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The Case for Flexibility SPECIAL REPORT THE FUTURE OF THE EUROPEAN UNION March 25th 2017 The case for flexibility 20170325_SR_EUROPEF_001.indd 1 20/03/2017 12:22 SPECIAL REPORT THE FUTURE OF THE EUROPEAN UNION Creaking at 60 As it marks its 60th birthday, the European Union is in poor shape. It needs more flexibility to rejuvenate itself, argues John Peet THE EUROPEAN PROJECT has sometimes given the impression ofbeing CONTENTS in perpetual crisis. Indeed, its spiritual father, Jean Monnet, saw this as the best way to advance to his preferred goal of“ever closer union”, argu- 4 The euro ing that “Europe will be forged in crises, and will be the sum of the sol- That sinking feeling utions adopted for those crises.” Yet as the union prepares to celebrate 60 5 Euro membership yearssince itsfoundingtreatywassigned in Rome on March 25th 1957, itis Exit strategy ACKNOWLEDGMENTS in deeper trouble than ever. Many people helped in the research A big reason for this is the politics in EU member countries. Crucial 6 Immigration for this special report, most of them elections loom in many this year, and populist parties opposed to the Compassion fatigue not quoted in the text. The author European project and in favour of referendums on membership of the would like to thank, in particular: 8 Foreign and security policy euro, the EU or both are likely to do well. In the Netherlands, Geert Wild- Rebecca Adler-Nissen, Peter Alt- Home and abroad maier, Adam Bielan, Uwe Corsepius, ers’s anti-European Freedom Party gained seats in an election on March Jon Cunliffe, Pieter de Gooijer, 15th, though fewer than many had feared. In France Marine Le Pen of the 10 Institutions ¢¢ ¤ ¡ Jonathan F £icky Ford, Lykke National Front is expected to win a place in the second, run-off round of Democracy and its dilemmas Friis, Timothy Garton-Ash, Sylvie the presidential election in early May, just as her father did in 2002. Al- Goulard, Charles Grant, Daniel Gros, 12 Safeguarding democratic though, like him, she will probably lose, she will come closer to winning François Heisbourg, Simon Hix, rule Julian King, Jens Kisling, Jonathan than he did. And ifshe loses, it may be to Emmanuel Macron, who is run- Who rules the rulers? Knott, Kornelius Korneliou, Philippe ning as an outsider with an untried political party. Leglise-Costa, Bruno Le Maire, Mark Leonard, Ed Llewellyn, Cecilia Then in September Germany will go to the polls, and the anti-euro 13 A multi-speed, multi-tier Malmstrom, Anand Menon, Niklaus Alternative for Germany party is likely to win its first seats in the Bundes- future Meyer-Landrut, Robin Niblett, Jean tag. Although Angela Merkel may yet remain chancellor, her new Social Differentiate or bust Pisani-Ferry, Marek Prawda, Norbert Democratic challenger, Martin Schulz, is running close behind her in the Röttgen, André Sapir, Marietje Schaake, Dominic Schroeder, Daniela polls. Were he to replace Mrs Merkel, the shockto a European project that Schwartzer, Pierre Sellal, Reinhard she haslargelyled for12 yearswould be profound. Italymustalso hold an Silberberg, Poul Skytte-Christof- election by early 2018; two of its leading parties have at different times fersen, Kaja Tael, Charles Tannock, called for a referendum on the country’s euro membership. Anthony Teasdale, Jeppe Tranholm- ¤ ¦ One reason for the likely success of populists against incumbents is Mikkelsen, Margret ¥estager, Klaus Welle, Thomas Wieser, Caroline that Europe’s economic mood is so glum. Although growth has returned A list of sources is at Wilson and Guntram Wolff. and the euro zone has stabilised, growth rates are still low and, notably in 1 Economist.com/specialreports The Economist March 25th 2017 1 SPECIAL REPORT THE FUTURE OF THE EUROPEAN UNION 2 the Mediterranean, unemployment (especially among young ceived a slight boost from the Brexit decision, but they remain people) is punishingly high. Greece remains a basket-case on the strikingly low by past standards (see chart). edge of default, and the markets are nervous about Italy and Indeed, whenever any European treaty has been put to a France. Public debts across the union remain large, and progress vote in recent years, it has been as likely to be rejected as ap- on liberalising structural reforms has largely stalled. The euro proved. The Danes and the Irish are famous for having to be zone has a partial banking union, a centralised bail-out fund and asked to vote twice to produce the desired result. French and a European Central Bank (ECB) prepared to act as a lender of last Dutch voters sank the EU constitutional treaty in 2005. The resort, but its architecture remains incomplete and there is little Dutch also rejected an association agreement with Ukraine last agreement over how to finish the job. year. In capitals around Europe, diplomats gloomily conclude Migration remains a huge issue. The numbers entering the that there may never be another treaty, for at least one country EU from the Middle East and Africa have