Working Paper
Faculty of International Business and Economics
Poznan University of Economics
WP/02/2016
Michael Berger
Economic theory of European integration
Poznań, May 6, 2016
1
Economic theory of European integration
Michael Berger
Keywords: energy policy, European Community, European Commission, international
political economy, customs union, economic integration, democratic deficit
JEL: E02, E13, E42, E52, E61, B2, F5, F10, F15, F30
Abstract
This paper aims to provide a qualitative analysis of the concepts of political and
economic integration. With the current European crisis that manifests itself in various
different ways, the achievements of the European integration process so far have
turned fragile and show strong signs of growing divergence between the respective
member states. Integration theories are back on the agenda coupled with the neofunctionalist concepts of political integration and spill-over effects. Difficult tradeoffs between efficiency, stability and sustainability are to be made with exogenous
influences and rapid globalization in place, and the ambitious challenge for 28
different member states to agree on almost every topic. The successive enlargements
can indeed be regarded as a very successful foreign EU policy so far but will this be
the case with further enlargement? Will the notion of an ever closer union be
successfully implemented or will the integration process come to a halt with the
looming threat of a British exit?
This work is based around four sections and its main contribution is to show the
different theories that have developed in the field of European integration as well as to
provide an explanation on the current debate of integration and enlargement. The first

Paper has been accepted for publication by Tadeusz Kowalski. The author wishes to thank Ida
Musiałkowska for comments. All remaining errors are those of the author.
The author is a PhD candidate at the Faculty of International Business and Economics, Poznan
University of Economics.
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section of the paper is devoted to a brief overview on the basics of integration where
the various stages of economic policy integration will be analysed as well as concepts
and theories surrounding regional integration and functional spill-over effects. The
second section focuses on the emergence of economic integration within Europe and
gives an overview of the different stages of EU enlargement and the adoption of the
single common currency. The third section explores the EU’s strategy on further
enlargement and the possible effects that would come with it. The fourth section
covers the Europeanization of institutions and tries to find answers on issues such as
the perceived democratic deficit or the emergence of a new super state. The paper
closes with conclusions.
1. Basics of integration
The current economic crisis within the EU has severely shaken the very notion of
European integration and has caused increasing doubts about the future outcome of this unity,
in particular with regards to its stated goal of an ever closer union 1. The recent euro crisis has
revealed structural and institutional faults of the initial integration process, which have led to
growing tensions and internal divisions between member states. In addition, the current
migration crisis is testing the values on which the EU was founded.
What happens in Europe over the next few years will be fundamental for the future
collaboration within the Community and will be of decisive importance. Theories of
integration and common governance are back on the agenda, coupled with the notions of
solidarity and cooperation. Although the EU has long been seen as a remarkable political
achievement, encouraging economic growth by ways of economic and political integration,
fundamental discrepancies had been disregarded as long as the Community seemed to work
1
Preamble contained in the first paragraph of the Treaty Establishing the EEC, 25.3.1957, also to be
found in the Treaty of Rome.
3
well. However, serious challenges through external factors as well as the divergence of
national interests are constantly leading to a loss of efficiency and the valid question as to
whether such loss could be compensated by creating “more Europe” and shifting more
competencies to the European Commission and the Parliament.
The question thus, that needs to be raised in this context is how the member states will
redefine their interests, is Brexit2 a real threat or is it just a way of pursuing national interests
within a broader cooperation framework within the EU? Is the Visegrád group3 going to
enhance the cleavages between member states in the view of the current crisis and threaten
the existence of our “pluralistic security community” [Deutsch 1957]? According to Hanson,
a profound transformation in the pattern of international relations is in existence, embracing
North America and the EU, where states within this community share common principles and
normative values, such as human rights, market economics and liberal democracy [Hanson,
1993]. The transition from initially six member nations of the European Coal & Steel
Community (ECSC) to 28 of today’s EU has created an increasingly complex and
multilayered system with different views and opinions regarding the scope and extend of
integration of the Community.
A certain degree of divergence within the EU is not an odd thing at all, since member
states engaged in cooperative activities right from beginning, “even in the absence of a
harmony of interests” [Axelrod, 1984]. In the context of globalization, even a common
conception of Europe might not be the ultima ratio, for, as Klaus Armingeon rightly points
out, “the EU is exposed to and suffers from global challenges almost to the same extend as
national states” [Armingeon, 1997]. He points out that globalization might lead to a decline
of national governments´ capabilities and questions whether the European Commission can
easily compensate for such a loss of efficiency, by shifting national competencies to this
institution.
As mentioned, the European integration process has evolved a gradual transference of
authority and power to the EU institutions with the defined goal being the notion of an “ever
closer union” in the respective Treaties. The future development of a closer European
integration will therefore decisively depend on the willingness of member states to expand
the common policies to areas such as foreign & security policy, common energy policy, a
2
Withdrawal of the UK from the EU, shortened after the words “British Exit”. A referendum is to be held in 23.
June, 2016.
3
An alliance between Poland, Czech Republic, Slovakia and Hungary.
4
monetary risk-sharing mechanism beyond a national service, common tax laws, as well as the
introduction of a common constitution for the EU. In order to be able to evaluate whether this
possible and desirable, one has to evaluate the current integrational policies adopted so far.
Integration denotes the act of bringing together various components into a single
system that functions as one. Economic integration in this respect, explains “the process in
which two or more states in a broadly defined geographic area reduce a range of trade
barriers to advance or protect a set of economic goals”4. Such integration can take several
forms representing varying degrees, from a free-trade area with the abolishment of
quantitative restrictions between member states, over a market union, eventually leading to an
economic union. In this respect, total economic integration of the EU would be the ultimate
stage with the Commission as a supra-national authority being the agenda setter for a wider
and more coherent political role, including a monetary and fiscal policy, a common defense
and energy policy or even a common constitution of Europe.
Whether this is achievable in the future will depend on various factors, but a look at
the various stages in the past will be helpful; the initial integration process of the EU was
rather characterized by complex patterns of bargaining and trade-offs between benefits and
burdens of member states, rather than unconditional cooperation towards a common goal
[Balassa, 1961]. Surely, political rather than economic reasons were on top of the agenda
when the ECSC was established in 1951, the primary objective being the avoidance of future
wars between France and Germany. Thus, European security was the main aim of the ECSC,
and sectoral market integration merely the means. Pascal Lamy5, former European
Commissioner for Trade, significantly noted that ‘cooperation on coal and steel was the first
thing the founding fathers of the European project agreed upon. It was a trick they played:
they wanted a political union and the easiest place to begin was a common market in these
two basic products’ [Klein, 2002].
During the course of the European Economic Community (EEC) however, the focus
changed and subsequent developments6 were rather driven by market integration and
4
Encyclopædia Britannica Inc., 2016, accessed at http://www.britannica.com/topic/economic-integration.
French political consultant and European Commissioner of Trade from September 1999-November 2004.
From 2005-2013 he was Director-General of the WTO and is currently Honorary President of the think tank
„Notre Europe”.
6
Common European foreign policy, European Defence Community, European Political Cooperation (EPC) in
1970, Common Foreign and Security Policy (CFSP) by the Maastricht Treaty, environmental policy, energy
policy or migration policy.
