Fit at 50? A special report on the European Union March 17th 2007
Republication, copying or redistribution by any means is expressly prohibited without the prior written permission of The Economist The Economist March 17th 2007 A special report on the European Union 1
Fit at 50? Also in this section
Are you sitting comfortably? A brief refresher course on the workings of the European Union. Page 2
The quest for prosperity Europe’s economy has been underperform- ing. But whose fault is that? Page 3
Constitutional conundrum Damned if they do and damned if they don’t. Page 5
The ins and outs The EU’s most e ective foreign-policy instru- ment has been enlargement. But how far can it go? Page 8
Four Ds for Europe Dealing with the dreaded democratic de cit. The European Union has been far more successful than anyone Page 11 expected when the Treaty of Rome was signed half a century ago. But, argues John Peet, it now has three big problems to solve The European Union at 100 N MARCH 25th 1957 a gaggle of lead- the project’s history worse than the per- Is the best yet to come? Page 14 Oers from six European countries iod of Charles de Gaulle’s empty chair in (France, West Germany, Italy and the Be- 1965, or Margaret Thatcher’s persistent de- nelux trio) met in the great hall of the Hora- mands for our own money back be- tii and the Curiatii in Rome’s Capitoline tween 1979 and 1984. museum. Behind them two 17th-century Yet today’s di culties should not be al- frescoes depicted ancient Rome’s bloody lowed to obscure Europe’s achievements history: a suitable backdrop, since one of of the past 50 years. True federalists actu- their concerns was to prevent a recurrence ally saw the Treaty of Rome as a move of Europe’s internecine wars. They signed away from the building of a European su- a treaty to establish a European Economic perstate that they had hoped would de- Community (EEC), soon to become velop from the European Coal and Steel known as the common market. Next week- Community, set up in 1951. But in fact the end the present crop of European Union EEC grew out of two other events: the leaders will gather in Berlin (because Ger- French National Assembly’s rejection of many holds the rotating EU presidency) to the proposed European Defence Commu- Acknowledgments mark the 50th anniversary of this historic nity in 1954 and the Suez crisis of 1956. The The author wishes to thank those who gave time for inter- views, not all of whom are mentioned in the text. Special step towards European integration. rst pointed to a reassertion of nation- thanks are due to José Manuel Barroso and his fellow Euro- The German chancellor, Angela Mer- states at the heart of Europe; the second led pean commissioners; to Martin Schulz, Graham Watson, El- kel, wants the Berlin summit to issue a France to conclude that a European com- mar Brok, Alain Lamassoure, Bronislaw Geremek, Inigo Mendez de Vigo and James Elles at the European Parlia- ringing declaration about the values and munity was in its vital interest. ment; to the Danish foreign ministry; to François Heis- successes of the EU. She sees this as a way A bigger objection to the EEC was that it bourg, Charles Grant, Pavel Swieboda, Paul Hofheinz, Jean to relaunch the European project , which covered only a small part of Europe. So- Pisani-Ferry and André Sapir among think-tankers; and to Jacques Delors, Peter Sutherland, Chris Patten, John Kerr, many think has been in serious trouble viet-dominated eastern Europe was ex- Patrick Messerlin and Timothy Garton Ash. ever since French and Dutch voters re- cluded, as were fascist Spain and Portugal, jected the draft EU constitution in the sum- because they were not democracies. But A list of sources is at mer of 2005. Shortly afterwards Jean- Britain and others chose to stand aside, ei- www.economist.com/specialreports Claude Juncker, prime minister of Luxem- ther because they disliked the political bourg, which then held the EU’s integration implicit in the new grouping or An audio interview with the author is at presidency, declared solemnly that the because they wanted to preserve their www.economist.com/audio EU is not in crisis; it is in deep crisis. neutrality. Indeed, two years after the Jacques Delors, who was president of the Treaty of Rome came into force, seven A brie ng on the EU is at European Commission from 1985 to 1994, countries (Austria, Britain, Denmark, Nor- www.economist.com/europeanunion says that the present crisis is the worst in way, Portugal, Sweden and Switzerland)1 2 A special report on the European Union The Economist March 17th 2007
A brief refresher course on the Are you sitting comfortably? workings of the European Union
HE nuts and bolts of the European tates every six months, so each country a airs, the parliament has no say. The TUnion are hardly riveting, but a basic now gets to be in the chair once every 13½ parliament has to approve the choice of knowledge of its institutions is essential years. The council often makes decisions commission president and can dismiss to understanding how it works, so here is by quali ed majority, a weighted system the entire commission, but not individual a quick reminder. of national votes, but on some issues (eg, commissioners. At the heart of the EU, as envisaged by taxation) it has to be unanimous. The European Court of Justice, based its French founding father, Jean Monnet, As part of the council, the high repre- in Luxembourg, acts as the EU’s supreme is the European Commission, to which sentative for foreign policy reports to na- court in areas for which the union is each national government appoints one tional governments and may (or may not) responsible (which does not include commissioner for a ve-year term. The work closely with the commissioner for criminal law, for example). There is one college of 27 commissioners sits atop a external a airs. The common foreign and judge per country. A court of rst instance 20,000-strong bureaucracy that consti- security policy he runs is not part of the helps with the caseload. Cases are de- tutes the EU’s executive. The commission classic Monnet machinery (sometimes cided by simple majority. Luxembourg also has the sole right of initiating legisla- known as the community method ), but also hosts the Court of Auditors, which tion, administers the budget and has is formulated by the member govern- checks EU spending and quali es the ac- other independent powers including de- ments. The same is true for most policies counts every year. ciding competition cases and represent- on justice and home a airs. The EU has a plethora of other agen- ing the union in trade negotiations. The other law- and budget-making cies, as well as the Luxembourg-based The commission takes its political cue body is the European Parliament. It has European Investment Bank, the world’s from the European Council, made up of 785 members, directly elected in rough biggest multilateral borrower. Among the the 27 heads of government, which meets proportion to each country’s population. more puzzling are two Brussels-based ad- four times a year and also nominates the Like the commission, the parliament visory bodies: the Economic and Social commission president. The European serves for ve years; unlike the commis- Committee, which brings together the Council is, in practice, the highest incar- sion, which is in Brussels, it holds its ple- social partners , and the eponymous nation of the Council of Ministers, the nary meetings mostly in Strasbourg, Committee of the Regions. Between them main law- and budget-making body, though committees meet in Brussels. they cost some 150m ($200m) a year to which brings together national ministers Most EU laws are subject to co-decision run, and nobody can remember what (eg, of nance, foreign a airs or agricul- by the council and parliament, but in they are for. But this being the EU, nobody ture). The presidency of the council ro- some areas, including justice and home dares to scrap them either.
