Brexit, with the departure from the EU of a free-market champion, has boosted the coordination of the free-trade countries of northern Europe.

16th century engraving showing a view of Lübeck, when it was part of the Hanseatic League.

ANALYSIS / Jokin de Carlos Sola

Made up of the little people of Europe's northern coast, the Hanseatic League controls the sea and the money that moves across it. This definition applies to two organisations, one medieval and one recently created, ready to make its voice heard on the European stage.

In 2017, eight northern European countries (the Netherlands, Ireland, Denmark, Sweden, Finland, Estonia, Latvia and Lithuania) began the process of creating the New Hanseatic League initiative. Its main objective goal is to maintain and increase economic orthodoxy, now that the United Kingdom - one of its main supporters - is leaving the European Union, and to prevent France from taking advantage of this moment to implement its expansionary Economics policies.

The first League

The First Hanseatic League or simply the Hansa was a commercial and defensive alliance of trading cities and guilds of the major maritime cities of the Baltic and North Atlantic. Founded in Lübeck in 1158, the first alliance consisted of the free German maritime cities of Lübeck, Hamburg, Lüneburg, Wismar, Rostock and Stralsund.

Many other cities later joined the Hansa, such as Cologne, Groningen, Berlin and Stockholm. In addition, the Hansa set up trading posts in ports in almost all of northern Europe, and even established their own quarters - called kontors -in other places such as London, Antwerp, Novgorod and Bruges.

This alliance acquired great commercial as well as military importance. Since its foundation, the Hansa had maintained an almost symbiotic relationship with the Baltic monastic state of the Teutonic Knights. Later it would establish its own fleet. With the growth of the nation states and the decline of the guilds, the Hansa declined until it consisted only of Lübeck, Hamburg and Bremen, and was finally dissolved with German unification.

Creation of the New Hansa

With the enlargement of the European Union, new opportunities arose to balance the power of the dominant Franco-German bloc (also known as the Aachen bloc) on the European committee . Thus, the Visegrad group , the Three Seas Initiative or the Craiova group have been created in Central and Eastern Europe. In recent years, the New Hanseatic League has emerged in the north of the continent.

The latter initiative was born in the wake of Brexit. As the third country in terms of economic weight in the EU, the United Kingdom has had a great influence on the Union's economic policy, defending ideas such as economic stability, deficit reduction, debt reduction, economic deregulation and a stable monetary policy that avoids inflation, as well as a free trade policy.

These ideas clashed with the French economic policy of greater economic dirigisme and interventionism, with its emphasis on social projects and protectionism. Meanwhile, Germany's cautious attitude acted as a balance and middle ground between the two positions. London's positions have also been supported by the Netherlands and Denmark, as well as other countries with a tradition of maritime trade, who, faced with the prospect of the UK's departure from the EU, decided to establish greater coordination among themselves.

Another cause for the training of the New Hansa is the coming to power of Emmanuel Macron and his rise as a strongman in the EU. Macron has abandoned part of the economic speech with which he was elected in 2017 to move closer to traditional French positions, also followed by countries such as Italy and Spain.

A final trigger for the Dutch- and Irish-inspired initiative was the replacement in January 2018 of Jeroen Dijsselbloem as Eurogroup president by Mario Centeno, Portugal's socialist minister. For many northern European politicians, Dijsselbloem's intransigence in the face of the Greek debt crisis in 2015 was correct and a way forward for EU and Eurozone economic and monetary policy.

This group was initially known by names such as "The Vikings" or "Bad Weather Coalition". In February 2018 the finance ministers of the Netherlands, Denmark, Ireland, Sweden, Finland, Estonia, Latvia and Lithuania signed the founding document of the New Hanseatic League.     

Political and economic values

The main objectives of the New Hanseatic League are based on free trade ideas, as well as maintaining a balanced budget . Its main objectives are the development of the European Stability Mechanism, established in Luxembourg. The idea would be that this development would eventually turn the ESM into a plenary session of the Executive Council European Monetary Fund, which would redistribute wealth between member states with surpluses and those with trade deficits. The Hansa is also in favour of giving the ESM more power to interfere in national budgets in order to avoid exceeding deficit limits.

However, although the founding document sticks to the European Stability Mechanism, the Hansa does not intend to stop there. Some representatives of these countries have spoken out against a budget for the eurozone, a eurozone finance minister and a common deposit insurance scheme, as proposed by Macron. They also criticised the European Commission for its decision not to initiate a disciplinary procedure against Italy over its deficit and debt.

The Hansa's positions have gained general popularity in their respective countries. On the one hand, the right-wing parties in those places have long advocated free trade approaches, while the left-wing parties do not want the welfare state of their respective populations to be put at risk in order to help the southern European countries.

