Italian Prime Minister Giuseppe Conte (right) and Chinese President Xi Jinping during a signing ceremony at Villa Madama in Rome during Xi's two-day visit to Italy in March 2019. Photo: Christian Minelli/NurPhoto

It’s high time for the European Union to discuss more seriously and collectively its future trajectory in the international arena. Questions like what needs to be done to retain the current balance of power in the region, why the bloc is losing its game, and most important, whether the Union is still needed, have to be addressed.

For the EU, it seems less a leadership crisis and more a crisis that has emerged because of the lack of unity and direction. The region has become a playground for Germany, France and the UK, helping the economically rich and politically stable nation-states to promote their individual national interests, all at the cost of the collective interests of the EU itself.

German Chancellor Angela Merkel speaks with British Prime Minister Theresa May and French President Emmanuel Macron ahead of roundtable talks with European Union leaders in Brussels on October 19, 2017. 

The sense of acquiring more freedom when it comes to implementing economic and foreign policy is expanding up and down the EU at an increasing rate – greater than what we’ve observed previously. Independence was always more lucrative than interdependence, and the member states in the bloc are realizing its importance – prosperity comes with freedom.

While unions have a long history of successfully preventing conflicts among their members, if they are fundamentally characterized by socio-economic disparity and disruption, you can’t expect a lot from them. In short, they get weaker as time passes. Undoubtedly, the EU can be placed in this category. With no plan to proceed in the direction set out by its founding principles, members in the search of better economic prospects will detach themselves one way or the other.

On Saturday, the third-largest economy of the eurozone – Italy – shook hands with Chinese President Xi Jinping as it officially joined China’s Belt and Road Initiative. A total of 29 separate sections of “non-binding” memoranda of understanding were signed by the leaders of the two states. According to the “win-win” agreements formalized, China and Italy will seek to promote cooperation in the banking industry, between a Chinese construction company and Italian ports, between media outlets, and in the spheres of technology and science, among others. Also included in the billion-dollar package of deals is export of Italian oranges to China.

The value of these bilateral agreements – according to various media outlets – was estimated at around US$2.8 billion, and is expected to rise to $22.6 billion in the future.

Italian Prime Minister Giuseppe Conte and Chinese President Xi Jinping during a signing ceremony in Rome on March 23 as part of Xi’s two-day visit to Italy. Xi was there to sign an MoU to make Italy the first G7 country to join China’s ambitious Belt and Road infrastructure project. 

While Italian oranges (and many other goods in future) will get access to Chinese markets – which according to Italian Minister of Economic Development Luigi Di Maio will correct the trade imbalance between the two countries – at the same time billions of dollars’ worth of loans in the name of investment for infrastructure will be injected into its economy, which will then be used to import Chinese equipment and labor that will certainly increase Italy’s trade deficit with China in the long run.

The deal as a whole will push the already highly indebted country toward an intense economic recession. Second only to Greece in the eurozone, Italy’s debt-to-GDP ratio has surged to 131%, with the biggest public-sector debt in the EU, amounting to €2.3 trillion euros ($2.57 trillion). The country’s output will grow by a mere 0.6% in 2019. With no macroeconomic indicators showing positive development, Italy will face dire consequences if it cannot pay back massive loans.

He Lifeng, chairman of China’s National Development and Reform Commission, shakes hands with Luigi Di Maio, Italy’s labor and industry minister and deputy PM, at the signing of the MoU on the BRI.

Unemployment is skyrocketing; figures show that 33% of Italy’s youth were out of work as of January. And yet the administration plans to incur a large budget deficit, estimated at around 2.4% of gross domestic product this year.

Italy’s leaders, unfortunately, are living in a fools’ paradise, as they think that setting a minimum basic income for the unemployed, establishing a guaranteed basic income for poor citizens, introducing huge tax cuts and lowering the retirement age from 62 to 60 will alleviate poverty. In the words of Sir Humphrey of the famous British TV series Yes, Prime Minister, “When did you acquire this taste for luxuries?”

