Europe 2.0? The EU after the British referendum

Article first published by Policy Network on 24 May 2016.

At a Policy Network seminar on 12 May, plausible post-referendum scenarios were discussed. Brexit or not, one thing is certain: there will be no EU superstate in the future

For Brexiters, history is already written: the EU is on course to become a superstate. Britain had better jump off the train before it happens, and other enlightened nations would be well advised follow suit. Those who have studied European integration in recent years know that this claim is not just gross exaggeration – it is completely misleading. Rigorous understanding of what the EU is today and what ‘integration’ has meant in the recent past is crucial to dispel this myth. It also helps to make an informed judgement on how the UK referendum is likely to impact on the EU, whatever the result.

No federal Europe: the new intergovernmentalism

Most Remainers and Brexiters share one particular assumption: that the crisis in the euro area will force integration in a core group of EU member states and redesign the European project. Little has changed in the British perception since Osborne’s famous suggestion that the eurozone should embrace the “remorseless logic” of monetary integration in 2011. The assumption is largely correct, but there is confusion as to the timeframe and what is meant by ‘integration’. Six years after the beginning of the debt crises, it has become clear that there is a significant share of ‘reluctant Europeans’ not only in the UK, but spread across the euro area. The currency union has not taken giant steps towards a fiscal union and more central institutions. The short-term firefighting on display relies on member states’ one-off contributions, conditional collective loans, intrusive peer surveillance and fiscal policy through the monetary backdoor. More radical decisions, such as debt mutualisation, the setting-up of automatic transfers or simply debt reliefs, have been methodically avoided so far. Creditor countries have resisted pressures to depart from the Maastricht surveillance-based architecture.

Such reluctance to supranational and solidarity mechanisms is best understood in the light of the shift from the ‘permissive consensus’ of the early years of European integration to the ‘constraining dissensus’ characterising EU policymaking today. While the first decades were driven by business interests far away from a relatively indifferent public, the expansion of the EU’s reach to core state powers (such as money and border management) has led to politicisation, mostly in negative terms. The public’s reluctance to fully transfer resources and state powers to the EU has brought about the paradox of intergovernmental integration. The ‘new intergovernmentalism’ theory has formulated a number of hypotheses on this new integration course, such as the informal rule of deliberative decision-making (by opposition to the formal possibility of majority voting) and the multiplication of ‘de novo’ agencies with member states representatives – such as the European External Action Service (EEAS), the European Stability Mechanism (ESM) and Frontex – to the detriment of the genuinely supranational European commission.

To a large extent, the EU has already internalised the constraints represented by a reluctant public. The new prominence of the European council and its agenda-setting role reflects the fact that European governments can no longer hide behind technocrats and need to ensure the decisions taken in Brussels are acceptable domestically. Logically, national parliaments have also enjoyed a more visible role holding their governments’ European role accountable, though the extent to which they have raised their profiles still varies a lot. Referendums have also contributed to set the EU agenda directly.

In short, British Eurosceptics mix up a more political union – in the sense that the union gets involved in ‘high politics’ – with institutional centralisation. It is paramount to assess the possible impact of the British referendum in the light of this new pattern of integration.

If Britain remains – the status quo

What will happen to the EU if Britain votes to stay in? The answer is: not very much in the short to mid-term. Implementing the 19 February agreement may not be easy, especially the controversial provisions related to migrants’ access to welfare. However the issue is here to stay and the UK will not be alone in facing the difficulty of reconciling a fundamental EU principle with the reality of a public backlash against it. In the field of economic governance – and, in particular, financial services regulation – procedures have been agreed upon in case of disagreements between euro-ins and euro-outs. As such, they do not prevent disagreements from happening in the first place, but they reflect the goodwill which is likely to dominate in the near future.

In any case, a remain vote will make little difference to the eurozone’s internal debates. Though committed by the five presidents’ report to launch a formal ‘completion’ process in 2017, the idea of a euro area treasury (mentioned in the report) remains a distant dream and conditional on greater economic and social convergence in the first place. As Waltraud Schelkle pointed out at Policy Network, northern European countries will not lock themselves into fiscal union until the situation in southern Europe radically improves. And fiscal union may not be what is usually assumed. For instance, granting the European Stability Mechanism a banking licence in order to borrow from the European Central Bank and bailout restructuring banks would be a less visible but not less effective insurance mechanism than automatic fiscal transfers.

Neither is the clarification on ‘ever-closer union’ in the 19 February agreement likely to take the EU to a different place. Andrew Duff has written that the formulation risks promoting “never-closer union”. Yet, it merely states the obvious, namely that existing treaty provisions (opt-outs and enhanced cooperation) allow “those that want to deepen integration to move ahead, whilst respecting the rights of those which do not want to take such a course”. A reason for concern is the attitude of the four Visegrad countries – Poland, Hungary, Czechia and Slovakia – vis-à-vis their treaty obligations. They may resist being forced into the euro area (though Slovakia is already a member) and they are likely to continue rejecting refugee burden sharing in the Schengen area. However, their fear of a second-class status prevents them from following the British example.

If Britain leaves – Europe 2.0?

Muddling through would not be an option for EU member states in case of Brexit. Brexit would provoke domestic and global shock waves. Anti-EU political forces would enjoy a temporary boost and global elites would take a second look at the EU. This would compel pro-EU government forces to react swiftly and boldly.

The assumption that Brexit would give the decisive impetus for deeper EU integration is, nevertheless, too optimistic. Previous episodes of EU history have shown that the gap between declaratory politics and implementation can be huge. For the reasons laid out above, Brexit would not lead to a swift transfer of capacities to the EU level as a way to buttress the edifice. What can be expected in the short term are reassurances about the political commitment behind the EU project.

Germany and France are expected to take the lead in containing disorder and moving forward. This will not be easy. Disagreements on the euro area’s final destination have barely changed since Maastricht. Also, as Sophia Besch and her colleagues at CER have made clear, Brexit will lay bare Franco-German divisions in areas in which the UK provided a useful third party. Paris and Berlin will need to engage directly with each other in order to make strategic decisions on the future of the single market, the EU budget and EU defence.

The political commitment behind European unity – something which is vividly shared in the six historic EU nations – is likely to sustain political union over time. French politicians from thecentre-right and the centre-left have for instance recently called for a European “refondation”. However, as Mark Leonard suggested at Policy Network, the Lisbon treaty may be the last treaty binding all EU member states. The renowned former legal counsel of the council of the EU, Jean-Claude Piris, has heralded the increasing use of intergovernmental treaties as a way to proceed without unanimous consent. Possible areas of differentiated integration include economic and social policy, energy, defence and migration – something which could potentially mark the beginning of a brand new European project.

Brexit or not, the odds are therefore that the EU is here to stay but no grand plan is going to rescue it rapidly from the intermediary and messy stage in which it finds itself. It will take years, if not decades (and certainly many more crises) to overcome barriers to supranational integration and cross-border solidarity – as it would take years to repair the damage of Brexit. Politicians and opinion leaders should learn to live with the EU as it is, appreciate its unique qualities, harness the potential of power it contains, and stop fantasising about breakthroughs or exits.

The author is very grateful to Chris Bickerton, Uta Staiger, Valentin Kreilinger, Andrew Duff, Waltraud Schelkle, Pat McFadden, John Peet, Mark Leonard and Sophia Besch who participated in the Policy Network’s seminar on 12 May.

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