5
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selective common economic policies. The Treaty of Rome in 1957 and the creation of the
common market were clearly evidence of this change towards an economic dimension of the
integration process. Subsequently, European integration took mainly place through
enlargements and accessions by means of promoting full membership and economic
advantages of the community. Accordingly, a number of integration theories developed
which sought to explain the outcome of the integration process, focusing on security and
welfare issues, as well as the capability of regional organizations to better settle conflicts
between neighbouring states, compared to universal organizations [Börzel, 2013]. However,
it needs to be taken into account that European integration theory does in fact not comprise of
a single homogenous research agenda but rather a wide range of theoretical approaches that
differ with regard to their ontological and epistemological assumptions as well as their
analytical focuses [Bergmann and Niemann, 2015].
The decisive theoretical contributions to the topic of European integration were Jacob
Viner’s and Bela Balassa’s works, which elaborate on the theory of preferential trade
agreements. Viner introduced the distinction between the trade-creating and trade-diverting
effects of customs union and his main contribution was the welfare consideration within the
theory of international trade. Drawing on the work of Viner, Bela Balassa made his
contribution by defining and identifying the stages of regional integration by specifying his
view on economic welfare within functional integration. Balassa defines economic
integration as “the abolition of discrimination within an area” [Balassa, 1961]. According to
him, there are five different stages of economic integration: a free trade area, a customs
union, a common market, and finally an economic union [Ibid., 1961]. The following section
outlines Viner’s work as well as the Balassa stages of reginal integration and reviews the
economic integration with regards to further developments.
1.1.
Stages of economic integration
Integration theories started to emerge in the 1950s and 1960s with the introduction of
neofunctionalism and intergovernmentalism which mainly sought to explain the outcome of
the integration process, analyzing trade integration gains and explaining the theoretical
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implications. Questions as to why states desire to participate in an integration process and
what benefits they envisage to achieve through this process started to emerge with different
scholars elaborating on this theoretical field. Tibor Scitovsky for instance, argues that
economic integration helps improve effective competition by means of loosening
monopolistic and oligopolistic market structures within individual countries [Scitovsky,
1958]. Earlier on, in the 1950s, Viner tried to explain trade gains from integration and the
theoretical implications of preferential trade agreements. His static analysis of economic
integration divides possible effects of economic integration into the effects of trade creation
and trade diversion. Viner described trade creation as the process where countries enter into a
trade agreement and therefore trade shifts from the high cost supplier to the lowest cost
supplier within the union and asserts, that trade creation raises the home country’s welfare,
while trade diversion7 lowers it [Viner, 1950]. Thus, according to Viner, a customs union is
economically justified if it leads to a trade creation, but in reality, the welfare impact of
customs union formation is at least ambiguous. According to Johnson, the concept of trade
creation and trade diversion would need to be defined more on the basis of welfare effects
rather than in terms of trade flows [Johnson, 1965].
Viner, who took a broad view of custom unions and strongly favoured free trade,
referred to a customs union as not always beneficial to the countries involved, the
determining factors would rather depend on the respective circumstances [O`Brien, 1976].
Indeed, he regarded the relationship between economic union and political union as a very
important one since a customs union could be regarded as a step towards political union and
therefore would help achieve a lasting peace between the countries concerned. Viner puts this
issue within the historical context and shows that most customs unions formed in the past had
actually been driven by political and not economic considerations, with the most
economically beneficial customs unions being the hardest to form [Viner, 1950]. In this
context, he initiates the theory of “second best”8 where governments create customs unions,
however motivated by their wish to simultaneously satisfy both free traders and protectionists
[Ibid., 1950]. His general conclusion concerning customs unions is rather negative, in as
much as he asserts that such a union is “unlikely to yield more economic benefit than harm,
unless it is between sizable countries which practice substantial protection of substantial
similar industries”, i.e., unless strict circumstances prevail. In conclusion Viner’s theory
7
Trade diversion in this context means the welfare change due to the replacement of imports from a low cost
source by imports from a higher cost source.
8
See Viner’s wool and wooden cloth example in “The Customs Union Issue”, 1950.
7
effectively stipulates that countries are motivated to integrate if integration is likely to
produce trade creation and static gains more than trade diversion and losses. James Meade
argues on the point of trade creation and diversion that Viner’s analysis would only apply
under conditions of inelastic demand and total elastic supply, something Meade calls trade
expansion [Meade, 1955b]. Indeed, static concepts are ill-suited to dynamic measurement and
cannot appropriately be used to measure growth effects. In addition to Meade, other
economists like Lipsey, Johnson, Lancaster, Corden, Cooper and Krauss commented on
Viner, so for instance Lipsey on Viner’s implication of welfare judgment [Lipsey, 1957], or
Corden on the assumed constant cost issue, where Viner’s concept of the nature of costs in
international trade tries to explain the cause and the mutual beneficiality of international trade
by international differences in relative costs of production [Corden, 1972].
The general criticism of the customs union theory is that it builds on strict
assumptions of perfect competition where it only deals with static welfare effects, and the
outcome whether customs unions have positive or negative welfare effects depends highly on
the respective situation in which every member state is practicing protectionism. As already
mentioned above, the static analysis of integration cannot appropriately be used to measure
growth effects and new economic integration theories added a new dimension to this area of
study by introducing the concept of dynamic effects of economic integration. Balassa’s
dynamic theory effectively proved that static analysis was simply not enough to fully analyze
welfare gains from economic integration. His work listed the principle dynamic effects of
integration as large-scale economies, investment activity, productivity growth, technological
change, as well as the amelioration of market structure and competition [Allen 1963, p. 451].
Balassa’s theoretical contribution from 1961 to the issue of integration was
remarkable; he not only placed the free exchange area and customs union right at the starting
point and foresaw this step in direct succession, he also brought the monetary union into the
picture and anticipated the decline of the international monetary system order that was in
place back then, i.e., the Bretton Woods Agreement. In trying to capture the complexity of
market integration he distinguished five stages of economic policy integration, which will be
described briefly:
(I)
Free Trade Area (FTA): countries abolish under an agreement tariff and
quotas on imports within their area while retaining their own restrictions from
all other countries. Balassa sees the issue of a trade deflection here, where
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products from outside the FTA enter the member country with high tariff
through a member with low tariff. This could be avoided through a declaration
of origin in order to distinguish from products produced in the FTA.
(II)
Custom Union (CU): countries go a step further and establish a common
tariff within their trade area. They remove all internal quotas and apply one
common external tariff.
(III)
Common Market (CM): under this Agreement member states are allowed the
free movement of production-capital and labour within the common market
area. All restrictions on trade in products as well as movement of labour are
abolished.
(IV)
Economic Union (EU): this in principle is the common market agreement in
place, harmonized however on certain economic policies, such as market
conduct, structure and performance.
(V)
Total Economic Integration (TEI): an economic union, with unification of
monetary, fiscal, social policies, including an inter-state solidarity. A supranational authority sets incentives, coordinates and implements decisions.
At first glance the first three stages seem to refer more to market integration whereas
the later two bring in aspects of policy integration. However, the first three stages also bring
in elements of policy integration since this is a prerequisite for safety regulations and
stabilization purposes [Pelkmans, 1980]. Balassa’s stages are very convincing, it needs
however to be mentioned that they cannot be followed and explained in every situation
rigidly, the European Economic Community was for instance founded without the initial
stage of a free trade area, something that will be discussed in the following chapter. In
addition, there are other limitations with this classical view since it does not distinguish
between positive and negative integration, i.e., the removal of discrimination within national
economic policies or the transfer of powers to common institutions with joint exercise
[Tinbergen, 1954]. Table 1 below shows the attempt of a modified seven stage approach by
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the author, which is based on Balassa’s stages of economic integration but incorporates
further developments of today’s current situation.
