EU three years before its collapse

On Mar 25, 2017, the European Union is going to mark the 60th year of the Treaty of Rome – a pact that gave birth to the European Economic Community. On that day, the leaders of the 27 member states are going to meet in Rome. The British leader will not be there as officially Great Britain will break away from the EU right after that ceremony.

Many people believe that today, the EU is facing an existential crisis and that its future is vague. Its problems are growing and the worst of them are unemployment, unstable EURO, growing debts, rising populism, migration and terrorism. The economy has been stagnant since 2008-2009. The budgets of the member states are limited by a bunch of tough regulations.

The host of the ceremony, Italy, is facing a zero economic growth. In France and Spain, things are no better. In France, as many 26% of the young people are jobless, in Spain and Italy, this percentage is as high as 40%. As many as 400,000 young Greeks have emigrated from their country since 2008. More and more populist parties and leaders are emerging all over Europe. In Hungary and Poland, the rulers are conservative nationalists, who are showing open disrespect for the EU’s values. The UK’s Brexit has become a real knockdown for the EU, who has lost the fifth biggest economy in the world and the second biggest investor in the all-European budget. As a result, Old Europe is forced to cut its subsidies to New Europe (Central and Eastern Europe and the Baltics).

Diversity of social models and consumption levels are the key obstacles to Europe’s unity. The EU leaders claim that now that inequality in the world is growing, Europe is a place where it is the lowest but they are lying as in terms of welfare, we can see two-digit gaps between some EU nations. In Central Europe, workers wonder why they get just 4 EUR for something their colleagues in Western Europe do for 20 EUR.

The EU is cracking from the West to the East and from the North to the South, with the European leaders no longer able to offer something better to their people. As a result, only each fifth EU citizen supports the idea of a supranational government in Europe. The European dream is coming into a deadlock with no enlargement prospects ahead.

This is why the coordinator of the EU, the United States, is showing indifference towards its problems. Even more, during his last meeting with German Chancellor Angela Merkel, the new U.S. President, Donald Trump, insisted on Europe’s doing something to cut its deficit and to pay for the military assistance it gets from the United States. It seems that as far as Europe is concerned, Trump prefers negotiating with national governments rather than Brussels.

In the meantime, they in Brussels keep advocating reforms but their key problem is that politically, Europe is not as deeply integrated as it is economically. There are two solutions here: either to make the EU smaller but deeper integrated or to keep it the way it is but to make it less integrated economically. The latter scenario was exactly what the British wanted but since nobody heard them, they decided to break away. Europe’s major problem is that it has proved unable to develop a social model matching its economy.

So, the EU needs reforms to survive. On Mar 1, 2017, EU President Jean-Claude Juncker appeared with a White Paper on the Future of Europe, where he presented five different reform scenarios. By the elections into the European Parliament in June 2019, those proposals will have to be merged into one single plan. Most of the reforms are scheduled for 2017-2020. That is, the Europeans have just three years left.

The scenarios are as follows:

- The EU27 sticks to its course, it focuses on implementing and upgrading its current reform agenda. Priorities are regularly updated, problems are tackled as they arise and new legislation is rolled out accordingly. The speed of decision-making depends on overcoming differences of views in order to deliver on collective long-term priorities. EU legislation is checked regularly to see whether it is fit for purpose. Outdated legislation is withdrawn.

- The EU27 cannot agree to do more in many policy areas, it increasingly focuses on deepening certain key aspects of the single market. There is no shared resolve to work more together in areas such as migration, security or defense. Cooperation on new issues of common concern is often managed bilaterally. The EU27 also significantly reduces regulatory burden by withdrawing two existing pieces of legislation for every new initiative proposed.

- The EU27 proceeds as today but where certain Member States want to do more in common, one or several “coalitions of the willing” emerge to work together in specific policy areas. These may cover policies such as defense, internal security, taxation or social matters. In practice, it a scenario of the "multi-speed Europe."

- Where there is a consensus on the need to better tackle certain priorities together, the EU27 decides to focus its attention and limited resources on a reduced number of areas.

- Where there is consensus that neither the EU27 as it is, nor European countries on their own, are well-equipped enough to face the challenges of the day, Member States decide to share more power, resources and decision-making across the board.

The White Paper has one important reservation: the EU members shall have to agree on one of the scenarios and shall have to be united in its implementation. But what if they fail to come to a consensus? In this case, the White Paper offers scenario 1 – keeping everything the way it is and going towards a breakdown. The authors of the paper perfectly know that the EU members will not be unanimous and this is why they have not specified the legal and institutional mechanisms of their reforms.

The White Paper also contains comments that show that some of the scenarios are prior to the others. Scenario 2 – Nothing but Single Market – is not desirable as it will have certain negative consequences for Europe’s unity, like lower regulatory burden, differences in national standards, smaller room for collective endeavor, restricted movement of people and services and no single policy on migration.

Scenario 1 – Carrying On - is also unacceptable. Priority is given to Scenario 5 - Doing Much More Together. It seems to be perfect for the authors but hardly practicable for the readers. But, in any case, it is the goal the EU must try to achieve if it wants to survive. The White Paper gives five spheres needing reforms: single market & trade, economic & monetary union, Schengen, migration & security, foreign policy & defense and EU budget.

The best scenario for each of the spheres is as follows:

- Single market strengthened through harmonization of standards and stronger enforcement; trade exclusively dealt with at EU level;

- Economic, financial and fiscal union is achieved as envisioned in the report of the Five Presidents of June 2015;

- Cooperation on border management, asylum policies and counter-terrorism matters are systematic;

- The EU speaks with one voice on all foreign policy issues; a European Defense Union is established;

- Significantly modernized and increased, backed up by own resources; a euro area fiscal stabilization function is operational.

This scenario requires serious amendments to the Treaty of Lisbon. On the other hand, the EU members can realize it by forming smaller unions on specific tasks – defense, financial regulation, migration. The multi-speed principle presented in scenarios 3 and 4 is supposed to ensure higher flexibility for deeper integration.

Benelux supports this approach but the Visegrad Four (Hungary, Poland, the Czech Republic and Slovakia) believe that the multi-speed model will ruin the EU. They see it as a way for the EU core to gain monopoly in making finance- and migration-related decisions and to turn the Visegrad Four and the eastern members into Europeans of second quality.

According to Emmanuel Macron, possibly the future president of France, multi-speed Europe is a fait accompli. So, he suggests deeper integration with the Eurozone. Formerly, the key opponent of this scenario was the UK, now it is Poland. But the Poles are not as strong as the British. Macron suggests appointing a single finance minister for the Eurozone. So, according to Macron, the reforms are not for the whole EU. What he suggests can be found in Scenario 3, saying that no single EU nation shall be left outside general integration but also that no one shall be able to prevent the others from trying to achieve it. Macron sees France and Germany as the locomotives of the reforms just because they are the locomotives of the economic growth.

Under Francois Hollande, France was indecisive and that was one of the key reasons why the EU is going off balance.

One of the key problems of the EU is decision-making process. This is why the White Paper keeps reiterating the need to act more quickly and decisively. And one of the key goals is unity. To united 17 Eurozone members instead of 27 EU members seems to be a much easier task, especially as those in Eurozone are keen to see EURO stable. So, France and Germany may well use EURO as a way to attain consensus on the reforms.

Very soon, after the elections in France and Germany, we will see who will be the key executors of the reforms. The upmost goal of those people will be to guarantee that the Eurozone’s unity principles are strong enough for any populists to shatter them.

EADaily’s European Bureau