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A Key Year For NATO (And Maybe The Euro)

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Welcome to Wider Europe, RFE/RL’s newsletter focusing on the key issues concerning the European Union, NATO, and other institutions and their relationships with the Western Balkans and Europe’s Eastern neighborhoods.

I’m RFE/RL Europe Editor Rikard Jozwiak, and this week I’m drilling down on two issues: What NATO will be up to in 2024, and who will be next to adopt the euro?

Brief #1: NATO’s Busy And Significant Year Ahead

What You Need To Know: For NATO, the year 2024 will be all about the five S’s — Sweden, succession, Steadfast Defender, spending, and summit. And possibly in that order as well. Perhaps the most imminent news could be the end of Sweden’s drawn-out membership saga. Applying in the spring of 2022, most expected a quick entry later that year. But Turkey and Hungary had other plans, and while Finland joined in April last year, Stockholm had to wait.

But ahead of the first NATO ministerial meeting of the year, in Brussels on February 14-15, there is genuine hope that there will be a flag-raising ceremony and Sweden will become member number 32.

This is based largely on small, positive signs from Ankara. The Turkish foreign affairs committee approved the Swedish ratification instrument on December 26, 2023, and when the full plenary opened for business again last week the issue was the last of 42 items on the agenda.

But don’t read too much into this. Ankara is still angling for F-16 fighter jets from the United States, plus there are local elections in Turkey on March 31 and recent Turkish air strikes against Kurdish militia in North Iraq and Syria — all issues that can delay the ratification process. And then there is Hungary. While Budapest has promised that it won’t be the last to ratify, the Hungarian government’s spring legislation plan sent to the parliament didn’t contain any references to Swedish accession. It could very well be that the flag-raising ceremony will have to wait till the next NATO ministerial meeting in April.

Deep Background: In April, we might find out who will be NATO Secretary-General Jens Stoltenberg’s successor after the Norwegian’s 10 years in the hot seat. From speaking on background to NATO officials, although he will officially leave in the fall, the organization is keen to lock down a candidate before the EU will select its new presidents for the European Council and the European Commission, as well as the bloc’s new foreign policy chief after June’s parliamentary elections.

The most likely scenario is that the larger NATO nations, led by the United States, will find a suitable compromise candidate that everyone can live with. The frontrunner is Dutch Prime Minister Mark Rutte, who is expected to leave national politics once a new Dutch government is formed. But don’t rule out a push by the eastern flank countries for a different candidate, who argue that, for a long time, they have spent significant budgetary resources on defense and have a greater political understanding of the military alliance’s biggest adversary, Russia.

Estonian Prime Minister Kaja Kallas is a name on many lips; a dark horse could be Latvian Foreign Minister Krisjanis Karins, who was born and grew up in the United States, a neat symbol of the transatlantic nature of the alliance.

This spring will also see NATO conduct its largest military exercises in decades — Steadfast Defender 2024 with over 90,000 troops. The exercises will last over four months across Europe, starting in late January, with the military alliance testing various aspects of NATO’s new defense plan, a 4,000-page document adopted last year that details deployment and strategic roles for countries if NATO was attacked.

Drilling Down:

  • The headline event of the year will, however, be the Washington, D.C. summit on July 9-11. The three-day meeting suggests that it will be more than just a self-congratulatory birthday party, as the organization turns 75 this year. But the event could very much be entangled in the U.S. presidential election cycle, as the convention for the Republican Party takes place just days afterward.
  • The Republican convention could be where Donald Trump is confirmed or coronated as the party’s candidate for the November election. In his previous stint as president, between 2017 and 2021, Trump was critical of other NATO members for not spending enough on defense.
  • While it is far from certain that Trump will be president again, even the possibility of him reentering the White House will bring the issue of defense spending to the top of NATO’s agenda. And while European allies have been spending more and more for the last decade, particularly since Russia’s full-scale invasion of Ukraine in February 2022, the question is if that is enough.
  • Take the so-called Wales pledge, which was made at the alliance’s summit in Newport in 2014. It was then agreed that all allies should reach the target of spending 2 percent of gross domestic product on defense in the next 10 years. A decade later only 11 out of 31 allies have done so, even if a few more are likely to hit the goal this year, including heavyweights such as France and Germany.
  • Ukraine will obviously feature heavily both at the summit and in the run-up. But as the outcome of the war remains hard to predict, so is Kyiv’s NATO integration. Amid U.S. skepticism about giving the country too much membership encouragement in Vilnius, few believe that the tune will change so close to the American election.
  • From speaking on background to diplomats and NATO officials, Ukrainian membership of the organization is seen as the elephant in the room and they have not seen what they would regard as hopeful signs from D.C. It looks like Washington won’t be an “enlargement summit,” with other NATO hopefuls such as Bosnia-Herzegovina and Georgia set to only be represented by ministers and not leaders.
  • Instead, the focus will be the question of providing Ukraine with more military aid. Ukrainian diplomats earlier this month briefed NATO officials about recent Russian attacks, where there was discussion about Kyiv’s missile stocks.
  • Expect NATO allies to do a lot more “bulk buying” — i.e. getting together to buy military equipment, just as Germany, the Netherlands, Romania, and Spain recently did to procure up to 1,000 Patriot missiles, some of them destined for Kyiv.