Table 1: Modified stage model of economic integration
Description
Characteristics
Examples
FTA
Removal of internal tariffs & quotas with
NAFTA, AFTA, CISFTA,
national tariffs retained for outside trade
COMESA, GAFTA, SICA
Removal of internal tariffs & quotas with a
Andean Community (CAN), East
common external tariff
African Community (EAC),
Customs Union
MERCOSUR, Southern African
Customs Union (SACU),
Common Market
Free movement of persons, goods and services
EEA/Switzerland
within the community
Economic Union
Monetary Union
Stability & Growth
Harmonization of certain national policies and
EU, Caricom (CSME), Eurasian
transfer of policies to supranational institutions
Economic Union (EEU)
Single currency within the community with a
Central African CFA Franc, West
single central bank in charge
African CFA Franc, EURO
Harmonization of taxes and spending policies
(Fiscal Union)
Political Union
Creation of a European demos, issuance of
joint European debt instruments and shared
economic risks
Source: own depiction
In addition to Balassa’s first four stages, the monetary union has been added with the
member states deciding to abolish the national currency and incorporate a single common
currency within a specified geographical area.
Examples of the CFA as a common currency for the UEMOA 9 or CEMAC10 areas in
Africa or the dollarization of South American countries can be listed as well as the Euro
9
Union économique et monétaire ouest-africaine (UEMOA), consisting of Benin, Burkina Faso, Côte d’Ivoire,
Mali, Niger, Senegal, Togo and Giunea-Bissau.
10
within the Eurozone. In addition, a fiscal union with tax harmonization, a common
unemployment insurance scheme, and a common budget has been added, something that
indeed would add a new model of integration. A single fiscal policy could lead to the
rebalancing of fiscal rights and duties among member states and would be established on a
permanent basis, in contrast to the European Financial Stabilization Mechanism (EFSM) and
the European Financial Stability Facility (EFSF) which provides for temporary, last minute
and case by case interventions or the European Stability Mechanism (ESM) which works as a
crisis resolution mechanism to give financial aids to Eurozone countries in difficulty, for
exceptional reasons [Laruffa, 2014]. Finally, a last stage of total integration has been added,
that of a political union or a state union. If such a political union is the aim of European
integration, than we are currently at an intermediate stage with direct powers of enforcement
for the EU, a supranational Euro Council, a super-economic Commissioner and tight powers
of oversight of fiscal and macroeconomic policies still to come.
Balassa has always argued that Viner’s analysis of economic integration has almost
exclusively dealt with custom union issues among industrialized countries and subsequently
many studies have argued that economic integration should be treated as an approach to
economic development, not as a tariff issue [Jaber, 1971, Balassa and Stoutjesdijk, 1975,
Axline, 1977]. Thus, according to Shams, economic integration in developing regions of
Africa will not be about different degrees of preferential treatment agreements or the
promotion of intra-regional trade but rather about the enhancement of economic development
of its members in order to alleviate poverty, to promote health and education and to tackle
illegal border migration and all its associated problems [Shams 2003].
1.2.
Concepts & theories of economic integration
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Communauté Économique et Monétaire de l'Afrique Centrale (CAMAC), consisting of Cameroon, Gabun,
Republic of Congo, Equatorial Guinea, Central African Republic and the Tchad.
11
By examining the conditions that maximize trade creation and trade conversion,
economic integration theory helps to understand the effects of integration as well as the
economic rationale for pursuing such integration. The theoretical background of the most
influential theories shall help to analyze the different concepts employed by the integration
process of Europe. Regional integration theory comprises of six main theoretical approaches
which offer different ways of understanding the main issues arising out of this topic, but
European integration cannot be explained by coming up with just one of these theories; as a
matter of fact, the EU incorporates different aspects of all theories and many a compromise
agreement will involve overlapping theoretical views. The following shall offer a brief
introduction:
(I)
Federalism: the process of attempting to lead to a federation of states, it
ascribes political rights to the federal government and individuals rather than
the single nation-state. Federalists tend to see nations as artificial political
entities and see the real power in a strong federal union with a common desire
for security, prosperity, commonness and geographic proximity. Thus,
common interests which eventually lead to a federation as a united block are
key for a strong federal government, united within a common constitution or
charter. In addition, subsidiarity and multi-level governance is seen as the best
way to avoid the creation of a big and inefficient central state.
(II)
Functionalism: this approach focuses on trans-national cooperation, the
creation of international agencies with limited and specific powers defined by
the function they perform. Since states freely decide to join these functional
agencies, there is no threat of diminishing the nation state’s sovereignty. In
addition, through transfer of functional responsibilities to international
agencies, a working peace system could evolve with certain political decisions
taken at the lowest level of organization, for those directly affected by them.
Thus, flexibility is a very important aspect, since human needs rather than the
creation of a supranational state, are the priority.
(III)
Neo-functionalism: influenced by functionalism, the model intends to
strategically replace power politics with a new supranational body in specific
sectors, executed in various steps of low and high politics. By way of
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functional spill-over, sectoral integration would lead to the unintended
consequence of promoting further integration in additional areas. Economy
and institutional issues in form of a high authority play an important role for
economic issues affect all member states and a high authority can act as a
guarantor of their common will within the community. As integration becomes
deeper, decisions will be transferred to be taken by common institutions rather
than national governments with social and economic groups trying to
influence the high authority.
(IV)
Intergovernmentalism: views coordination and agreements between states as
important and far from being obsolete, accepts that nation-states are the last
recipients of sovereignty. The emotional link of the citizens is seen as a unique
feature and member states eventually control the nature and pace of the
integration process, rather than supranational organizations. Accordingly, the
dominant mode of policy-making is intergovernmental bargaining and
consensus building techniques.
(V)
Liberal Intergovernmentalism: further developed theory which came about
with the renewed integration process in the mid 80s and some modifications
with regards to preferences and common values as well as interests. The EU is
conceived as a gathering of sovereign states which remain in control over their
own decisions and therefore integration should be based on each member
state’s government rather than European institutions, the people, or any other
agent. The common institutions are seen to be mere common platforms which
help to trade-off, negotiate and solve various issues at international level. The
central role of the European Council is recognized since it represented by the
member states and acts as the main decision making body of the EU.
(VI)
Realism: realism considers that the nation-states are unitary rational actors
and key in international politics since they operate in an environment where
there is no higher sovereign power. Thus, realism is a state-centric theory with
a focus on conflicts but with a strict division between domestic and
international politics and therefore attaches very little significance to
international institutions.
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In a closer look at the above, federalist and functionalist theories provide an
interesting normative account of international integration, however, they can only give
answers in the development of the EU in a limited way since more comprehensive concepts
have been introduced in the following years. Federalists had the outcome of nationalism and
the outbreak of WW II in mind and regarded the absolute sovereignty of states as prone to the
rise of totalitarian regimes through their desire to dominate one against the other [Spinelli,
1941]. Altiero Spinelli’s Ventone manifesto is a political statement towards a federation of
European states with the focus of forming a new political system through a restructuring of
politics and extensive social reform.
