TIME europe

Europe’s Economic Woes Require a Japanese Solution

Rome As Italy Returns To Recession In Second-Quarter
A pedestrian carries a plastic shopping bag as she passes a closed-down temporary outlet store in Rome, Italy, on Tuesday, Aug. 12, 2014. Italy's economy shrank 0.2 percent in the second quarter after contracting 0.1 percent in the previous three months. Bloomberg—Bloomberg via Getty Images

The region’s economy is starting to resemble Japan’s, and that threatens to condemn Europe to its own lost decades

No policymaker, anywhere in the world, wants his or her national economy to be compared to Japan’s. That’s because the Japanese economy, though still the world’s third-largest, has become a sad case-study in the long-term damage that can be inflicted by a financial crisis. It’s more than two decades since Japan’s financial sector melted down in a gargantuan property and stock market crash, but the economy has never fully recovered. Growth remains sluggish, the corporate sector struggles to compete, and the welfare of the average Japanese household has stagnated.

The stark reality facing Europe right now is that its post-crisis economy is looking more and more like Japan’s. And if I was Mario Draghi, Angela Merkel or Francois Hollande, that would have me very, very nervous that Europe is facing a Japanese future — a painful, multi-decade decline.

The anemic growth figures in post-crisis Europe suggest that the region is in the middle of a long-term slump much like post-crisis Japan. Euro zone GDP has contracted in three of the five years from 2009 and 2013, and the International Monetary Fund is forecasting growth of about 1.5% a year through 2019. Compare that to Japan. Between 1992 and 2002, Japan’s GDP grew more than 2% only twice, and contracted in two years. What Europe has to avoid is what happened next in Japan: There, the “lost decade” of slow growth turned into “lost decades.” A self-reinforcing cycle of low growth and meager demand became entrenched, leaving Japan almost entirely dependent on exports — in other words, on external demand — for even its modest rates of expansion.

It is easy to see Europe falling into the same trap. Low growth gives European consumers little incentive to spend, banks to lend, or companies to invest at home. Europe, in fact, has it worse than Japan in certain respects. High unemployment, never much of an issue in Japan, could suppress the spending power of the European middle class for years to come. Europe also can’t afford to rely on fiscal spending to pump up growth, as Japan has done. Pressure from bond markets and the euro zone’s leaders have forced European governments to scale back fiscal spending even as growth has stumbled. It is hard to see where Europe’s growth will come from – except for increasing exports, which, in a still-wobbly global economy, is far from a sure thing.

This slow-growth trap is showing up in Europe today as low inflation – something else that has plagued Japan for years on end. Deflation in Japan acted as a further brake on growth by constraining both consumption and investment. Now there are widespread worries that the euro zone is heading in a similar pattern. Inflation in the euro zone sunk to a mere 0.4% in July, the lowest since the depths of the Great Recession in October 2009.

Sadly, Europe and Japan also have something else in common. Their leaders have been far too complacent in tackling these problems. What really killed Japan was a diehard resistance to implementing the reforms that might spur new sources of growth. The economy has remained too tied up in the red tape and protection that stifles innovation and entrepreneurship. And aside from a burst of liberalization under Prime Minister Junichiro Koizumi in the early 2000s, Japan’s policymakers and politicians generally avoided the politically sensitive reforms that might have fixed the economy.

Europe, arguably, has been only slightly more active. Though some individual governments have made honorable efforts – such as Spain’s with its labor-law liberalization – for the most part reform has come slowly (as in Italy), or has barely begun (France). Nor have European leaders continued to pursue the euro zone-wide integration, such as removing remaining barriers to a common market, that could also help spur growth.

What all this adds up to is simple: If Europe wants to avoid becoming Japan, Europe’s leaders will have to avoid the mistakes Japan has made over the past 20 years. That requires a dramatic shift in the current direction of European economy policy.

First of all, the European Central Bank (ECB) has to take a page out of the Bank of Japan’s (BOJ) recent playbook and become much more aggressive in combating deflation. We can debate whether the BOJ’s massive and unorthodox stimulus policies are good or bad, but what is beyond argument at this point is that ECB president Draghi is not taking the threat of deflation seriously enough. Inflation is nowhere near the ECB’s preferred 2% and Draghi has run monetary policy much too tight. He should consider bringing down interest rates further, if necessary employing the “quantitative easing” used by the U.S. Federal Reserve.

