© The Author 2015. Oxford University Press and New York University School of Law. All rights reserved. For permissions, please e-mail: [email protected] The state of our unsettled Union Brigid Laffan* This is a time of transition for the European Union (EU), and 2014 is a year of renewal for European institutions, involving elections to the European Parliament and the beginning of a five-year legislative term under new leadership in the Commission, the European Council, and the External Action Service (EES). The EU has been tested—perhaps like never before—during the Eurozone crisis. The Union’s legal framework, its governance structures, its ability to respond to pressing societal needs and relations among the member states, have all been placed under severe strain since 2009. The Union managed to battle through the acute phase of the crisis albeit at a high social, political, and economic cost and is in mending mode. The address develops four analytic propositions about the state of the Union arising from observable trends in this crisis phase of European Union integration. The four propositions are (i) that contestation and politicization in the Union are here to stay; (ii) that the euro area mark 2.0 implies “more Europe”; (iii) that “more Europe” in the euro area implies even more differentiation in the Union; and (iv) that the return of geopolitics puts the spotlight on the Union’s role in twenty-first-century world politics. The future of the EU will be shaped by the interaction of these four dynamics. “I sing of time’s trans-shifting…”1 1. Introduction It is an honor and a privilege to address this distinguished audience on “The state of our unsettled Union.” I do so as Director of the Robert Schuman Centre at the European University Institute (EUI), as a European citizen, and as someone who takes public engagement on European issues very seriously. As a citizen of Ireland, which has had more EU referendums than any other, I have voted seven times on European treaties. I have participated in many lively debates on television, on radio, and in print on Europe. I have stood outside supermarkets and football pitches talking to individual * Director, Robert Schuman Centre for Advanced Studies, European University Institute. Email: [email protected]. This article is the text of a speech delivered on the occasion of the State of the Union 2014 (May 9, 2014). 1 Robert Herrick, The Argument of his Book, available at http://www.poetryfoundation.org/poem/176694. I•CON (2014), Vol. 12 No. 4, 853–863doi:10.1093/icon/mou068 854 I•CON 12 (2014), 853–863 voters, discussing different EU treaties and explaining why Europe matters. The lesson I take from my personal experience of many campaigns is that the case for Europe can be communicated politically, and that individual citizens can be motivated to support it, but only if they are persuaded that the Union has a part to play in addressing their concerns and that they themselves are comfortable with making a political choice about Europe. This year, 2014 is a year of commemoration and recollection: a hundred years since the outbreak of World War I; seventy-five since the outbreak of World War II; twentyfive since the collapse of communism; and ten since the Union’s bold enlargement to east central Europe on May 1, 2004. 1914 is the most searing of reference years, as on August 4 that year, in Fritz Stern’s haunting words, “the first calamity of the 20th century, the calamity from which all other calamities sprang”2 was unleashed. The Europe of 1914 did not have powerful institutions to mediate relations among the Great Powers, foster shared interests among Europe’s peoples, and contain conflict. A fragile balance of power system succumbed in thirty-seven short days to the vanities, miscalculations, and blunders of leaders and their generals. These references to pivotal years of twentieth-century history highlight for us that Europe’s Community, now Union, was forged in the shadow of a long European trauma. More recently, the welcome unfreezing of Europe’s post-war divide in 1989 opened the way to a truly “European” Union on a continental scale. The taming of inter-state relations in Europe and the openness to new members is the Union’s unrivalled contribution to this continent and the wider world. I address you today in a year of transition and at a time of change for the European Union. The Union has experienced two major shocks over the last five years: first, the extended shock of the Great Recession; and, more recently, the reemergence of hard geopolitics to the east. It is not my intention to address Ukraine and Russia in any detail, but the images of militias in balaclavas and military maneuvers at a European border remind us that the European states system has been transformed in this part of Europe, and that our Union played a pivotal role in that transformation. The display of hard power and the use of force that we witness on the frontier of the Union are unimaginable within it. 2. 2014: a year of transition 2014 is a year of transition and renewal for the EU and European institutions. The European Parliament elections, in a few short weeks, are a key event in the political life of the Union. This time is different, we are told. The experiment of declaring Spitzenkandidaten undoubtedly adds political drama—drama that continues here later this afternoon with the presidential debate among the candidates. We cannot yet judge what impact, if any, the Spitzenkandidaten will have on the future leadership of the Commission on the Union’s policy choices. 