Six Stories to Watch in Europe in 2013

1. Hollande Getting Mugged by Reality

Arguably this is the most decisive question for the future of Europe: will French President François Hollande, who made it into office on an economic fairy tale agenda, be able to break free from his own promises and do what’s right for his country? Can he muster the courage to face the wrath of his center-left power base when finally telling them the truth about the abysmal French economy and the harsh reforms needed to get it back on track? More importantly, can he part with some of his own long-held statist, socialist beliefs about the economy, which have been proven wrong again and again? The management of the euro crisis rests on France’s credit-worthiness, which has already been damaged. The EU can’t afford another French downgrade. Germany needs a strong France to drive the EU politically and Britain needs a strong France to get things done internationally. Hollande will perhaps be Europe’s decisive man of 2013.

2. Germany Going to the Polls

There seems to be little doubt that Angela Merkel will remain as chancellor after next year’s September 22 parliamentary elections in Europe’s largest country. Save a rogue event in mostly predictable German politics, she is a safe bet. Most Europeans seem to wish her good luck for the elections even though not all have a high opinion about her strategy for the crisis. But her success will depend largely on whether she can continue her high-wire act between looking tough on the crisis while being generous with those in need. So far she has played this game masterfully both at home and abroad. But the German economy is less robust than many believe, unhappiness about her seemingly heartless pragmatism is mounting in her own party, and several important state elections will provide ample opportunity for small or medium-sized political earthquakes in Germany. And then there is of course the question of what kind of coalition will emerge after the results come in in September. Combine all this with the byzantine complicatedness (and current legal insecurity) of Germany’s electoral system and you are in for a suspenseful ride.

3. Iran Splitting Europeans

As I have written before on this blog, most observers believe that 2013 will bring some sort of culmination of the crisis over Iran’s nuclear program. Will there be a new offer? Will diplomacy prevail? Or is a military escalation inevitable? Underneath these obvious questions lurks the potential for political upheaval on the European foreign policy front. Europeans have shown remarkable unity on the sanctions front, thanks to considerable American pressure and some good leadership in the EU. But this consensus is as politically fragile as it is economically costly. In case of a military escalation it might well fall apart. Doomsayers predict another Iraq-like European schism over the question of whether Iran should be bombed or not. Memories of that near-death experience in 2003 are still fresh and no one wants to repeat it. But American interventions, no matter if done with or without UN approval, tend to bring out the worst of European political populism. Iran is already an emotionally hyper-charged subject and it would be very difficult to keep the Europeans united behind an intervention. The first thing to suffer would be that fragile little creature called EU foreign policy. It is already suffering badly from the crisis, the weakness of the EU’s new diplomatic service, and the lack of interest on the part of EU member states. Iran might well deal it another major blow.

4. Tackling Gazprom

As mentioned here before, the antitrust inquiry conducted by the European Commission against Russian energy giant Gazprom is a hardball geopolitical game disguised as a dispute over EU competition law technicalities. In 2013, the Commission will present its preliminary findings and decide whether it wants to go to a full procedure. If so, expect a very tough dispute and a considerably miffed Kremlin. With President Vladimir Putin increasingly relying on nationalism, that archetypical weapon of weak and fearful governments, relations with the EU and with some Eastern European states could sour considerably. Gas wars, as in the past, are not excluded. It is surprising how little attention this case gets. It has all the ingredients to be one of the real big stories in EU foreign policy in the next year.

5. Transatlantic Free Trade?

Pessimists believe it will never come. Optimists believe it would be the most important geopolitical decision the West could make in an era when power is shifting away from the Atlantic to the Pacific. So even in its earliest stages, a possible Transatlantic Free Trade Agreement stimulates the imagination of observers and strategists alike. TAFTA would be a tough call, even under the best of circumstances. The U.S. Congress would have to give President Obama a mandate to negotiate such a deal. Thousands of tricky legal and political issues, from subsidies to safety standards to genetic modification to hormones in beef, would have to be resolved. There is hardly a lobby that would not get involved, from business to environmental groups and from banks to labor unions. Protectionists would be up in arms like never before. But the basic idea is immensely powerful because of its simplicity and its enormous economic potential: the free flow of goods between Europe and America. No market would be bigger, no incentive for growth greater. The year 2013 will show whether such a project is feasible in the medium term.

6. Britain in the Grip of English and Scottish Nationalism

The United Kingdom might not yet be at the crossroads, but it is getting there fast, and the mere talk of crossroads seems to keep an entire political class alive at the moment. The country is in bad shape. The economy is structurally flawed, public finances are in tatters, the coalition government and its prime minister are exceptionally weak (with a hopeful Conservative successor already waiting patiently on the sidelines), and doubts about the general course of the country are lingering. English nationalism (for that’s what it really is), fuelled by those doubts, has turned an always skeptical debate about Europe into an orgy of dishonesty, vitriol, and populism. The once famous British pragmatism and attachment to sober assessment of interests has given way to anti-European hyperbole and hysteria. On top of that, Scottish nationalism is preparing for its great political feast in 2014 when a referendum will be held on independence. The battleground for both developments will be 2013. Can the populist profiteers of the crisis sustain their attack on common sense or will realism prevail? The answer to this will have a profound impact on the political future of Europe, both in its internal (integration) and external (foreign policy) dimensions. Watch out for Britain in 2013!

One could easily add a few more developing stories to the list: will the EU’s banking union take off and, if so, in what shape? Will early forays into political union be made afterwards? What will happen after Italy goes to the polls? Will the country abandon Mario Monti’s moderate reform course? What will austerity do to NATO? Will a new U.S. Secretary of State invest as much in Europe as Hillary Clinton did? Will the EU get tough on Ukraine? And of course: can Greece survive?

In its slow transition from a Cold War political order and mindset to one befitting the new, globalized, multi-polar world, Europe will arguably remain the most interesting political experiment anywhere to be found. The year 2013 will deliver some important clues as to whether the Old World is brave enough for a role in the new one.