But Japan’s case also shows that monetary policy alone can’t raise growth. The BOJ is currently injecting a torrent of cash into the Japanese economy, but still the economic recovery is weak. Prime Minister Shinzo Abe finally seems to have digested that fact and in recent months has announced some measures aimed at overhauling the structure of the Japanese economy, by, for instance, loosening labor markets, slicing through excessive regulation, and encouraging more women to join the workforce. Abe’s efforts may prove too little, too late, but European leaders must still follow in his footsteps by taking on unions, opening protected sectors and dropping barriers to trade and investment in order to enhance competitiveness and create jobs.

If Europe fails to act, it is not hard to foresee the region slipping hopelessly into a Japan-like downward spiral. This would prove disastrous for Europe’s young people — already suffering from incomprehensible levels of youth unemployment — and it would deny the world economy yet another pillar of growth.

TIME russia

Over 27,000 Russian Tourists Are Stranded as E.U. Sanctions Take Effect

A group of 30 Russian tourists wait at Antalya Airport in Turkey on Aug. 4, 2014, after their Russian tour company went bankrupt
A group of 30 Russian tourists wait at Antalya Airport in Turkey on Aug. 4, 2014, after their Russian tour company went bankrupt Anadolu Agency/Getty Images

Oligarchs are having to ditch their private jets, too

Over 27,000 Russian tourists have been left stranded abroad after the collapse of Russian tour operator Labirint. The firm cited a “negative political and economic situation” as a reason for its failure, Sky News reports.

Labirint is the fourth Russian tour company to tank in three weeks. “We worry that this is only the beginning and that there will be a domino effect,” a spokeswoman for the country’s Federal Agency for Tourism told radio station and news site Echo of Moscow.

The marooned tourists, in countries such as Egypt and Bulgaria, are a visible sign that the E.U.’s sanctions on Russia, imposed over Moscow’s role in the ongoing Ukraine conflict, are having some effect. Tougher punishments were imposed last week, following the downing of a Malaysia Airlines jetliner in eastern Ukraine on July 17, purportedly by a missile fired by pro-Russian separatists.

Besides affecting tour operators, sanctions have also led to a grounding of Russian budget airline Dobrolet, a subsidiary of state-controlled Aeroflot. The carrier ended up on the sanctions list because it provides direct flights from Moscow to Crimea, the Ukrainian region annexed by Russia earlier this year.

The targeting of Russian banks, meanwhile, has caused Russia’s second oil producer Lukoil to scale back investment plans because it cannot access funds, while Reuters reports that leading Russian banks have been forced to reassure clients that they are able to meet their commitments despite being on the E.U. list.

Prominent Russians are also being inconvenienced. Gennady Timchenko, a billionaire businessman close to President Vladimir Putin, has had his private jet grounded after Gulfstream stopped servicing the aircraft and its pilots were prevented from using its navigation equipment. However, he told Russia’s Itar-Tass news agency that he’d found an alternative to his Visa and MasterCard credit cards.

“As soon as the sanctions came in I got myself [a Chinese Union] card … and it works brilliantly!”

The sanctions could also hurt European businesses, however. Adidas has scrapped its revenue and profit target for next year because of its exposure to the Russian market, U.S. aviation giant Boeing could lose its contracts with Dobrolet, and the German Committee on Eastern European Economic Relations has said that more than 25,000 German jobs are in danger. There is an expectation among European investors that future growth may be hampered, with the euro zone’s Sentix investment index in August dropping to its lowest level in a year.

“As this slump derives from an event which is subject to politics and power play, the central banks, particularly the European Central Bank, will have difficulty in trying to counter this,” Reuters reported Sentix as saying.

Moscow has begun to hit back at sanctions by imposing bans of its own, mostly on food products. It has already banned Polish apples (it says for health reasons, but Polish farmers think the move is retaliatory) and Australian beef. Now, Reuters reports, Moscow is mulling a ban on U.S. poultry — it currently buys around 8% of U.S. broiler-meat exports each year.

