The EU has good reasons to celebrate its last 60 years – or at least most of it: it promoted peace, democracy and cooperation among its members and created the world’s largest single market. The seemingly unidirectional process of ever further enlargement and ever further deepening of the Union, however, has come to an end just now with the exit of the United Kingdom and the rejection of EU policies (e.g. on migration) and rules (e.g. on fiscal discipline) in several member states.
The Commission is therefore right to outline the future of EU integration in its White Paper in the form of different scenarios including “Doing less more efficiently” and “Those who want more do more”. The regulatory overreach in a “one-size-fits-all” fashion has alienated many citizens from the EU. They see their lives regulated by a political machine they cannot democratically hold accountable. Political leaders in member states and EU institutions have started to see this problem. Hence today’s Rome festivities and the Rome declaration, despite solemn prose, are not marked by exuberance, but a healthy dose of realism and pragmatism.
An important part of this pragmatism is the recognition that “ever closer Union” and “ever wider union” following a “one-size-fits-all” approach is no longer the only and not even the best way forward. There has been much talk about “multi-speed” Europe as the model preferred by the leaders of Germany, France, Italy and Spain. It seems to insinuate that these countries stand ready to form the “avant-garde” or “pioneer” group engaging in further integration, especially with regard to the governance of the Eurozone. But while politicians in these countries can agree that greater integration under the label of “fiscal union” or “political union” is needed, their ideas about how to go about it are far apart.
The French, the Italians and at least the left in Spain want an “economic government”, a concept which boils down to the mutualisation of public debt, more fiscal activism from the ECB, a common EU or euro zone tax authority, a common eurozone budget, common eurozone unemployment insurance, common deposit insurance. They also want EU industrial policy to focus more on picking European industrial champions and protecting losers from global competition. Instead of binding commitments, the “Club Med” favours political discretion, intergovernmental acts of political will – legitimised or driven by a eurozone parliament – to decide on how to spend money raised from common taxes or mutualised eurozone debt instruments.
The Germans (but also the Dutch, Fins or Austrians) hate these ideas. They prefer an “economic constitution” to “economic government”. German Finance Minister Wolfgang Schäuble still insists on binding rules that would be enforced through automatic sanctions or by independent agencies following strict criteria. To be sure, he also wants to install a eurozone finance minister. However, raising and spending European taxpayers’ money or issuing joint euro bonds would not fall within the minister’s remit. Instead, he or she would have the power to override national finance ministers – and even parliaments – if they break the rules.
Both concepts of a “fiscal union” come close to visions of a European federal state, but each of a very different kind: an interventionist planned economy or a legal framework for an open market economy. Both proposals would require changes to EU treaties that member states would have to approve unanimously. But it is inconceivable that all 28 EU countries (or even 19 eurozone members) will rally around one of the proposals. For both legal and political reasons, such visions are extremely unlikely. Rather, expect more lofty debate and little substantive change. For better or worse, any major steps toward a “United States of Europe” are unlikely to occur for decades.
Still, for the governance of the Eurozone there will have to be some agreement on rules applicable to all members of the currency club. “Multi-speed” does not work here; there would have to be one speed and one direction for all. But since there is no agreement between the Northern members around Germany and the Southern members around France, “muddling through” and complex incoherent compromises are likely to persist.
France and Germany will hold elections this year; Italy sometime by early 2018. This may also have an impact on the core group’s future position. If (what seems as unlikely as was the election of Donald Trump last year) Marine Le Pen wins the elections in France or Beppe Grillo wins those in Italy, the whole project of the Common Currency could fail. But if France elects Emanuel Macron and Germany Martin Schulz as their leaders (and perhaps Mario Renzi manages a come-back), the balance of power could shift towards the “Club Med” solution.
In fields outside the “core” of the European project – the single market, common trade policy and common currency” – there can and should be more flexibility. However, “two-speed Europe” is not its most convincing form. It takes for granted that there is common destination agreed by all that all can and want to reach at some time. The “ever closer Union” and “one-size-fits-all” fallacy of European integration would still hold. A preferable model would be “variable geometry” where different countries – “the willing and capable” – engage in mutual integration in different policy areas. These could also be open for non-EU members (e.g. free trade, foreign and defence policies, domestic security, anti-terrorism). Europe would again live up to its motto: United in Diversity!