2 This quote from Fritz Stern is one of the most frequently quoted WWI references because it captures the long-lasting consequences of that war. The state of our unsettled Union 855 The elections draw our attention to the political climate in Europe. Turnout will be a crucial barometer of the attitudes and political engagement of European citizens six years after the outbreak of the global financial crisis. Low or declining turnout will undermine the European parliament’s claim to representativeness. The eventual division of seats between the two largest groups, the European Peoples Party (EPP) and the Socialists Group (Group of the Progressive Alliance of Socialists and Democrats) will count as these two parties continue to dominate the parliament. The performance of Euro-skeptic parties both of the radical left and right will be eagerly watched. It is likely that the first truly transnational European elections will be a major success for EU critical parties. The political complexion of the house will affect the legislative battles ahead and the leadership of the Commission. There is much we do not know: • • • • Will the Parliament coalesce around the candidate of the party with the largest number of seats—that is behind either Jean-Claude Juncker or Martin Schultz? How will the European Council react to the outcome of the election? What coalitions will the member states forge around which candidates in the intense post-election period? And how will the election of the Commission President play out in tandem with the other EU roles to be settled this year (those of the European Council President and High Representative)? Is the Union ready for this experiment? Neither the Parliament nor the European Council will want to trigger a constitutional crisis but they may not be able to prevent it. We can anticipate fierce battles within the Parliament; between the Parliament and the European Council; and among the member states over the new procedure and the distribution of roles. Once the votes are counted and seats distributed, a potent cocktail of member state, party, and institutional politics will begin in earnest. We know with certainty that no one party in the parliament will have enough votes to elect the Commission president on its own. Thus, coalition politics will be the order of the day. If the radical left and right perform as well as anticipated, this might shape a grand coalition not just for the election of the Commission president but for the entire legislative period ahead, with all of the attendant consequences for EU strategy and policy. One or more of the Spitzenkandidaten may survive to the end game or they may be replaced, given the exigencies of member state and institutional politics. Whatever its final complexion, the new collective leadership of the Commission, the European Council and the European External Action Service (EEAS) will confront a crowded agenda as the Union seeks to stabilize a weak recovery, move beyond crisis mode, and address intensifying external pressures. 3. A time of transition This is a time of transition not just a year of transition for the European Union. It has been tested—tested perhaps like never before—during the Eurozone crisis. The Union’s legal framework, its governance structures, its ability to respond to pressing 856 I•CON 12 (2014), 853–863 societal needs and relations among the member states, have all been placed under severe since 2009. The Union managed to battle through the acute phase of the crisis albeit at a high social, political, and economic cost. It is now in mending mode but its troubled member states continue to face a legacy of hardship and debt. Moreover, taxpayers in creditor states feel exposed to the risks they have taken in bailing and backing the currency. Both creditor and debtor states were caught in a vice-like grip by the markets and their banking systems. It is neither wise nor feasible to attempt to predict the “state of the Union” by the end of this decade, notwithstanding the emphasis on 2020 in many EU policies. Taking a bird’s eye view, however, it is possible to sketch in broad outline a number of underlying trends that the crisis dynamic has unleashed and a number of issues that the Union is faced with. The last six years have brought a chasm between the world of the Brussels/Frankfurt beltway and domestic politics in the member states sharply into focus. The division of politics in the Union, exemplified by the striking resilience of the EU’s policy-making system, on the one hand, and deep political and economic fissures across the member states, on the other, was revealed. At several stages during the acute phase of the crisis, it appeared as if the euro would implode, given the relentless pressure on individual member states and on the currency union as a whole. Implosion was, however, averted, because the Union’s decision-making capacity proved robust enough to prevent collapse.3 The governments of all euro states, both creditor and debtor, were forced to agree to highly controversial and costly policy interventions. The European Council and the European Central Bank (ECB) muddled through by addressing the immediate pressures of the crisis, while building more robust institutions and policy instruments for the longer term. Crisis management and mending went hand in hand. Legal and institutional frameworks were stretched but not broken. Summer 2012 was the turning point. Chancellor Merkel