assessments of the prospects for the euro, see Alessandra Stanley, "Italy Savors Victory in Euro Race, but Doubt about Future Lingers," New York Times, April 30, 1998, A1; John Peet, "An Awfully Big Adenture: A Survey of EMU," The Economist, April 11, 1998; Robert A. Levine, "European Monetary Union: Where Has It Been? Where Is It Going? What Is It Doing to Europe?" World Policy Journal, Winter 1997/98, pp. 10-19; Josef Joffe, "Europe's Colossal Coin Toss," New York Times, May 1, 1998, A33. Back.

Note 14: Craig Whitney, "Europeans Accept a Single Currency Despite Late Snag," New York Times, May 3, 1998, A1. Back.

Note 15: For two useful analyses of the NATO expansion debate and its implications, see Jonathan Eyal, "NATO's Enlargement: Anatomy of a Decision," International Affairs 73, no. 4 (1997), 695-719; and Joyce P. Kaufman, "A Challenge to European Security and Alliance Unity," World Affairs 161, no. 1, Summer 1998, 22-32. Back.

Note 16: For a chilling discussion of Russia's present economic and political crisis, see "Russia's Crisis: Could it lead to fascism?", The Economist, July 11, 1998, 19-21.  Back.