"Following Ukraine, We Need A New Recovery Plan", a Conversation with Pascal Lamy
Pascal Lamy5th Director General of the World Trade Organization
“Following Ukraine, We Need A New Recovery Plan”, a Conversation with Pascal Lamy
You have been at the core of European construction for a long time. Can you help us understand the changes that are taking place since the Russian invasion of Ukraine? Basically, what happened last weekend in Brussels?
I think that we have experienced another step in the transformation of the European Union into a true power. The mechanism of financing 500 million euros of military aid at the European level to support the Ukrainian army is a very important symbolic step. Beyond this symbolism, the most significant aspect of this process is the unprecedented and massive package of European sanctions.
Putin is laying siege to Kiev, we are laying siege to the Russian economy, in other words, the weak point in relation to its military power. The sanctions on the financial system lead to establishing a balance of power between the Russian military attack on Ukraine and the West’s economic response.
Do you think that this response will make it possible to concretely change the power balance in Ukraine? In shifting the field of confrontation, what are the risks of triggering an escalation?
I don’t think that Putin will have the advantage in a struggle of this kind, and I believe that in the end the balance of power will swing to the Western side. I agree with Jeangène-Vilmer’s paper. Putin has already lost the war and that is the problem. We are not yet talking enough about how to get out of this crisis, but this is an urgent matter. Putin will either be removed from power by domestic political destabilization in Russia — which seems unlikely at the moment — or he will have to be offered an exit once the right balance of power has been reached. In the meantime, we will probably have to suspend Russian gas and oil imports, as public opinion in several Member States, including Germany, is beginning to demand.
Let’s circle back to the Union for a moment. Is it experiencing a “pivotal moment”?
Yes and no. This is not “the” moment that changes everything. As your most recent map shows, there is unprecedented community consensus on purely Westphalian issues, but let’s not delude ourselves! The use of EU budget funds for defense remains prohibited by the treaties. Member States have therefore committed to sending military aid to Ukraine as part of a European extra-budgetary mechanism.
Basically, it is like the 2020 European recovery plan, which was not “the” Hamiltonian moment that some expected but was nevertheless a turning point. We are at a historic step in a succession of events that lay out the Union’s path towards power in the Gramscian sense, and the materialization of a European capacity, of which Draghi’s famous “whatever it takes” is another key event.
Each of these three episodes seems to circumvent taboos that were particularly related to Germany’s role…
Indeed, in all three instances, it was the German anchor that had to give in order to encourage the Union’s overall progress.
In 2012, when Mario Draghi delivered the famous phrase “whatever it takes”, he bypassed the provisions in the Maastricht Treaty on the issue of monetizing public debt in the eurozone, even though the Germans had explicitly requested this guarantee in order to accept the treaty. In 2020, with the Next Generation EU plan, a second German taboo fell, since Angela Merkel had regularly said that she would never accept a common European debt. On Sunday morning, a third taboo fell in Germany, as Chancellor Scholz announced a strengthening of the country’s military.
How do you explain these German evolutions?
Each of these developments was prefaced by a series of narrative shifts. When Angela Merkel declared that with Donald Trump we must take responsibility for our own security, she caused a shock in the German political space that paved the way for Olaf Scholz’s speech. The Federal Minister of Economic Affairs and Energy, Peter Altmaier, has made the shift from Brussels ideology to industrial policy possible…
All of these narrative shifts are heading in the direction of greater European integration, with the exception of Brexit, but this could also be seen as another catalyzing event.
If we take the German analysis a step further, we can see that it was the more right wing governments that had to accept fiscal and financial heterodoxy, and it is a more left wing government that is now moving away from Germany’s pacifist orthodoxy.
One of the surprising things when we read Olaf Scholz’s speech — but which was already present in the German coalition contract and pre-programme — is that words like “autonomy” and ” sovereignty”, which were rejected out of hand two years ago by Angela Merkel’s presumed successor, Annegret Kramp-Karrenbauer, are now at the center of Germany’s policy agenda.
There is no doubt that the speech on Sunday morning marks a turning point for Germany and therefore an inflection point for Europe.
Is this a French inflection?
The French ideology with regard to the European dynamic has always consisted of trading the memory of national power for the plan to transmute these national powers to the European level. This is one of the reasons why De Gaulle embraced it — and also for economic reasons that were less clear to him.
The idea of a Great France Europe, of a Europe which would allow France to become “Great Again” has always existed. It comes from de Gaulle, from Mitterrand, and from Macron. The idea that public power plays a role in the economy, in society, that goes beyond what ordoliberalism dictates, has always been French. From this point of view, France has not changed, but Germany has, as a result of external events, moved closer to a certain French ideology of Europe.
France has also changed a lot in this dynamic…
Indeed. What France has conceded in return for ordoliberalism is not at all insignificant, and was done in spite of French culture, for instance in the competition policy of the Treaty of Rome. When, a few decades later, the French understood that the text of a new constitutional treaty contained “free and fair competition”, they voted against it. A majority of the public thought that this was wrong, that it was liberalism on the march. In reality, it was ordoliberalism on the march, and there is a difference between liberalism and ordoliberalism, which is obvious when you know a little about Germany.