and ECB President Draghi, working in tandem, orchestrated the delicate process of delivering a consistent and credible signal to the markets. President Draghi made the decisive announcement in London that “[w]ithin our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”4 Financial market actors began to accept that those responsible for the euro area would indeed do “whatever it takes.” Extensive political capital was invested in rescuing the currency, particularly by the heads of state and government, and the ECB, which put the credibility of the latter on the line. Governing parties carried the political weight and bore the political costs of the rescue. The resilience of the policy-making system masked powerful center–periphery dynamics that were, and continue to be, at play. There is a deep fracture between the countries in the south and Ireland—an honorary member of Club Med—and the creditor states to the North. All economic indicators point to a fractured euro area. The measures taken included four rescue packages, banking support for Spain, new laws on economic governance, and banking Union. 4 Global Investment Conference in London, July 26, 2012. The Draghi speech was followed on August 2 by the announcement of the Outright Monetary Transactions (OMT) package. 3 The state of our unsettled Union 857 However, because of its consequences for individuals, families, and society, unemployment is perhaps the most compelling indicator of all. At the end of 2013, the gap in the average unemployment rate between the two best performing states (Austria and Germany 5 percent) and the two worst (Greece and Spain 26 percent) was 21 percentage points, and the gap for youth unemployment was almost 50 percent. This is a failure. Europe’s youth in fiscally troubled countries are experiencing a level of mass unemployment that should not be acceptable in one of the world’s richest continents. Fractures between states have been accompanied by fractures within countries because of the distributional consequences of the crisis. The effects of unemployment and welfare cuts on those most vulnerable undermine a core European value: a commitment to well-being for all. Although achieving a rational macroeconomic policy is deeply problematic in the Union, mass unemployment and growing inequality should not be tolerated as the “new norm.” At issue is the question of whether the euro area will offer a return to prosperity for all, or just constrain governments. Turning now to the dynamics unleashed by the crisis, I offer four analytic propositions about the state of the Union arising from observable trends in this phase of European Union integration. The four propositions are: (i) contestation and politicization are here to stay; (ii) the euro area mark 2.0 implies “more Europe”; (iii)“more Europe” in the euro area implies even more differentiation in the Union; and (iv)the return of geopolitics puts the spotlight on the Union’s role in the twentyfirst century world politics. 3.1. Proposition 1: a Union contested The enduring images I carry of the crisis are the colored graphs of “bond spreads” that became the staple diet of prime-time news; mass anti-austerity marches; and European citizens burning the European flag because of its symbolism. The Union undoubtedly moved “closer to its citizens”, as they learnt what it meant to share a single currency. Domestic crisis elections were marked by high levels of volatility and incumbency losses, as voters demanded hyper-accountability. Since 2009, governments in almost all states have been defeated, in some cases by historically high margins; and once-mighty political parties have been brought low. The widespread punishment of incumbents offered a political opening to anti-system parties enabling them to gain further traction with dissatisfied voters. The performance of Beppe Grillo’s 5-Star Movement in the 2013 Italian elections when polling over 25 percent of the popular vote in contrast to Mario Monti’s Civic Choice which could only muster 10.5 percent, is a striking example of a more widespread phenomenon. Disaffection and protest have generated a politics of anti-politics in many states. The performance of the Front National (FN) in the March 2014 muni cipal elections in France, and the abysmal performance of the Socialists just two years into the Hollande presidency, reveal the political cost of governing in hard times. The 858 I•CON 12 (2014), 853–863 EP elections are likely to confirm this trend. The polls suggest that more Europeans will vote for populist, Euro-skeptic, and radical parties of the left and right than they did in 2009, and that in the next parliament there may well be four political groups to the right of the EPP. National political systems are under strain across Europe, and national democracies struggle to respond to voter demands. Those political forces committed to maintaining and strengthening this Union must begin to ask what weight democratic politics can bear, and how contestation in and about the EU can be politically managed, so that it does not put more stress on the system than the system can bear. Politicization might well lead to such a high level of dissent that even the elite consensus on which the Union rests will break down. Or it may in time enhance the legitimacy by furthering the debate on the political and policy choices facing the Union. This depends both on the agency of politicians and on economic recovery. Politicians who aspire to govern Europe cannot insulate EU policy-making and the Brussels beltway from open political debate any longer. While maintaining their programmatic differences, centrist political forces of both the left and the right must be willing to engage in robust argument about the successes, challenges, and—yes!