The most successful period for the application of the functional approach was
immediately after WWII up until the mid 70s, with David Mitrany having influenced these
theoretical arguments for regional and global integration. Mostly developed in Western
Europe, it was considered the proposed solution in order to bring different states closer
together and deal with international collaboration [Griffiths, 2008]. Mitrany promotes the
separation of technical and political issues to avoid conflicts between states and believes in
the spill-over logic, however, this view is based on a very optimistic perception that technical
cooperation will generate spill-over effects beneficial in other areas [Mitrany 2008]. This
spill-over issue had also been at the heart of Jean Monnet’s considerations towards a closer
integrated Europe through the appliance of the Monnet method of integration. Spill-over is
the process by which sectoral cooperation schemes create the need for further integration in
neighbouring areas, which again lead to new actions, eventually leading to a gradual erosion
of national sovereignty. Lindberg refers to a situation in which “a given action, related to a
specific goal, creates a new situation in which the original goal can be assured only by taking
further actions, which in turn create a further condition and need for more action” [Lindberg
1963]. Table 2 below introduces the elements of Monnet’s method:
Table 2: Elements of the Monnet method
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Source: Graph by Jean Monnet Chair 2012
Monnet’s method is being applied by his strategic thinking approach, using economic
instruments to achieve his goal, i.e., choosing the most important strategic area of his time to
start the integration process, the coal and steel sector. He promotes the real transfer of
national sovereignty to the supranational European High Authority, albeit limited initially, in
a step-by-step approach under the assumption of a spill-over process, or the functionalist
principle of “form follows function” [Mitrany, 1966]. This approach is clearly the opposite of
Spinelli’s federalist approach mentioned above. Although the Monnet method was successful
in the economic integration of a small group of countries, its approach has been criticized for
its elite decision taking by consensus behind closed doors, lacking transparency,
accountability or participation of the people by way of referenda. According to Lijphart,
Monnet’s model could be favoured nevertheless in situations where it would help to
overcome deep divisions within the member states [Lijphart, 1999]. The evolution of the EU
system has certainly been shaped by Monnet’s approach and this will be further discussed
under section 2 below.
Influenced by functionalism, neo-functionalism has developed to the most important
theory in explaining the European institutions. The American political scientist Ernst Haas,
the primary scholar developing this theory, assumes a functional spill-over, in which the
initial decision by governments to place a certain sector under the authority of a supranational
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institution creates pressure to extend the authority into neighbouring areas of policy [Haas,
1961]. Thus, with the strategic decision to integrate the coal and steel sector under the aegis
of a high authority, pressure had been exercised upon other areas to promote further
integration. The distinction between low and high politics is an important one, since neofunctionalists suggest the integration of initially low politics, those that draw little attention
from the media and the public and only at a later stage the integration of high politics, such as
a common military and defense policy, or a common constitution.
The European Commission which has been assigned the high authority status within
the EU has therefore the institutional task to provide ideas for deeper integration in various
areas, and while it is doing so by proposing regularly new policies or promoting new
enlargements, it assumes its function on taking decisions for a deeper Europe. George rightly
makes reference to an additional spill-over effect, the political spill-over, in which the
Commission and subnational actors such as lobbyists, international organizations or interest
groups create additional pressure for further integration [George, 1991].
As integration becomes deeper, decisions will be transferred to common institutions
rather than national governments. At the same time, social and economic groups will try to
influence the high authority, leading thus to more actors and sectors being involved in the
integration process. However, the theory does not take into account the special link between
the state and its citizens and there is no empirical evidence to support that people will just
transfer loyalty from national governments to a supranational European authority just because
they expect to receive a bigger economic benefit. Furthermore, the spill-over does neither
explain phases of slowdown of European integration nor the different crises of the EU.
The concept of intergovernmentalism was further developed in order to better explain
European integration which responded to the perceived weaknesses in neo-functionalism
[McCormick, 2008]. The special emotional loyalty of citizens is seen as an important issue
within this theory, denying thus the right of state leaders to transfer political power granted to
them through democratic elections, to international supranational organizations. Thus, the
state takes a centric view whereby its preferences “are the key determinant in any move
towards further European integration” [Cini, 2010]. Stanley Hoffmann’s claim that the
nation-state “had proven obstinate” [Hoffmann, 1966], is consistent with the later findings of
William Wallace or Paul Taylor, that “neo-functionalists had underestimated the resilience of
the nation-state” [Wallace, 1982, Taylor, 1983]. The accession of new EU member states in
16
1973 was prove of this, with Denmark, Ireland and the UK resisting the gradual transfer of
sovereignty to the high authority.
A similar view was supported by Alan Milward who believed that member state’s
governments rather than supranational organizations “played the central role in the historical
development of the EU and were strengthened as a result of the integration process”
[Milward, 2000]. Since states choose to integrate according to the national interest,
integration will not necessarily continue through a natural spill-over effect as predicted by
neo-functionalism for member states eventually “control the nature and pace of any further
integration”, thus also explaining the slowdown of integration in the past [Bache, George and
Bulmer, 2010].
Liberal-intergovernmentalism is naturally close related to the concept of
intergovernmentalism and conceives the EU as a gathering of sovereign states which remain
in control over their own decisions [McCormick, 2008]. Andrew Moravscik emerged as the
prominent representative of this theory arguing that the EU’s historic intergovernmental
agreements, such as the Treaty of Rome or the Treaty on European Union, were not
decisively promoted by supranational institutions, unforeseen spill-overs or international
collaboration of interest groups and lobbyists but rather by “a gradual process of preference
convergence among the most powerful member states, which struck central bargains among
themselves and offered side-payments to smaller member states” in order to create a common
interest for wealth and power among all member states involved [Moravcsik, 1998].
Subsequently, Moravccsik sees a rationalist framework of international cooperation, where
“limited powers are delegated to supranational organizations that remained more or less
obedient servants of the member states” [Ibid, 1998]. He develops a three-step model
consisting of
a) a liberal account of the development of national preferences,
b) an intergovernmental model of the relative bargaining power of states,
c) an institutional choice emphasizing the role of international institutions in
enhancing the credibility of interstate commitments.
The first liberal stage consists of an aggregate account of each respective nationstate’s interests brought forward on the negotiation table of the EU, reflecting the distinctive
17
economics, parties and values of each member state. Contrary to neo-functionalist believe,
however, the respective national interests are determined “back home” rather than shaped or
blurred by participation in the EU. In the second stage national governments bring again their
preferences on the negotiation table, with the difference that a supranational organization in
form of the Commission will now exert certain influence over policy outcomes. Thus, the
bargaining power of states will be an important factor in addition to possible side payments
and package deals offered. Finally, a rational choice of institutional preference is being put
forward, whereby the ultimate goal of increasing credibility of mutual interstate commitments
is being achieved by member states delegating sovereignty to supranational actors like the
Commission or the ECJ. Furthermore, by pooling sovereignty through supranational
institutions, state compliance with international agreements can be monitored more
effectively.
According to Waltz, strong states use institutions and interpret laws in ways that suit
them [Waltz, 2000]. In addition, close interstate cooperation is rather difficult in fear of
unequal bargains and therefore, states will not be attracted to close cooperation or even
surrender sovereignty to supranational institutions. Smaller states, however, due to the
weakness might be well advised, to transfer certain aspects of sovereignty to international
institutions as a trade-off for security. Thus, they will join membership of such an
international organization, despite the awareness that these organizations will serve the
interests of the most powerful states. As a result, small EU member states, which Keohane
defines as a state that according to its leaders cannot make a significant impact on the system
by acting alone, would not expect to exercise any considerable influence in international
policy making, since its bargaining power capabilities are limited [Keohane, 1989].