If we look at a longer time frame, the French position has moved quite a bit towards ordoliberalism, and the German position has moved quite a bit towards a Europe that is forced to be powerful. When reading Scholz’s speech, it is clear that he was not happy, that he did not foresee a bright future for Germany if it were to embark on the path of power by doubling its military budget. The idea of his speech was more along the lines of “perhaps we should have done it, we didn’t, so now we must”. This is more Churchillian than Hugolian.
Hence this very French irony that “they have finally understood what we have always understood”, and that we kept saying but without the ability to learn the consequences — that is, that Europeans must wake up and understand that we live in a brutal world.
Geopolitics changes from words to things…
It is true that as long as Germany was at peace with France and Russia, the geopolitical dimension had largely disappeared from Germany’s ideological universe, which was focused on the economy. The shock of Sunday morning’s speech is that, for the first time in quite a while, one of these two peace processes has turned into a potential war.
This is, in my opinion, a constraint to which the German political space will react. I don’t think it’s just another speech on the subject of a constantly postponed increase in defense spending. There is a great deal to be done to properly remilitarize Germany; it is not just by putting another 50 or 100 billion euros into a defense budget that we train soldiers. You need a strategic culture and operational capability. There is a difference between the ability to finance equipment and military performance on the ground.
I think we need to introduce this dimension of duration and examine the process in which we find ourselves and in which we have taken a step forward with the preparation of sanctions and the German speech from Sunday.
Could we say that the Union is going through a “Schmittian moment”, marked by the sudden appearance of a common enemy in the maximum political intensity of war? Is this politicization not intended to transform the technocratic, sometimes impolitic, aspect of European construction? In short, could the “geopolitical commission” sought by Ursula von der Leyen end up being realized through the confrontation with Putin?
The President of the Commission is a former German Defence Minister. Obviously, there is strong symbolism when she speaks of a “pivotal moment”. Here too, the narrative is probably still a little ahead of schedule. But it is not a problem to be one step ahead of reality, when one expresses hope and gives oneself the means to move forward.
Personally, I believe that we are crossing one rubicon after another, if I may say so, towards European power. The particular circumstances, related to the Russian invasion of the Ukraine, produce in a way this political energy. But I don’t underestimate the technocratic energy it took to put together a package of European sanctions with the Americans in such a short period of time.
How do you explain the speed of this reaction? It took years to get to Draghi’s “whatever it takes”, a few weeks to get to the Recovery Plan, we are here in a matter of days…
Grab the mantle of history as it passes by! “Der Mantel der Geschichte ergreifen” as Kohl said, quoting Bismarck, when the Wall fell, and all his advisors were trying to dissuade him from aligning the eastern mark with the western mark. Until Friday, there were tensions over the positions of Italy, Germany, and Ireland, whose first reflex was to preserve their economic interests. And then the mantle of history came crashing down.
You will notice that each of the three milestones on the road to European power was caused by external dramas. The subprime crisis contaminated the European economy. Covid-19 contaminated us. And Putin wants war to contaminate Europe. It is clearly not the traditional European compromise machine between the 27 that has been the cause of these transformations, but we can see that this machine is learning to react more quickly. A political space other than the Westphalian world may therefore emerge. I only hope that the road to European power, and it will still be a long one, will not always be paved with catastrophes.
Should this process be structured in a more institutional way, by revising the treaties for example?
I don’t think we’re on the brink of major institutional change. Each of these great moments of inflection have taken place with “equal institutions”. Like Jacques Delors, I am more of a “functionalist”: the cart of progress first, the institutional ox to pull it if necessary. If this war lasts, the collateral damage for Europe and the world will be significant at the economic level. It is better to start with the concrete, that which the populations feel first.
Where do we start?
We need to think about two measures: a common economic package similar to that of 2020 to cushion the energy and inflationary shock; and to put on the table a vision of relations between Europe and Russia, outside the Putin ideology, which considers the Russian world as the last beacon of Western civilization in a world in decline.
We must turn to the Russian people and tell them that we are ready to work in different areas, returning to Europe-Russia relations of twenty years ago. In 2004, I had the opportunity to discuss with Vladimir Putin, when we were negotiating the conditions for Russia’s entry into the WTO, an integration that took place almost ten years late because of America’s veto. At the time, Europeans and Russians agreed to launch a free trade zone between the European Union and Russia. Vladimir Putin himself, against the advice of some of his advisors, agreed, at our request, to sign the Kyoto Protocol. This is part of what the European Union, as an emerging geopolitical power, should be able to do.
Should a new recovery plan be designed for this new period?
I think so. We must take into account the war’s cost for the European economy. The Russians will be the most affected by these sanctions, but the European Union is also the most exposed to the economic consequences of these sanctions compared to the rest of the world, if only because of the soaring price of fossil fuels. We export 90 billion euros to Russia every year. This is not the bulk of European exports, but it is important for profitable sectors which are primarily German. Our countries will be affected unequally, and we must therefore react in solidarity.
