ISET Economist Blog

Georgia's New European Modus Operandi
Saturday, 04 March, 2017

It was the best of times, it was the worst of times,

It was the age of wisdom, it was the age of foolishness,

It was the epoch of belief, it was the epoch of incredulity,

It was the season of light, it was the season of darkness …

- Charles Dickens, A Tale of Two Cities


The above quote seems to fit the state of affairs in the European Union fairly well, as the EU’s crisis is continuing, getting deeper, and engulfing more actors than when it started. To name a few well-known events and stats: Greece probably had the first meaningful kick-off in the chain of developments when it faced threats to stability in its own financial system at the end of 2009. At that time, an unreported estimated deficit jumped from 7% of GDP to the first 13%, and then stabilized at 15% as the "new normal." With yields on Greek sovereign debt reaching record figures, it became evident that the problem was not one of liquidity in finances, but a lack of solvency and state competitiveness.

The Greek default was followed by an ominous sequence of events across a range of Eurozone member states. The Italian banking sector started showing simmering cracks, reflected in a rate of 17% of non-performing loans. While EU authorities eventually managed to pool a 500-billion-euro emergency fund to rescue the Greeks, the banking crisis in Italy is of no lesser scale, if not even bigger, requiring a new Europe-wide bail-out and austerity measures of the same quality as in Greece.

The monetary union in Europe was always premised on Germany and France, the stalwarts of the pro-Union deal between nation-states forming that union. For the Germans, it was not about managing trade with their European partners only, but about a political culture of managing finances, too. Today's Germany, however, is heavily beset by a trade surplus (according to the latest World Bank data, Germany's export ratio to GDP stands at circa 47%), which is not primarily the result of German strength but of depressed importing economies. This is not a sustainable situation, and in the medium term, the German powerhouse may decline in its exports and experience a weakened economy, as well (which will, in turn, cause political tensions between Germany and countries which traditionally import German-made goods). As for France, an expensive euro aggravated the dire stance of the economy, resulting in loss of competitiveness, higher unemployment, and stagnating business activity.

Although not a part of the monetary union, the Brexit referendum, reminiscent of the times of "splendid isolation," was another blow to the foundation of the common market, making the looming uncertainty of preserving economic and financial unity even more radically uncertain.

As a result, the European Monetary Union has become like a ship that is trying to pass an almost impassable passage, namely between the Scylla of an ailing economic union and the Charybdis of the frail health of the political union.  The fundamental reason for this dilemma lies in the inefficacy of Brussels. This face-off has further evolved with the surge of centrifugal and populist movements in Europe. Indeed, the economic and social challenges the EU faces yield a fertile ground for the current rise of nationalism in Europe, which in itself is in direct response to the failure of European institutions to function in tangible and result-oriented patterns.

Divergent interests and inclinations within the EU are looming on security issues too, with clear-cut polarization of those interests among the "core" member states and the "expansion-driven" East European states. With the new U.S. administration's ambiguity on the NATO umbrella for Europe (if not outspoken skepticism on the viability of collective defense), Brussels is struggling with as yet obscure efforts to lay down a formidable and far-reaching pan-European security set-up. It should be emphasized, however, that the ultimate responsibility of what happens with the EU remains with the Europeans, and no non-EU actor may critically influence the union's foundations.

On top of all of the above issues, the refugee crisis and terrorism are adding to the Europeans' pains, further threatening to undermine efforts to unite the member states. A new anti-establishment movement asserts that the EU is not working for the interests of national states; protectionist policies and anti-immigration measures are what’s most needed. This agenda comes under the guise of traditional liberal democracy, by asserting the dominance of self-governing nation-states. Moreover, this assertion is supposed to look similar to the United Nations, whose founding constituencies are sovereign nations, and where the right to national self-determination trumps any other rights.


In contrast to the EU’s quite upended policy affairs described, Georgia maintains a steady pace towards integrating with the European Union, and its bold reforms are truly unparalleled in any other country in the vicinity.

On the path to liberalizing the EU’s visa regime, and with the respective process kicking off in 2012, Georgia has undergone a sweeping tide of reforms, encompassing 15 key areas related to politics, economy, and civic sectors, enacting over 130 legislative acts, working out eight national strategies, ratifying seven framework international treaties and conventions, and has introduced qualitatively new structures and services. These reforms were carried out under the vigilant scrutiny of the uncompromising and unflinching guidance of the European bureaucracy, amounting to 22 missions on the ground and four full-fledged reports.

It appears as if Georgia's belief in the unity of the European nations is unflagging, and its dedication to charting the course to the values-sharing European family is irreversible. That clearly resonates against the subdued mood in some of the European member states.


The routes of the EU and Georgia seem to collide, but this appears to be the case only at a first glance. Even when speaking about possibly conflicting agendas, it is essential to remember that the current European core of dissent does not reflect the basic quality of commitment of the member nations and Georgia to the founding premises of representative and liberal democracy, but rather tactics and a delay in fixing and re-organizing a common European family.

The core Europe may require some respite for sorting out its internal challenges and recalibrating an approach to extending further to the East. This "silent request" has to be heard by Georgians, and they need to accommodate it responsibly and with an understanding typical for a European nation. That should not entail taking pressure off the process, but instead, conducting it at a reasonable pace and with caution. The European institutions need repair, and the European centrist forces have to return from backstage with new vigor and strength. At the same time, the mentioned respite and recalibration would allow for a pause on the Georgian end too, allowing for a deepening of institutional and civic reforms, enhancing approximation with EU legal requirements and standards, and, most importantly, a much-needed accumulation of wealth and upgrade of living standards to the levels commensurate with those of the member states.

Meanwhile, the expediency of making two ends meet provokes scrutiny of some new, frighteningly bold elements for even closer integration with the EU through definitive interim arrangements. Among possibly groundbreaking institutional developments would be the transformation into a wider Europe, with the EU remaining as the core inner Europe and the rest of aspirant countries, including Georgia, comprising outer Europe, through a so-called two-tier European union. In fact, a wider Europe is already the reality, with fairly intensive interconnectedness between the EU and the nations on its periphery. At the same time, however, an institutionally designed two-tier system is supposed to make Georgians (and few other nations in the same pack) feel more European, politically, and culturally. Further arrangements of this kind may well be suitable for the EU in avoiding the alienation of EU applicant states, while simultaneously protecting them from the influence of their authoritarian neighbors. The system would allow the existing member states to retain exclusive access to key spheres of security, foreign policy, and fiscal and monetary matters, without undue interference by second-tier member states aspiring to become fully-fledged members of the Union at some future point. In return, the latter group would clearly be in a position to have a voice in the re-constitution of new Europe, departing from an exclusive (and, secluded) club towards a new union of truly European nations, sharing not only values and knowledge but risks too, as is the case in every genuine partnership.

Most meaningfully, however, a wider Europe would be excellent self-assertion of post-WWII European values, hinged on recognition of wisdom over foolishness, belief over incredulity, and light over darkness.

As in every crisis, this is probably the best of times for a quest for a sound and re-emerged genuine European spirit too.

The views and analysis in this article belong solely to the author(s) and do not necessarily reflect the views of the international School of Economics at TSU (ISET) or ISET Policty Institute.