2 set up the rival European Free-Trade Asso- they would instantly qualify for member- change. It has sent troops as far a eld as ciation (EFTA). Seven and Six was how ship are Iceland, Norway and Switzerland. Aceh and Congo and co-ordinated big na- this newspaper greeted the news. The European Union has also moved tional deployments in Lebanon. It has Fifty years later the European Econ- far beyond the economic sphere. The com- started membership negotiations with omic Community has changed out of all pletion of the single market was set in train Croatia and, most momentously, with Tur- recognition, having metamorphosed into only in the 1980s and remains a work in key. Claims that this club has been unable the European Union and grown far be- progress. But just as the American govern- to function since 2005 seem overblown. yond the original six members. Despite ment used the constitution’s interstate the EFTA experiment, Britain applied for commerce clause to expand its powers, so The 50-year itch membership only four years after the the European institutions have exploited Yet the EU does face three huge, related pro- Treaty of Rome, but was blocked by de single-market rules to extend their respon- blems. The rst is what to do about its draft Gaulle’s veto and did not join until 1973, sibilities into such areas as social policy, constitution, which was signed in October along with Denmark and Ireland. welfare and the environment. Along the 2004 in the very room that witnessed the Several waves of further expansion fol- way the EU has acquired a single currency, signing of the Treaty of Rome. The con- lowed, including Spain and Portugal in a common foreign policy, a passport-free stitution’s declared purpose was to im- 1986. The biggest of all saw the admission travel zone and policies on justice and prove the functioning of the institutions, of ten new members, including many ex- home a airs, plus a nascent defence alli- to clarify the distribution of powers and to communist central European countries, on ance with its own military-planning sta . bring the union closer to its citizens. But May 1st 2004. At the start of this year Ro- This does not sound like an organisa- because it was turned down in the French mania and Bulgaria became the EU’s 26th tion in deep crisis. Even in the past two and Dutch referendums, the treaty has not and 27th members. Plenty of others are years the EU has agreed on a seven-year been rati ed. clamouring to be let in. The only countries budget and set out ambitious plans for an Ms Merkel hopes that the Berlin dec- that have chosen to stay out even though energy policy and for tackling climate laration will not only relaunch the EU but1 The Economist March 17th 2007 A special report on the European Union 3
2 also start resuscitating the constitution. Yet lar opinion polls taken by Eurobarometer zens to take a less jaundiced view of their the task she has taken on is immense. Any reveal high dissatisfaction with the union union. But it will start by considering the new treaty must not only be unanimously in other countries as well. In many of union’s third and perhaps most serious agreed on but also rati ed by all of the un- them, voters seem strongly opposed to fur- problem: the poor performance of its ion’s 27 members before it can take e ect. ther enlargement. The French and Dutch economies in recent years. That seems much less likely to happen no to the constitution re ected this bleak It was the roaring economic growth of because of the second big problem facing mood. The new members are more enthu- the EEC, above all else, that made it such a the union: popular disenchantment with siastic about the union than the old ones, success in its early days. It was this econ- the project. As Mr Delors notes, there is no but even in them it is not hard to discover omic dynamism, too, that lured rst Britain dream, no vision that strikes a chord with Eurosceptics. and then all the others to apply for mem- today’s European citizens in the way that This special report will weigh the bership. Conversely, it was gloom about reconciliation and an end to war did 50 chances of making progress with the EU the economy, and particularly over persis- years ago. Most of today’s leaders, he com- constitution or devising some other insti- tent high unemployment, that played the plains, devote their time to attacking Brus- tutional settlement , to use the current biggest part in the rejection of the constitu- sels and all its works, not to spreading the catchphrase in Brussels. It will consider tion and in the spread of Euroscepticism word about the EU’s achievements. how this is a ecting plans to admit yet across the continent. If the EU is to ourish The mistrust of the union is perhaps more new members. And it will assess the far beyond its 50th birthday, it is its econ- most pronounced in Britain, but the regu- debate over how to persuade Europe’s citi- omy that most needs attention. 7 The quest for prosperity
Europe’s economy has been underperforming. But whose fault is that?
S IT happens, the recent economic g- Europe slowed in the late 1990s, whereas Aures in Europe have been better than Better than its reputation 1 in America it speeded up. Unemployment anyone dared hope. The German econ- Unemployment rate, % GDP growth, % in Europe has been persistently higher omy, in the doldrums for six long years, is EU15 EU15 than across the Atlantic. Europeans have at last gathering speed. In 2006 GDP in the United States United States also been slower to take up information EU as a whole grew by 2.9%, and in the 10 technology, and the economic climate has euro area by 2.7%. In the fourth quarter of been less conducive to innovation and re- last year the euro area’s GDP growth out- 8 search and development (R&D). stripped America’s for the rst time in ve 6 The transatlantic gap can be exagger- years. Average unemployment has fallen ated: much of America’s faster GDP to 7.5%, the euro area has generated 12m 4 growth merely re ects faster population new jobs over the past eight years and 2 growth and longer hours of work, and dif- even productivity growth has started to ferences in measurement also play a role. pick up. Across Europe the mood has be- 0 But the perception that over the past de- 1997 99 2001 03 05 07* come noticeably more optimistic. cade Europe has stopped catching up with Sources: Eurostat; OECD *Forecast Yet this greater optimism comes after America, and in some respects actually an extended period of profound gloom. fallen behind, is broadly accurate. Over the past decade GDP growth has boosted growth; the movement of work- Europe’s response has come in two been generally lacklustre; productivity has ers out of farming and into industry had main forms: the creation of the euro in stagnated, in some countries even fallen; raised both productivity and GDP; and 1999 and the drawing up of the so-called and unemployment has stayed stub- many more women had entered the la- Lisbon Agenda in 2000 to boost the EU’s bornly high (see chart 1). The contrast with bour force, lifting output. Once these ef- competitiveness. The Lisbon Agenda set 50 years ago, when the Treaty of Rome was fects had run their course, rapid growth be- an ambitious goal for Europe: to turn it into signed, could hardly be greater. West Ger- came much harder to sustain. the most competitive and dynamic many was in the midst of its Wirtschafts- The same factors played a part in other knowledge-based economy in the world wunder, a miracle country of rapid rich countries, such as America. Yet the EU by 2010. The plan was to promote liberalis- growth, low unemployment and fast-ris- economies, and especially the euro area, ing reforms, increase R&D spending and ing living standards. France was enjoying have in recent years performed much less encourage the deregulation of labour and les trentes glorieuses, 30 splendid post-war well than the American economy, which product markets across the continent. Sim- years when everything went right. And It- is comparable in size. GDP per head in the ilarly, the euro’s proponents hoped that aly was quickly gaining ground on its euro area is almost 30% lower than in the single currency would not only in- richer European neighbours. America, and the gap is widening: the crease cross-border trade but also, by im- Some slowdown after the catch-up OECD reckons that trend growth per per- posing tougher price and wage discipline years of the 1950s and 1960s was inev- son is only about 1.5% a year, compared on its members, speed up structural re- itable. Reconstruction after the war had with America’s 2%. Productivity growth in forms in all European economies. 1 4 A special report on the European Union The Economist March 17th 2007
2 Yet even the most fervent EU enthusiast would concede that these hopes have come to little. Joaquín Almunia, the eco- nomics commissioner, maintains that the current revival is linked to the structural re- forms made in recent years, which may be starting to pay o . But most economists put it down to two other factors: a cyclical upswing and a huge improvement in Ger- man competitiveness after years of real wage restraint. If they are right, it is reason- able to doubt that today’s recovery will prove sustainable and to fear that Eu- rope’s economies could slip back into their previous underperformance.