Brief #2: Which Country Will Be Next To Adopt The Euro?

What You Need To Know: The debate about the adoption of the euro for the seven European Union member states not using the common currency could come to the fore this year, with European Parliament elections in June approaching and much discussion expected within the bloc about various ways to make it more efficient. While it would be hard to force those countries to adopt the euro, six of them — Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Sweden — are actually legally obliged to join once they fulfil all the economic and legal criteria. The seventh country, Denmark, is the only one with an opt-out even though its currency is pegged to the euro.

The relative success of the euro has also created some momentum. Since its introduction as a virtual currency in 1999 (coins and notes started circulating in 2002), it has gone from 11 members to 20 today, with Croatia the latest to join in 2023. Even non-EU Kosovo and Montenegro use the euro as their currency, without the direct permission of the European Central Bank (ECB). And this is despite the eurozone crisis more than a decade ago that threatened to rip apart the common currency zone and force some countries, largely in the south, to abandon the euro. In the end, no country left and the euro is now the world’s second reserve currency after the U.S. dollar. According to a survey published last year, nearly 60 percent of the respondents of the seven non-eurozone EU member states thought the euro had a positive impact in countries already using it, and a majority in five of the seven countries would like their country to introduce it. (Only Bulgaria and the Czech Republic had majorities who were wary of joining the euro.)

Deep Background: The country closest to join should be Bulgaria, which was hoping to have the euro as its currency on January 1 this year but is now looking at the start of 2025 instead. Sofia is reportedly nearly ready when it comes to the economic convergence criteria — keeping interest rates, debt, and the budget deficit under a specific threshold and having spent more than two years in the euro’s antechamber, the European Exchange Rate Mechanism, in which a country’s national currency exchange rate stabilizes against the euro.

Bulgaria still needs to lower its inflation rate; the benchmark is that it cannot be higher than 1.5 percentage points above the rate of the three best-performing member states. With the country’s inflation gradually going down, it is very possible this can be achieved in 2024. In the end, it will be up to the other member states to decide via consensus. And it is very much a political decision, as was the case when Croatia joined little over a year ago, despite having a higher amount of debt than what is usually allowed.

The Netherlands and Germany still harbor fears about taking in Bulgaria, the poorest EU member, and will look closely at how well the country has implemented euro-related legislation, notably on money laundering, but also concerning such things as personal insolvency, changes to the insurance code, and the legal integration of the Bulgarian Central Bank into the Eurosystem — the monetary authority of the eurozone — which the Bulgarian parliament is soon set to pass. Key will be the convergence report, produced by the ECB and the European Commission, which is expected in June.

Drilling Down:

  • Romania is another of the seven countries that has stated that euro integration is a political goal. But it is not really on the horizon yet. Romania’s economy has taken a big hit in recent years, and it hardly meets any of the economic convergence criteria. With 2024 being a super election year in the country (local, parliamentary, presidential, and European), there is little talk about the common currency now and the goal set by the country’s national bank, to join by 2029, is still the tentative target.
  • Hungary has no intention of joining the euro and has even amended its constitution to explicitly state that the forint is the country’s currency. With its Prime Minister Viktor Orban locked in several political battles with Brussels in recent years, he is keen to keep Hungarian control over the national bank and key monetary policies such as the setting of interest rates.
  • Besides Bulgaria, Romania, and Hungary, we are left with the Czech Republic, Denmark, Poland, and Sweden. And here things could become interesting. Czech President Petr Pavel threw a curveball in his New Year’s speech on January 1 by noting that it was time to start taking concrete steps toward euro membership. While most parties in the ruling government coalition support adopting the euro, the biggest one, the Civic Democratic Party, is split and its leader, Czech Prime Minister Petr Fiala, noted that adoption is off the table until parliamentary elections next year.
  • In Poland, euro adoption is not on the agenda for now even though the parties of the new, more EU-friendly government is generally in favor of joining.
  • In Denmark, there is likewise not much political talk about the matter, but in Sweden there was, for the first time, a majority last year in favor of adopting the euro, according to various polls. That partly reflects the growing general unhappiness about the slide in value of the Swedish krona against the euro.
  • In both Sweden and Denmark, there were consultative referendums over 20 years ago on joining the common currency in which the “no” side won. Similar plebiscites would be likely in the future . But if one country were to join, the other would probably follow — this would also put pressure on Poland and the Czech Republic to follow suit — as pretty much the entire Nordic-Baltic region would be part of the eurozone.

Looking Ahead

EU foreign ministers will gather in Brussels on January 22. They will meet their Ukrainian counterparts to discuss more EU sanctions on Russia, the attempts by Brussels to use frozen Russian assets to financially contribute to the rebuilding of the war-torn country, and the urgent question of weapons deliveries to Kyiv.

On January 28, Finns go to the polls to elect a new president. The incumbent, Sauli Niinisto, must step down after two six-year terms and will be remembered as a key player in securing the Nordic country’s entry into NATO last year. Opinion polls point toward a second round in February, as the two front-runners, the center-right Alexander Stubb and the Green candidate Pekka Haavisto, are very unlikely to secure 50 percent of the vote outright this coming Sunday.

That’s all for this week. Feel free to reach out to me on any of these issues on Twitter @RikardJozwiak, or on e-mail at [email protected].

Until next time,

Rikard Jozwiak

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