TIME russia

Dutch Minister Says E.U. Is Imposing New Sanctions on Officials Over Russia’s Actions in Ukraine

(BRUSSELS) — Dutch minister says EU is imposing new sanctions on officials over Russia’s actions in Ukraine.

TIME Russia sanctions

Flight MH17: Europe Unlikely to Enforce Tougher Sanctions on Russia

Analysts say the European Union is unlikely to go beyond sanctioning individuals

On Tuesday, European Union (E.U.) foreign ministers will meet to discuss increasing sanctions against Russia following the downing of flight MH17. The U.S. has blamed the incident on separatist rebels who, it claims, shot the plane down using weapons supplied to them by Moscow.

The meeting will be the bloc’s first opportunity to discuss the tragedy which took the lives of 298 people, the majority of whom were from countries within the E.U.

In March, the E.U. and the U.S. imposed sanctions against Russia for Moscow’s involvement in the Ukrainian conflict. These were tightened July 16, the day before flight MH17 was shot down.

The E.U. has enforced “tier two” sanctions which affect individuals by freezing their assets and banning them from traveling. So far, 72 Russian politicians and aides of Putin have been affected. However, with the U.S. having imposed sanctions against Russia’s biggest companies, including state oil company Rosneft, there is pressure on the E.U. to match these “tier three” sanctions that go beyond individuals. But, despite U.K. Prime Minister David Cameron calling for tier three sanctions on Monday, analysts remain skeptical.

“I think that it’s highly unlikely at this stage that the E.U. is planning anything further than individual sanctions,” says William E. Pomeranz, Deputy Director at the Kennan Institute for Advanced Russian Studies. “The EU has a much more substantial trade relationship with Russia than the U.S. does, it has a heavy reliance on Russian gas.”

Jonathan Eyal, International Director at the Royal United Services Institute, echoes his sentiment. Eyal told TIME: “The Russia of today is not the Soviet Union of the Cold War. It is very deeply integrated into the economies of Europe particularly in terms of energy resources.”

Despite Cameron’s bluster, he will be painfully aware of this. In March of last year, British oil and gas giant BP bought shares worth close to 20% in Rosneft, the state-backed Russian oil and gas giant.

Eyal refers to a “disgraceful competition” within the E.U. that’s preventing a firm response towards Russia. According to Eyal, Britain is worried about the effect sanctions will have on London’s financial district. France fears damaging its impending sale of two warships to the Russian navy, whilst in Germany, there are concerns about jobs linked to Berlin’s trade with Russia. “This leads to the lowest common denominator being sought in sanctions,” Eyal notes.

Economic interdependence isn’t the only reason for Europe’s weak sanctions. “The legacy of the financial crisis has left some European countries feeling vulnerable,” comments Jeffrey Mankoff, deputy director at the Center for Strategic and International Studies’ Russia and Eurasia program. “They have less appetite to do something that will lead to economic disruption.”

Even for European countries that have pulled through the 2008 financial disaster, Russia’s immediate presence can be a significant deterrent. “Geography always plays an important role in international relations,” states Pomeranz. “Obviously the E.U. has to be mindful of its neighbors.”

Meanwhile, Washington also seems unwilling to push Moscow too far. And if Washington isn’t prepared to lead, it’s unlikely Europe will follow. “Europe has always been a free rider on the back of the U.S.,” says Eyal.

Mankoff shares his view, adding: “U.S. leadership on [sanctions] has been relatively lacking so far. And because it’s been lacking it’s been relatively easy for the Europeans to drag their feet.”

Were the U.S. to challenge Russia more directly, there is no guarantee, however, that Europe would follow suit. Constrained by trade relations, geography and shaky economies, Europe is both unwilling and unable to risk poking the Russian bear.