—failures of the EU. Nor should they overreact to the arrival in the European Parliament of more EU-critical forces. Not unexpectedly, the depth and duration of the crisis have affected public attitudes toward the European Union, eroded trust in its institutions, and undermined the value placed on membership. Trust in the Union has declined from 48 percent in the fall of 2009 to 31 percent in the fall of 2013. These global figures hide significant variation across the member states. There is a major decline among the most economic ally stressed states, from just under 80 percent in 2002 to 35 percent (–53 percent) in 2013. Moreover, individual European citizens have little sense of political efficacy. Two-thirds of respondents do not think their vote counts in the Union, according to the latest Euro barometer (fall 2013). Denmark is the only country where a majority of voters claim to have influence. At the opposite end of the spectrum, in ten of the twenty-eight member states fewer than one in ten citizens think their votes count. Given the increased visibility of the Union in the member states and the politicization of European issues in elections, European elites should not ignore these findings. The Union must move beyond the politics of “There is no Alternative” (TINA) because there can be no democratic politics without voice and choice. 3.2. Proposition 2: more Europe This contested Union faces powerful functional pressures for “more Europe” within the euro area as the Union addresses the design faults that were so harshly exposed. “More Europe” implies a more intrusive Union in the euro states and further centralization at the supranational level. Member states are increasingly subject to more stringent surveillance, reinforced penalties, and constraint on national policy choice. The growing policing role of the Commission and member states as assessors of their partners’ national budgetary strategies, and, in extremis, as imposers of sanctions, introduce a The state of our unsettled Union 859 strong supranational dimension to the economic policy with all the attendant implications for national politics and democracy. The new system greatly strengthens the responsibility to the collective and places further limits on the freedom of governments to respond to their electorates. Co-responsibility within the euro area comes at the price of responsiveness at domestic level. The step change in economic governance has gone hand in hand with deeper integration, notably the establishment of a banking union. The centralization of supervision in the ECB represents a major federalization of power. Given the scope and the ambition of this development, and the pronounced heterogeneity of European banking, the creation of a banking union will not be without tension. Nonetheless, banking supervision is decisively switching from the national to the European arena. Beyond supervision, a Single Resolution Mechanism (SRM) is a necessary complement to ECB supervision. Agreement on the SRM was reached on March 20, 2014. The complexity of the final deal is underlined by its dual character; an SRM Regulation under EU law and an intergovernmental agreement addressing elements of the Single Resolution Fund (SRF). The deal is truly significant because the Resolution Authority has a backing fund which will be built up over eight years and its resources will be gradually mutualized during this period. This breakthrough on mutualization, albeit on a very limited scale, is another step change in the euro area. Pressures for further centralization will not rest with banking union. Ahead are battles about how much more centralization will be needed. Already the euro area has been forced into deeper integration which, in turn, creates tension with those outside. This brings me to my third proposition: yet further differentiation. 3.3. Proposition 3: yet further differentiation Up until the 1990s, membership in the European Union implied agreement on a common constitutional and legal order, as well as shared institutions based on common principles. Successive enlargements and diverse preferences among the member states gradually led to more flexibility. The euro states have been propelled into deeper integration, including important measures adopted outside the treaty framework and the euro area is now the core of the Union given the ties that bind these states. Non-euro states are very sensitive to these developments as they seek to protect the unity of the Union’s institutional system and the openness of the euro area. The ten non-member euro states do not form a homogenous whole, but rather comprise two groups: those who have decided to opt-out (the UK, Denmark, and Sweden), and those who are committed to joining if circumstances allow. The position of the United Kingdom is the most problematic. “Europe” has become one of the most salient and toxic issues in UK politics. David Cameron’s Europe speech in January 2013 was groundbreaking for his country’s relations with the Union. In it he set out the road map of what he, as UK Prime Minister, would do if his party wins the 2015 general election. His intentions were clear; he is committed to renegotiating the terms of UK membership after the election followed 