EU expanded too fast and will probably fail, Lee Kuan Yew said in 2012

Mr Lee Kuan Yew (right) and former German chancellor Helmut Schmidt met in Singapore in May 2012 to discuss Europe’s crisis and other issues. The Straits Times/ANN FILE PHOTO

As the world struggles to make sense of Brexit, there has been renewed public interest in the future of Britain and the European Union(EU). One Singaporean who had tracked Europe’s great effort at integration over many decades was the late Lee Kuan Yew.

In the years following the European debt crisis which began unfolding in late 2009, Mr. Lee was asked on several occasions for his views on the EU. He weighed in, speaking with clarity, depth of understanding and keen insight.

In September 2011, Mr. Lee predicted at a dialogue the collapse of Europe’s currency union and said it would be “a very painful business” but that a one-tier Europe was too hard to achieve. At that time, the European debt crisis was some two years old, having been taking place since end 2009.

Mr. Lee, Singapore’s founding prime minister, was speaking at a dialogue to mark the seventh anniversary of the Lee Kuan Yew School of Public Policy. He said European leaders would try very hard to keep the euro zone from collapsing as that would be “an admission that their aspiration of one Europe is not achievable.” “But I do not see it being saved. But they’ll try and keep it going.”

When asked by a participant if Singapore would buy the bonds of debt-ridden European countries, Mr. Lee said Singapore’s gross domestic product was a fraction of the European Union’s, and thus it is “in no position to rescue the Europeans, nor do I think that buying their bonds will necessarily rescue them.”

He pointed to the currency union among the 17 EU countries as the problem. “A fundamental problem of the euro is that it makes everybody, every European country, march to the same drummer whereas each country has its own tempo and you cannot expect the Greeks to march like the Germans, so the problem will not go away.

“Eventually, I’m not sure when because it would be an admission of the aspiration being out of reach, a two-tier Europe or even a three-tier Europe is possible but a one-tier Europe with different spending habits, thrift habits and discipline is too difficult to achieve.”

The euro came into existence in 1999 in the hope of increasing economic cooperation and growth in Europe, while shoring up the EU’s presence on the world stage. But as several euro zone countries faced debt crises, the currency union came under fire because it forced other European countries to bail out the troubled member nations, as well as denied policymakers the flexibility of monetary policy as a tool to fight recession.

Mr. Lee also said he did not think the Chinese were interested in “rescuing Europe for the sake of Europe. They’re interested in buying euro bonds cheap and hope that it will give a good return.”

Reports at that time estimated that up to one-quarter of China’s reserves may be euro-denominated. When moderator Kishore Mahbubani, dean of the Lee Kuan Yew School of Public Policy, said that a strong EU would be in China’s geopolitical interests, Mr. Lee disagreed. He said: “No, no, no. It’s easier to deal with 27 weak European countries than to deal with 27 united European countries.”

In May 2012, Mr. Lee met his old friend Helmut Schmidt for three days in Singapore to discuss China’s rise, Europe’s crisis and key issues in the East and West.

Mr. Lee was then 89 years old and Mr. Schmidt, who was chancellor of West Germany from 1974 to 1982, was 93.

Both men were interviewed by German newspaper Die Zeit during the visit and they were asked if, in the light of Europe’s history of feuds and hostilities, including two world wars, the European Union was inspite of its flaws a great achievement. Below is the exchange between the two former leaders and Die Zeit journalist Matthias Nass.

Zeit: Is the European Union that we have today not a great achievement and an inspiration for other regions in the world, despite all its flaws?

Lee: No, I do not view the European Union as an inspiration for the world. I view it as an enterprise that was conceived wrongly because it was expanded too fast and it will probably fail.

Zeit: So Asia cannot learn from the European integration?

Lee: We cannot achieve integration in the same way, that is for sure. But what we can draw from this is the growing insight into our common interests, free trade zones, and then we can build up on it step by step. The problem in Asia is China’s dominant position.

Zeit: So is free trade the maximum of what can be achieved in Asia?

Lee: Free trade and a feeling of belonging together; we do not fight each other. We settle differences, that is a fact. We meet regularly; we do not threaten each other.

Zeit: Couldn’t the current crisis bring Europe one big step forward towards political unity?

Schmidt: In theory, you may be right, but in reality, we need leadership figures. We need people like Harry Lee or Jean Monnet.

Mr. Lee also dwelt at length on Europe’s future in the book Lee Kuan Yew: One Man’s View of the World, published by Straits Times Press in 2013. Below is an excerpt from it.

“In the last two to three years, European leaders – including David Cameron, Nicolas Sarkozy and Angela Merkel – have separately declared that multiculturalism has failed in their countries. In other words, the Turks who have settled in Germany have not become Germans, nor have the Algerians and Tunisians in France become French. Increasingly, Europe sees these people as indigestible. Race is at the root of this inability to assimilate, although religion, culture and language are also factors. But it is also not possible for Europe to stop the inflow because these immigrants meet a pressing domestic need. So we may well see European governments letting in immigrants when they can, only to hit the brakes when electoral cycles come around and far right parties outflank their moderate opponents with angry rhetoric. However you look at it, they face a catch-22.