TIME

5 Key Questions about the E.U. Election Results

Why so many Europeans voted for parties that are hostile to their own political and economic union

European voters have sent their politicians into a tailspin by voting in unexpectedly large numbers for anti-European Union parties in the weekend’s European Union parliamentary elections. Those parties want to dump the euro, pull their countries of the E.U., and some of them even want to destroy the institution itself. Since the E.U. governs 503 million people in 28 nations, the implications could be far-reaching. Not surprisingly, Europe’s leaders are reeling from the results. People in Europe and around the world are wondering what it all means and what comes next. Here are some of the questions they’re asking:

 

1. Why should we care about the E.U. anyway?

The E.U. covers a huge swath of territory, from Britain to Poland, and its combined economy, worth about 13 trillion euros, is the biggest in the world, outsizing even the U.S. economy. From their headquarters in Brussels, E.U. officials implement thousands of decisions that the E.U. parliament has voted in. Those laws and regulations range from the very important – like rescuing economies from collapse and imposing sanctions on Syria, Iran and Russia, to the truly mundane. Until a few years ago, the E.U. regulated the shape of bananas and cucumbers – a response to the retail industry’s argument that it needed to know how many fitted in a box. On weightier matters, the E.U. is important to the White House. Europe is America’s closest ally in facing down foes like Russia’s Vladimir Putin or Syria’s Bashar Assad, and like the U.S., France and Britain are among the only five countries with permanent veto powers on the United Nations Security Council. The E.U. is also the U.S.’s biggest trading partner, with a new, sweeping free-trade agreement currently being negotiated. One last thing: since its precursor organization was founded in 1951, Europe has enjoyed its most peaceful period in history.

 

2. But if it’s such an important and powerful force for good why did politicians who actually want to destroy the E.U. do so well in the vote?

To be fair, only 43% of registered voters went to the polls. Most appeared too indifferent, or perhaps confused (yes, Europeans find this confusing too): The E.U.’s gargantuan bureaucracy can feel impersonal and distant and voters often feel uninspired. In addition, millions of Europeans rank the E.U.’s performance very poorly. Years of recession and high unemployment, coupled with expensive bailouts of faltering economies, like those of Spain, Ireland, Cyprus and Greece, have left voters fed up, wondering why their leaders are so unable to solve Europe’s problems. Their deep alienation handed the fiercely right-wing, nationalist leaders, like Marine Le Pen of France’s National Front and Britain’s Nigel Farage of the U.K Independence Party, or UKIP, an election gift. Both of those leaders won shock victories. There were also big wins for anti-E.U. far-left parties, like Spain’s Podemos, which didn’t exist four months ago and now has five seats in the E.U. Parliament. Perhaps it shouldn’t be surprising: The E.U.’s own pollsters recently found voter trust at its lowest point ever. The one bright spark, according to the Brussels-based Center for European Policy Studies, or CEPS, an E.U.-funded think tank, is that Americans have even less faith in Congress than Europeans do in the E.U.

 

3. These gains were just in the European Parliament. Do these Eurosceptic leaders want power in their own countries too?

Absolutely. Le Pen and Farage view their E.U. victories as a big step towards taking power at home. That’s a good reason why these elections have so shaken Europe’s presidents and prime ministers; their political futures are on the line. But some political observers argue that anti-E.U. politicians are sure to lose elections at home, and that the voters in these E.U. elections simply vented their anger and frustration at Brussels by casting protest votes, which might not translate, when they need to choose the next British Prime Minister or French President. “You have very deep economic wounds,” says Daniel Gros, director of CEPS. “Since few countries can accept they got themselves into this mess, the E.U. is the best scapegoat you can think of.” That might be so. But consider that in Germany, Europe’s strongest economy, the anti-E.U. party, Alternative for Germany, won 7% of the votes.

What’s more, the far-right politicians head to the E.U. Parliament with hugely increased credibility and visibility among voters at home, who might no longer see the parties as slightly nutty and largely irrelevant fringe organizations. The parties could also use their election victories to create a ground-force of organizers back home, ready to fight national elections. For Le Pen, however, France’s two-round presidential election system will almost inevitably filter out smaller parties like her National Front. Nonetheless, anti-E.U. leaders sound supremely confident when discussing their political futures. “The National Front will be in power within 10 years,” Le Pen told TIME in an interview last month. And Farage told the BBC after his victory on Sunday, “now anything is possible.”

