by Heather Grabbe & Stefan Lehne
September 8, 2016
EU leaders will meet in Bratislava on September 16 to reflect on how to move forward after the June 23 British referendum decision to leave the union. They are considering how to develop the remaining EU of 27 members and how to give an impulse to further reforms. Some would like to relaunch European integration on the sixtieth anniversary of the EU’s founding document, the Treaty of Rome, on March 25, 2017.
However, the political reality is that the EU will be unable to redefine its mission before 2018–2019. After the body blow of Brexit, there is no going back to business as usual; yet the electoral timetable and divisions across Europe make major decisions impossible for at least two years.
In Bratislava, the leaders should therefore focus on concrete projects that demonstrate the EU’s added value in high-priority areas such as migration and security. But they should also launch a deeper reflection on the EU’s longer-term orientation. In particular, they need to consider a big structural question: how to ensure internal cohesion with more flexible integration. The union will need more of both these properties—flexibility and cohesion—to cope with external challenges and contain the centrifugal forces that threaten to tear it apart.
Divisive Forces, Dysfunctional Leadership
For several years at least, negotiations with the UK on the terms of its departure will absorb attention and energy, while sowing division. After London triggers Article 50 of the EU treaty to launch the exit procedure, probably in 2017, there will be at least two years of negotiations on the basic structure of the future relationship. By 2019, there should be a decision on exit conditions, but many issues—like the details of the future trade regime and UK involvement in foreign and security policies as well as justice and home affairs—will take much longer to sort out. The Brexit negotiations could divide the remaining 27 member states further if the talks encourage other members to demand special deals, for example on the free movement of people.
The sense of drift is heightened by traditional forms of leadership becoming dysfunctional. The Franco-German couple is not producing solutions (although the June 2016 paper by the two countries’ foreign ministers setting out ideas for reform is encouraging). At the top of European politics, there are few strongly pro-integration leaders left. While the authority of the Brussels institutions is in decline, most prime ministers and presidents think in national terms. Yet leadership of the common EU project has to come from national politicians in this era of renationalization.
The coming months are likely to see further turbulence. Italian Prime Minister Matteo Renzi could be severely damaged in a forthcoming referendum if voters reject his proposed constitutional reforms and turn to support the Five Star Movement. In 2017, France’s presidential election could bring the far-right National Front to the door of the Élysée Palace, while Germany could have a different governing coalition at the federal level because of the rise of the right-wing Alternative for Germany. In these big members as well as many smaller ones, anti-establishment parties are making electoral outcomes unpredictable, including the European Parliament elections in 2019.
Brexit is just one of many divisive forces. The North-South cleavage over fiscal discipline in the eurozone remains deep. East and West are far apart on how to deal with the influx of migrants from the Middle East. After the British referendum, EU members fractured into small groups: the six founding members met in Berlin to discuss the future, while Poland tried to organize a rival meeting of nonfounders in Warsaw. Other discussions happened among the Visegrád Four (the Czech Republic, Hungary, Poland, and Slovakia) and the Mediterranean eurozone members. The resulting cacophony of different calls—for deepening, a hard core, a looser union, more flexible integration, and other responses—revealed that the EU has never been more divided.
In these conditions, EU leaders cannot agree on major structural reforms in the next months before the Treaty of Rome celebration. In this period, it makes sense to focus on immediate deliverables to address burning issues, such as terrorism and border management, and show the public that political leaders can deliver common responses. Current initiatives, like strengthening the counterterrorism capacity of the EU’s law enforcement agency Europol and implementing a new border and coastguard agency, are worthwhile to bring the member states back together and demonstrate the added value of the union in ensuring security.
Such projects will help counter fragmentation, which is the biggest risk in the short term. But as well as ensuring short-term deliverables, leaders need to have a deep strategic discussion about the longer-term structural questions facing Europe. What they should not do is spend time drafting a new political declaration. The European Council, which brings together EU heads of state and government, has to work against its usual tendency of avoiding controversial issues and putting out bland statements.
