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It's Still the Economy, Says New EU Envoy
The Washington Diplomat / November 2010

By Larry Luxner

On Sep. 30, speaking to a room packed with diplomats, journalists, friends and members of Congress, Ambassador João Vale de Almeida officially inaugurated the new Delegation of the European Union to the United States.

“There are three reasons I’m happy tonight,” Vale de Almeida said, beaming before the TV cameras as Baroness Catherine Ashton — the EU’s de facto foreign minister — stood at his side. “First, because Cathy is here. She is the driving force behind the European External Action Service. Second, because this inauguration is so symbolic. It brings together a new building, a new role for the EU, and a new ambassador in Washington.

“But the most important reason,” he admitted with a big grin, “ is that I arrived here when the move was already complete. All I had to do was choose the furniture.”

In fact, when The Washington Diplomat interviewed this veteran Eurocrat just a few weeks before, hardly any furniture was in sight. Not a single picture adorned the wall of his spartan office; most of its contents still sat in boxes, waiting to be unpacked.

Amidst mounting debt problems in Ireland and Portugal, and ominous rumblings on both sides of the Atlantic that the European Union is on its deathbed, Vale de Almeida clearly has more urgent matters to deal with.

The Portuguese-born diplomat, who started his job July 16, is already the most powerful diplomat in Washington. As the first EU ambassador to the United States since the Lisbon Treaty entered into force on Dec. 1, 2009, Vale de Almeida speaks for 27 nations with a combined population of 500 million people and a GDP approaching $16.5 trillion.

“I would dare to say this is the most important relationship for the European Union, and also for the United States,” said Vale de Almeida. “This relationship is crucial, central and strategic for both sides. Our ties are extremely positive, but we believe we can do even better to untap their full potential. That’s my job here.”

The transatlantic relationship, which in recent years has been overshadowed by the rise of China and a variety of crises ranging from Iraq to Afghanistan, will once again grab headlines Nov. 20 at the European Union-U.S. Summit in Lisbon. President Obama will be there, along with Belgium’s Herman van Rompuy, president of the European Council, and Portugal’s José Manuel Barroso, president of the European Commission.

Given the current economic malaise worldwide, it’s no surprise that financial regulation — along with climate change, trade policy, terrorism and nuclear proliferation — will be at the core of the Lisbon talks.

Yet in an interview with The Times of London, Barroso said he’s deeply disappointed with the current state of relations between Washington and Brussels. “The transatlantic relationship is not living up to its potential,” he complained. “I think we should do much more together. We have conditions like we have never had before, and it would be a pity if we missed the opportunity.”

Europeans are frustrated that Congress failed to approve a cap-and-trade system for carbon emissions, and were further disappointed when the Obama administration announced a reform of the U.S. banking system, unilaterally undercutting discussions within the G20 Financial Stability Board on coordinating regulation on financial services. Obama’s decision to skip the previous EU-U.S. summit in Madrid last May didn’t help matters.

* * *

Vale de Almeida, who will be at the Lisbon meeting, spoke to The Diplomat at length about his job and bilateral relations from the gleaming new EU mission at 2175 K Street, overlooking Washington Circle.

“This is a delegation, not an embassy, though the head of the delegation is an ambassador,” he explained. “For all meaningful purposes, it works like an embassy. We enjoy diplomatic status and have access to the Obama administration. But we are not a country, rather a group of countries that share their sovereignties and have a lot in common.”

The EU Delegation occupies the 8th through 11th floors of the building, whose entrance is decorated with the flags of all 27 member nations as well as a sleek, backlit timeline highlighting important dates in Europe’s march toward integration, from the 1957 Treaty of Rome — signed by Belgium, France, Italy, Luxembourg, West Germany and the Netherlands — right up to last year’s ratification of the Lisbon Treaty.

By coincidence, Vale de Almeida was also born in 1957, in Lisbon, and he’s been fascinated by European politics ever since he was an 18-year-old journalist working for Diario de Noticias, Portugal’s most important newspaper.

“I grew up during the dictatorship, and the revolution took place in 1974. That’s what led me to journalism,” he recalled. “A lot was happening politically, and I covered mainly economic stories.”

Vale de Almeida was recruited to work for the European Commission in 1982, four years before Portugal itself joined the EU. He relocated to Brussels and stayed there for the next 21 years — working closely, in different capacities, with former commission presidents Jacques Delors, Jacques Santer and Romano Prodi.

He also served in the Directorate General for Education and Culture, as well as deputy chief spokesman of the European Commission.

In 2004, he became chief of staff and main adviser to Barroso, as well as his “sherpa” for the G8 and G20 summits. Later, as the most senior EU official under Ashton — whose official title is “high representative for foreign affairs and security policy” — Vale de Almeida helped formulate and execute the EU’s foreign policy and played a key role in preparing the new European External Action Service introduced by the Treaty of Lisbon.

In fact, it was Lady Ashton who personally appointed Vale de Almeida to his current position in Washington.

“My job first and foremost is to work hand in hand with the 27 EU ambassadors here, and secondly to represent the union as such — not replacing the member states but adding value to their work,” he said. “We are a solid team.”