 

4. Does that mean the E.U. is basically dead on its legs?

No. The E.U. is not about to die any time soon, despite the anti-E.U. politicians storming the barricades. The institution’s machinery is simply too complex and deeply entrenched to collapse that easily. And even though they made big gains the so-called Eurosceptics still won only an estimated 175 out of 751 seats in the E.U. Parliament. The old mainstream politicians still outnumber them. That said, these elections aren’t likely to leave the E.U. untouched. European leaders have holed up in emergency meetings in their capitals and Brussels since the shock results rolled in on Sunday night. Le Pen and her allies are vowing to block the new trade agreement with Washington, push to end the continent’s open borders, stop any attempts to add new E.U. members to the existing 28 countries and severely limit immigration to Europe. Even with a small minority, the anti-E.U. politicians will likely be much more vocal in the parliament. Le Pen envisions being able to nudge the debates in their direction, potentially allowing anti-E.U. groups to gain broader support for their causes. Their success at the polls could also persuade traditional politicians to sharpen some of their own criticisms of the E.U., and shift their own policies. Although Le Pen is unlikely to win on major issues that go against the E.U.’s constitution, like sealing borders, there are other possibilities for her to disrupt the E.U.’s agenda, or insert her own. If she succeeds in forming a trans-national, right-wing political group in the parliament, she will be entitled to attend meetings of political leaders. She would also be able to become one of the E.U. rapporteurs who report to parliament on specific policy issues, as they make their way through the committee procedure. A rapporteur’s “opinion carries a lot of weight,” according to the European Law Monitor, an independent information service.

 

5. These anti-immigration politicians – is that a polite way of saying they have racist policies?

Many Europeans, including some Muslims, would say so. No anti-E.U. politician will admit to racist policies, however, and most have worked hard to shed any lingering sense that their parties are racist. UKIP leader Farage has rejected joining a Le Pen-led political bloc in the E.U. Parliament, saying the National Front has a history of anti-Semitism; Le Pen has virulently disputed that. What unites both UKIP and the National Front is their belief that the growing number of immigrants to E.U. countries undermines Europe’s economy. Le Pen argues that French Muslims are imposing their beliefs on the Christian majority, and abhors any push to segregate girls and boys in public swimming pools, or exclude pork on school lunch menus. “Not all Muslims, but Islamists who, now permanently in France, are constantly asking for special treatment,” she told TIME last month, She told voters at a public meeting last month that France’s immigration policy was “a catastrophe,” and after the National Front won 11 municipalities in local elections last March, she said those towns would introduce pork on the menus of school canteens. Observant Jews and Muslims do not eat pork.

 

TIME United Kingdom

London Is a Worse Nitrogen Dioxide Polluter Than Beijing

A general view through smog of the Canary Wharf financial district on April 2, 2014 in London.
A general view through smog of the Canary Wharf financial district on April 2, 2014 in London. Dan Kitwood—Getty Images

An E.U.-mandated shift to diesel cars has sent London's NO2 emissions through the roof. "It's a public-health catastrophe," says one prominent campaigner

British tabloids may lash out at Chinese smog all they want, but when it comes to one important pollution indicator, the U.K. capital actually outpollutes even Beijing.

A European Union–wide shift to diesel, in order to curb CO2 emissions, has sent London’s nitrogen dioxide levels through the roof, Bloomberg reports. Not only are they the worst in Europe, reaching twice the E.U. limit, they also surpass the Chinese capital’s by a whopping 50%.

“Successive governments knew more than 10 years ago that diesel was producing all these harmful pollutants, but they myopically plowed on with their CO2 agenda,” Simon Birkett, founder of the nonprofit Clean Air in London, told Bloomberg. “It’s a public-health catastrophe.”

In 2000, the E.U. drew up rules allowing diesel cars to discharge more than three times the amount of nitrogen dioxide than those using gasoline.

“We’re stuck now with these diesel cars,” says Matthew Pencharz, the environment and energy adviser to the mayor of London. “About half our cars are diesel, whereas 10 or 15 years ago it was lower than 10%.”

Nitrogen dioxide irritates the lungs, increasing susceptibility to respiratory infections. In China, efforts are mostly focused on other pollutants, such as PM10, levels of which almost triple those in London.

[Bloomberg]

TIME E.U.

