outgrowing the union

A survey of the European Union September 25th 2004

Outgrowing the UnionOutgrowing the UnionA survey of the European Union September 25th 2004

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The European Union has achieved much, but it may now be pushing upagainst its limits, says Gideon Rachman

omic, but their goals were political. Starting with agreements between six

countries on the pooling of coal and steelresources in 1951 and moving on to the cre-ation of a common market in 1957, the EU

has gradually spread into a plethora of ac-tivities. Today it is hard to think of a �eld ofpublic policy in which it is not active. It isinvolved in everything from foreign policyto immigration, and is reckoned to beresponsible for around half of all newlaws passed in its member states.

The people who run the EuropeanCommission in Brussels like to believe thatthis golden age of peace and prosperity isdirectly linked to the rise of the EU. Yet thisview is often contested. Peace in Europe, itis argued, could equally be credited to thepresence of American troops on Europeansoil, and prosperity to the same causes ofeconomic growth as in the United States orAsia, such as rising productivity and in-creasing trade. As for freedom, the revolu-tions in central Europe and Spain, Portugaland Greece were not led from Brussels.

Indeed, say critics of the EU, far frompromoting peace, prosperity and freedom,it now threatens all of these achievements.In Britain, for example, Eurosceptics see adirect threat to British self-governmentand democracy in the many laws emanat-ing from institutions in Brussels overwhich the British electorate has no control.In Britain and elsewhere, critics also arguethat the EU is increasingly responsible for atide of unnecessary regulation that is en-gul�ng the European economy. And somebelieve that its overweening ambitionmay end up causing exactly the sort of con-�icts that it has been seeking to eradicate.Martin Feldstein, an eminent Americaneconomist, has argued that the launch of asingle European currency could cause po-

Peace in our timeEurope has largely avoided war for 60 years,but the European Union no longer gets thecredit.

E pluribus unum?The pros and cons of becoming a superpower.Page 4

Passport to prosperityThat was one of the EU’s big attractions; but isit still? Page 6

One for allThe perils of a single currency. Page 9

No love lostThe EU is becoming ever bigger and morepowerful�and ever less popular. Page 10

Europe à la carteWith many more members and increasinglydiverging interests, a one-size Europe may nolonger �t all. Page 12

The Economist September 25th 2004 A survey of the European Union 1

1

A divided Union

FOR many centuries Europe was theworld’s most powerful, prosperous and

technologically advanced continent. Thatperiod of European cultural and politicaldominance came to a de�nitive end withthe second world war. In 1945 Germanywas defeated and in ruins; France washalf-starved and humiliated; Britain wasbankrupt and on the point of losing its em-pire; Spain was a backward, isolated dic-tatorship; and the countries of central andeastern Europe had been absorbed into aSoviet empire. Nobody would haveguessed that Europe was at the beginningof a new golden age.

In 2004, a continent that had beenwracked by war for centuries can lookback on almost 60 years spent largely atpeace. A continent that lay in economic ru-ins in 1945 is now prosperous as never be-fore. A continent that in 1942 could list onlyfour proper democracies is almost entirelydemocratic. A continent that was dividedby the iron curtain until 1989 now enjoysfree movement of people and commonpolitical institutions for 25 countries,stretching from the Atlantic coast of Portu-gal to the borders of Russia.

This new period of peace and prosper-ity has coincided with the rise of a newform of political and economic organisa-tion. The founding fathers of what is nowthe European Union�Jean Monnet, aFrench civil servant, and Robert Schuman,a French foreign minister of the 1950s�were convinced that the origins of con�ictin Europe lay in the continent’s system ofcompeting nation-states. As Schuman putit, �Because Europe was not united, wehave had war.� Those founding fatherswere determined to build a new union inEurope that would banish con�ict forgood. Their building-blocks were econ-

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litical tensions culminating in war. But for now the EU is riding high, with

more and more countries seeking to join it.Having started with just six members in1957�Belgium, France, Germany, Italy,Luxembourg and the Netherlands�the EU

now has 25. Its biggest ever expansion wascompleted in May this year with the addi-tion of ten new members, mainly from theformer Soviet block. The Poles, the Spanishand others undoubtedly won their free-dom without any help from Brussels. Butthey all saw joining the EU as a way ofconsolidating democratic gains and spur-ring economic and political modernisa-tion. For much the same reasons Turkeyand the Balkan countries are now waitingin the wings.