Yet when asked what his most urgent concern is as EU ambassador, Vale de Almeida responded immediately: the economy.

“It’s the main issue confronting politicians on both sides of the Atlantic,” he said. “The financial crisis of 2008 was extremely tough, and we are only now getting out of it. The issue now is how we can make this a sustainable recovery, and one that does not lead us into similar situations in the future. Both President Obama and all the prime ministers of Europe need to make sure this recovery produces enough jobs.”

* * *

Unemployment in both the United States and the EU averages around 10 percent, though among the 16 countries that use the euro, joblessness varies wildly, from a low of 3.8 percent in Austria to a high of 20.3 percent in Spain. In Germany — the EU’s single largest economy — unemployment stands at 6.9 percent.

Analysts said the figures showed a stark contrast in the health of different eurozone nations.

“We have the periphery countries, where the labor market is showing no improvement, and we have the core eurozone, where the labor market is actually pretty good and continues to show good news,” Carsten Brzeski, an economist at ING, recently told reporters.

Such data has reinforced the view among experts that the European Central Bank will keep interest rates low for the foreseeable future, with inflation less of a concern than stagnant growth rates.

But Charles Kupchan, professor of international relations at Georgetown University and a senior fellow at the Council on Foreign Relations, says Europe’s problems run far deeper than most Americans realize.

“The financial crisis has taken a painful toll on many EU members, and high national debts and the uncertain health of the continent’s banks may mean more trouble ahead,” he wrote in a recent Washington Post opinion piece. “But these woes pale in comparison with a more serious malady: From London to Berlin to Warsaw, Europe is experiencing a renationalization of political life, with countries clawing back the sovereignty they once willingly sacrificed in pursuit of a collective deal.”

Kupchan added: “For many Europeans, that greater good no longer seems to matter. They wonder what the union is delivering for them, and they ask whether it is worth the trouble. If these trends continue, they could compromise one of the most significant and unlikely accomplishments of the 20th century: an integrated Europe, at peace with itself, seeking to project power as a cohesive whole. The result would be individual nations consigned to geopolitical irrelevance — and a United States bereft of a partner willing or able to shoulder global burdens.”

New York Timescolumnist Roger Cohen shares that view.

“The idealism that once prompted talk of a United States of Europe, propelled the creation of a single currency and banished war from the Continent has evaporated in an epidemic of small-mindedness,” Cohen wrote Oct. 9. “No wonder President Obama skipped an EU-U.S. meeting, and even coming up with an agenda for a planned November summit is proving arduous.”

But Vale de Almeida insists the outlook today is better than it was only a few months ago.

“For me, what matters is that we have an approach that offers solutions, and that we’re implementing them. Regardless of our diversity, we must be able to design a ‘road map’ that is capable of incorporating solutions,” he said.

Vale de Almeida, who penned a Washington Post editorial of his own refuting doubters like Kupchan and Cohen, concedes that the financial crisis is having a severe impact on many European countries, including his own. But to suggest that the EU is on the brink of collapse, he says, is “profoundly inaccurate” and “seriously underestimates the resilience” of the 50-year-old dream of European integration.

“Look at the EU’s dynamic response to the Greek sovereign debt crisis,” he told The Diplomat. “The Greek situation was difficult, but we tackled it in an unprecedented way. We set up mechanisms with the IMF for direct support of Greece, and to prevent similar situations in the future. This is very solid evidence that the EU is capable of delivering when it has a problem. I am confident that we have all the mechanisms at our disposal to tackle any problem that may occur.”

* * *

In May, the EU — amidst fears that the so-called “Aegean Contagion” would spread to fiscally challenged Portugal — mustered an unprecedented $1 trillion financial commitment to safeguard the plunging euro and stabilize the continent, as well as a $145 billion rescue package in coordination with the International Monetary Fund.

The bailout, initially rejected by the Germans, was made conditional on the implementation of harsh and deeply unpopular Greek austerity measures that included raising the retirement age for government workers from 61 to 65; slashing government wages by 20 percent and pensions by 10 percent; hiking the value-added tax to 23 percent and boosting alcohol, cigarette and fuel taxes by 10 percent (see “Greece Confronts Modern-Day Epic of Economic Survival,” The Washington Diplomat, June 2010).

Vale de Almeida praised the Greek people for taking such “extremely courageous” measures after years of state mismanagement.

“Greece will have our support, but the government knows it has to implement these measures; otherwise the IMF will not be able to help,” he said. “It’s unfair to say we are just throwing money at the problem. They’re making enormous efforts to do things that in the past they wouldn’t have done.”

The ambassador added: “Whatever happens in one country affects other countries. The financial crisis started in the U.S. with the subprime issue and affected Europe, Asia and the world. The Greek situation goes well beyond the frontiers of Greece. It’s an illusion to believe that one’s problems are restricted to one’s frontiers.”

Yet panic now grips both Ireland and Portugal, where cash-strapped taxpayers are likely to foot the bill for their governments’ past mistakes.