Skepticism Prevails as Europe Prepares to Go to the Polls

FRANCE-EU-VOTE
Martin Schulz, left, President of the European Parliament Jean-Sebastien Evrard—AFP/Getty Images

An election that was supposed to get Europeans more excited about their continental government, which holds a round of voting to decide which lawmakers sit in European Parliament every five years, has fallen prey to familiar divisions

Before the leading candidates for the European Union’s most powerful position took to the stage for their first televised debate late last month, the moderator looked confidently into the camera and declared: “History is being made.” For the first time, the moderator assured viewers, “you have a say in choosing the European Commission President.”

That may yet prove to be wishful thinking. Until now, national leaders of the European member states would disappear behind closed doors to pick a suitable candidate to lead the main E.U. body, which proposes and upholds laws and guides the day-to-day administration of the 28-country bloc. Giving voters a say in who gets Europe’s top job is meant to make this process more transparent and enthuse the continent’s notoriously apathetic electorate. But the alliance is facing a familiar problem: Not all national governments think it’s a good idea, and a system aimed at boosting the E.U.’s democratic credentials threatens to do the exact opposite.

Here’s the background: Every five years, citizens across the E.U. are given a chance to elect lawmakers to sit in the European Parliament, with the next vote taking place May 22-25. This assembly works along with the 28 governments and the European Commission to formulate, debate and pass laws. Soon after parliamentary elections, the new Commission President is appointed, and becomes the public face of the E.U.

This year, for the first time, the various political groups in the European Parliament have been have been asked to put forward a candidate for the post. The idea is that having personalities fighting a U.S.-style campaign will reenergize voters and help boost turnout, which has dropped from 62% in the inaugural election of 1979, to 43% in 2009. Another motivating factor is dwindling trust in the E.U., with Pew last year finding that only 45% of respondents viewed the E.U. favorably, down from 60% in 2012. This is partly because of the devastating impact of the eurozone crisis, which has sent unemployment soaring and sparked austerity programs which will have an impact for years to come.

The habit of E.U. leaders making decisions behind closed doors with little public scrutiny has also dented the democratic credentials of the alliance. And so, the political group that wins most of the 751 seats in parliament this month will be asked to nominate the next European Commission President.

In theory, this is meant to make the process more transparent.

The European Parliament’s two largest political groups have embraced the plan, with Jean-Claude Juncker, the former prime minister of Luxembourg, representing the center-right European People’s Party, which is currently forecast to win the most seats. Martin Schulz, the current European Parliament president, is leading the Socialists & Democrats. Both have embarked on E.U.-wide bus tours, also taking part in televised debates to convince voters that they are the best candidates for the top job.

But there is one key problem: The 28 national leaders in Europe have the option of simply ignoring candidate put forward by the largest political group in parliament. This is because the language in the E.U. treaty is unclear. The national leaders are free to put forward their own choice for Commission President, with the treaty only obliging them to take the election results “into account.” In other words, despite the push for more transparency, they could reject the nominee put forward by the political group that wins the upcoming election. Were such a scenario to unfold, IMF head Christine Lagarde, Danish Prime Minister Helle Thorning-Schmidt and Irish Taoiseach Enda Kenny are all being touted as potential nominees.

Parliament would still have the option of refusing to approve a candidate selected by the heads of state—but that could lead to a prolonged political stand-off which would be disastrous for the bloc’s image. “If you do get to that situation it’s only going to taint the image of the EU – it’s another institutional argument that is arcane and just looks like its on another planet to what people really care about,” says Stephen Booth, Research Director at the Open Europe think tank in London.

The possibility that national leaders might chose their own candidate has already led to divisions between the seven different political groups in the European Parliament. Five are treating the election as a vote for the next Commission President. The remaining two groups want the 28 heads of state to decide who holds the top job, arguing that national leaders are elected with greater turnout and therefore have more democratic legitimacy. They also want the Commission President to remain politically neutral.

These divisions reflect soul-searching across the EU over the best way for the alliance to move forward after the battering of the eurozone crisis. Figures like Juncker and Schulz are enthusiastic cheerleaders for the single currency and a more unified Europe. For them, giving voters a say in the appointment of the next Commission President is a way of solidifying “project Europe.”