The ideological origins of the New Hansa could be traced back to British Thatcherism in the 1980s. This political ideology included on the one hand a liberal approach to Economics, advocating ideas such as deregulation, privatisation and free trade. Thatcherism did not advocate the break-up of the EU, but included a sceptical view, advocating a union limited to Economics, without advancing political union. This thinking, in opposition to traditional French dirigisme, has had a clear influence within British politics and within the Conservative Party. However, its influence on other European politicians, such as various leaders in the Netherlands and Denmark, is somewhat less well known.

The defence of a liberal and capitalist Europe, contrary to a strong central power, is shared by many countries, all of them located in the northern fringe of the Union. This pits them against the Mediterranean countries, which have required EU aid in recent years.

However, there are other elements that characterise these countries beyond their wealth and geographical position, such as their size and their dependence on trade, derived from their maritime character. This makes them favourable to increased trade treaties and forces them to seek resources they do not have on their own territory.

Leadership of the group

The New Hanseatic League is an initiative and not an organisation as such, so it has no official leader; decisions are taken in unofficial councils of heads of government and finance ministers. However, several personalities have been prominent, notably Mark Rutte, the Dutch prime minister, and Wopke Hoekstra, his finance minister.  

Wopke Hoekstra is considered the architect of the New Hansa. Aged 41, he is a Christian Democrat, a practising Protestant, a member of the Remonstrant Brotherhood and a former student of the Institut Européen d'Administration des Affaires (INSEAD), Europe's most prestigious business school. He has shown the most intransigent side of the Dutch government on economic issues in recent years. It has reached the point that Dijsselbloem himself has criticised the New League's training because, according to him, it damages the idea of solidarity within the Union.

Mark Rutte, on the other hand, has used the creation of the New Hansa to increase the Netherlands' weight in European politics. Rutte is regarded as one of the most active Dutch premiers in foreign policy since the Second World War and has tried to assert the Netherlands in the EU vis-à-vis France and Germany. At the same time Rutte has tried to occupy the British voice in Europe's committee as one of the most Atlanticist leaders.

Other leaders who have shown their involvement in this project have been the Danish finance minister until 2019, Kristian Jensen, and the Irish deputy prime minister, Simon Coveney. On the other hand, the role of Denmark and Sweden was core topic for the Baltic countries to move away from the Visegrad group and join the New Hansa.

Economic, financial and technological weight

The Hansa has managed to bring together an economic weight that other initiatives of the same kind have not been able to muster. Currently, the combined GDP of the Hansa countries is more than 2.2 trillion euros, close to the 2.5 trillion euros of the French GDP, the second largest economic force in Europe.

The group also has clear financial clout. Cities such as Amsterdam, Stockholm and Dublin have been climbing the ranks of Europe's leading financial capitals in recent years, although they have yet to overtake Paris and Frankfurt. Moreover, these are countries where technological innovation exists, especially Estonia and the Netherlands.

The fact that group does not exceed 10% of the European population somewhat mitigates its influence, as the votes of the countries and blocs in the European committee are partly based on issue of inhabitants, but it is nonetheless a relevant political actor in the EU. In contrast, the southern European countries (Spain, Italy, Portugal and Greece) account for 30 per cent of the European population, but are considered less decisive.

The Hansa positions represent a break with the EU principle that, for reasons of inter-territorial social cohesion, those countries that have more and are more developed contribute more. The ideas of the more radical sections of the Hansa can even be labelled as a certain neo-colonialism, insofar as they seek to use the supranational mechanisms of the EU to ensure that debtor countries in the South repay loans, which will keep them at certain levels of debt.

The Netherlands, Sweden, Denmark, Finland and Ireland are among the top contributors to the common European budget , behind the top four (Italy, UK, France and Germany). On a per capita basis, the Netherlands, Sweden and Denmark are at the top of the list. While Estonia, Latvia and Lithuania are beneficiaries, they are less so than Poland, Greece or Romania.

Given its greater contribution to the EU, or less dependence on aid, the Hansa is demanding a greater say in the EU's direction. For the time being, it has succeeded in imposing various criteria on budget in 2020, as opposed to those of the recipient countries.

Exercise of influence

One of the main objectives of the New Hanseatic League was to ensure that the two most controlling figures over the European Economics (the presidency of the Central Bank, and the leadership of the International Monetary Fund) were to its liking. In both cases it has failed, largely because of Emmanuel Macron's intervention.

The Netherlands had a particular interest in the appointment of the ECB, as outgoing president Mario Draghi had lobbied the Dutch government to activate stimulus policies. The New Hansa's candidate was Bundesbank president Jens Weidmann, known for his criticism of Mario Draghi's stimulus policies and for advocating a high-interest policy. Macron agreed with Germany that the European Commission would go to a German (Ursula von der Leyen) in exchange for the ECB being chaired by Christine Laguard, who would continue Draghi's policies.