The main thesis of liberal intergovernmentalism has acquired a dominat status in the
study of regional integration and draws on insights from neofunctionalism but also to
intergovernmentalism. It seeks to explain integration through a multistage model of
preferences, bargaining, and institutions, rather than through monocausal proposition and for
this, two basic assumptions about politics are important:
(I)
Main actors  states
18
States are the critical actors and achieve their goals through intergovernmental
assertion of interests, negotiation and bargaining, rather than through a
centralized or supra-national authority making and enforcing political
decisions.
(II)
States act  fully rational
Rationalism is a prerequisite within liberal intergovernmentalism since it is
assumed that actors are in the position to select from alternative courses and
choose the one that satisfies their interests or goals.
Thus, collective outcomes are effectively the result of aggregated individual actions
based on efficiently negotiated rational preferences within an international umbrella and the
willingness to cooperate. In this line of thinking, Moravcik describes EU integration as a
series of rational choices made by rational leaders, after an evaluation of economic interests
and issue-specific preferences [Moravcik, 1998]. Grossman and Helpman add to this that the
national interest in terms of economic areas from an equilibrium between producer interests
on the one hand, and taxpayers and regulators on the other hand, derives
[Grossman and
Helpman, 2002].
Later developments such as realism and neo-realism were more state-centric with a
strict division between domestic and international politics and therefore attaching very little
significance to international institutions. Realists see the national states as remaining in full
control over their fate and the key actors in international politics with no higher sovereign
power, viewing thus European integration merely as a gathering of sovereign states [Cini,
2010].
19
2. Emergence of economic integration within Europe
Since the European integration process was an elite project with mainly political
motives, such as security aspects rather than economic market integration in mind and the
implicit desire to pursue political integration via economic means, this was one main reason
for many countries11 to retreat from the negotiations of the Treaty of Rome in 1956.
Subsequent developments of the EU, however, were entirely by market integration rather
than foreign policy cooperation.
The ECSC Treaty, whose foundation has been extensively discussed elsewhere12, was
the starting point of European integration, followed by the Treaty of Rome in 1957 and the
establishment of the European Economic Community (EEC)13, with the emphasis of
establishing a liberalized common market and the elimination of national tariffs & quotas. By
way of a General Agreement on Tariffs and Trade (GATT)14, the six ECSC members were
engaged in a common commercial policy with the rest of the world and in particular the US,
albeit within a narrow scope of anti-trust rule-setting. Furthermore, the Treaty of Rome also
defined the general objectives of European agricultural policy15, its creation which was
proposed by the European Commission a bit later, in 1960. In 1962 a new and highly
interventionist policy was introduced as a key element to the EEC, the Common Agricultural
Policy (CAP), which implemented a system of agricultural subsidies and the removal of
tariffs on agricultural products [Berger, 2012].
As already mentioned above, the main instrument of European integration was by way
of successive enlargement, coupled with the processes of deepening and widening. In fact, a
growing membership has been part of the development of European integration right from the
beginning [Rehn, 2007]. Enlargement has been achieved in six steps, commencing in 1973
with three new members joining and stretching towards the latest round in 2013. Table 3
below depicts the six enlargement rounds that have led to today’s 28 member states of the
European Union:
11
Denmark, Norway, the UK or Switzerland.
See Berger 2014 for more.
13
The Treaty of Rome also created the EURATOM, which, however, later proved to be of limited impact.
14
GATT comprises of a set of rules agreed upon by nations and was signed by a total of 23 countries in Geneva
on October 30, 1947; it took effect on January 1, 1948.
15
The CAP principels were firstly introduced at the Stresa Conference in 1958.
12
20
Table 3: Stages of European Union Enlargement
Initial ECSC members 1951:
France, Germany,
Belgium, Netherlands,
Luxembourg, Italy
1
First round 1973:
Denmark, UK, Ireland
2
Second round 1981:
Greece
3
Third round 1986:
Portugal, Spain
4
Fourth round 1995:
Austria, Finland, Sweden
5
Fifth round 2004:
Cyprus, Czech Republic,
Estonia, Hungary, Latvia,
Lithuania, Malta, Poland,
Slovakia, Slovenia
6
Fifth round 2007:
Bulgaria, Romania
Sixth round 2013:
Croatia
Source: own depiction
The European Commission considers enlargement to be a principal feature of the
Union’s political landscape up until today [European Commission, 2015]. The initial six
members paved the road for a harmonized and liberalized European cooperation, those who
followed afterwards were forced to accept the overall design agreed by the founding
members, being only able to adjust their preferences accordingly. In particular the UK but
also Denmark were, following the intergovernmentalist line of thinking, very adamant
towards a considerable transfer of powers to common institutions and this has remained ever
since. The current discussion of a possible Brexit coupled with the vanquished threat of
Scottish independence in Britain’s own backyard probably confirms the awkward partner
status of the past. Loss of national sovereignty and the constraints imposed by European laws
and institutions coupled with the preference of a US-style market regulation rather than
negotiation of common European matters seem to be a persistent phenomenon of British
21
policy [George, 1994]. Nevertheless, while the first round of enlargement in 1973 happened
within a prosperous environment of high growth and monetary stability, the second round
could rather be perceived as a more difficult task, comprising of countries with weak
economies and barely democratic political structures. Indeed, the first free elections in Greece
were recorded in 1974 (after the military junta had been ousted), in 1976 in Portugal and in
1977 in Spain.
Although skepticism towards widening membership to the three new Mediterranean
countries was high, they were admitted to join in two steps, in 1981 and 1986. Greece, which
had already signed an association agreement with the EEC in June 1961, managed to
convince European leaders through President Konstantinos Karamanlis that democracy in this
country could only be stabilized by way of full membership, thus avoiding the danger that
both strong communist movements and anti-democratic dictatorial movements could assume
power. In addition, Karamanlis had a long-lasting personal friendship with Valéry Giscard
d'Estaing, thus paving the way for accession at a much earlier stage as in the case of Spain
and Portugal.
The 1990 unification of Germany and the disintegration of the Soviet Union produced
a new political situation, with many of the new independent states being interested in
acquiring full EU membership. Maastricht provided a platform for the most ambitious
revision of the treaties in force and led to the creation of the single European currency,
probably the most remarkable unifying factor of European integration. The Treaty on
European Union (Maastricht Treaty) was eventually signed in February 1992 (later to be
amended by the treaties of Amsterdam and Nice). The Maastricht Treaty in addition created
the convergence criteria for countries which were to join the Monetary Union (EMU) and
adopt the common European currency, and in addition established the European Central Bank
(ECB) and the pillar structure of the EU. Subsidiarity and supranationality became new
trigger words and the EMU was regarded as the ideal mechanism to achieve European
integration and combine widening with deepening.
Besides the objective of achieving regional integration, another economic desire was
to be fulfilled by a common currency, that of common agricultural prices within the
Community. The EMU was seen as the optimal policy mix to increase convergence between
national economies, introduce exchange rate stability and control inflation rates within the
common market area. Furthermore, the adoption of a single currency would make prices for
22
products and services more transparent and increase economic competition among
international companies [Heylen, 2000].