In early October, the Irish government announced it would inject a fresh round of capital into the country’s ailing financial sector, bringing the total cost of Dublin’s bank bailout to $68 billion. But that’ll require making additional budget cuts and raising taxes at a time when Ireland — whose budget deficit now equals 32 percent of GDP — is already mired in a deep recession. Ireland’s economy shrank by 10 percent last year and fell another 5 percent at an annualized rate in the second quarter of 2010.

In Portugal, the situation is even worse. Prime Minister José Sócrates has presented a new austerity package aimed at generating $7 billion with a mix of public-sector wage cuts, a pension freeze and tax increases, including a boost in the VAT from 21 to 23 percent. Sócrates is attempting to slash Portugal’s budget deficit from 9.3 percent of GDP to 7.3 percent this year and 4.6 percent in 2011.

But that’s sparked accusations by Pedro Passos Coelho, leader of the opposition Social Democrats, that the minority Socialist government is breaking a pledge not to raise taxes further.

“In the same year, we will not grant tax increases twice,” he told the New York Times when asked if his party’s rigid opposition to Lisbon’s latest budget plan could risk forcing Portugal into Greek-style financial chaos. “The markets will be back in exactly the same nervous position in four or five months if the government kills growth and does not present instead any structural reforms of its expenses.”

Indeed, protests have erupted all across Europe as the EU moves to stiffen sanctions for governments that fail to cut their budget deficits and debt quickly enough.

In late September and early October, truck drivers, transport workers and students in Spain, France, Belgium, Ireland and Greece staged noisy demonstrations against the spending cuts and new EU labor laws that make it easier to fire employees. Even the institution itself wasn’t immune from the rallies; at EU headquarters in Brussels, protesters set off firecrackers and waved banners attacking the austerity measures, though that did little to dissuade top Eurocrats from their determination to meet their fiscal targets.

“We will pull the handbrake before the car rolls down the hill,” warned Barroso, whose proposals cannot be enacted before 2012.

Well before that, on Jan. 1, 2011, Estonia will adopt the euro as its official currency — boosting the eurozone to 17 countries at a time when some Europeans are beginning to question to wisdom of having created the euro in the first place.

* * *

“The first thing I heard about the euro was that it was too weak. Then they said it was too strong, and now again it has dropped,” said Vale de Almeida. “As a good diplomat, I don’t comment on exchange rates, but what I can say is that the euro has been a great success, and it is seen as such by the public. It’s a source of security and well-being for Europe.”

In Washington, there’s a widespread sense that Europe has taken a back seat to other issues. Yet if Vale de Almeida feels snubbed in any way by the White House, he’s not letting on.

“I think the decision to hold the summit in November, in Europe, is the right response to those concerns. Basically, the U.S. is saying in clear language that Europe is its most important partner in the world, and that they want to cultivate this relationship. I don’t see any problems on that front.”

When he arrives in Lisbon, Obama will probably be greeted like a rock star. It’s no secret that the 44th president is more loved in Europe than here at home. According to a poll conducted by Transatlantic Trends, 78 percent of EU respondents approve of Obama’s handling of foreign policy issues, compared to 52 percent of Americans.

“In Europe, President Obama is extremely popular. He is very much focused on results,” said Vale de Almeida. “He’s also very charismatic and impressive on a personal level. When I went to the White House in August to present my credentials, he was extremely nice to me and my family.”

Vale de Almeida, who moved to Washington with his wife, one of his two sons (the other works in a bank in Brussels) and his black Labrador, says one of the key elements of the new Lisbon Treaty is to give the EU a “single, more coherent voice in foreign affairs” — and that’s exactly what is happening.

“We have moved forward with external relations by creating a new role for Lady Ashton,” he explained. “She represents the EU in the Mideast Quartet and deals with Iran on behalf of the EU, and on all matters in which the EU has a common position. This will help make the union more active in foreign policy.”

Vale de Almeida said he’d focus on Iran, Afghanistan, Pakistan and the Middle East peace process, though “on the foreign policy side, Iran is top of the list.”

To that end, the diplomat pointed to the EU’s “unprecedented” punitive measures against Iran, which he said target key sectors of the Ahmadinejad regime over its attempts to build nuclear weapons. This latest package of penalties — approved by EU foreign ministers in late July following intense pressure from the Obama administration — affects petroleum, banking, shipping, insurance and transportation as well as nuclear-related industries.

Among other things, they specifically prohibit investment, assistance or technology transfers by European companies in the oil and gas industries, meaning EU firms are no longer allowed to help Tehran refine petroleum products. They also freeze the foreign holdings of Iranian banks.

“Both the U.S. and the EU have shown that Iran needs to understand it must come to the negotiating table. That is our objective,” said the ambassador. “We haven’t seen much coming out of Iran, so we decided to go even beyond the UN sanctions and adopt additional restrictive measures.”

Vale de Almeida, who declined to say what would happen if Israel launches a pre-emptive strike on Iran’s underground nuclear facilities, insisted that both Washington and Brussels “are on the same wavelength in our determination to pass on to Iran a very clear message — that it should engage in negotiations, and that we won’t accept a situation in which this need to negotiate is ignored. I’m very glad to see there is full convergence on this.”

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