Look on your doorstep So what is Europe’s problem? First, what- ever it is, it is not Europe-wide, nor indeed linked to the euro. This supposedly scle- rotic continent includes three of the world’s ve best-performing and most competitive economies: Denmark, Fin- land and Sweden. Britain and Ireland have also done well in recent years. Nor is it only north European economies that have put in a spurt: Spain, too, has grown fast since 1999. Of these six success stories, three are in the euro zone and three are not. The poor performers in Europe have been the core countries of the euro, in par- ticular France, Germany and Italy (see and making their economies less exible. serves. Yet the euro’s broader economic chart 2). Since these three account for two- Both the IMF and the OECD have been urg- impact has been limited because of its thirds of euro-area GDP, their failings have ing further liberalisation as the only sure members’ failure to liberalise enough. As led to slow growth for both the euro area route to better economic performance. the OECD puts it in its most recent report and the EU as a whole. It is evident that Eu- Even Europe’s political leaders understand on the region, insu cient exibility pre- rope’s economies have sickened at na- this, though they are also swift to spot po- vents the euro area reaping the full bene ts tional not European level, so it is at na- litical obstacles to reform. As Luxem- of economic and monetary union. tional level that the cures are needed. bourg’s Mr Juncker once said, we all When the euro began, critical econo- Nor is there much disagreement among know what to do, we just don’t know how mists directed most of their re at the sta- economists about what those cures to get re-elected after we’ve done it. bility and growth pact, which attempted to should be. In all three countries labour Mr Almunia hopes that the recent im- set rigid limits on budget de cits run by and product markets are too highly regu- provement in the EU economies may euro members and threatened huge nes lated, holding back employment growth break the unfortunate cycle of partial re- if those limits were breached. This provi- forms that take time to bear fruit and are of- sion made little economic sense. Because ten followed by election defeats. But there the single currency deprived members of Perking up 2 is another, less hopeful possibility: that monetary and exchange-rate exibility, GDP, % change on year earlier opponents of change will treat the present they were likely to need more, not less, s- Spain Germany Italy recovery as a sign that no further reforms cal exibility. Predictably enough the sta- Britain France are needed. bility pact was swiftly bust by France and 5 Within the euro area a debate is in pro- Germany, after which it was tted with ex- gress over whether the single currency it- tra loopholes. 4 self encourages or discourages reforms. Since then the pact has become much 3 Most of its progenitors had hoped for the more accommodating as more and more rst. The euro has clearly boosted intra-EU countries have breached the budget-de cit 2 trade, by somewhere between 5% and 15%, ceiling of 3% of GDP. Mr Almunia main- 1 according to the OECD. It has also been a tains that it is now su ciently exible to + 0 spectacular success from a technical point set a reasonable long-term path for those – of view, establishing itself not just as a via- euro-area members that still need more s- 1 ble currency but as the only plausible rival cal consolidation. In particular, the level of 2000 01 02 03 04 05 06 to the dollar. For example, it now accounts public debt remains too high in Italy, Bel- Source: Eurostat for 25% of global foreign-currency re- gium and Greece, and to a lesser extent in1 The Economist March 17th 2007 A special report on the European Union 5
part of this improvement has come at the Sinners and saints 3 expense of other euro members with A German miracle 4 Public debt, Maastricht definition which it is now locked into the single cur- Unit labour costs*, % change 1998-2006 % of GDP, 2006 rency. In particular, the Mediterranean 100– + 10203040 30 50 70 90 110 quartet of Italy, Spain, Portugal and Greece has su ered a huge loss of competitive- Portugal Italy ness in a relatively short time (see chart 4). Greece Greece This loss is re ected in colossal current- Italy Belgium account de cits (eg, 8.5% of GDP for Spain, Spain France Germany which has been growing fast) or pitifully Germany France slow growth (only 1.3% a year for Italy Source: OECD *Nominal Britain since the euro began). Without the euro, It- Spain aly at least would surely have had to de- value by now. In a sense, the single cur- stantial reform, liberalising product and la- Source: OECD rency has protected its members, but at the bour markets alike, to make their econo- price of storing up big problems in future. mies more exible and better able to cope 2 France and Germany (see chart 3). Some analysts still speculate that Italy with shocks. Ironically, the two EU mem- But the failure of the euro countries to might one day be forced out of the euro. bers with arguably the most exible econ- liberalise has become a much more press- That would be politically unthinkable, omies are Britain and Denmark, both of ing concern. Not only is it holding back the and most politicians in Rome duly refuse which have chosen not to join the euro. euro area as a whole, it is also increasing to think about it. Leaving the euro would Alas, the political leaders in Mediterra- the divergence between members. This also be costly, as Argentina found when it nean countries show little appetite for tak- shows up most clearly when comparing was forced o its currency peg to the dollar ing on the special-interest groups that al- movements in unit labour costs. in 2001. So what else can Italy do? One ways resist painful reforms. possibility is to follow the German exam- Meanwhile the new EU members that The coming crunch ple and endure years of wage restraint. But were once pressing for early entry need to Germany initially su ered from entering that requires a lot of discipline. Moreover, think again. Slovenia scraped in at the start the euro at a high exchange rate, but over the two-tier labour markets that have be- of this year; Malta and Cyprus may follow the past seven years German companies come common in Europe, with insiders on soon. But the Baltic states do not seem have spectacularly improved their com- permanent contracts insulated from the ready; and Poland, Hungary and the Czech petitiveness, thanks mainly to keeping a fears of unemployment a icting tempo- Republic, the three biggest new members, tight rein on wages. This is at the root of rary workers, o er little incentive for work- are unlikely to join before 2012 at the earli- Germany’s economic recovery and has al- ers to accept real pay cuts. est. They would be wise to employ the lowed it to claim back from America its po- The harsh conclusion is that, for euro waiting time not only to grow fast but also sition as the world’s biggest exporter. But members, there is no alternative to sub- to make their economies more exible. 7 Constitutional conundrum
Damned if they do and damned if they don’t
T IS clear that economic reform ought to triggered by an inter-governmental confer- treaty needs unanimous agreement). That Ibe at the top of the EU’s agenda, espe- ence (IGC). The trouble is that each IGC produced the Maastricht treaty of 1992, cially for euro members. Yet Germany, cur- (and consequent treaty) has left some na- which not only promised to create a single rently in the EU president’s chair, is mostly tional governments dissatis ed, leading to currency by 1999 but also set up a common ignoring it. That may be because the Ger- perpetual calls for yet another IGC and foreign and security policy and new ar- man economy is looking good at the mo- treaty (see table 5 on next page). rangements for co-operating on justice and ment, or because Ms Merkel’s grand co- This game began with the Single Euro- home a airs. alition of Christian and Social Democrats pean Act in 1986, which extended quali- Maastricht was followed by Amster- cannot agree on further reforms. But it is ed-majority voting to a whole raft of pol- dam and then Nice, agreed on after a night- also because she has lit on another priority icy areas because that seemed the only mare four-day summit chaired by France’s altogether: to revive the EU constitution re- way to push through the legislation president, Jacques Chirac, in December jected by French and Dutch voters. needed for the 1992 single-market pro- 2000. That made three new treaties in the The story of the constitution (or more gramme. Jacques Delors, then the commis- space of eight years, none of them wholly accurately, constitutional treaty) is te- sion’s president, seeded the act with refer- satisfactory. In 2001 an EU summit at Lae- dious, but it must be told to explain why ences to monetary union, and three years ken, outside Brussels, considered what the EU is in turmoil. In truth, too much of later another IGC was summoned against were termed the Nice leftovers: simpli ca- the past 20 years has been spent debating British wishes (an IGC can be called by tion, greater transparency, a bigger role for the union’s institutions, a process usually simple majority, even though any new national parliaments and subsidiarity (the1 6 A special report on the European Union The Economist March 17th 2007