On January 1, 1999 the EMU was reality and produced the single European currency,
initially only as an accounting currency. With physical coins and banknotes circulating only
after January 2002, the euro became official legal tender in twelve out of fifteen countries
within the Eurozone. Denmark, Sweden and the UK decided not to participate in this
mechanism, amid fears over not having a self-governed monetary policy and maintaining
macroeconomic control measures over the respective countries. Thus, Denmark and the UK
obtained opt-out clauses in the Maastricht Treaty, while Sweden decided to stay out
unilaterally [Holden, 2009]. Despite the decision not to join the single currency, the transition
of monetary matters to EMU probably constitutes the most important turning point in
European integration. With it came the creation of financial tools like the Structural Funds
and the Cohesion Fund established in order to reduce regional disparities in income, and
better wealth distribution. These structural policies and programmes account for a great part
of the Community’s funding, in addition to the CAP.
In February 2001, the Treaty of Nice was signed after negotiations at an
Intergovernmental Conference that ran through most of the year 2000. Nice amended the
Maastricht Treaty and the Treaty of Rome by reforming the institutional structure of the EU
to allow for eastward expansion and introduced the increased use of qualified majority voting
in the European Council, a concession to the bigger countries in view of a new enlargement
of mostly small and medium-sized countries, with the exception of Poland. In particular
Germany, had insisted on this issue by the demand that her greater population should be
reflected in a higher weighting [Laursen, 2006]. The 2004 enlargement was the largest single
expansion of the EU, in terms of territory, number of states, and population to date, with
seven of them having been part of the former Eastern Bloc. As a matter of fact, the accession
of Bulgaria and Romania in 2007 constitutes, according to the Commission, part of the same
wave of enlargement as 2004, these two countries having joined later since they were
regarded not yet ready to join in 2004. In particular, judicial structures, political corruption
and organized crime, discrimination of minorities and human trafficking were regarded as in
need of significant improvement16. The final accession of a European country has been
completed in July 2013, when Croatia joined the EU as its 28th member state. Similar
16
European Community Regular Report on Romania’s progress towards accession 2004 [Com (2004) 657
final] and Regular Report on Bulgaria’s progress towards accession 2004 [Com (2004) 657 final].
23
accession requirements as with Bulgaria and Romania were on the table here, in addition to
cooperation with the International Criminal Tribunal for the Former Yugoslavia (ICTY) and
the extradition of several of its citizens to this United Nations institution. Furthermore, border
issues with Slovenia had to be solved in order to be admitted as a full member.
The EU has now 28 member states and it is not an easy undertaking to convince them
of being part of the European construction that is still to follow. However, the political
horizon becomes hazy in the future since there is no clear strategic vision of the further
enlargement and the candidate countries that wish to join the Community show rather too
many heterogeneous characteristics. The question thus arises, whether more Europe is
inevitably the better choice in the long run, something that shall be discussed in the next
chapter.
3. Further enlargement of the EU
With several candidate and potential candidate countries waiting for full membership to
the European Union17, the question remains how the future of Community will develop in the
light of the current financial crisis and migration issue. It can certainly be said that all
remaining candidates still have democracy deficits and rule of law issues to overcome, and
will only be admitted if they can meet the accession criteria. In addition, Kosovo is being
regarded as a potential candidate by the EU, although the area has not yet been recognized as
an independent state by all EU members in the first place.
Turkey’s progress, albeit a candidate country since the Helsinki European Council of
December 1999, can be regarded as rather slow in terms of accession criteria and shows even
retrograde trends with regards to democracy and freedom of speech. The standards of the
main pillars of democracy like the rule of law and the Turkish legal system have declined, the
Kurdish conflict in eastern Anatolia has re-erupted, and accountability and freedom of
expression as well as separation of powers have seriously been undermined. As a matter of
fact, the country’s democratic history has always been a tumultuous one with occasional
reforms having been interrupted by military interventions and political instability. The 2015
17
Canditates: Serbia, Montenegro, FYR of Macedonia, Albania, Turkey. Potential candidates: Bosnia i
Herzegowin, Kosovo area. Furthermore, Georgia and Ukraine expressed their wish to join negotiations.
24
official Turkey Progress Report of the European Commission clearly expresses serious
concerns with regards to the independence of the judiciary and the separation of powers, the
silencing of media, the political repression of the opposition as well as adequate consultation
and deliberation in the law making process. In summary, the report asserts that the pace of
reforms with regards to political criteria has considerably slowed down [European
Commission, Turkey 2015 Report].
Apart from Turkey, various other countries also applied to join the EU long time ago,
such as Morocco in July 1987 or Switzerland in May 1992. In addition, countries like
Georgia or the Ukraine have expressed their interest to officially apply in the future. The
planned association agreement between the Ukraine and the EU has faced a serious blow by
the Dutch “no” referendum of April 06th, 2016. Although the legal status of the referendum is
controversial, the outcome has been perceived as a strong warning against the European
project, with people increasingly losing faith in common European institutions. Budget cuts,
bail-out and austerity measures, the allegedly democratic deficit of the European bureaucracy
as well as the EU’s comitology have led to strong criticism [Føllesdal and Hix, 2006]. In
addition, the latest EU-Turkey deal which shall help to solve the migrant crisis, something
that can be described as horsetrading at best, has sparked anger and lack of understanding
with many national political parties, politicians and citizens, mainly for the way the deal has
been set up and the concessions granted to Turkey.
It remains thus to be seen whether the strategy of enlargement will be applied as
extensively in the future as has been done so far. One of the issues will be whether rule-sets,
norms and identities can easily be applied within a larger union as we currently have, after
all, there is a subjective feeling of certain countries belonging to Europe and therefore it is
believed to be a reason to enable enlargement, in spite of possible costs [Sjursen, 2006].
While this argument can be regarded as comprehensible with the countries that have joined
the EU so far, it is certainly questionable with the one’s waiting to join.
25
4. Europeanization of institutions
The EU has been described as a unique political entity which has developed its own
system of democracy and acts within its own sui generis. Issues of economic, ecological or
cultural problems have a serious impact at international level since decisions made in one
state can have serious effects for citizens of another state, with very limited influence of the
later to diminish the impact. Faced with 28 different policy systems and national power
structures, European integration has to distill many actors and ideas in order to enhance
international cooperation and avoid becoming remote and incomprehensible. Growing Euroskepticism resulting from the perceived non-transparent decision making process, the
handling of the recent crisis situations, the lack of democratic structures as well as the
ongoing enlargement process, has led to the question whether the institutions responsible are
in fact capable of handling the EU’s internal contradictions.
These issues are certainly not new and have extensively been argued within the
theoretical literature on international and regional integration but the vehemence of the
current discussion coupled with a possible Brexit in the near future brings a new dimension to
this discussion. Certainly, one could argue in the words of Haas, who asserts that
organizations can learn and policy-makers who, faced with the uncertainties of international
governance associated, “turn to new and different channels of advice, often with the result
that international policy co-ordination is advanced” [Haas, 1992]. Thus, according to Haas,
under conditions of uncertainty and unforeseen developments, actors turn to networks of
professionals with specific competencies in certain disciplines and a shared set of normative
and principle beliefs in order to engage in negotiation processes and propose knowledgebased decisions. As uncertainty gives rise to demands for more and deeper information, Haas
sees a central role in this process of policy coordination through so-called epistemic
communities [Ibid., 1992]. Although admittedly this is an interesting approach in trying to
explain the policy process of the EU partly, it does not explain the behaviour of the European
institutions sufficiently and does not take into account the individual interests of these
epistemic communities. Furthermore, ideas and knowledge are not paramount, since ideas
cannot be unconditionally separated from interests [Jacobsen, 1995].
