European Affairs

Yes to Enlargement - But the Worst Problems Are Still Ahead     Print Email
John Wyles

If ever there was an occasion for political hyperbole, the EU summit meeting in Copenhagen in mid-December certainly qualified. The confirmation given there by the 15 heads of state and government that ten countries - eight of them from Central and Eastern Europe - were now fully entitled to join the European Union from May 2004 was a triumphant moment in European history.

The East-West political fissures opened up by the post-war division of the continent and the ensuing Cold War have been definitively closed. Liberal democracy and the free market have finally been established as the natural order in territories where both were once anathema.

Yet, such triumphalism as there was in Copenhagen will be short-lived. As it always was, the European Union remains a work in progress, and if Copenhagen signaled the political resolution of one set of problems - the accession terms of the candidate countries - it immediately brought into focus the extraordinarily difficult tasks that still lie ahead.

Each of these tasks raises fundamental questions about the political, institutional and economic organization, and the identity, of what is widely called "the project" (a misleading term wrongly implying that European integration could be abandoned.) The key questions that cannot be evaded are:

 

  • What is the geographical scope and political purpose of the European Union?
  • What institutional architecture and arrangements are needed to ensure that a Union of 25 (perhaps soon to be 30) countries is efficient, effective and democratically accountable?
  • What should be the policy priorities to strengthen economic competitiveness, raise economic growth potential and offer the new member states, whose average gross domestic product is only around 40 percent of the EU average, a real prospect of catching up economically with the current 15 members?

It can be easily understood that these questions are inextricably connected. Purposes, institutions and policies shape each other. For example, if the vision of the European Union recently offered by the European Commission as a "world power" was adopted as its purpose, then the depth of political integration required would not be feasible if the Union's geographical limits were also extended to Russia's Pacific coastline and into North Africa.

Although Commission President Romano Prodi generally lacks the political wisdom of some of his predecessors, he has wisely called for a debate on this issue. He is convinced that the larger and more geographically, culturally and economically diverse the Union becomes, the greater will be the constraints on political integration.

This is precisely why Britain favors a Union with the widest possible borders, and why nobody should have been surprised to read British newspaper reports immediately after Copenhagen suggesting that the British government saw merit in Tunisian and Algerian membership of the Union. Britain has traditionally been the most resistant of the major European powers to political unification.

The borders issue has been brought into focus by the immense pressure applied by Ankara and Washington in the run-up to Copenhagen in an effort to persuade the EU leaders to set an early date for the start of negotiations on Turkey's EU membership.

At French and German insistence, widely supported by other member states, the heads of state and government would go no further than setting December 2004 as the time for a review of whether Turkey fulfilled the criteria for membership. If it passes this scrutiny, negotiations will begin "without delay."

The Copenhagen decision should not deceive anybody into believing that there is a real consensus among the member states on the issue of Turkish membership. German opposition parties are opposed to it, despite a recent poll showing 60 percent of Germans in favor, while 65 percent of French people are against, according to a recent newspaper survey.

Resistance is greatest in the Northern countries, particularly in Scandinavia. Suggestions that the European Union wishes to remain a "Christian club" do not adequately define the hostility to Turkish membership. After all, most countries accept, with some resignation, that Bosnia, Kosovo and Albania, with their Muslim populations, will be admitted over the next ten years or so.

Turkey's size is a major problem, as is its geography. Its borders reach deep into the Middle East. There are already 70 million Turks, and Turkey will be bigger than any EU country, with a projected 90 million inhabitants by 2015. Its middle class may be European in outlook, but Turkey could import into the Union explosive tensions between secularism and Islamic fundamentalism.

With their less than enthusiastic welcome for Turkey in Copenhagen, the current member states have bought themselves a little time to assess whether an Islamic party at the helm of a democracy really will lead to a strengthening of human rights and social tolerance or to something altogether less acceptable.

But if the European Union remains formally benevolent to Turkey, could it hold the line if Ukraine, or Belarus or even Russia insisted on joining? With some desperation, the political center-right in Europe, as represented by the European Peoples' Party in the European Parliament, is trying to develop a new membership category of "very close to but not in the Union" for Turkey and other putative applicants.