The next window of opportunity to find durable solutions could open after the French and German elections in 2017 and in the run-up to the new terms of the European Commission and Parliament in 2019. Leaders need to start working now to overcome their divisions through substantive debate, so that by 2018–2019 they have a credible plan for the EU’s future for broad public discussion.
In parallel, the EU should organize a wide variety of deliberative processes at the local and regional levels, so that not only national leaders and EU institutions formulate new ideas. Innovation is more likely to come from outside the current establishment, so web-based and other deliberative forums should discuss major initiatives. Regular deliberative polls on policies such as those related to regulations and fundamental rights would help take the temperature of the debate across the 27 post-Brexit member countries while encouraging better-informed debate. Citizens need to know more about the EU to contribute workable ideas, while the political class needs to know more about citizens to design EU policies to address their changing expectations.
Containing Centrifugal Forces During Brexit and Beyond
The terms of the future relationship between the UK and the EU are unpredictable for some time yet. The immediate question is the extent of access to the single market that the UK and its EU partners can agree to, especially given that free movement of people is an integral part of it. The new British government has already made clear that it considers none of the existing models (such as the relationships that Norway and Switzerland have negotiated) adequate and that it will aim for a sui generis solution.
Beyond the internal market, the UK will have interests in continuing participation of some kind in EU policies and programs ranging from research to foreign policy to some aspects of justice and home affairs (for example, the European Arrest Warrant). The remaining EU members will be open to keeping London involved in these areas, given its assets and size. The most likely outcome is therefore greater flexibility of participation in EU projects.
The Brexit negotiations will encourage more flexible integration among the remaining members as well. On top of the considerable variable geometry that has existed for decades, new forms will emerge. Every member state has to agree to the UK’s new relationship with the EU, and some will demand special deals as their price. The historical irony is that Brexit is happening when the EU has never been more British. Many other members would prefer a lighter union with fewer obligations, as traditionally favored by the UK—although they disagree on what to remove.
The British opt-out from the EU’s treaty-enshrined goal of an “ever closer union”—negotiated by former prime minister David Cameron in February 2016—will now never be implemented, but this phrase is no longer a realistic objective for most of Europe. The federalist dream of political, economic, and monetary union as the ultimate goal died when the proposed EU constitution was rejected in French and Dutch referenda in 2005. The EU’s future purpose and scope are open questions.
One method of containing the EU’s centrifugal forces consists of more flexible memberships of different EU projects. Historically, opt-outs and special arrangements have allowed the EU to move forward while keeping everyone on board. For example, the Schengen Area of passport-free travel does not cover all those inside the union—either because they didn’t want to join or because other members didn’t trust them to manage their borders—but it does include some non-EU members (Iceland, Liechtenstein, Norway, and Switzerland).
Flexibility is often the only way to cope with increasing heterogeneity across the members. Most future projects for deeper integration will require some flexibility. Enhanced cooperation among smaller groups is likely in security and defense because of divergent stances and vastly different levels of military capability. Groups of member states could be charged with implementing particular elements of EU foreign policy, as foreseen in the global strategy published by the EU’s foreign policy high representative, Federica Mogherini, in June 2016. Internal challenges such as migration and terrorism will require new initiatives in justice and home affairs that not all members want—because they are affected to different degrees—or that not all will be capable of joining.
In many areas of future integration, flexibility is also the only way to move forward, given the differences in levels of ambition and capacity among member states. Such flexibility can come in several forms, either differentiated memberships or more flexible rules. In some areas, variable geometry of countries will provide coalitions of the willing that advance while others can join later or not at all; but other policies can accommodate different views and capabilities by developing rules that offer the member states more room for maneuver.
However, in the context of deepening divisions, the costs of differentiated integration are rising. The wrong kind of flexibility risks turning European integration into a set of transactional relationships and could reduce solidarity among partners. Flexibility can also produce overly complex decisionmaking procedures that make the EU hard to understand and trust. And it can lead to unfairness, with only some members shouldering the burden of common policies that benefit all.
The UK experience proves this point: opt-outs worked to keep the UK in for four decades, but the special deals eroded Britons’ sense of solidarity and commitment to common interests. A purely transactional relationship is very fragile in times of crisis; it has to prove its worth at every point in negotiations, not on the basis of a community of destiny. And opt-outs make the EU even more baffling to citizens.