Luigi Di Maio, Giuseppe Conte and Italian Deputy Prime Minister and Interior Minister Matteo Salvini attend a press conference to present A new budget package law on January 17.

China’s model of expanding its influence across the world is crystal clear: Give loans to highly indebted economies like Pakistan, Kenya, Sri Lanka and others, ask them to use their key national assets (ports, railways, roads, pipelines) as collateral in case they default because of the predatory nature of these agreements, and finally seize those assets when they actually do default.

China Communications Construction Company, 63.8% of whose shares are held by a Chinese state-owned enterprise, has been awarded the task of “managing” Italy’s Genoa and Trieste ports.

A general view of the Port of Trieste during the 50th Barcolana Regatta on October 14, 2018.

It has not been revealed what type of management CCCC will do, but looking at the history of port developments under Belt and Road Initiative, it will be the development of ports’ infrastructure. In 2010, China Ocean Shipping Co (COSCO) started buying stakes in Greece’s Piraeus Port; by August 2016 it owned 100% of Piraeus Container Terminal. Two years later in August 2018, China’s and Greece’s foreign ministers signed an MoU putting the foundation of their cooperation within the BRI. This was followed by the development of a railway line connecting Greece to Macedonia, Macedonia to Serbia, and Serbia to Hungary.

Rows of shipping containers from COSCO Pacific Ltd and other companies are seen at the freight terminal at Piraeus port, operated by Piraeus Container Terminal SA.

“Belt and Road Initiative” is a short form of what is actually called the “Silk Road Economic Belt and 21st Century Maritime Silk Road Initiative.” China’s aim is to become a maritime superpower. These ports will eventually provide the People’s Liberation Army (PLA) access to regions across the world. Today Chinese naval vessels pay “friendly visits” to these ports; who knows when they will arrive with “not-so-friendly” intentions? They took over Sri Lanka’s Hambantota Port and very soon will do the same with Mombasa Port if Kenya defaults on repayments of BRI loans, according to a report by Kenya’s auditor general.

Other than port investments in Greece, China is a major stakeholder of Belgium’s CSP Zeebrugge Terminals, Spain’s Noatum Container Terminal in the Port of Valencia, and dozens of other ports in Europe.

It is shocking to see a major US ally and a very important EU member state ignoring the concerns of Brussels and Washington while prioritizing China over them. I feel that the structure of power is gradually changing from its roots. The European Union’s lazy attitude toward setting out a general fiscal policy for the bloc is the primary reason countries like China take the opportunity to jump in and expand their influence across the region.

At the peak of the European debt crisis in 2010-11, Greece, Portugal, Ireland, Italy and Spain were on the brink of a bond default. It was the uncontrolled expenditure that caused their budgetary deficits to shoot up, which when accompanied by slow growth across Europe after the 2008 global financial crisis pushed them toward economic collapse.

Giuseppe Conte and Xi Jinping before the signing of trade agreements on March 23 in Rome.

Disbursement of a series of multibillion-euro funds by the European Central Bank, the EU and the International Monetary Fund saved those plunging economies from crippling. It won’t go the same way if a situation like that occurs once again. Unfortunately, many EU members are still highly indebted. The situation could get worse. What if a global financial crisis takes place once again? What role would China play in a situation like that? With trillions of dollars in its vaults, could Portugal or Spain or other EU states and G7 members get a “kiss of fulfillment” from China?

Without unity, direction and prioritizing the bloc’s interests over individual national interests of member states and the formulation and implementation of reasonable and sustainable fiscal policy, it will be highly difficult for the EU to prevent China from expanding its influence in the region. If the EU leadership fails to create a consensus among member states to support a single decisive fiscal policy for the bloc, I’m afraid very soon it will be too late.

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Ali Salman Andani

The writer is a New Delhi-based economic and political analyst and columnist for various online and print media outlets. His analysis focuses on economic, political, social and cultural issues, especially those related to corruption, human rights violations, the global market economy, foreign policy, and environmental crises. Find him on Twitter @an_alisalman

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