2 buzzword for ensuring that decisions are taken at the lowest sensible level of gov- ernment). But rather than call yet another IGC, the Laeken summit decided to sum- mon a convention in which represen- tatives of the EU institutions, national gov- ernments, parliaments and the public could debate what to do. The convention on the future of Europe was chaired by a patrician former presi- dent of France, Valéry Giscard d’Estaing. Eager to leave his mark, Mr Giscard d’Es- taing soon persuaded his colleagues to go well beyond their Laeken remit and, in a deliberate invocation of America’s Phila- Time for a little constitutional, says Merkel to Barroso delphia convention of 1787, draft a full- blown constitution for the EU. The result had promised to put the constitution to a constitution in 2005 still came as a huge was not, however, an elegant 20-page doc- referendum at home before ratifying it shock: it was the rst time that two coun- ument like its model, but a 300-page behe- including Britain, France, the Netherlands, tries had said no simultaneously, the rst moth which was presented to another EU Spain and Poland, as well as ballot-happy time any big country had done so, and the summit in mid-2003. Denmark and Ireland. rst time a founder member had rejected The rst part of the new text features in- The campaigning for these referen- anything. When a few weeks later an EU stitutional changes. These include a new dums was mostly shambolic. Mr Chirac summit failed to agree on a budget for council voting system that re ects coun- sent copies of the entire, largely incom- 2007-13, the sense of crisis was complete. tries’ populations; an extension of quali- prehensible, text to all French voters. The ed-majority voting and of co-decision- Dutch government refused to campaign at Picking up the pieces making with the European Parliament to all. With so many national governments Since the double rejection the EU has o - most legislation; a permanent president of mired in unpopularity and economic trou- cially been observing a pause for re ec- the council, in place of the six-monthly ro- bles, it was scarcely surprising that opin- tion . The trouble is that even now, no- tating presidency; a new foreign minister, ion polls in both countries started to turn body knows what to do. The French and to combine the jobs of high representative against the treaty, even after Spanish vot- Dutch governments have made it plain and external-a airs commissioner; and a ers had said yes in February 2005. On May that they are not prepared to follow previ- smaller commission. It also provides an 29th French voters rejected it by 55% to 45%, ous practice and submit an only slightly re- exit clause for any members who might and on June 1st Dutch voters turned it vised text to a fresh vote. Others, notably wish to leave the club. down by 62% to 38%. the British, Poles and Czechs, now balk at Part two of the constitution consists of This was not the rst time that coun- rati cation as well. But 18 of the 27 EU a charter of fundamental rights, rst tries had said no to Europe. Norway twice countries have endorsed the constitution, drawn up as a declaratory statement at voted against joining the club at all. The and no fewer than 20 recently met in Ma- Nice. A lengthy third part comprises a con- Danes rejected the Maastricht treaty in drid to declare themselves its friends . solidated and slightly amended version of 1992 and the Irish the Nice treaty in 2001. Germany is especially keen to stick to most all previous treaties. After both these rejections a few adjust- of the present text, if only because the new There followed another IGC, featuring ments were made, some declarations voting system in the council would sub- more rows about institutions, but in added and the verdicts reversed in a sec- stantially increase its weight. mid-2004 a text of the constitutional treaty ond vote. The Danes and Swedes also Ms Merkel plans to present the June EU was unanimously agreed on. The snag was voted against joining the single currency. summit with a road map for taking the that by then as many as 12 governments Yet the French and Dutch snub to the constitution forward. Each country has nominated two o cials to meet in secret to prepare this a bizarre decision, since one A treaty too far? 5 purpose of the constitution was to in- EU treaties crease transparency. The timing is very Year Year in tight, because a new French president will signed force Main provisions be chosen only on May 6th, and the new Single European Act 1986 1987 Majority voting, single-market legislation by end-1992 French National Assembly will not be Treaty on European 1992 1993 Monetary union, common foreign policy, justice and home affairs; elected until June 17th, four days before the Union (Maastricht) Danish opt-outs added later summit. There will also loom the prospect Treaty of Amsterdam 1997 1999 Social policy, more majority voting, incorporation of Schengen of a new British prime minister, presum- passport-free zone ably Gordon Brown, preparing to take over Treaty of Nice 2001 2003 New voting system, smaller commission, provisions for enlargement to 27; Irish declarations added later from Tony Blair. Yet whatever the political permuta- Constitutional 2004 Not More majority voting, new institutional settlement, establishes Treaty ratified a constitution for Europe tions in di erent countries, it is clear that there are only four broad options: Source: The Economist Treaty plus. This would add material to1 The Economist March 17th 2007 A special report on the European Union 7
2 the present text, such as more social pro- preferred choice of Britain, and perhaps of should concentrate on what it can deliver tection (an EU-wide minimum wage?), Poland, the Czech Republic and even the best in elds as diverse as foreign policy plus perhaps new provisions on such cur- Netherlands. All four countries have res- and energy security. But he complains rently fashionable topics as energy and the ervations about some of the institutional that, wherever he goes, half the questions environment. The word constitution provisions in the present text, even if they he is asked are about the constitution. The might be quietly dropped. The Spanish are wrapped up in a mini-treaty. For exam- feeling of un nished business haunts and other governments favour something ple, the British are against the charter of everything else that the EU does, which is along these lines, as apparently does the fundamental rights and most extensions why so many countries are anxious to Socialist presidential candidate in France, of quali ed-majority voting; the Poles op- avoid the do-nothing option. Ségolène Royal. But the British govern- pose the new voting system; and the ment is not alone in strongly opposing Dutch dislike the proposed foreign minis- Budget blues more social measures. And such a maxi- ter. But the do-nothing option will satisfy Into this combustible mix is about to drop malist document would surely have to be neither those who argue that the EU of 27 another issue that has been largely ne- put to the vote again in several countries, cannot continue as it is, nor those who glected recently: the EU budget. The nanc- including the two that said no in 2005, risk- have already rati ed the constitution. It is ing package for 2007-13 agreed on in De- ing another rejection. Ms Royal has said also awkward because the Nice treaty cember 2005 included a clause promising she would like to hold a fresh referendum speci es that the commission to be chosen a thorough budgetary review in 2008. This on an expanded treaty in 2009. in 2009 must have fewer commissioners was a concession to the British, who had to Treaty minus, with a promise of more than member countries, and its voting pro- give up a chunk of their budget rebate to to come. This option was rst branded by visions extend only to Romania and Bul- get a deal. Mr Blair had demanded further Nicolas Sarkozy, the main centre-right can- garia. The absence of any new treaty could reform of the common agricultural policy didate in France, as a mini-treaty , though thus become a big obstacle to further en- (CAP) as his price for negotiating on the re- he has since dropped the term. It would largement (see next article). bate, but Mr Chirac’s intransigence adopt only the big institutional changes in Over the next few months negotiators blocked that. The promise of a review be- the constitution a new voting system, the will concentrate on these four options, or came a face-saving device for Mr Blair. foreign minister, a permanent president of variants of them. Two concerns will be up- Now, however, the budget review is ac- the council and more majority voting (but permost in their minds. The most impor- quiring new signi cance, for three reasons. drop the smaller commission). Such a text tant will be that the union cannot a ord The rst is that the commission is taking it might be called an amending treaty, which another failed rati cation. In several coun- seriously. The EU budget, at just over 115 could be rati ed by national parliaments tries that points to avoiding a referendum billion, or 1% of the union’s GDP, is rela- alone, in time for the 2009 European elec- at almost any price. This desire could put tively small. But it is also ludicrously ar- tion. Yet cherry-picking from the present the countries seen to be most at risk of los- chaic. Mr Blair rightly pointed to the absur- document would upset the delicate com- ing such a vote (Britain, France, the Nether- dity of devoting almost half of all EU promises that went into it. The Irish and lands and perhaps Poland) in a strong bar- spending to the CAP (though that is an im- perhaps the Danes might still have to vote, gaining position should a new IGC be provement on the 1980s, when the CAP which could lead to demands for referen- convened except that these four do not absorbed 70%). A further one-third of the dums elsewhere. To reassure maximalists, agree on what they want. budget goes on regional support, espe- the rest of the constitution might be put o The second concern will be to achieve cially for infrastructure spending, but to a further convention or IGC to be sum- something, anything. José Manuel Bar- nearly half of that regional money is moned soon after 2009, but others would roso, the commission president, is a prag- bagged by relatively rich countries. Only a not nd that prospect reassuring at all. matist who has spent the two years since tiny fraction of the budget is spent on pro- Treaty minus, with a promise of no the French rejection urging that the EU jects that might further the Lisbon Agen- more to come. This is a slimline version of da’s goal of promoting high-tech growth. Mr Sarkozy’s mini-treaty, favoured nota- These blemishes were pointed out bly by the British, who do not want to hold forcefully in the 2003 Sapir report, written a referendum or be dragooned into an- at the commission’s own request. The re- other huge convention or IGC. It would port recommended cutting CAP spending adopt the sort of small treaty proposed by to nothing and redirecting regional spend- Mr Sarkozy, but probably with no exten- ing to poor countries, with the balance of sion of quali ed-majority voting. It would the budget being either returned to na- be purely a piece of institutional tidy- tional governments or devoted to such ing-up, which could be rati ed by national worthier activities as R&D. But when the parliaments on the promise that nothing commission and the council drew up the else would soon be put before them. Even budget for 2007-13, they largely ignored so the Irish would have to vote, as might these recommendations. Still, Sapir sets a the Danes if the new treaty transfers any useful framework for the budget review. new powers to Brussels. And any such The worst feature of the EU budget is document would cause deep dissatisfac- that, to make up for spending so much on tion in most of the 18 countries that have the CAP when some member countries already rati ed the full constitution. have so few farmers, it is littered with re- Nothing at all. This is the option if all bates. The British rebate, bludgeoned out else fails. It also sometimes seems to be the New members will come CAP in hand of her partners by Margaret Thatcher’s1 8 A special report on the European Union The Economist March 17th 2007
