NEW YORK – Europe’s efforts to revive its flagging economy and confront the crisis in Ukraine may seem to be two entirely separate challenges. But policymakers, struggling to contain Russian designs and find an acceptable long-term settlement on the European Union’s eastern borders, could learn a lot from the way that European Central Bank President Mario Draghi has managed to stabilize the eurozone economy.
In early September, Draghi repeated his pledge “to do whatever it takes” to keep the eurozone functioning, announcing more innovative measures to revive the currency union. Although Draghi has not implemented the sort of far-reaching monetary-policy measures witnessed in the United States over the past six years, his approach nonetheless provides European leaders with some valuable lessons in policymaking, especially when faced with clashing national interests. Similarly, when it comes to marshaling a united approach to the Ukraine crisis, EU leaders could do worse than adopt the Draghi approach.
The first lesson of that approach is simple: Do not compromise on the essentials. This was demonstrated by Draghi’s original 2012 “whatever it takes” pledge to place a floor under the eurozone crisis, thereby creating the bedrock for recovery. Similar considerations are at play in Ukraine. Russia has clearly shown how far it will go to keep Ukraine within its sphere of influence, and prevent Ukraine from following Estonia, Latvia, and Lithuania into the EU and – more importantly – NATO. Europe needs to show that it, too, will do whatever it takes to defend Ukraine’s territorial integrity and prevent Russia from weakening and subordinating its neighbor. This may then set the tone for an agreement.
To achieve this goal, the EU must learn Draghi’s second lesson: Pre-empt, rather than react (which becomes even more important in the context of the current tenuous cease-fire). Instead of improvising sanctions in a belated response to Russian intervention in Ukraine, Europe should draw clear red lines, and set out concrete, effective punishments if those lines are breached. Tough rhetoric but moderate sanctions will not work. Draghi’s announcement in 2012 of the ECB’s “outright monetary transactions” program backed his bold pledge, restoring confidence so quickly that the OMT scheme never had to be deployed.