Ever Closer Union? Crises and Opportunities

In our most recent two articles, we examined the state of the European Union and – through the European Central Bank – the state of its major project, the Eurozone.  And it is clear that the while the Union is in general struggling to find answers to the very challenging issues it faces, the Eurozone is, through the efforts of the ECB, making progress and genuinely in a better condition than it was this summer, when the threat of Greek exit from the euro was very real and the whole future of the single currency was being questioned.

In this concluding article in our trilogy, we consider this in more detail and ask what the EU as a whole can learn from the success of the ECB.  Why is the ECB not only succeeding at its main task – that of running an effective monetary policy for the single currency – but increasingly taking on tasks that might more naturally be the responsibility of other institutions?

It is hard to escape the conclusion that the ECB is successful because it is a genuinely federal institution, endowed by the member states of the Eurozone with real (and sufficient) powers and an effective decision-making process.  Moreover, anyone who has dealings with the ECB will quickly find that both the Governing Council and the staff of the Bank really do strive to work “for the benefit of the whole Eurozone” without national bias.  And it is not very surprising that a body with adequate federal powers and a genuine federal mindset is able to achieve its objectives at a federal level.

Another similar institution, at the whole-EU level, is the European Investment Bank (EIB), which I served as an alternate director for the UK between 1996 and 2000.  Like the ECB, the EIB has sufficient EU-wide powers to carry out its remit and a strong EU-wide non-national approach; and like the ECB it is therefore able to act across its sphere of operation effectively and without national bias.

Outside the financial field, one can also cite the European Court of Justice as a genuinely Europe-wide institution operating above the national level.  Indeed, the ECJ has managed to overcome the challenges of very different national legal systems, based as they are on different fundamental approaches such as Napoleonic law and Common law, and has an impressive record of uniting the Continent’s legal systems under a common umbrella of basic principles.

The contrast with the political sphere is clear.  Here nationalism bedevils almost every field and individual states’ interests are seldom far from the surface.  And although the Commission, for example, tries to be above nationalism, however communautaire the staff of the Commission are, and even most of the Commissioners, they are part of a political process which at its apex is unable to avoid national interests and national biases, because it is formed of national politicians elected by and ultimately answerable to national electorates.

The challenges of the migrants are just one example of this:  the politicians all understand the need for a common EU-wide (or at the very least Schengen-wide) approach, but national electorates and their concerns will not allow this.  And that is in a field where there is an EU structure – the Schengen area and the principle of the free movement of peoples – to build upon and defend.  In other areas there is not even this much:  the member states are still extremely reluctant to cede any part of fiscal policy, ie the tax-and-spend side of government, to any EU body at all.

It is tempting to draw the conclusion that wherever Europe sets up a truly competent supranational body, it can and does make genuine progress, and that therefore, what is needed is to strengthen the federal authorities that the EU already has and create new ones where they are lacking.

The challenge is that before the EU can do this, it needs to establish what extra Union-wide bodies the EU, and especially the Eurozone, actually needs.  And to do that requires a consensus about what type of union the EU wants to be.  And, apart from the fact that the political class want the Union to be more than a confederation of states sharing a common market, while the various electorates want it to be less than a federal state, there has been little progress on this.

But Europe may have an unexpected opportunity to take this discussion forward, and it comes from a most unlikely source, London.

The United Kingdom has always been a challenge for the EU.  Despite over 40 years of membership, it is the Union’s most reluctant member, it has continually sought opt-outs from the Union’s flagship projects, and it has in turns puzzled, disappointed and exasperated its partners.    And on the surface, the current demand from London for a renegotiation of the UK’s terms of membership, with the threat that the country may actually vote to leave the Union altogether if its demands are not sufficiently met, is not only most unwelcome in itself but, coming when there are so many other issues to solve, extremely awkwardly timed.

And indeed this has been the response of a fair number of the other member states, who do not seem to want to discuss Britain’s concerns, or even go to the effort of disagreeing with them, so much as simply dismiss them.  But the more thoughtful are prepared to ask themselves why the UK feels this way, and are even prepared to admit that some of the UK’s concerns – for example over the relationship between the increasingly coherent and powerful Eurozone and the non-euro states – are not without foundation.

Interestingly, the Union’s two leading states seem at the moment to have diverging views.   Germany, for example, has shown itself surprisingly open to seeing whether there is any flexibility in the EU’s arrangements to meet Britain’s needs, while France has so far been most unwilling to unravel the EU’s current arrangements at all.  It is hard to avoid the conclusion that this is at least in part because Germany is fairly sure it prospers despite the EU’s (many, and known) imperfections, and will therefore continue to do so in any amended regime; whereas France is more concerned that it prospers at least in part because of the EU’s imperfections, many of which are in their favour (eg the Common Agricultural Policy), and which any change might put at risk.

At this stage of the UK renegotiations, those who do not want to engage with the British or the issues they raise are still possibly in the majority.  But it is quite likely – if the evidence of the Scottish referendum in 2014 is any guide – that as the date for the referendum draws near it will prompt some genuine soul-searching, both in the UK and on the Continent, and some genuine questions about whether there is a better way to build and run the Union, and indeed what the long term structure of the Union should be.

And only those Pollyannas who deny that there is anything wrong with Europe at all should find this unwelcome.