2 handbag-wielding in 1979-84, is the best- rect payments, the case for nancing at EU cellor of the exchequer, strongly opposed known, but the Germans, Dutch, Austri- level is weaker: there is no reason why na- the EU budget deal in December 2005. ans and Swedes now all have special re- tional governments should not pay for Yet there are now whispers in Brussels bates of their own. Indeed, the latest bud- their own farmers. Several countries fa- about one of those grand bargains often get row in Brussels is over how far vour partial national nancing of the CAP, struck at EU summits: give Mr Brown a se- countries that get rebates should contrib- as does the budget commissioner, Dalia rious dose of CAP reform, including some ute to others’ rebates. A useful aim for the Grybauskaite. More surprisingly, so do national nancing, and he might accept a budget review would be to put paid to this some in uential Frenchmen, including revised constitution after all. Certainly it Alice-in-Wonderland world altogether. Alain Lamassoure, an MEP who is one of makes sense that a new treaty should be The best way of doing that would be to Mr Sarkozy’s advisers. The French realise accompanied by a fresh look at the budget. tackle the CAP once and for all. In fact it has that, when the full panoply of farm sup- Other countries might buy the idea if they already changed far more than its critics al- port extends to central Europe (it is now be- see a prospect of getting not only a chunk low. Since 2003 most farm subsidies have ing phased in), they will become net con- of the constitution (perhaps with an un- been switched to direct payments, not tributors to the CAP. Indeed, opponents of derstanding that more might come later) linked to production and therefore not future farm reform will be found not in but also an end to the hated British rebate, trade-distorting (whereas American farm Paris but in Warsaw and Bucharest. which would become redundant if CAP subsidies have shifted the other way). A reform were su ciently bold. growing chunk of the money goes on ru- Looking for a bargain Any such bargain would, however, ral-development projects, not farming as The time is thus ripe for another attack on take time and patience to strike. With a such. Feeding into the budget review is a the CAP and the way it is nanced. And new French president and a new British mid-term health check of the CAP to be that adds another reason for paying atten- prime minister, it will certainly be hard to conducted by the agriculture commis- tion to the budget review: that it could be- do before 2009. Meanwhile another issue sioner, Mariann Fischer-Boel. She wants to come linked to the fate of the constitution. may come to a head: further enlargement cap payments to individuals, shift even The timing is tricky, because negotiations of the union to the western Balkans, start- more spending to rural development and on the constitution could start later this ing with Croatia. The trouble is that several scrap milk-production quotas. year and the budget review is not starting countries, as well as the commission itself, An idea she is not keen on is national - until next year. And the odds of a quick have said that there cannot be any further nancing of the CAP. When farm subsidies deal on the constitution remain low. Brit- enlargement without an institutional set- took the form of price support, they had to ain, the main architect of the budget re- tlement. Thus enlargement, a key foreign- be paid at EU level because products view, is a big obstacle to a renewed treaty. policy goal for the EU, has also become crossed borders. But as they switch to di- And it is no secret that Mr Brown, as chan- hostage to the constitution. 7 The ins and outs
The EU’s most e ective foreign-policy instrument has been enlargement. But how far can it go?
T IS sometimes said that the European success in Afghanistan is now crucial to were ever adopted, it would bolster the IUnion is an economic giant but a politi- the EU’s credibility, as well as NATO’s. In common foreign policy by turning the cal pygmy, with no foreign policy to speak the diplomatic world the union also pulls high representative into a foreign minis- of. Certainly foreign and defence policies, more weight. Javier Solana, the high repre- ter . More important than the exact title of above all others, remain largely in the sentative for foreign policy, is in touch this person would be three accompanying hands of national governments; and for- with the American and Russian foreign changes: merging the job with that of the eign-policymaking with 27 countries, ev- ministers at least as much as his British, external-a airs commissioner, giving it ex- ery one of them with a veto, is inherently French and German counterparts. tra clout and money; setting up a common di cult. Last year, for example, Poland Consider Iran and nuclear prolifera- EU external service that could, in time, be- alone blocked the start of negotiations on tion. Besides having their hands full with come more important than national dip- a new partnership agreement with Russia. Iraq, the Americans have no diplomatic re- lomatic services; and making the foreign Yet to conclude that the EU has no foreign lations with the government in Tehran. So minister the permanent chairman of EU policy at all would be wrong. Britain, France and Germany were en- foreign ministers’ meetings. For a start the union is the world’s big- trusted with trying to persuade the Irani- Yet even this would not resolve the big- gest aid donor, which gives it great sway in ans not to build a nuclear weapon. Mr So- gest weakness in the EU’s foreign policy: Africa, parts of Asia and the Middle East. It lana soon joined the trio on behalf of the that it cannot work when national govern- has also acquired military heft, with wider EU. Their approach may not have ments disagree with each other. This was troops deployed (sometimes with NATO, been particularly successful, though it has most obvious over Iraq, on which the EU with which links have not always been probably strung the process out but it has as a whole did next to nothing. It has also close enough) in Bosnia, Congo, Darfur been a substantial example of a common often been true of relations with Russia. and Kosovo. Chris Patten, a former exter- EU foreign policy in the making. The new east European EU members gen- nal-a airs commissioner, suggests that If any version of the EU constitution erally take a tougher line than older mem-1 The Economist March 17th 2007 A special report on the European Union 9
2 bers; and the Russians, as Europe’s chief tries that fully opened their labour mar- time round, the constitution was meant to suppliers of energy, have proved adept at kets to workers from the new entrants im- provide the deepening: if it is blocked, that playing divide and rule. Even on China, in- mediately, Britain, Ireland and Sweden, raises questions over further widening. ternal di erences have persisted over gaining the most. Some critics also see the lack of an insti- whether to end the EU’s arms embargo. No The second, related reason is that, tutional settlement as a bar to enlarge- institutional change can alter these, even partly in response to the new arrivals in ment, arguing that the EU’s machinery, ini- though polls suggest that a common ap- 2004, many EU governments have lost en- tially designed for six members, cannot proach to foreign policy is near the top of thusiasm for enlargement. This is particu- function e ectively with 30 or more. The the list of what voters want from the EU. larly true of France, Germany and Austria. Nice treaty provided votes and parliamen- By far the most successful EU foreign Although Mr Chirac has always favoured tary seats for Romania and Bulgaria, but policy has been its own expansion. In the Turkish accession, he did not speak in fa- not for Croatia (though in practice the nec- 1980s the prospect of joining played a criti- vour of it when it became an issue in the essary changes, along with a new deal on cal part in ensuring a smooth transition referendum campaign in 2005. Instead, he the size of the commission, could go into from dictatorship to democracy in Greece, amended the French constitution so that a Croatia’s accession treaty, which like all Spain and Portugal. More recently it has referendum is now required on all future treaties must be rati ed by all EU mem- transformed the east European countries new entrants after Croatia. Germany’s An- bers). This argument is aimed mainly at as they moved from communist central gela Merkel is no fan of enlargement and Britain, which opposes attempts to revive planning to liberal democracy. The coun- has long argued against Turkey’s entry the constitution but is the chief proponent tries of the western Balkans have been (though her government is willing to let of more enlargement. The none-too-subtle paci ed and stabilised after the bloody the negotiations proceed for now). Austria message is that turning down the rst 1990s thanks mainly to their hopes of EU is even more hostile to Turkey, though it would mean losing the second. membership. And Turkey has made would like to take in the countries of the wholesale changes in its politics, econom- western Balkans in its own backyard. A Turkish tangle ics and society largely to boost its chances The third reason, inevitably, is the fail- The elephant in the room in all discussions of joining. Indeed, judged in terms of suc- ure to ratify the constitutional treaty. In about EU enlargement is Turkey, which cess in exporting its values to its backyard, part this is because of an age-old argument was one of the earliest applicants to the the EU has done much better with its known, in the EU jargon, as widening v European club and was accepted as eligi- neighbours than the United States has deepening. Brussels folklore has it that ble back in 1963. The Turks were mi ed to with central and south America, largely widening (admitting new members) natu- be overtaken by the east Europeans in the because of the carrot of enlargement. rally con icts with deepening (further 1990s (one Turkish general wondered After this year’s arrival of Romania and integration of existing members). To avoid whether his country would have done bet- Bulgaria, there is further work to do in this, expansion has often been timed to co- ter to spend 40 years in the Warsaw Pact in- south-eastern Europe. Entry negotiations incide with treaty changes: a key motive stead of NATO). The EU, for its part, argued began with Croatia and Turkey in October for the treaties of Maastricht, Amsterdam that Turkey was far from ful lling the Co- 2005, and are due to start with Macedonia and Nice was the knowledge that the east penhagen criteria for membership some time in the next 12 months. EU for- Europeans were waiting in the wings. This (which include democracy, a free-market1 eign ministers also acknowledge that the only way to prevent the Balkan tinderbox of Serbia, a newly independent Montene- gro and a would-be independent Kosovo from exploding again is to hold out to the whole region the prospect of joining their club. Yet the very notion of further enlarge- ment is now in question, for three reasons.