An overdose of flexibility could also exacerbate the problem of collective action. It is harder to overcome the obstacles to a common solution when member states are affected by a problem to different degrees. Flexible membership of projects heightens the asymmetries in the extent to which countries are prepared to work together. The more the EU is fractured into different levels and types of integration, the more governments will be tempted to sit back and leave it to other leaders to bear the burden.
Special deals therefore encourage free riders. They also make it harder to achieve the kind of cross-cutting deals that are essential to overall progress in integration. Rarely do all members feel strongly enough to push forward in one area, but all can make gains when several different issues are decided on together in a package. If decisions are made in isolation among small groups of members, the incentive goes down to find the overarching compromises that are essential to agreement on big issues. Paralysis could result.
Consolidating Core Integration Projects
Given the inevitability of more flexibility but also its considerable downsides, what’s the irreducible common foundation in which every member needs to participate to keep the EU functioning? The accepted wisdom at the EU level is that it is the four freedoms of the single market (free movement of capital, goods, people, and services), a self-standing project with a very solid legal base, well-functioning institutions, and a strong political consensus that it serves the interests of all members. The single market’s vulnerable spot is some countries’ resistance to free movement of people (especially workers), which is why the Brexit negotiations will have to be handled with great care to avoid setting precedents for other countries.
Otherwise, the single market enjoys a stable equilibrium politically and economically, so long as members continue to comply with the rules. Noncompliance is a mortal danger to the single market because fair competition relies on everyone respecting the laws and applying them. That is why the European Commission has to respond to French threats to stop recognizing posted workers—those who are sent to work temporarily in another member state—and Italian bank bailouts that defy EU law. With the UK’s departure, the single market will lose a vociferous defender with a strong record of compliance. The Brits have been awkward partners, but they could be relied on to enforce EU rules rigorously.
By contrast, a stable equilibrium is far off for the two major integration projects that were built on the single market: the eurozone and the Schengen Area. Both are half-finished and lack the vital ingredients of a robust institutional base and political consensus. To survive long term and withstand further asymmetric shocks, the eurozone is likely to need a European treasury, some form of fiscal capability, a full-fledged banking union, and a degree of debt mutualization. Public support for this approach would grow if benefits also came from the EU level, such as continent-wide unemployment insurance and bank deposit guarantees. The political conditions for such infrastructure are not present now and are most likely to emerge only in moments of further crisis.
Over time, this deepening of the eurozone would create stronger ties between its members, solidifying an inner circle. Not only would it become more difficult to join the single currency, but decisions made by the inner circle would also affect the EU members that stay outside. Therefore, the eurozone should take into account the interests of nonmembers so that members can fly together in a more diverse union rather than let a hard core take over.
A more robust Schengen Area is needed to cope with high immigration pressure over the coming decades. To survive politically and function effectively, Schengen will need external border management that all member states trust; progressive harmonization of asylum and migration policies, with burden-sharing arrangements to cope with sudden influxes of mobile people; much stronger institutions with executive mandates; and complementary external policies.
However, these two projects have very different political dynamics. The eurozone was supported by the European Central Bank, a strong, independent institution that could provide measures of last resort, whereas Schengen has no such executive agency. The eurozone deepened its institutional foundations while in crisis because its collapse would have been an economic and political catastrophe for its members. By contrast, when Schengen is in crisis mode, governments are tempted to resort to national measures—an option they do not have with the eurozone.
Moreover, reimposition of border controls is costly to citizens and businesses but does not threaten governments and whole economies the way a currency’s collapse would. Schengen has an additional problem: security trumps economic interests in this age of populism, because leaders feel the need to show that they can control who enters the country. Schengen suffers from a catch-22: every terrorist attack and crisis on the union’s external border makes EU-level cooperation more necessary but less attractive to politicians.