For the IMF, Rutte proposed Dijsselbloem, despite his criticism of the Hansa. The final vote was between him and Bulgarian economist Kristalian Georgieva. Although Germany ended up voting for the Dutchman, Georgieva became the new head of the IMF. 

However, the Hansa has also had some victories, such as holding the Commission firm on the Italian budget , which was going to exceed deficit limits; exerting influence on the European budget , which has suffered a drastic reduction; or slowing down, if not completely blocking, Macron's project for a common budget for the Eurozone.

visit from Dutch Finance Minister Wopke Hoekstra (right) to his Irish counterpart Paschal Donohoe (left) at the end of 2018 [Gov. of Ireland].

Expansion strategy and partnerships

One of the problems previously mentioned for the Hansa has been its lack of weight in the European committee . For this reason, its leaders have sought the political alignment of countries with which there may be ideological overlaps.

One of the first countries to establish contact with the Hansa countries was Austria. This makes sense since Austria has a similar economic structure to the other Hansa countries due to its small size and population. In addition, the government of Sebastian Kurz seemed to have a strong programme towards Europe very much in line with the Hansa. Famous is the proposal of several Austrian politicians for the creation of two European currencies, one for the north and one for the south. This subject of connections would be very important for later influencing Germany. In the new von der Leyen Commission, the Finance Committee was won for Austria by the economist Johannes Hahn.

The Austrian courtship also seems to have a strategic goal as a step to also start influencing Germany, which acts as a balancer of the balance. Several German politicians from the CDU and CSU are favourable to the Hansa's thinking and have been very influential throughout Merkel's government. But when Wolfgang Schäuble was removed from the Finance Ministry and replaced by the Social Democrat Olof Scholz these positions lost importance.

Similarly, the Hansa (and above all the Netherlands) has been establishing contacts with the Flemish government in Belgium. Although Flanders is just another state in the Belgian federation, the lack of a government in Brussels gives it great importance, along with the government of Wallonia. In addition, the Flemish control the port of Antwerp and have always been closer to the ideas of the Hansa.

On the other hand, the Hansa also seems to have initiated contacts with Slovakia and the Czech Republic. This was seen when in March 2019 both countries signed a declaration together with the Hansa countries against the Italian budget . It would be unusual to see these countries moving very close to the Hansa because they remain natural recipients of European funds. However, given that they are countries with healthy accounts, they could be seen as allies of the Hansa in some future actions.

In a way we could see Hanseatic diplomacy as a partial evolution of Otto von Bismarck's diplomacy (to push France out of power by training regional alliances). The aim is to form a sufficiently strong bloc that can present itself solidly on the European committee and convince Germany to tilt the balance towards budgetary orthodoxy and the interests of the northern countries. Alongside France are most of the southern countries. One could very generally say that the Hansa's objectives are: "Mobilise the North, seduce Germany, silence the Mediterranean".

Strange alliances in front of the Hansa

The Hanseatic configuration of alliances around Europe and their influence on the new European budget seems to have created curious alliances, the largest of which is undoubtedly the one that may arise between Poland and France.

This may sound strange, because when it comes to foreign policy, social policy and on certain points of European integration, Poland and France have been poles apart. But when it comes to economic policy and the European budget , France and Poland are on the same page, and this may result in a common front against the Hansa.

The reasons for the Franco-Polish rapprochement are varied. Both nations follow the tradition of the social welfare state, France because of its republican fraternity bequest and Poland because of its Catholic heritage, both opposed to the Hanseatic absentee state. Moreover, both countries have reasons to want to avoid restrictive budgets. The Polish government fears that a drastic reduction of investment in Poland would force it to make social cuts, which would lead to instability. France is sample opposed for a more ideological reason: Macron has championed the idea of 'A Europe that protects' and would have trouble sticking to this idea.

Nevertheless, Poland and France have some sticking points, especially with Macron's attempt at a new Ostpolik to calm relations with Russia.

Conclusion

The creation of the New Hanseatic League is ultimately written request a reaction to two movements: the creation of European regional systems and the withdrawal of economic policies favouring Northern Europe. 

If the countries of Europe organise themselves into blocs, it may be easier to carry out certain initiatives because there are fewer interlocutors to negotiate with.

On the other hand, the creation of an initiative with the specific goal purpose of defending northern interests may pose a risk for southern countries, accentuating north-south differences in Europe. This would put Germany, which wants to avoid such a compromise, in a difficult position status .

The smart thing to do would be to avoid these confrontations directly by seeking other sources of revenue for the EU that do not compromise the wealth of the Hansa countries, as Morawiecki expressed and Macron has also pointed out. Thus, some taxes have been discussed, such as those on air travel, financial transactions and the digital world. But again, with the importance of the financial sector and new technologies in countries such as Ireland or Estonia, this may encounter civil service examination. It is not a simple task.

In any case, it should be ensured that European politicians have sufficient vision and understanding to make agreements that take into account all the idiosyncrasies of the European Union.