Enlargement fatigue The rst and perhaps most serious is a de- cline in support for enlargement among EU voters. Opinion polls for the whole un- ion still show a narrow majority in favour, but in some countries the mood has turned sharply against. The French and Dutch rejections of the constitution in 2005 partly re ected dissatisfaction over the 2004 enlargement. Olli Rehn, the en- largement commissioner, complains that EU governments have made little e ort to spell out the bene cial e ects of that en- largement to their voters, even though a commission analysis shows that the econ- omies of new and old members alike have done well out of it with the three coun- A vote against further enlargement too 10 A special report on the European Union The Economist March 17th 2007
2 economy, observance of human and mi- ready hostile to the countries they live in. nority rights, and political stability). A close eye is being kept on Turkey and When the mildly Islamist Justice and the western Balkans by those with mem- Development Party won the Turkish elec- bership aspirations of their own: Ukraine, tion in 2002, it soon proved itself a bigger Moldova, Belarus, and countries in the reformer than the ercely secular govern- Caucasus and even north Africa. The un- ments that preceded it. Recep Tayyip Erdo- ion has not so far recognised any of these gan, who became prime minister in March as actual or even potential candidates for 2003, made it his top priority to get Turkey membership. Instead it has adopted a ready to join the European Union. Over neighbourhood policy that is supposed the next two years his government passed to cover such bread-and-butter issues as a huge array of constitutional and judicial aid, trade concessions and immigration reforms to that end. He won his reward in and visa policies. October 2005, when the EU opened mem- bership negotiations with Turkey. Living with the neighbours Unfortunately things have mostly gone Yet the neighbourhood policy su ers from downhill since then. After making such ef- an inherent structural aw. It is meant to forts to qualify, the Erdogan government apply equally and without discrimination lost its reforming zeal. Relations with the to countries that may one day join the EU, Kurds in Turkey’s south-east, which im- and to countries that will never do so. proved when the government scrapped However, the rst group will always have many of its most repressive laws, deterio- an entirely di erent agenda: to them any rated again after the Kurds of northern Iraq neighbourhood policy is a mere stopgap cemented their autonomy and the separat- Will Europe open its doors? until they can begin the long march to- ist PKK guerrillas resumed ghting follow- wards membership. Countries that can ing a cease re. Moreover, the Turks soon muddle through the rest of 2007. Croatia never hope for this might be readier to in- ran into predictable trouble over Cyprus. may join the club about the turn of the de- vest in making the neighbourhood policy A condition for the opening of mem- cade . After that the Turks will have a itself more substantial. bership talks was that Turkey extend its choice: to resume their reforms, putting So is it time to de ne the boundaries of customs union to all the 2004 entrants, their talks back on track towards member- the EU? Even enthusiasts for enlargement which included Cyprus. Admitting the ship later in the decade, or to turn away think it may be approaching its natural (Greek-Cypriot) republic without settling from the road towards Europe altogether. limits. The western Balkans, now sur- its dispute with the (Turkish-Cypriot) The trouble is that the issue may come rounded by EU countries, obviously ought north was, as Lord Patten concedes, a mis- to a crunch sooner than that. Mr Sarkozy to be in. Moldova, Ukraine and Belarus take . A UN plan to reunite the disputed is- and his advisers are explicitly saying that also seem likely candidates. There might land fell apart in April 2004 when the Turkey has no place in the EU. Many Ger- be more doubt over the Caucasus, which is Greek-Cypriots, who had been promised mans note with horror that, if Turkey ever even farther o though Georgia makes membership of the EU in any event, over- joins, it is likely on present demographic no secret of its ambition to join. But north whelmingly rejected it in a referendum. trends to become the most populous Africa would be o most lists of potential (The Turkish-Cypriots, desperate to be ad- member by 2020, with more voting candidates. Morocco has been told that it is mitted to the EU as well, endorsed it.) weight and more MEPs than Germany. El- ineligible because it is not part of Europe. An exasperated EU promised to allevi- mar Brok, a German Christian Democratic Talk of the Roman empire, of the Mediter- ate the isolation of the Turkish-Cypriots, MEP who until this year chaired the Euro- ranean as mare nostrum or of Algeria’s and but as full members the Greek-Cypriots pean Parliament’s foreign-a airs commit- Morocco’s old status as parts of France and now have a veto over this. In December tee, says it was wrong to open negotiations Spain will change few minds. 2006 the Turks refused to open their ports in the rst place, and the more honest To say now where enlargement will and airports to the Greek-Cypriots be- course would have been to tell the Turks end might also be a good way to reassure cause nothing had been done for the that they must settle for something short nervous voters in existing member coun- north so the EU suspended negotiations of full membership. Yet Turkey refuses to tries who have turned against the idea. But on eight of the 35 chapters in the mem- contemplate anything second-class. their nervousness re ects mainly a failure bership talks. A fallout between the EU and Turkey, on the part of EU leaders to explain the one of its biggest and most important bene ts of expanding the club, not a hos- Heading o a train-wreck neighbours, would be disastrous. It would tility to any speci c countries (Turkey be- Mr Rehn insists that this is not a train- surely put an end to any hopes of settling ing perhaps an exception). And it would wreck , noting that good technical pro- the Cyprus problem. Worst of all, many seem odd to set limits now to a policy that gress is being made and a new chapter will Muslims would see a failure of Turkey’s has worked such wonders. If Turkey and be opened shortly. He describes the com- membership hopes as a rebu adminis- Cyprus, why not one day Lebanon? mission’s approach as rm but fair. There tered by a Christian club. Not only would Why not Israel (already a participant in the is a case for a breathing-space in EU-Turk- that further sour the West’s relations with Eurovision song contest)? Indeed, why ish relations ahead of Turkey’s presidential the Islamic world; it would also cause dis- not another day Morocco or Russia, and parliamentary elections later this a ection among the EU’s own 15m-strong both of which have a strong European her- year. He suggests that the right course is to Muslim population, many of whom are al- itage and culture? 7 The Economist March 17th 2007 A special report on the European Union 11
Four Ds for Europe
Dealing with the dreaded democratic de cit
HE biggest failing of the EU has long tional treaty. But whatever the ultimate states some of the powers that Brussels Tbeen the yawning gulf between the un- fate of the constitution, it is not going to be has arrogated to itself over time. Mr Bar- ion, as both a project of integration and a a vehicle for regaining voters’ a ection. roso’s commission has repeatedly prom- set of institutions, and the mass of its citi- That leaves three other options. ised to review and scrap some of the tor- zens. Nobody could pretend that, when rent of regulations and directives that has French and Dutch voters voted against the Love me do poured out of Brussels in the past 20 years, constitution in 2005, they were objecting The rst is to concentrate on showing Euro- and it also claims to subject new regula- merely to speci c provisions in the text; pean citizens that the union works. Mr Bar- tory proposals to a more rigorous cost-ben- nor that they were just using the opportu- roso, the commission’s president, is keen e t analysis than before. There has been nity to give their governments a good kick- on this idea. In the economic eld, it means more talk than action, but at least the ing. It seems much more likely that they persisting with the Lisbon Agenda for fur- amount of new legislation being proposed were expressing a general feeling of resent- ther reform and liberalisation across Eu- by the commission has dramatically de- ment towards the European project and its rope. To this can now be added the related clined over the past decade. remoteness. That feeling is more emphatic issues of energy and the environment, as The second idea for making the EU in some countries than in others, but it examples of areas where it is self-evident more popular with its citizens is to deal seems to be strong everywhere. that EU governments should be co-operat- with what is known as its democratic de - The traditional response by govern- ing (though what is really needed is global cit. Eurosceptics make much of the Euro- ments has been to ignore such resentment. co-operation). Foreign policy is another pean institutions’ lack of transparency and Europe was always an elite project, went area where most European citizens believe accountability, their corruption and their the argument, and so it should remain. As that a union acting together can do more remoteness from the citizens. They note long as political leaders understood and than nation-states acting alone. that the commission is not merely far away pursued the case for European integration, A concentration on delivery does not from most national capitals but unelected that should be enough. French