The Schengen dilemma epitomizes the choice between more flexible membership and more flexible rules. The future of the area could be a move ahead by a small, like-minded group of members to establish a truly integrated asylum, refugee, and migration policy. Alternatively, the Schengen members might escape the political stalemate by making their rules more flexible; for example, they might decide that rather than adopting quotas for accepting refugees, countries could share the burden by contributing financially or by giving operational support to other member states or to the new European border and coastguard agency. In choosing between types of flexibility, the key is to ensure an overall balance between obligations and benefits among members.
Therefore, the eurozone is more likely to be consolidated through further crisis, whereas Schengen could fail if tested again. The EU is still trying to muddle through because its members disagree about how to complete these projects. Governments can see what needs to be done, but they are looking over their shoulders at the growing power of anti-EU narratives in their domestic politics. The necessary measures would require deepening integration in areas of core state power, which goes against the zeitgeist of reaffirming sovereignty.
By 2019, EU leaders need to be ready with a widely supported plan for moving the union’s core projects forward. Former European Commission president Jacques Delors’s bicycle metaphor—that Europe has to keep pedaling forward with integration or it will fall over—is true for the eurozone and Schengen Area, even if it no longer holds for the whole EU. The public can see that leaders are avoiding difficult decisions and controversial subjects, so muddling through is draining public support.
Forging Cohesion With Flexibility
European leaders also need to look beyond the union’s two flagship projects. Internal cohesion will remain the EU’s major challenge. The union’s growing heterogeneity of ambitions and capabilities will require more flexible integration. A set of nine principles will help ensure that differentiation does not result in fragmentation.
- Contain Brexit spillover. Both the EU’s remaining 27 member states and the UK have a strong interest in preserving the closest possible relationship, but each benefit enjoyed needs to carry corresponding responsibilities. The Brexit agreement must not trigger free riding or a proliferation of special deals.
- Protect the integrity of the single market. The EU’s single market relies on a community of law, so no opt-outs are possible and the four freedoms should remain integral. Freedom to live and work anywhere in the union does not imply full and immediate access to all social benefits, however, as confirmed by the European Court of Justice. The single market has provisions to deal with asymmetric shocks and emergency situations that can be further developed to avoid member states resorting to noncompliance.
- Punish noncompliance. Refusal to apply EU rules is the most dangerous form of unilateral self-differentiation. Control and enforcement mechanisms need to be strengthened to ensure sanctions follow if members refuse to enforce the rule of law.
- Ensure respect for fundamental rights and the functioning of common institutions. That means no measures that lower standards for protecting refugees or minorities or that prevent EU institutions or agencies from doing their jobs.
- Consolidate the half-finished projects of monetary union and the Schengen zone—while respecting the interests of members that stay outside them.
- Allow flexibility on new projects—as long as they are compatible with what the EU as a whole wants to achieve. Whether such initiatives develop within or outside the treaties, they should be constructed to minimize the downsides of weakening solidarity, encouraging merely transactional relationships, and complicating decisionmaking.
- Foster inclusive debates about the future of the EU to reverse the current trend of members splintering into subgroups with sharply opposed interests. A sense of common destiny would become stronger if there were cooperation initiatives across the current divides of North vs. South and East vs. West, and especially between Germany and the rest.
- Bring the public back in. Governments should reach out to their societies for ideas on the future of their country in Europe, and the EU institutions should organize deliberative forums at the regional and local levels. Given the negative image of Brussels in many countries now, national politicians have to take the lead on outreach and engagement, but it needs to go beyond the national level. Ultimately, the internal cohesion of the EU relies on the support of a very broad base of Europeans.
- Use flexibility creatively to develop relations with third countries. EU membership candidates could be allowed to participate in EU projects and policies before accession. Post-Brexit arrangements for the UK could offer suitable models for Turkey and Eastern Partnership countries.
Flexibility can enhance cohesion if it is applied pragmatically in an ambitious framework for European integration. Its added value is to accommodate the heterogeneous levels of will and capacity across the member states. If handled well, flexibility will help the EU reach integration goals rather than standing in their way. The EU’s leaders should aim for as much unity as possible and as much flexibility as necessary to keep diverse members working together.
Heather Grabbe is the director of the Open Society European Policy Institut
*This article originally appeared on Carnegie Europe