Enlargement should be enough of achallenge to keep the Brussels machinehumming for the foreseeable future. Butoddly enough, many of the most ardentbelievers in the creation of a European fed-eration see enlargement as an unwelcomedistraction from the EU’s most urgent busi-ness: to develop into a real political union.Enlargement and political union��widen-ing� and �deepening� the EU�have oftenbeen portrayed as opposing courses, but infact in the past �ve years they have movedahead simultaneously. On January 1st2002, 12 EU countries ditched their na-tional currencies and adopt a new singlecurrency, the euro; and in June 2004, the 25EU governments agreed on the Union’s�rst ever written constitution.

Over the past decade Europe, a conti-nent often accused of sclerotic caution, hasdisplayed a daring political imaginationthat has produced a run of successes. Jav-ier Solana, the EU’s foreign-policy chief,explains: �Our philosophy is jump in the

pool, there is always water there.�The trouble with that kind of philoso-

phy is that it can eventually lead to a nastyaccident, and indeed the European projectlooks increasingly troubled. Economically,the EU is falling further behind the UnitedStates, and can only envy the dynamismof China or India. Politically, its membershave been at each other’s throats over Iraq,the management of the euro and the con-stitution. Perhaps most dangerously of all,the EU is plagued by a lack of popular un-derstanding and enthusiasm.

The penalties of successThe survey will argue that many of theEU’s current di�culties stem from its pastsuccesses. In post-war Europe, achievingpeace and re-establishing prosperityseemed like urgent and di�cult tasks thatrequired political sacri�ces. Now, though,long years of peace and prosperity in west-ern Europe, together with the collapse ofthe Soviet threat, make further Europeanintegration seem much less urgent. Indeed,the very depth of the political integrationachieved so far has caused something of abacklash as the EU has gained new powersthat threaten deeply rooted national tradi-tions. Sometimes this has been in impor-tant �elds such as frontier controls and �s-cal policy, but sometimes, too, it has beenin areas that irritate by their triviality.

The post-war gains in European pros-perity may also have begun to create theirown problems. Rich countries such as Ger-many and France were encouraged to de-velop elaborate welfare states which arebecoming increasingly una�ordable aspopulations age. Before the creation of asingle EU market and a single currency,such problems could be regarded as

mainly national in character. But now theycan cause tensions across the Union.

Enlargement is another example of asuccess that makes the EU a riskier place.By increasing the diversity of political in-terests and views within the Union, it hasmade them much harder to contain withina single framework.

European federalists�the heirs to Mon-net and Schuman�are well aware of theseproblems. Some believe that a new impe-tus for European unity can be provided bytrying to build up the EU into a new super-power�a global force that can equal theUnited States. But so far any moves in thatdirection have served only to deepen divi-sions within the EU, in particular over atti-tudes to America.

The EU’s new constitution representsanother e�ort to preserve and deepenEuropean unity, but it too could back�re.For the constitution to come into force, itmust be approved by all 25 EU countries. Atleast 11 of them are likely to hold referen-dums, and in a few of those, notably Brit-ain, the verdict is likely to be negative. Suchan outcome could well provoke a crisiswithin the Union.

This survey will conclude that the EU

may indeed split. But a split need not be adisaster. It could lead to a multi-layered EU

in which di�erent countries adopt di�er-ent levels of political integration and ex-periment with di�erent economic models.If the EU were preserved as an over-arch-ing framework, it could actually bene�tfrom such diversity. But there is also adarker, if less likely possibility. A split inthe EU could cause Europe once again to di-vide into rival power blocks. That couldthreaten what most agree is the Union’scentral achievement: peace in Europe. 7

IN THE whole of Europe there is probablyno more blood-soaked battle�eld than

Verdun. In 1916 some 800,000 French andGerman soldiers were killed or wounded,�ghting inconclusively over a few squaremiles of territory near the Franco-Germanborder. The young Charles de Gaulle waswounded three times and captured at Ver-dun. Louis Delors, a 21-year-old Frenchprivate, su�ered terrible injuries there andwas almost killed by a German o�cer who

was �nishing o� the French woundedwith a pistol. In the 1990s his son, JacquesDelors, became the founding father of amonetary union of France, Germany andten other European countries. Mr Delors’stwo great collaborators were Helmut Kohl,the German chancellor, whose father hadalso fought at Verdun, and François Mitter-rand, the French president. In 1984 thesetwo leaders, in a historic act of Franco-Ger-man reconciliation, walked hand in hand

across the battle�eld that had been a kill-ing ground for so many young men fromboth countries.