The EU can be described as a convergence of interests of states within defined stages of
integration and according to Moravcik, the contemporary situation in the EU can best be
explained as liberal-intergovernmentalism where governments, as the main actors, have full
26
access to information and ideas and thus, initiate and mediate negotiations that are naturally
effective and deprived of big transactional costs [Moravcik, 1999]. There are, however,
different concepts, styles and policy perceptions about the way the EU’s relation between
efficiency and democracy and various criticisms on the issue of democratic deficit have been
voiced within this context, with no clear answer as yet as to the question of how democracy
should function properly at a level higher than the nation state. In order to understand the
European policy process better, the current skepticism towards European institutions
mentioned above shall be analyzed briefly.
4.1.
European Union, a new super state emerging?
Academic literature considers the EU to be a polity that deals with various issues of
equal concern for all member states, which individual states cannot handle very well due to
their abilities as well as the lack of overall information of the topic in question. As Hix and
Høyland note, the EU is nowadays one of the most productive legislators with a wide range
of policy areas, producing more than 150 pieces of new legislation each year [Hix and
Høyland, 2011]. In this respect, Lawton identifies the Europeanization by Brussels through a
de jure transfer of power and loyalties from national governments to supranational European
institutions and argues that this shift signifies a merging of a single European approach,
rather than a convergence of European policy styles [Lawton, 1999]. Accordingly, European
policy-making becomes a process dominated by supranational institutions, with complex
coalition and bargaining building and a considerable distance from domestic institutional
settings.
Certainly this kind of supra-nationality shows a strong indication of state-like
characteristics and coupled with the fact that a large proportion of legislation on EU level is
being decided by unelected officials in Brussels, the question could be allowed whether the
EU is actually already a state. The answer certainly will depend on the respective definition
of the state but if the assumption will be based on elements of the Westphalian state 18 with a
territory, an existing population, a central government, and sovereignty, it could lead to an
affirmative conclusion. However, there is an important element that suggests the opposite, the
fact that the EU is still a highly decentralized system in which national governments remain
18
The Peace of Westphalia in 1648 ended the Thirty Years’ War in Europe and legitimated the right of
sovereigns to govern their peoples free of outside interference.
27
the masters of the treaties with the power to amend or initiate changes to EU treaties. In
addition, the EU lacks a common fiscal policy with taxation and spending capacity.
Nevertheless, there is now, undoubtedly, a European political system in the sense that there is
a clearly defined and stable set of institutions and common rules which have gained wide
acceptance and one could argue in Majone’s normative claim, that the EU is essentially a
regulatory state addressing market failures and producing policy outcomes that are paretoefficient [Majone, 1994]. According to Majone, pareto-efficiency, which refers to decisions
where there is some benefit to both parties but no one is made worse off, is more desirable
than value-allocative efficiency, where there are both winners and losers. He thus asserts, that
the amount of EU regulation increases hugely over time and regards a good part of national
regulation as being of “European origin or being produced in order to implement European
legislation” [Majone, 1996].
The Treaty of Lisbon, which entered into force in December 2009, apart from
amending the Treaties of Maastricht and Rome19 also introduced a legally binding bill of
rights, the “Charter of Fundamental Rights”. According to the Treaty of Lisbon, the Union is
required to respect the national identities of Member States20 and any Member State may
decide to withdraw from the Union in accordance with its own constitutional requirements21.
Member States for the first time have the explicit legal right to leave the EU and a procedure
to do so is now provided for. From this it becomes clear that the Union is not a state but an
association of sovereign national states and its legitimacy derives from the sovereign powers
of its Member States. This is in line with the decision of the German constitutional court
rejecting the constitutional complaint against the Act Approving the Lisbon Treaty22.
With tax harmonization and social security rights in place as well as new policy areas
such as foreign and security policy and army, energy, and fiscal consolidation, the
supranational Commission could lead to the final outcome by acting as the motor of
integration and subsume individual nation states to a European federal state in the future,
similar to the federal system of Germany or the US. Eventually, a spillover effect of the
integration process could be visible with member states merging to common policies, values
and symbols, resulting in the future to a high degree of sovereignty and thus to a policymaking state.
19
The Treaty of Rome was furthermore renamed the „Treaty on the functioning of the EU” (TFEU).
Art. 4(2) of the Lisbon Treaty.
21
Art. 50(1)of the Lisbon Treaty.
22
German Constitutional Court - BverfG (note 1), para. 231 from June 30, 2009.
20
28
4.2.
Does the EU suffer of a democratic deficit?
The EU has been accused of suffering of a democratic deficit due to the lack of a
democratically elected European government. This discussion is not a new one and for
decades there have been continuous discussions about the appropriate structure within the EU
[Moravscik, 2002]. Democratic deficit refers to a limited influence on the outcome of
decisions enacted by EU supranational bodies due to a lack of democratically elected agents
in the Council or the Commission by the citizens of Europe [Scharpf, 1997]. The concerns of
democratic legitimacy appeared with the Single European Act (SEA) in 1987 and the
Maastricht Treaty in 1992 with attention on this issue appearing to be high on the agenda of
politicians as well as members of the European public once again. Academic literature on this
issue is rather heterogeneous resembling a similar line of divided discussion as between intergovernmentalists and federalists.
A majority view argues that the democratic deficit is real since the European government
is not being democratically elected. The European Commission should therefore be fully
accountable to the European Parliament, it is argued, in order for citizens to be ensured that
the Commission is adopting policies approved by their elected representatives. Dahl argues in
this line of thinking and asserts that if the assumption of a democratic ideal is maximum
citizen participation, then international organizations must be subject to popular control in
order to claim being democratic [Dahl, 1998]. In addition, political elites need to be willing to
engage in public debates within a shared political culture and a common identity, in order to
ensure support and tolerance of groups within the population that might feel deprived or
disadvantaged. Without this support, it is difficult to see how decisions taken at supranational
level can be enforceable among those groups that are required to levy heavy costs. This is
echoed by Sifft, who attributes that the democratic deficit derives from an apparent lack of
“democratic substructure that underlies every democratic polity” [Sifft et al., 2007].
There are on the other hand also arguments that negate the thesis of a democratic deficit
in the EU with Moravcsik and Majone being the most prominent ones, asserting that the EU
does not have to be democratic in the usual meaning of the term; since it is not a superstate
but rather a regulatory agency, a dominating role of the European Parliament or a directly
elected Commission would lead to a politicization of regulatory policy-making, thus not
being able to produce pareto-efficient outcomes [Majone, 2002b]. Majone therefore sees the
29
EU rather in a credibility crisis than within a democratic deficit issue. The solution to the
issue is, according to Majone, the introduction of greater professionalism and technical
expertise to the EU, stronger rights to minority interests and better scrutiny of the
Commission by the European Parliament [Majone, 2000]. Similar Moravcsik, who points out
that national governments are the most directly accountable politicians in Europe and that the
respective governments scrutinize the supranational actions in Brussels through their national
parliaments [Moravcsik, 2004]. Furthermore, he asserts that there are high thresholds in place
for the adoption of EU policies and the ECJ as well as national courts exercise sufficient
judicial review of such EU actions. Also, there is little gap between the preferences of
national governments and final EU policy outcomes, for it is essentially the governments who
run the EU (the Commission merely being an agent of national governments) and since there
is hard bargaining in the adoption of all EU policies, it is unlikely for anything which will
negatively impact important national interests at EU level [Moravcsik, 2002]. In the author’s
opinion, this approach is only partly comprehensible; while indirect control via national
governments surely provides some control over supranational decision-making outcomes, the
current situation in the EU can hardly be evidence of it. Moravcsik does not seem to consider
that voter’s preferences are not purely exogenously determined, and therefore asserts that
most issues that are being discussed at EU level are simply not salient enough for voters and
thus a debate about these policies is unnecessary on a bright level. However, without the
articulation of positions of a policy debate, it is not surprising that a debate over a particular
policy does not exist and therefore issues lack voter salience [Follesdal and Hix, 2005]. A
good example of this is the discussion regarding the TTIP 23 negotiation with the US, which is
being discussed secretly and with only few enlightened technocrats involved.