860 I•CON 12 (2014), 853–863 by an “in”–“out” referendum by the end of 2017.5 This diminished the UK’s influence in the Union during this critical period. The leader of the opposition, Ed Miliband, has stated that he will not hold a referendum on the terms set out by Cameron, but has pledged to hold one in the event of a new treaty involving a significant transfer of power. The British question would receive far more attention on the European agenda if these were normal times. The crisis, however, has monopolized political energy and relegated the position of this large member state to the margins. In March 2014, the Prime Minister set out the key changes he is seeking for a new settlement with the Union. Although stated in general terms, essentially, he wants to end the UK’s commitment “to ever closer union,” repatriate some powers, strengthen the blocking powers for national parliaments, reduce red tape, free the police and justice systems from Brussels interference, and control the access of EU migrants to UK welfare benefits.6 The other member states have been careful not to make any concessions at this stage, but the Cameron shopping list resonates with the sentiments in a number of other countries. All indications are that the UK’s partners are prepared to negotiate a deal but are unlikely to offer major changes which in turn would make it more difficult for Cameron to present the outcome convincingly as a “new settlement” in an “in”–“out” referendum. If those advocating exit prevail, the UK would have to seek either a bilateral deal, like Switzerland, or membership of the European Economic Area (EEA) like Norway. Just how willing the Union would be to grant a large state this status, given that it was developed with small, rather than large, states in mind, is impossible to predict. In any event, generous market access would turn the UK into a taker, rather than a shaper, of European regulation. Of course, by then, the Union may want to develop a new kind of privileged partnership for a number of large states at its borders, such as Turkey, Ukraine, and perhaps then also the UK. This is not just a British issue, but an important challenge for the EU as a whole. It may be tempting to regard the departure of an “uneasy” partner with a certain amount of equanimity, especially as its prime minister introduced his demands for reform at a time when the EU was already under severe strain. An EU–UK divorce would, however, carry great dangers for the Union in the long term. It would embolden anti-EU forces in many states, and introduce a degree of contingency to the membership of all. The UK would be a powerful reference point for those opposing integration in all member states. This could destabilize the Union, and perhaps transform differentiation into disintegration. This brings me to my final proposition, the return of geopolitics and hard security. The Prime Minister was motivated by a desire to contain the Euro-skeptics within his own party, counteract the rising popularity of Nigel Farage and UK Independence Party (UKIP), and put the Labour Party under pressure on Europe. 6 David Cameron, The EU Is Not Working and We Will Change It, The Telegraph (Mar. 15, 2014), available at http://www.telegraph.co.uk/news/newstopics/eureferendum/10700644/David-Cameron-the-EU-isnot-working-and-we-will-change-it.html. 5 The state of our unsettled Union 861 3.4. Proposition 4: the return of geopolitics and hard security During its formative phase, the European Union was insulated from geopolitics because of the bipolar character of the international system and the security blanket provided by North-Atlantic Treaty Organization (NATO) and Pax Americana. The fall of the Berlin Wall and the subsequent disintegration of the Soviet Union opened the way for a peaceful unification of the continent, the Balkans aside, and for a peace dividend that freed European states to spend less on security and defense. A united Germany reemerged as a power bridging the east and west of the continent. All of these developments confirmed and reinforced the EU’s self-understanding as an inward-looking peace-loving power built on the deployment of “soft power.” It allowed the EU to exist in a geopolitical bubble. The Arab Spring and its aftermath were a reminder of Europe’s unstable neighborhood but events in the east amount to a shock. Clearly, the threat of war has not disappeared as Russia seeks to reassert its dominance in its neighborhood. Moreover, the turmoil in Ukraine was triggered by a deep conflict between forces wanting to embed Ukraine in a close relationship with the EU and those favoring a strong relationship with Russia. The European flag was flown in defiance of Russia by the protesters in Kiev. If the crisis cannot be de-escalated, the EU and the US is forced to strengthen sanctions and offer yet more support to the beleaguered government in Kiev. For certain, we can say that hard security and traditional “high politics” is back in European affairs and high on the Union’s agenda, with respect to Russia and Ukraine, but more generally as well. The crisis has already tested, and will continue to test, the capacity of the Union to agree collectively on core foreign policy interests and actions when faced with a serious external security challenge on its borders. The crisis also puts EU energy policy high on the agenda and will provide an important impulse to reduce dependency on Russian oil and gas. 4. Whither the transition? For the foreseeable future, the state