Twin pincers are attacking the flanks of Europe’s political power: the eurozone crisis and a ‘big three’ diplomatic crisis. Whilst the economic crisis has distracted the EU since 2008, the foreign policy crisis has diminished it.
The first pincer, as we have been reporting this week, is the proposed troika solution, which has reignited the eurozone crisis. The European Central Bank pulled the plug on Cyprus by threatening not to accept Cypriot government debt as collateral against liquidity support unless a haircut was accepted. Yesterday’s vote in Nicosia was a rejection not only of this rescue package but of bailout foreign policy.
For Nigel Farage, the scene is a PR dream. Plucky little Cyprus defies the world of Brussels diktats and big power intransigence. Result: The diplomatic crisis that rises from this is reputational damage to the euro, the Commission, the eurogroup and Germany. And a door left ajar for a further increase in Russian influence on an island within the EU and adjacent to Syria. With the Cypriot finance minister in Moscow, Russia might ride to Nicosia’s rescue by lending him the €6bn shortfall.
The second pincer, however, is the wider problem of which Cyprus is merely a symptom. This is the decade-long deadlock in the big three’s view of how to conduct and coordinate European policy in order to leverage continental power. The UK and Germany cohere over economic policy, the UK and France over defence policy and Germany and France over less and less.