It is clear that the Euro-crisis has and will have huge implications for EU foreign policy. A lot depends on what happens in the next months – the solution to the Greek or Italian problems, the contours of a multi-speed Europe and how messy a solution or non-solution to the euro-crisis will be. Things can get worse, or they can get better. But it is already possible to take a snapshot of the foreign policy implications of the Eurozone crisis. The picture contains a push to the background of all foreign policy issues, followed by fewer foreign policy resources and a coma for EU soft power, made worse by the fact that the EU understanding of power is so unhedged.  

1) Less time for foreign policy    

When your house is burning, this is a bad time to be chatting or engaging neighbours. When political leaders and administrations are engaged full time in managing the economy – saving the Euro, reducing public spending or stemming the tide of unemployment, foreign policy is pushed even more to the bottom of the list of priorities. Leaders simply have less time and desire to understand or strategise about how to react to foreign policy events – be it Putin’s return to the presidency, the latest turn in the political mess of Egypt, Tunisia or Ukraine. And foreign policy issues which sometimes need not just competent diplomatic management, but also high-level political drivers, is relegated to working level – where many issues cannot be solved. Foreign policy matters are then seen like issues that need to be put aside, postponed, thrown under the carpet and get out of the way until more urgent problems are solved.

2) Fewer money 

Foreign policy is costly. Some money need to be spent on military resources and other – on assistance. Both of these types of spending buy the EU various degrees of influence, power and diplomatic weight.

The amount of EU spending for foreign policy is the result of a trade off between moral commitments (to help those in need of humanitarian assistance, post-colonial guilt), self-interest (stabilise countries, use political influence to promote economic interests, give aid to reduce emigration) and politicians’ accountability to voters. With a growing pie – politicians and decision-makers could get a decent balance between these various imperatives. But with a shrinking pie, a more egoistic narrow-mindedly voter oriented behaviour is likely to come to the forefront. This will restrain EU member states’ desire to spend money internationally. The increasing number of those affected by unemployment or salary cuts might suddenly become much less altruistic internationally and put increasing pressures on elites to spend money at home. At the end of the day foreign aid recipients don’t vote and a generously funded foreign policy is likely to be increasingly seen as something of a luxury.

All this is a huge problem for all great foreign policy powers, but especially for the EU, which in the absence of hard power has relied so much on economic power, conditionality and financial aid as its main foreign policy tools. On this the EU is like an investor with a shockingly undiversified portfolio of investments, to use Nick Witney’s parallel.

The EU takes a lot of pride in the fact that it is the biggest donor in the world. But even before the acute phase of the euro-crisis the political relevance of EU aid in the emerging world was undermined by alternative sources of funding for many of the emerging countries –from China,Russia, or their own burgeoning economies. Now the EU not only has to compete for political influence with other aid donors which is debilitating in itself, but might also face the need to reduce foreign policy funding. This is EU’s foreign policy double dip: the loss of relative influence compared to the other powers (due to their rise), supplemented now with loss of foreign policy resources not just in relative, but also absolute terms.

A side-effect of this problem also relates to market-access related conditionality. For decades the EU used access to the EU market as a carrot which is exchanged for all kinds of concessions – economic or political (such as the human rights conditionality in EU association agreements). But now, this tools might also become problematic on two accounts. First, the ‘carrot’ of EU’s stagnating market might become less attractive in relative terms (again not least by comparison with faster growing alternative markets). And second, the ‘carrot’ might be put out of sight for some external partners as a result of potential protectionist backlashes inside the EU.

While other powers, such as the US or Russia are also affected by the crisis, in financial dire straits they are still left with raw military power or assertive high-quality diplomacy. The EU has little hard power, fewer money, a half-baked External Action Service and a disparaged collection of divided national foreign ministries. This is roughly like the (probably Chinese) saying that ‘in a famine a fat man looses weight, and a thin man dies’.

3) The euro-crisis of soft power

The third serious effect of the euro-crisis is on EU soft power, which is supposedly based on EU attractiveness as a prosperous, well-functioning model. I have argued before that ‘soft power’ has an element of free-riding to it. For the last twenty years the EU’s main foreign policy occupation has been teaching other how to live and making them want what the EU wants. This foreign policy model was reaching its limits already before the crisis as it was hitting the limits of cultural fascination with Europe which was much more valid in Central Europe in the 90s and the Balkans, than it is in the Middle East or much of the post-Soviet space (see ECFR report on the Limits of Enlargement-lite). But now this foreign policy model is evaporating. Few, if any foreign policy partners of the EU are likely to aspire to be like Europe. The fastest growing economies in Europe in 2010 were Turkey, Belarus and Moldova. Hardly a good advertisement for EU’s economic model.

Again, the draining of ‘soft power’ is costlier for the EU than for other powers like the US, whose ‘soft power’ also had to suffer as a result of the crisis, but whose ‘power portfolio’ is better hedged. The US at least retains hard power, whereas the EU had no hard power, and its ‘soft power’ might be entering into a coma.