Increasing numbers of voters, however, are moving in the opposite direction. Anti-EU parties from the extreme left and right are expected to do well, reflecting dwindling trust in a more unified Europe after the economic crisis.

National leaders like David Cameron in Britain and Mark Rutte in The Netherlands are also advocating less power for the EU and returning more decision-making to national parliaments. They are both cautious about an elected European Commission President, as is German Chancellor Angela Merkel, a powerful voice in the alliance.

Right now the best weapon for the sceptics is the lack of interest. Most of the 400 million eligible voters have probably never heard of Juncker and Schulz, and mainstream televisions stations have not been airing the debates. But Simon Hix, who is monitoring the polls for the London School of Economics, says interest is picking up in France and Germany. “It’s going to be very difficult for the governments to simply impose somebody,” he tells TIME. “If they do impose somebody, they are gong to have to launch a whole campaign to explain why this is justified.”

During April’s debate, the Liberal candidate Guy Verhofstadt looked straight into the camera and said it would be “the end of the European democracy” if national leaders simply chose their own candidate for Commission President. Those politicians planning to close the doors on the public once again can can only hope that no one was watching.

TIME Food

Europe’s War on American Cheese

Feta cheese is seen on display in a delicatessen store in Sa
Graham Barclay—Bloomberg/Getty Images

The E.U. has Wisconsin feta in its crosshairs

Blessed are the geographically accurate cheese makers. In an attempt to defend and expand its piece of the growing global cheese market, the European Union wants the United States to ban the use of certain cheese names that have become ubiquitous for consumers.

The proposal, part of ongoing E.U./U.S. trade talks, would ban American cheese makers from using terms like parmesan, asiago, feta, gruyere, gorgonzola, fontina, romano and others that refer to European regions from which those cheeses originate. Domestic cheese producers would be forced to drop those names and rebrand their products, potentially ceding a major edge to their European competitors in booming international markets like Asia.

“It’s a clever trade barrier,” says John Umhoefer, executive director of the Wisconsin Cheese Makers Association. “There would be a lot of uphill work to do for cheese makers to convince consumers that their ‘salty white cheese in brine’ is feta. They would have to market it all over again.”

The widespread usage of European names has been an issue since the mid-1990s, when the E.U. released its geographical indication registry, which sought to restrict some category names to the regions most associated with them, like Scotland and Scotch whisky or France’s Champagne region for the eponymous sparkling wine. In 2012 the E.U. further shored up its exclusive claim to certain foods when it signed a free trade agreement with South Korea that blocked feta cheese made outside of Greece and asiago, fontina and gorgonzola made outside of Italy from being sold in South Korea.

“That was certainly a big wake-up call for us,” says Shawna Morris, senior director for the Consortium for Common Food Names, a Washington lobbying group formed by U.S. milk producers and dairy exporters to fight the E.U. proposals. Morris says her group is focused on what she believes is E.U. overreach against U.S. suppliers and products they’ve been making for decades. “We simply think it’s ridiculous to decide after so many years that they can no longer use these names.”

The stakes aren’t paltry. Last year, the U.S. cheese industry brought in $22 billion and produced 11 billion pounds of cheese, according to the Wisconsin Cheese Makers Association. ($10 billion of that is in Wisconsin alone.) Barring U.S. cheese makers from exporting feta or parmesan would give Greece and Italy an opportunity to step in. Marin Bozic, an assistant professor of dairy foods marketing economics at the University of Minnesota, says a deal would not only give Europe a non-price advantage in foreign markets, where American cheese exports are booming, but would affect domestic consumers, too.

“People will be confused,” Bozic says. “But the problem is that those names don’t indicate origin. They indicate method of preparation. When you order Greek feta, you don’t expect that it’s feta from Greece. You just expect feta.”

Consumers have come to understand these names as representative of a type of cheese rather than rooted in a certain place, Bozic argues. “It’s not adding anything for consumers. There’s nothing about Greek feta that would make it taste superior. It’s a common food name and reverting back 50 years is no solution. It’s going to be a hard fight, but I don’t see the U.S. relenting on this topic. I think the E.U. would have to make real concessions in other fields to make it beneficial for the U.S.”

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