come down a lot, but would surely fail to ratify it. mainly because of a questionable bilat- eral deal with Turkey to close the main transit route into Greece that could fall Whenever any European treaty has been put to a vote apart at any moment. Hundreds of would-be migrants still take to leaky boats in recent years, it has been as likely to be rejected acrossthe Mediterranean everyweek. The as approved distribution among EU countries of those refugees who have got through has created serious tensions, with Germany particularly angered by The Brussels institutions are not in much better shape. The the refusal ofcentral European countries to take more than a few. European Commission under Jean-Claude Juncker has com- Workto strengthen the union’sexternal bordershasbeen fitful at mendably slashed its output of red tape. Yet Mr Juncker was a best. Internally, the Schengen frontier-free system istroubled and poor choice, forced on EU leaders by an ambitious European Par- several border controls have been reintroduced. liament. The European Council’s president, Donald Tusk, has The deteriorating geopolitical environment makes matters sometimes been preoccupied with fighting against the govern- worse. Turmoil and waracross the Middle East and in north Afri- ment of his native Poland. The parliament continues to flex its ca were one big cause of the surge in migrant inflows. An aggres- muscles and accrete power to itself, yet voters disdain it. Turnout sive Russia underPresidentVladimirPutin isnowseen as a direct in every single direct election since the first one in 1979 has fallen, threat, particularly in eastern Europe. Turkey’s president, Recep hitting a new low of42.6% in 2014. Tayyip Erdogan, is turning his back on a club that seems to have rejected his membership aspirations, and is spurning its demo- When more Europe is not the answer cratic values as well. To cap it all, America’s new president, Do- European leaders celebrating in Rome are well aware of nald Trump, has shown himself hostile not just to multilateral these problems. Their responses to similar troubles in the past free trade and Muslim immigrants but intermittently to the EU, have fallen into two categories, neitherofwhich seems adequate praising Britain’s decision to leave and urging others to follow. this time. One is to follow Monnet’s advice and take a further That points to perhaps the biggest current concern of all: bold leap towards ever closer union. Since the Brexit decision the EU’s unpopularity with both national governments and there has been much talk of a new Franco-German initiative to their voters. Following last June’s referendum, in which the Brit- relaunch the project. True believers like Guy Verhofstadt, a for- ish voted to leave by 52% to 48%, their prime minister, Theresa mer Belgian prime minister who is now leader of the Liberal May, is about to triggerthe two-yearprocess forBrexit underArti- group in the European Parliament and has just written a book, cle 50 ofthe EU treaty. Brexitmaybe more painful forBritain than “Europe’s Last Chance”, argue that, since the union’s troubles are forits 27 partners, but it is still a threat to the future ofa union that created mainlyatnational level, more Europe and a leap towards has previously only ever expanded. Some politicians in other ever closer union must be the answer. countries have openly said that they want to follow Britain’s ex- Yet the evidence is that people in most member countries ample. The EU’spopularityratingsin othermembercountries re- simply do not agree. Brexit was a warning of what can happen when the EU losestouch with voters. And manygovernmentsalso stronglydisagree with Mr Verhofstadt. Political leaders in France and Germany now treat the union as essentially an inter-governmental or- ganisation and openly disparage the European Commission and European Parliament. During the euro crisis, Mrs Merkel tellingly began talking ofa “union method” based on national capitals and parliaments instead ofthe classic Monnet method built around the EU institutions. Even in Italy, Matteo Renzi, a passionate pro-European, spent much of his recent premiership attacking Brussels for exces- sive rigidity in enforcing the euro’s rules. That leaves the second type of re- sponse, which isto muddle through. After all, the euro and migration crises seem to be past their worst. Excessive austerity 1 2 The Economist March 25th 2017 SPECIAL REPORT THE FUTURE OF THE EUROPEAN UNION the countries of Europe move at different speeds, and not always towards the same goal. Within the EU, this idea has a long history. In 1975 the Tindemans report, drawn up by a former Belgian prime min- ister, floated the concept of a two-speed Europe. In 1994 Edouard Balladur, then France’s prime minister, proposed a Eu- rope of three concentric circles: an inner core ofthe single currency, a middle tierof those in the EU but not the single curren- cy, and an outer circle of non-members with close links to the EU.
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