This approach will almost certainly harness broader support in the next few years, which means that Turkey's path to full membership should not be taken for granted.

The candidate countries invited to join in Copenhagen still have to hold referendums to confirm that they will enter the Union on the terms negotiated. But the likelihood of a 25-member European Union by May 2004 will now concentrate attention on the Convention on the Future of Europe that has been examining the Union's future political and constitutional structure for the past year.

Cunningly steered since its launch in February 2002 by former French President Valery Giscard d'Estaing, this gathering of representatives of national governments and parliaments, as well as the European Parliament and the Commission, is due to produce a draft constitutional Treaty by mid-2003.

If Mr. Giscard d'Estaing succeeds in persuading the Convention to adopt the constitution by consensus, it will be politically very difficult for the subsequent Intergovernmental Conference of member states (the only body that can amend the Union's constituent treaties) to take a different tack in 2004.

It is still too early to make confident predictions about what might emerge from the Convention. Its praesidium, or high-level steering group, has produced a skeletal outline of a constitution intended to define the competences of the Union, to simplify its instruments and operations, and redesign its institutions.

Seeking to bring more democracy, transparency and efficiency to the way the Union works, the skeleton draft has listed eight objectives as answers to the question: "What is the Union for?" It is a cautious list in the sense that it omits nothing of importance:

 

  • Protect the common values, interests and independence of the Union
  • Promote economic and social cohesion
  • Strengthen the internal market and economic and monetary union
  • Promote a high level of employment and a high degree of social protection
  • Establish a high level of environmental protection
  • Encourage scientific and technological progress
  • Create an area of liberty, security and justice
  • Develop a common foreign and security policy, and a common defense policy

For its part, the Commission has produced for the Convention a highly federalist set of recommendations for institutional reform which would do away with national vetoes on all policy matters; fully extend the legislative powers of the European Parliament into those areas, such as the budget, where its role is currently limited; and, in time, give the Commission a central role in shaping foreign and security policy.

Although the Convention has often been portrayed as a battleground between federalists and those who want greater powers to remain with national governments, other sets of attitudes may be even more important in determining its final outcome.

The prospective new members are able to play a full part in the proceedings, except that they cannot stand in the way of a consensus. One key fact about enlargement is that it will add nine small member states (with a population of less than 30 million) and one larger one, Poland. So there will be 19 small member states and six large ones (Britain, France, Germany, Italy, Poland and Spain) in the 25-nation Union.

Some of the proposals aired by the larger countries, especially France and Britain, have aroused suspicions that a serious and, for the moment, covert attempt is under way to alter the balance between the Union's institutions in favor of the Council (where national governments reign supreme) and, within the Council, in favor of the larger countries.

The worst nightmare for both the small countries and the federalists would be a directorate of the large countries that succeeded in curbing the Commission's powers of independent initiative and turned it into a mere secretariat.

Small countries rightly see the Commission as occupying the front line in the protection of their interests. So it is likely that the 19 smaller members will rally behind a vision much closer to that of the Commission than that of British Prime Minister Tony Blair, who wants to retain power for national governments.

In the public debate inside and outside the Convention, the differing approaches have been defined by arguments about the respective roles, legitimacy and effectiveness of the Presidents of the Commission and of the Council. Mr. Prodi and his colleagues at the Commission want the Commission President to be elected by the European Parliament, and the Council to continue rotating its presidency every six months among the member states.

The big countries say that this is inefficient and will not help to project the Union's influence and policies in relations with third countries. The point is summed up in the question: Would President George Bush regard the prime minister of Luxembourg as a credible interlocutor on matters of war and peace?

Instead, London and Paris argue that the President of the Council should be elected by heads of government for at least five years. Among other things, he or she would be the chief foreign policy spokesperson for the Union and have a wider role in setting the policy agenda.

The Commission fears that the Convention, and ultimately the Inter-Governmental Conference, will try to tread a path between the federalist and the intergovernmental visions. Such an outcome is indeed quite possible.

In other words, there would be a little more integration, probably bringing immigration, crime-fighting, cross-border law and order policies more securely under the EU umbrella, accompanied by rather more political direction and priority-setting from national capitals, particularly those of the large member states. Voices from national capitals would also be strengthened by a closer involvement of national parliaments in policy debate and scrutiny.