voters always mean doing more at European (although the last thing a Eurosceptic would probably have refused to endorse level. Indeed, the arguments on subsid- wants is an elected commission), and yet the creation of the European Coal and iarity over the past decade suggest that perhaps 80% of the laws passed at national Steel Community back in 1951, and Ger- there is merit in giving back to nation- level originate in Brussels. man ones, if given a voice, might have ve- This is a seductive line of reasoning, but toed the abolition of the D-mark in favour it is awed. There is indeed a democratic of the euro 50 years later. Winning hearts and minds 6 de cit in Europe, but it is hard to maintain But ignoring the people’s views is no “Our country’s membership of the EU is a good thing” that it lies at the European level. In com- longer tenable. Margot Wallstrom, a com- % of interviewees in agreement parison with most national governments mission vice-president, even deplores the 020406080 the Brussels machinery is highly transpar- word club as connoting an elitist institu- ent: information is always easy to nd. tion. Politicians these days have to be more Ireland Corruption certainly exists, as it does ev- responsive to voters. Mindful of this, Luxembourg erywhere; but the auditors’ habitual quali- many leaders in Europe spend more time Netherlands cation of the EU’s annual budget relates attacking the Brussels institutions for inter- largely to how the money is spent at na- Belgium ference (even though almost all EU laws re- tional level. As for accountability, the com- quire those leaders’ endorsement) than Spain mission answers not only to national gov- preaching the European dream. The media Denmark ernments, through the council, but to the have also become more critical of the EU. Germany parliament as well. And the spread of referendums means that In truth, the de cit is to be found more Greece the people in the member states must now at national than at European level. The EU be repeatedly persuaded of the case for Eu- EU15 is a creature unlike any other: neither a su- rope. In the past 15 years a dozen national Italy perstate, nor a federal union, nor an inter- referendums have been held on EU ques- France governmental organisation. But it is closer tions (not counting acceding countries) to the third, in that nation-states remain Portugal and half of them have been lost. the main actors. Against this background Popular support for the EU has, in fact, Sweden the failure of democracy has been not to risen a bit in most countries over the past Finland make clear to citizens that they can nd out decade (see chart 6), but it remains dismay- Austria about and in uence what is going on in ingly low. Worries over this lay behind the 1996 Brussels through national institutions. Yet Britain Laeken declaration, the convention on the 2006 this ought to be easy, since the senior law- future of Europe and the ill-fated constitu- Source: Eurobarometer making body, the Council of Ministers, is1 12 A special report on the European Union The Economist March 17th 2007
An expensive and unloved talking-shop 2 made up of national governments. commission has increased too: in 1999 the nated, not elected, until 1914; the original As it happens, there is an example of parliament even engineered the commis- European Parliament was nominated from how this might work: Denmark. When the sion’s resignation. national parliaments before direct elec- country joined the then EEC in 1973, the Yet there is one area in which the parlia- tions in 1979). Such an innovation might Danish Folketing (parliament) was anx- ment has failed utterly, and that is to estab- encourage other parliaments to follow the ious not to lose its ability to steer legisla- lish its legitimacy as the natural conduit Folketing example and improve their scru- tion, despite the loss of sovereignty to connecting citizens to the European pro- tiny of what goes on in the EU. Sadly, the Brussels. So it set up a powerful European ject. Few European voters have the slight- union, like most international organisa- committee to call ministers to account. est idea who their MEP is, and fewer still tions, never abolishes anything. This committee summons ministers every know what he or she does all day. Turnout The third idea for re- ring European cit- Friday to discuss the following week’s in European elections is mostly low and izens’ enthusiasm for the club is to give council meetings in Brussels, and agrees to falling; campaigns are fought on national them a new dream, what some have called a negotiating mandate. If ministers want not European issues, re ecting in part the a narrative. The original narrative for the to deviate from this mandate, they must fact that the media are national not Euro- project was about peace and prosperity. telephone from Brussels to secure fresh in- pean; there is no sign of a Europe-wide de- But the rst is now taken for granted, ex- structions from the committee, which can mos. Voters see little connection between cept perhaps in the Balkans; and many vot- reconvene at a moment’s notice. how they cast their ballot and what hap- ers feel that the EU is either not helping or It sounds cumbersome, but it seems to pens in the EU. MEPs form broad political is actively hindering the second. So what work and it certainly gives Danes a groups the centre-right European Peo- might a new narrative for the 21st century greater sense of understanding of and in- ple’s Party, the Socialists, the Liberals and consist of? volvement in the EU. The EU committee in so on but tend to act together, not in op- the Folketing also maintains a large in- position to each other. The agenda of the Dream and reality formation and library service and a web- place, it often seems, is largely to advance Concern for the environment might fur- site that all Danish citizens can use. Den- its own powers. nish something. A second idea would be a mark’s famously Eurosceptic voters have One answer sometimes put forward to more active foreign policy, which might become noticeably more relaxed about remedy this is to increase the parliament’s even include a renewed push for enlarge- their country’s EU membership over the powers. Give it more say in the choice of ment. Poles and Lithuanians are not the past decade, even as hostility to Brussels commission president, for example, and only people who would be pleased if Uk- has grown in some other countries. more voters might take an interest. In 2004 raine were to join the club one day: the MEPs made clear to EU governments that orange revolution of December 2004 reso- A distant parliament their choice of commission president nated all round Europe. But what is What about the European Parliament? It should re ect the political make-up in needed most is more inspired leadership has a reputation as an expensive talking- Strasbourg. It would be easy to entrench by European heads of government, includ- shop, with a ludicrous monthly commute this practice, perhaps getting political ing a full acknowledgment to their voters between Brussels and Strasbourg that groups to propose their own candidates if of the practical importance of the EU. And adds some 250m a year to its costs. But it they gained a majority. Yet even if this in the end surely what voters really want is better than its reputation: the average were done, it is hard to see the parliament above all is economic success and greater quality of its members has risen, and it has winning greater legitimacy. prosperity which is why further econ- learnt how to work the EU system. In the A more robust solution would be to ac- omic reforms are so pressing. past year alone the parliament has played knowledge that the parliament has failed Yet harder-headed Europeans may not a crucial role in forging the necessary com- in this goal and to scrap it altogether. In its be interested in dreams or narratives at all. promises to secure an agreement on the place there could be a European Senate, As Germany’s Helmut Schmidt once put it, EU’s services directive and also on REACH, made up of nominated members of the if you have visions, you should see a doc- a set of rules governing the use and dispo- European committees of national parlia- tor. Such folk might prefer a di erent reas- sal of chemicals. Its in uence over the ments (the American Senate was nomi- surance: that the EU will be a group of1 The Economist March 17th 2007 A special report on the European Union 13