of this unsettled union will be “transition.” Indeed, transition or “becoming” is a permanent feature of the dynamic of integration. Thus the response to the crisis displayed both continuity and innovation—a trend which is likely to continue. The four dynamics I have outlined in this address—politicization, more policy integration, further flexibility, and the new consciousness of geopolitics—will have a major influence on the next chapter of the Union’s history. There is a profound tension between growing public contestation about Europe and the deepening of integration through technocratic policy solutions. Deeper integration in turn creates new tensions between insiders in the Eurozone and outsiders. And the return of geopolitics highlights the tension between the economic interests of each member state and the challenge to the European order emanating from Russia. The Union may not have the capacity to fully resolve these tensions; political systems rarely do. Nonetheless, the challenge for Europe’s collective leadership is to find ways of mediating them. 862 I•CON 12 (2014), 853–863 Rebuilding trust and fashioning an adequate consensus for the medium term is essential to managing these deep tensions. Rebuilding trust implies that all member states, particularly those in the euro area, take seriously their responsibility to each other, and ensure that in their domestic policies and practices, they do not endanger the well-being of partners. Rebuilding trust also depends on ensuring that Europe’s financial system is adequately regulated so that the public bailing out of banks is a last not a first resort. Rebuilding trust requires an open public debate within the member states and across the Union about shared priorities and choices for the next decade. And rebuilding trust implies taking “subsidiarity” really seriously so that the member states are not caged and rendered powerless. I end with a political message to Europe’s leaders who take power in November 2014. (i) Do not be complacent: Now that the market stress has abated, it might be tempting to think that there has been sufficient retrofitting of the Economic and Monetary Union. This would be a mistake, because the legacies of the crisis still need to be addressed, and the euro area is not yet equipped to deal with future crises. (ii) Do not be tempted by big-bang treaty change: A new constitutional convention may appear attractive, but given the experience of the Constitutional Treaty and the outcome of the referendums in 2005, asking the member states to negotiate and ratify such a treaty at this fragile juncture would overburden the domestic politics of many member states and provide Europe’s populist parties with an appealing political opportunity. (iii) Focus on the big questions: Europe faces many big issues such as the search for a sustainable growth model, energy, research and education, welfare provision, poverty, migration, and changing demographics. Rather than having sterile debates on the “future of Europe,” put the big issues on the table and facilitate deliberation across the Union and within the member countries on the choices we face. (iv) Focus on the global: The euro crisis turned the Union inwards as so much political energy and capital went into the rescue effort. Yet as Europeans, we live in and struggle with an age of global politics. Every European issue has a “global” dimension that would be folly to ignore. Moreover, Europe must play is role in the difficult search for transnational and global governance in this increasingly multi-centered world. (v) Bite the bullet on limited fiscal federalism: Economic governance cannot rely only on indicators, targets, monitoring and surveillance. The dismal experience of the hard hit countries demonstrates the costs of supply side adjustment without a macroeconomic capacity. Building a limited fiscal union—and I emphasize limited—beyond fiscal surveillance is necessary. (vi) Recognize the trials and tribulations of reform: Many member states face a decade of reform that address embedded practices and institutions. It is precisely those states where trust in the EU and in national governments is lowest, that most is demanded. Reform cannot be achieved by external diktat The state of our unsettled Union 863 alone. Democratic politics will not bear it. Thus in designing reform programs, it is important that the Union develops incentives and if necessary lubricates the process with side payments. If Robert Schuman were here today, what would he say about the state of this unsettled Union? Shortly before he died in 1963, Schuman had said that “the hard lessons of history have taught me not to trust hurried improvisations or overly ambitious projects.”7 Throughout its history, the Union has attempted to steer a course between improvisation and overly ambitious design. The crisis, however, was dominated by “hurried improvisations.” Now is the time to go beyond this while keeping in mind Schuman’s guidance on overly ambitious projects. We must remember that this Union has been crafted by artisans, not architects. It has achieved an enormous amount in just sixty short years, and we should have the confidence as Europeans to face and find a future that builds on our values, institutions, and creativity. 7 EP Library, Robert Schuman and May 9th, European Parliamentary Research Service (May 9, 2013), available at http://epthinktank.eu/2013/05/09/robert-schuman-and-may-9th/.
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