While developing a common foreign and security policy that both strengthens Europe's influence in the world and its military capabilities is an enormous challenge for the next decade or so, the much more immediate task is to set the Union on an economic growth path. The aim must be simultaneously to releave the pressures on big-country budget deficits (principally in France, Germany and Italy), reduce unemployment and create a platform from which the economies of the new member states can begin to catch up with the rest.

The European Union has failed to match U.S. growth and productivity rises for more than a decade and is increasingly showing symptoms of the "euro-sclerosis" that was swept away, perhaps only temporarily, by the 1992 single market program.

It is now well known that the greatest single problem is Germany, whose reluctance to liberalize and restructure its economy (as well as the risk it runs of deflation) is prompting frequent comparisons with Japan and its seemingly perpetual economic stagnation.

Some argue that the main problem is simply that Germany switched from the deutsche mark to the euro at too high a rate and has been suffering from the resultant loss of competitiveness ever since. They draw comfort from the fact that the German inflation rate is now below the euro zone average, on the grounds that this will bring a slow recovery of lost competitiveness.

For many others, however, the problem is more serious and can only be tackled by burying some of the political and social trade-offs underpinning the so-called Rhineland model of consensual, participative capitalism. In this view, labor market, pensions and welfare reforms are absolute priorities if Germany is to recover lost vitality and deal with a looming demographic crisis caused by an aging population.

The main economic problems, however, are not limited to Germany. That is why the heads of government set the celebrated target at their Lisbon summit meeting in 2000 of achieving the "most dynamic, knowledge-based economy in the world" by 2010. Their political purpose was both to speed up progress on market liberalization, privatization and internal market reforms, and to accelerate the pace of structural change in areas outside the European Union's spheres of competence.

These areas of strictly national jurisdiction (from putting computers in schools to reforming labor markets) are now subject to "open coordination." This is a procedural invention that seeks to score successes for intergovernmental cooperation by relying on peer group pressure, benchmark-setting and close Commission monitoring.

The political will to build the necessary changes into domestic programs, however, has flickered in many countries rather than burst into flame. As a result, achievements have been very patchy and the 2010 objective looks vainglorious.

Experience of "open coordination" indicates that objectives set centrally in the European Union tend to be elusive when they do not rely on the supranational "Community method" of decision-making for their attainment. That is why there is now something of a crisis in the management of the Economic and Monetary Union (EMU).

A new federal institution has been created, the European Central Bank, with the task of managing monetary policy to maintain stable prices. Fiscal policies, however, remain entirely a matter for national governments under the loose jurisdiction of the Growth and Stability Pact.

Labeled "stupid" in an extraordinary moment of autumn madness by Mr. Prodi (because he had nothing to put in its place), the Pact is supposed to ensure that euro zone countries deliver on their undertakings to keep their budget deficits below three percent of gross domestic product and, in the medium term, to achieve balanced budgets or surpluses.

The Pact has failed or is failing in too many cases. Portugal and Germany will be well above the three percent limit in 2002-2003, and possibly France as well. All three governments have put their domestic political interests above those of the euro zone economy and its single currency. They were able to do so because the Commission has very limited powers to force them to deliver on their undertakings.

The Commission has proposed a strengthening of its powers in EMU in its submission to the Convention. But deeper questions need to be addressed. Many people wonder how long it will be before citizens react against the lack of accountability in the management of macroeconomic policy in the euro zone.

Neither the Commission nor the governments of member states are directly responsible to voters throughout the euro zone for economic management or mismanagement, even though all voters can be affected by the consequences.

The Union is not about to adopt a federal constitution as a result of the current Convention. If, however, it wants to continue expanding its borders, and also respond to democratic imperatives, it may have to do so in less than a generation.

 John Wyles is a partner in the Brussels communications and political affairs consultancy, GPlus Europe. He previously was Brussels bureau chief of the Financial Times. Since 1993, he has been a political communications consultant. He was the European Commission's chief external adviser on communications strategy for the changeover to the euro until the end of 2001. He writes regularly on EU affairs and is a board member of the European Policy Centre, a Brussels think tank.

 

This article was published in European Affairs: Volume number IV, Issue number I in the Winter of 2003.