One Union with varying speeds of integration?Dec 1st, 2011 | By David Grodzki | Tags: common currency, core Europe, EU integration, Eurozone
The current economic and financial crisis of the European Union has made one thing clear: without proper supervision of member states and a stronger role of the European Commission, the EU will face a dysfunctional future. The case of Greek budget “adjustments” before and during its stay in the eurozone and Spain’s and Portugal’s failed economic policies, are examples that come to mind. One solution proposed by the Commission and agreed upon by the Council is the economic governance sixpack that will give the Commission a bigger say in questions of national economic policies to ensure fiscal stability and reduce macro-economic differences.
Closer cooperation between governments should certainly be welcomed. However, such a move might cause a number of problems. The most pressing one is the issue of an Europe of varying speeds which might lead to an internal division of the EU. The common currency is an example of a multi-speed Europe, as it allows a number of member states to integrate further than others. The Schengen area agreement is another example of an integration process which classifies states as “inside” or “outside”. Truth be told, the EU is already today an Union comprised of various multi-speed Europes. However, recent developments are alarming.
Will closer cooperation of the eurozone destroy the EU?
Recently the eurozone states agreed that it in order to prevent any future crisis in the eurozone, it is necessary to ensure that all members adhere to the rules of the Euro Plus Pact and implement a debt brake for their budget. Most countries, even those outside the eurozone have signed up to it, but the Czech Republic, Sweden, Hungary and the UK refused to do so for various reasons. The important issue though is not the support for the Euro Plus Pact or the debt brake that drew heavy criticism, but the increased cooperation between eurozone countries and especially the idea of having a “core-group” (the idea of a core-Europe had been tabled by Germany’s current finance minister Schäuble already back in 1994) that could lead the process.
As economic, fiscal and financial policies are becoming by definition more aligned, those outside the core-group, and especially those currently outside the eurozone, will find it increasingly difficult to follow suit. Paradoxically, stronger integration of eurozone countries, maybe even with a eurozone minister (instead of the current President of the Eurogroup) or its own economic government, will lead to a stronger division within the European Union as a whole (as the eurogroup will have to set up common rules not only in monetary but also in related fields such as employment or taxation). As can be already witnessed, finance ministers of eurozone countries hold meetings ahead of the meetings of EU finance ministers to discuss issues, leaving their colleagues in the dark. With the exception of Denmark and the UK, which both have opted to stay outside the Euro, all other member states will have to introduce the common currency eventually. However, currently they are not participating in eurozone meetings, and as it seems likely that the Franco-German tandem will push for increasingly tighter rules with regards to fiscal and probably also economic questions, non-eurozone member states will constantly struggle to catch up. It seems unlikely that they will ever actually do so, though. Stronger integration of the eurogroup countries will create an invisible barrier between them and the “outsiders”.
Even though the opt-out countries are uncomfortable touching the idea of ever introducing the common currency, they find themselves in a rather similar situation with all current non-eurozone states. They are on the outside and as there is little they have in common besides their status as outsiders, there is no reason to assume they would actually gather to discuss how to align their policies. Whereas the core-group and potentially the whole eurozone will become more homogeneous in time, the non-eurozone group will remain fragmented. As the common currency is one of the most important projects of the EU and one of the pillars of its success, the leverage and power of the in-group will increase. This development will obviously be the detriment of those that have no say in this question. British prime minister David Cameron had to make such an experience just recently when he was rather undiplomatically told off by Nicolas Sarkozy during the last EU summit.
How to resolve this issue?
I am not sure there is a proper solution of the problematic situation created by a multi-speed EU. On the one hand, we have various multi-speed agreements in the EU that have not yet had too much of a negative impact on the EU as a whole, however, on the other hand, a closer cooperation of the eurogroup countries that would result in a Union within the Union, cannot leave European leaders untouched. Especially those countries, that will have to join the eurozone eventually, will strive to make sure they won’t be left behind. One step should be the inclusion of future eurozone ministers in meetings, allowing them to observe and contribute unofficially to official agreements. More importantly, though (and a lot more problematic), seems to be that the “outsiders” will have to catch up and implement the same policies at the same time (if possible or as soon as possible), thereby in a way running on a parallel track, where the only difference would be that the first group already shares the common currency, and the second will do so very soon, too. The smaller the current gap between both groups will be, the easier they should be able to bridge the differences currently existing between insiders and outsiders to turn them into insiders.
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