The current situation in Europe is at least ambivalent towards the above made assertions
by Moravcsik in the light of existing political and ideological divisions, with much of the
bargaining taking place within closed expert groups. In addition, non-transparent decision
making produces winners and losers, with the latest feeling deprived and disadvantaged and
thus refusing cooperation with the political elites. The growing influence of so-called rightwing populist movements and nationalistic parties are the result of ignored and deprived
groups that have lost trust in value-oriented national parties from the middle of the political
spectrum. In addition, the increase in executive powers of EU institutions which actions are
out of control for national parliaments have led to a reluctance to affiliate with European
23
Transatlantic Trade and Investment Partnership (TTIP)
30
integration. The current debt crisis also illustrated that the Eurozone’s financial problems run
far deeper than the issue of excessive borrowing by ill-disciplined governments. While for
instance 19 nations bound themselves into a single currency zone controlled by the European
Central Bank, budget and tax issues were left in the hands of each member state; such an
arrangement certainly helped countries like Greece to understate their deficit figures.
Multiple bailout loans which came with harsh austerity terms such as deep budget cuts and
steep tax increases were the answer of the EU to the problem. Despite billions of Euros in
bailout money, Greece’s financial deficit problems still linger on with the economy having
shrunk by a quarter in five years and unemployment coming currently close to 30 percent
[Krugman, 2016].
The institutional problem of this solution is that the bailout money mainly goes toward
paying the country’s international creditors, rather than making its way into the economy.
Thus, the debt rises constantly instead of being reduced through these measures. In addition,
the decision to offer Eurozone funds to member states in distress resulted to a bailout
mechanism that was explicitly not foreseen in the EMU mechanism. Surely, this was done
out of fear of a spill-over to other financially weak countries such as Spain, Italy, Portugal,
Ireland etc., but it also meant the non-compliance with legislation that has been enacted by
the very EU institutions themselves.
In addition to the illustrated institutional issue of exceeding its own boundaries, the EU is
also perceived to have a weak European Parliament vis-à-vis the European Council and the
Commission. While it is true that according to the co-decision procedure the Parliament and
the Council have equal legislative power, the majority of EU legislation is still passed under
the consultation procedure with limited power for the Parliament to delay [Follesdal and Hix,
2005]. The argument thus goes that it cannot protect or guard people’s rights and
entitlements. Furthermore, actors who are members of EU institutions are neither directly nor
indirectly elected in their office, and voters have no opportunity to choose between rival
policy agendas and rival candidates at European level.
It needs to be mentioned in this context that the assumptions made are always based on
the fact that democracy is in fact the desired form of both nation states and European
institutions. Thus, in the vertical level the focus of democratic efficiency lies in the relation
between the EU institutions and the member states domestic political processes, aiming for
ever more effective democracy. The horizontal level focuses on the EU and its own
31
institutions, in particular the EU Parliament with the aim of implementing those measures in
order to fix the democratic deficit [Jolly, 2003]. Emphasis is thus given to the right balance
between efficient governance and democracy in order to avoid a super-state European elitedriven guardianship or even dictatorship.
5. Conclusion
This paper has outlined the stages of European integration and although several
interpretations of integration are valid, the process itself is mainly based on the idea of spillover effects deriving from the theory of neo-functionalism. As has been shown, the process is
one where member states have chosen to delegate parts of the sovereignty to a supranational
entity, initially through economic integration and trade, followed by enlargements and
accessions.
Despite the fact that European integration can be seen as a highly developed system for
the joint management of interdependence, the recent financial crisis has fundamentally
divided Europe between creditor and debtor states, and the current refugee crisis threatens to
drive a new wedge between those member states in favour of maximum migration and the
one’s opposing this. This widening of economic divergence has come with different
preferences and interests in substantial policy areas and an increase of national approach
strategies within the union. In addition, support for European integration has considerably
diminished facing huge challenges of community cohesion and the rise of right-wing parties
in almost all European countries. For too long, the EU has concentrated on the process of
enlargement and accession, neglecting economic market stagnation, the different perception
of member states and the existing strong corruption in many countries. The systemic flaws of
the common currency and its effects on various countries within the union have not been
32
corrected so far and the policy instruments in place are still prone to misuse and unstable
equilibrium.
The economic consequences of a breakup of the common currency are extremely difficult
to predict but there is fear of a general economic meltdown with substantial losses in trade
and far-reaching political costs. Furthermore, the diminished importance of France in matters
of European integration and its growing distance to Germany could lead to a further cool
down of the European vision. In this context, the UK referendum on whether to stay in or
move out of the EU will be pointing the way towards the possibility of a controlled exit.
Although such mechanism has initially not even been provided for, it could be the starting
point of a new dimension revealing the true weaknesses of the flawed European construction
and its national failures.
Of course, European integration could emerge stronger than before from this crisis
because the political elites will understand what is at stake and will enact transparent and
comprehensive decisions, changing the existing environment of uncertainty to one of trust,
mutual confidence and the readiness to find compromises. Exogenous events, for instance,
might create new opportunities for new ambitious major projects that will decisively expand
European cooperation. Such projects would incorporate the needs and concerns of those
countries that have found themselves on the losing side after the crisis. A good opportunity to
commence such a major project would be the creation of a common energy policy by taking
steps to diminish the much needed energy dependency away from Russian gas for South and
Eastern Europeans. For this however to happen, sustainable growth, and renewed investment
opportunities are needed for the countries concerned. What Greece needs is a new Marshall
plan with a new investment infrastructure and a job creation mechanism rather than more
austerity measures. After all, the Mediterranean Sea is said to own huge offshore gas reserves
with estimates worth of €464 billion, a fact that could dramatically change Greece’s fortunes.
Furthermore, the country could become a transit hub for gas to Europe with an important
contribution to the continent’s energy security outlook. This however, requires huge
investments to be made within an investor friendly and transparent political environment.
Within this context a solution to the restructuring and recapitalization of the banking
system needs to be found, the fact that European banks have been saved from bankruptcy by
tax payer’s money in violation of existing EU law has produced further insecurity as well as
an impediment to growth with the Eurozone. This could be another major project which
33
coupled to a common tax policy could bring back confidence and the notion of equality to the
European integration idea. Surely, new rules are constantly being discussed and have also
been imposed by the Commission but for the European vision to survive unilateral
approaches by a single member state trying to impose its views on others need to be stopped.
Although the leadership of a big country like Germany is certainly needed, it has not
responded to the crisis by approaching compromise solution but rather by take-it-or-leave
solutions whereby a dogmatic approach to macroeconomic policies is visible. In the author’s
opinion, the question is not whether more or less Europe is needed, but whether a better
integrational process within the Eurozone can be achieved, taking into account a rectification
of the systemic and institutional flaws mentioned above.
34
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