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 for the European Commission, the EU will face a dysfunctional future. The case of the Greek budget “adjustments” before and during its stay in the Eurozone and Spain's and Portugal's failed economic policies are both examples that come to mind. One solution proposed by the Commission and agreed upon by the Council is the economic governance "Six Pack" that will give the Commission a bigger say in questions of national economic policies in order to ensure fiscal stability and reduce macro-economic differences.
Closer cooperation between governments should certainly be welcomed. Such a move however may cause a number of problems. The most pressing issue would be a Europe of varying speeds, which might lead to an internal division of the EU. The common currency is a current example of 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 a Union comprised of various multi-speed Europes. Recent developments are however alarming, could potentially harm Europe, and consequently cause problems for the EU's transatlantic partners.
Will closer Eurozone cooperation destroy the EU?
The Eurozone states recently agreed that in order to prevent any future crisis, it would be necessary to ensure that all members adhere to the rules of the Euro Plus Pact and implement a debt brake for their budgets. Most countries, even those outside the Eurozone, have signed up to it, including the Czech Republic, Sweden and Hungary, who had reservations about any new agreements. The UK has decided to stay ‘outside’ and has thus isolated itself in Europe. The important point though is not that support for the Euro Plus Pact or the debt brake drew heavy criticism, but that it increased cooperation between Eurozone countries and promoted the idea of having a core group to lead the process.
As economic, fiscal, and financial policies are becoming 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, perhaps consisting of a Eurozone minister (instead of the current President of the Eurogroup) or with 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 areas but in related fields such as employment or taxation.
This can already be witnessed, with finance ministers of Eurozone countries holding 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, who have both opted to stay outside the Euro, all other Member States will be compelled to introduce the common currency eventually. They are not however currently participating in Eurozone meetings. 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. Stronger integration of the Eurogroup countries will therefore create an invisible barrier between Eurozone countries and the outsiders.
Even though the opt-out countries are uncomfortable with 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 to the detriment of those that have no say on the subject. British Prime Minister David Cameron experienced this recently when he was rather undiplomatically told off by Nicolas Sarkozy during the last EU summit.
The solution
A union within the Union is bad news for Europe and its transatlantic partners. Either the EU is transformed into a Core Europe and those currently outside are downgraded to partners of a new free trade area or all current Member States will have to sign up to and implement the latest agreements. (This will involve introducing the Euro within the next few years to ensure Europe's fragmentation is reversed) The first option would mean a step backwards for many Member States, the latter may prove to be a huge leap for them. Europe is economically strong; it will have to use that strength to prop up those Member States that are serious about joining the Eurozone. Only if EU members align and become more similar will the EU continue to play a significant role in the world. A fragmented Union will only be as strong as its parts, but combined it can rival the world's major powers.
David Grodzki currently studies Political Science and English Literature at Friedrich-Alexander University, Erlangen, Germany and regularly contributes to the European Student Think Tank, atlantic-community.org's new partner.
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January 11, 2012
Talha Bin Tariq, Government College University, Lahore, Pakistan, Gold Contributor (102)
I agree with the solution U have given..Nice thought & approach !!
Comprehensively explained !!
Regards,
Talha Bin Tariq