When Europe emerged from the devastation of two world wars, the idea of European integration seemed most natural. Here was a continent of countries that held many things in common. They had all lived through the Renaissance and the Enlightenment and had come away with one European culture, a similar way of thinking about themselves and the world. Christianity was the dominant religion. Going further back in history, these countries shared a heritage from the days of the Roman Empire, which gave them a certain uniformity in the way they organized society. Yet, for all their commonalities, what came to the fore dramatically in the 20th century were their disagreements and their separateness, as they were led by their worst angels to engage in brutal, internecine and protracted wars resulting in the death of millions. Integration, then, became a central mission for European leaders. It represented their best hope for enduring peace. It was the clearest way for the countries to build on their similarities, set aside their differences and bind the fates of their nations closer to each other so that they would never again have to suffer such horrible consequences that were, arguably, of their own making.

Having decided that this was an important project, they went about building the necessary institutions. They signed the Treaty of Paris in 1951, establishing the European Coal and Steel Community, the pioneer of the EU. In 1957, the Treaty of Rome, which proposed the creation of a common market, and common agricultural and transport policies, was agreed on. The community later evolved into the European Union and was expanded to include 27 states after the end of the Cold War. Of those states, 17 adopted a single currency, the euro.

Integration holds great promise apart from just peace. A Europe that achieves singularity in purpose would have much greater economic clout and, more significantly, a much bigger voice in international affairs. Put simply, it would be a more powerful Europe. If the Europeans were to deepen its integration efforts and go on to have one finance minister, and perhaps even to having one foreign minister and one defence minister, their augmentation in hard-power terms would be enormous. Consider the people of the United States of America. They are basically Europeans who have been transferred to another continent and have dropped their tribal loyalties and their different languages. If Europe integrates to the same extent and becomes the United States of Europe, there is nothing the Americans can do which they cannot do. Europe as one entity is more populous than America (500 million versus 310 million) and has an economy one-sixth larger than America’s. Such a Europe would certainly be in the running for the world’s leading superpower.

Alas, all the signs point to the impossibility of integration. They have so far failed to make a single currency work and are not likely to progress to a single foreign policy stance or a single military. They have individual histories, each going back many centuries. Each nation is proud of its own traditions. Above all, they want to keep their languages alive – there is glory and literature behind it. America decided to start afresh and create a new literature, but Europe will not be able to do so. Even though English is already the second language in all the other countries, those on Continental Europe will never accept it as the single working language.

What then will be Europe’s place in the world? They will be smaller players on the international stage. In the face of dominance by the major powers such as the US and China, and maybe later on, India, Europe will be reduced to the role of supporting actor. Most of the European countries will be treated – quite rightly – as ordinary small states. Germany might be able to carry its weight alone, thanks to its population and its economic success, although it will not want to raise its head above the parapet because it is still filled with guilt for having killed six million Jews during the Holocaust. The British will retain some influence because of their special transatlantic relationship with America.

But otherwise, Europe cannot hope to count for much at a table where the US, China and India are seated, even if some European leaders may still be reluctant to admit it because of their historical sense of self-importance and their long experience in playing the game of international affairs. In the end, you are comparing nations of 40, 50 or 80 million against 1.3 billion Chinese and 1.2 billion Indians. The Chinese, especially, will find that a fragmented Europe makes life easier for them. They can deal with each country individually, rather than in a group. Each European country will be more dependent on the Chinese than the Chinese are on them. This will be even more so as China’s economy moves towards being driven by domestic consumption.

Europe’s declining international voice, however, will not result in its living standards falling by the same magnitude. If it can survive the break­ up of the euro, it goes back to what it was. Europe loses its voice in the world, but the countries in it have a high standard of education and skills and can make a good living. There will be some decline, but each country will reach a steady state at its own level of competitiveness. The Europeans will lead lives that are happy enough.

I write more in sorrow than in derision about Europe’s inevitable decline. I do not want to run Europe down. The Europeans are a very civilized people. Yes, they were colonialists – the French, the Belgians, the British and the Spaniards. But the French had their mission civilisatrice to transfer their civilisation to the Africans. And on the whole, the British left institutions behind them, including in Singapore. We had the rule of law, we had statutes, we had the English language and we were wise enough not to change any of that. They have helped us to grow. Their institutions were already working. What I did was to make sure that we did not subvert the institutions but reinforced them.

The Belgians, in stark contrast, left Congo in a mess. They extracted the raw materials and when the time came to leave, the place just broke up into tribal warfare. Congo is still in trouble today. In Guinea, Charles de Gaulle was so angry with Ahmed Sekou Toure, who was a forceful freedom fighter, that they ripped off all the electric and telephone wires before they left. Guinea has still not recovered from that. They did not do that to all French colonies but they did that to Guinea because Sekou Toure baited the French government. Thus, Sekou Toure inherited a non-working system, which he never got back into working condition. These things make a difference.

If the British had left me with a French or Belgian situation, I am not sure I would have been able to build it up to today’s Singapore. The British left in good grace. The main building of the Istana was occupied by the last Governor, Bill Goode, who handed it over intact, everything in order. He took me around and introduced me to the butlers and so on before leaving. From here he went to North Borneo for a while and then retired. We should be thankful for their system and their graceful exit.”

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