2 diversity not uniformity, and that not lead of Greenland, a Danish territory that A far better approach would be for those everybody on the European voyage needs holds the distinction of being the only who have no interest in joining to allow to go at the same speed. The Brussels jar- place to have withdrawn from the club (in others to go ahead which is how the Brit- gon for this idea changes and evolves: re- 1985). Nor do Danes cast envious eyes at ish dealt with the European single cur- cent examples include exibility, variable Norway and Switzerland, the two biggest rency at Maastricht. geometry and a multi-speed EU. What it European countries to have chosen to Equally, a multi-speed Europe might be means in practice is that some countries stand aside from the union. Both must ap- a good way of resolving growing tensions opt for projects of closer integration that ply almost all EU laws to gain full access to within the union over further enlarge- others prefer to avoid. the single market, and even make large ment. Already new, often poor members In fact this is already happening. All payments into the EU’s budget but play are invited on the basis that they do not members must participate in the single no part in its decision-making. take part in all EU activities right from the market, with its four freedoms of move- A multi-speed Europe could, in princi- start; they are usually given long transition ment (of goods, services, labour and capi- ple, be a way of solving several di erent periods before bene ting in full from the tal). Most of them are also members of problems at once. For example, the argu- union’s four freedoms. A multi-speed Eu- NATO, but some are not; only 13 of the ment over the constitutional treaty has rope might take that idea a stage further. present 27 are in the euro; a di erent but shown yet again that some EU members Turkey, say, might join on the basis not just overlapping 12 are in the Schengen pass- want more integration than others do. As of a long transition period but of an open- port-free travel zone, with the addition of things stand, this can lead to blazing rows, ended exclusion from the EU’s rules on the three non-members; and just seven have with those that want to hang back eventu- free movement of labour. signed the Prüm treaty governing the ex- ally being pushed into a corner from change of information among police which they either veto a project or, reluc- The risks of multi-speeding forces (see table 7). The Amsterdam and tantly, sign up to it to avoid being isolated. A multi-speed Europe clearly harbours po- Nice treaties both provide for reinforced tential dangers. The EU can work only if all co-operation , another piece of EU jargon its members sign up to the bulk of its rules, referring to projects that only some coun- Overlapping circles 7 known as the acquis communautaire, espe- tries choose to join. Countries in... cially for the single market. It will not be Once again Denmark o ers an interest- possible for members to opt out of compe- ing case study. The Danes are almost as tition rules, for example. Indeed, most sin- famous for their supposed Euroscepticism gle-market laws are not suitable for the as the British. When they voted no to the multi-speed treatment, though the single Maastricht treaty in 1992, it was renegoti- currency clearly is. ated to give the country four opt-outs: from If a multi-speed Europe were to become the single currency (from which Britain a multi-tier Europe and those in the lower was also excused, but Sweden was not, so tiers felt frozen out, that would be unsatis- although it has chosen to stay out of the factory too. Most proposals to create a euro, technically it has no right to do so); hard core , a group of pioneers or even from defence policy; from EU citizenship; a United States of Europe , embracing ei- and from justice and home a airs. ther the original six or, more likely, the 13 Living with these opt-outs can be awk- euro members, fall into this category. Nor ward. In defence, for example, Danish could a multi-speed arrangement work if forces are able to join NATO operations those who pursue a project can capri- but must pull out if the EU takes over. And ciously stop others joining if they want to. although the country retains the krone, the Yet it should be possible to nd ways Danish National Bank is not independent round these problems, using the European of the European Central Bank in its inter- Commission and, if need be, the European est-rate policy because it has chosen to Court of Justice as arbiters. The goal hold the krone in lockstep with the euro. should be not to create categories of rst- The governor, Nils Bernstein, admits that and second-class membership, nor to frag- he moves interest rates two hours after the ment the union. Rather it should be to ac- ECB does so. In the money market Den- commodate diverse views on how far and mark pays an average interest-rate pre- how fast to go, and to take in a wider range mium over the euro of 0.15-0.25%, accord- of members but all within a broad com- ing to Mr Bernstein, which could be said to mon framework set by the single market represent the cost of remaining outside the and the EU institutions. single currency. The other cost is a certain In 2005, after the French and Dutch re- loss of in uence, but a Denmark inside the jections, the commission published a pa- euro would hardly hold huge sway. per by Mrs Wallstrom called plan D, outlin- Yet despite, or perhaps because of, their ing various ways of bringing the EU closer opt-outs, the Danes seem increasingly to its citizens. A better name for what Eu- comfortable inside the EU. They no longer rope really needs might be plan 4D, to fear that a superstate is being built in Brus- stand for democracy, delivery, dreams and sels. There is little pressure to follow the Sources: European Commission; NATO *Approved but not yet enacted diversity. 7 14 A special report on the European Union The Economist March 17th 2007
The European Union at 100
Is the best yet to come?
IKE anybody nearing a 50th birthday, The other cause for quiet satisfaction Lthe European Union needs a makeover. has been the EU’s foreign policy. In the But as this special report has suggested, the dangerous second decade of the century, past two years’ talk of a deep crisis is over- when Vladimir Putin returned for a third blown. The union is functioning as well term as Russian president and stood (or as badly) as it did before French and poised to invade Ukraine, it was the EU Dutch voters rejected the constitution. were Germany’s and France’s e orts later that pushed the Obama administration to The e orts by the Germans to use their in that decade, under Angela Merkel and threaten massive nuclear retaliation. The stint in the EU president’s chair to resusci- Nicolas Sarkozy respectively, to push Ukraine crisis became a triumph for the EU tate the constitution may thus be as mis- through economic reforms. foreign minister, Carl Bildt, prompting the taken as the fatuous logo they have chosen These reforms produced a sharp fall in decision to go for a further big round of en- (above right). It is possible that an agree- unemployment just as Europe began to en- largement. It was ironic that, less than a de- ment may be reached on a minimalist joy a productivity spurt from the spread of cade later, Russia itself lodged its rst for- treaty, but it depends on a string of heroic information technology. The eventual re- mal application for membership. assumptions: that Mr Sarkozy wins the sult was a growing labour shortage, which At the same time politicians in Brussels French presidency; that the Poles can be was not resolved until the arrival of Turkey and Washington, grappling with the bullied into accepting institutional and Ukraine as full members in 2025. The blocked Middle East peace process, had a change; that some way can be found to accession soon afterwards of the rst eureka moment. EU membership had buy o Britain; and that almost everybody north African country, Morocco, helped to worked, eventually, in Cyprus, which was can avoid referendums. Since at least one prolong Europe’s boom. reuni ed in 2024; why not try it again? So it of these assumptions is likely to prove Of course it was not all plain sailing. was that Israel and Palestine became the wrong, the odds of a successful deal on the The great Italian crisis of 2015, when the EU’s 49th and 50th members. constitution seem low. government of Gianfranco Fini quit the The big challenge now is what to do Rather than harping on institutional re- single currency just as David Miliband’s about Russia. Its application has been form that may never happen, the EU Britain was about to join, cast a long pending for 15 years. Some say that it is too should concentrate on things it can shadow. Yet although Italian bondholders big, too poor and not European enough to achieve. That means putting forward took a hit from the subsequent default and join. But now that the tsar has been sym- sound policies in elds such as the envi- Italy’s economy was soon overtaken by bolically restored, Russia has an impecca- ronment; continuing the union’s enlarge- Spain’s, nancial markets proved forgiv- bly democratic government. A previous ment to take in the western Balkans and, ing, and the government of Walter Veltroni tsar saved Europe from Napoleon nearly ultimately, Turkey; and doing more work, managed to rejoin the euro fairly quickly. 250 years ago. It would be apt to mark the both in Brussels and in national capitals, to Since then no country has been tempted to anniversary by welcoming Russia back engage citizens in the project. Above all, it repeat Italy’s painful experiment. into the European fold. 7 means taking advantage of the present re- covery to push through economic reforms. Future special reports The future of the EU is hard to predict. O er to readers Reprints of this special report are available at a Countries and regions Over the next decade or so it could un- price of £2.50 plus postage and packing. China and its region March 31st dergo a burst of further integration; it A minimum order of ve copies is required. Brazil April 14th could fall apart into opposing camps of those who would go forward and those Corporate o er Customisation options on corporate orders of 100 Business, nance, economics and ideas who would go back; or, perhaps most Telecoms April 28th likely, it could just muddle through. So or more are available. Please contact us to discuss your requirements. Cities May 5th how might it look in 50 years’ time? International banking May 19th Send all orders to: The green economy June 2nd A centenary celebration, 2057 EU The Rights and Syndication Department The is celebrating its 100th birthday 26 Red Lion Square with quiet satisfaction. Predictions when it London WC1r 4HQ turned 50 that it was doomed to irrele- Tel +44 (0)20 7576 8000 vance in a world dominated by America, Fax +44 (0)20 7576 8492 China and India proved wide of the mark. e-mail: [email protected] Previous special reports and a list of A turning-point was the bursting of Amer- forthcoming ones can be found online ica’s housing bubble and the collapse of the dollar early in the presidency of Barack www.economist.com/specialreports Obama in 2010. But even more crucial