Just as important, we must also now align the trajectory of our climate transition — decarbonization — with that of greater strategic energy autonomy by reducing our dependence on gas more quickly than expected, which implies a reorganization of the European mix that will be costly, including in terms of investment.
Should the issue of refugees, and more generally the Union’s relationship with migration, be addressed in this new plan?
Yes, this is very important. It is estimated that we will have to take in between one and five million refugees. As it happens, the Eastern European countries that have been particularly reluctant to accept refugees of Muslim origin do not have the same reaction to the Ukrainians.
Economically, if these populations are received by Romania, Poland, or Hungary, it will be a demographic boon for these countries, which Ivan Krastev has so clearly shown to be afraid of immigration to other, more privileged European areas. This is an important dimension of what such a package should do.
Another concern is the effect of this war in the Balkans. Russia could also make a move there as a result of the shock it created, with new tensions and new migratory implications.
The Russian invasion is a moment that forces all countries to define their position. This allows us to see the tectonic power relations that are taking shape in this moment of interregnum. The basis of geopolitical analysis until the day before the invasion of Ukraine was that from now on the rivalry between China and the United States would structure the 2020s. Is this still true? How would you define the global geopolitical configuration after Russia’s invasion?
The answer to your question lies in Beijing. The global geopolitical consequences of this war will depend on China’s attitude, although I am not sure that my analysis of the current Chinese position and what it will become is correct. The same goes for what my Chinese friends tell me.
What China has been doing for the last week is akin to scuttlebutt. I think this situation opens up an important space for a China that would like to assume its responsibilities in the international order and seize this opportunity to reshape it, not in its own way because its hands are tied, but it is in a potential position to play a mediation role that history is offering on a silver platter.
For the time being, China has benefited from this world order, including at the WTO. But it has remained critical of the international order while shying away from taking responsibility outside of unilateral ventures like the New Silk Roads or the Asian Infrastructure Investment Bank.
China now has the opportunity to advance its position by saying that it can talk with both Putin and the West. Of course, this assumes that the Americans consider that China can talk to them, which is not a given. In any case, there is a window of opportunity, especially given the fact that an ostracized Russian economy is inevitably placed in China’s hands, especially in the area of finance.
What are you betting on?
China will play its hand according to its own interests and ideology. Xi Jinping seems to me, regrettably, less rational and more ideological than his predecessors, and he may prioritize rivalry with the Americans and vice versa. But the opportunity to present himself globally as an “actor of peace and harmony”, to use a Chinese concept, is attractive.
Will China, at some point, offer itself as an arbitrator, and if it does or does not, what will be the consequences? There is, of course, the scenario in which China would stand in solidarity with Russia; I do not believe in this scenario because it is too dangerous for the future of the Chinese economy which is much more open to the world than Russia’s.
In this optimistic bet that interprets China as a force for stabilization and restructuring rather than disorganization and implosion of the international order, would the European Union have an interest in engaging in the discussion?
Of course, because everything that has already been said about this European progress towards power has been said in circumstances where NATO has regained its full strength and splendor, and therefore in a transatlantic atmosphere that will again be put to the test if Trump or one of his equivalents comes to power in 2024, which could happen.
In our first interview, you said that in order to be sovereign, the Union must transform itself “from a cone to a cylinder”. Do you think that this geometric transformation is underway?
Yes, a new milestone has been reached. The European cone – whose base is economic and whose top is war – is becoming more like a cylinder of sovereignty, but there is still a long way to go in the technological, military and conceptual fields, as we can see with the famous strategic compass. We are still in a cone. Even if the middle is widening, the cylinder’s point has not yet been completed. It’s a bit like a roll, to keep with the imagery. When we look at European defense, there are still many questions to be addressed, whether it is the relationship to NATO or the role of France’s nuclear power in Europe. I think that the road to European defense is still very long, but the Russian aggression in Ukraine proves that it is indeed through the ideology of European foreign and security policy that military actions are taken. The fact that we were able to adopt such strong sanctions against Russia with the unanimity of all member states, including Viktor Orban’s Hungary, who is a great friend of Vladimir Putin, is the result of a shift in the perception of Russia as a threat.
We are finally experiencing the same kind of threats, which is necessary to develop a common security policy. There is no doubt among Europeans today that Vladimir Putin is an adversary of Europe and the West. There is therefore a common perception that is emerging within the Union, though this perception is still in contradiction with military capabilities. It is like a nesting doll: foreign policy, within security policy, within defence policy. We can see now that these policies are aligned in the same direction, including in the case of Sweden and Germany, which until a few weeks ago were opposed to sending offensive weapons to Ukraine. The unity with regard to the perception of threat has therefore made it possible to promote the idea that a military component is necessary for European power. To unite, Europeans must share not only dreams, but also nightmares.
Pascal Lamy, Gilles Gressani, “Following Ukraine, We Need A New Recovery Plan”, a Conversation with Pascal Lamy, Mar 2022,
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