Many of the European Union’s most ar-dent supporters still see the EU as a crucialbulwark against the return of war to Eu-rope. In pressing the case for monetary un-ion, Mr Kohl argued that adopting the eurowas ultimately a question of war andpeace in Europe. When e�orts to write aEuropean constitution looked like stalling,

Peace in our time

Europe has largely avoided war for nearly six decades, but the European Union no longer gets the credit

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2 A survey of the European Union The Economist September 25th 2004

2

Elmar Brok, a prominent German memberof the EU’s constitutional convention (andcon�dant of Mr Kohl), gave warning that ifEurope failed to agree on a constitution, itrisked sliding back into the kind of na-tional rivalries that had led to the outbreakof the �rst world war.

Remember the bad old days?Such arguments resonate particularlystrongly among an older generation ofFrench and German politicians, but alsohave wider currency. Timothy Garton Ashof St Antony’s College, Oxford, one of Brit-ain’s most astute observers of European af-fairs, says in a recent book that the Union isneeded �to prevent us falling back into thebad old ways of war and European barba-rism which stalked the Balkans into thevery last year of the last century.� Mr Gar-ton Ash concedes that �we can never provethat a continent-wide collection of inde-pendent, fully sovereign European democ-racies would not behave in the samebroadly paci�c way without the existenceof any European Union. Maybe theywould, but would you care to risk it?�

Believers in the pacifying e�ects of thedrive for European unity acknowledge thecontributions to peace in post-war Europemade by American troops and by thespread of prosperity and democracy. Butthey argue that the EU has played the cen-tral role, by forcing European leaders to co-operate intensively and continuously, byproving that membership of the Unionbrings prosperity and by demanding thatall EU countries adhere to basic principlesof democracy, human rights and thepeaceful resolution of disputes.

Seen in this light, EU enlargement is

part of the same �peace project� that wasinitially centred on reconciliation betweenFrance and Germany. Countries that ap-ply to join the EU �rst have to meet a set ofbasic democratic criteria, and have to putaside old territorial disputes. Eight formermembers of the Soviet block were admit-ted to the EU this year, and Romania andBulgaria are lined up for entry in 2007. Butthe idea that enlargement of the EuropeanUnion will inevitably resolve con�icts andspread freedom and democracy will faceeven bigger tests in future.

The European Commission in Brusselshas already made it clear that all the Bal-kan countries are potentially eligible formembership, in the hope of encouragingthem to make peace and introduce demo-cratic reforms. Croatia, which earlier thisyear became the �rst major combatant inthe Balkan wars to be formally accepted asa candidate for EU membership, had tostep up its co-operation with the Interna-tional War Crimes Tribunal in The Hague

before negotiations became possible. The EU was rightly castigated for its in-

ability to prevent war in the Balkans in the1990s, and many Europeans felt humili-ated by the need for American military in-tervention to end the con�icts in Bosniaand Kosovo. But the EU is taking over thepeacekeeping mission in Bosnia fromNATO later this year in what will be theUnion’s biggest ever military operation. Inthe longer term, it is hoped, the prospect ofEU membership may help to cement thefragile democracies and the peace settle-ments now in place across the Balkans.

An ever wider UnionA similarly ambitious logic is being ap-plied to Turkey’s aspirations to join the Un-ion. Although many EU politicians and cit-izens are worried about admitting a largeMuslim nation into the Union, the propo-nents of Turkish membership have the up-per hand. Turkey is likely to be invited tostart negotiations to join the EU later thisyear. Once again, the key arguments areabout peace and the spread of freedomand democracy.

At a time when relations between theWest and the Islamic world are so delicate,most EU leaders seem to feel that refusingto admit a large Islamic country into theUnion would be seen as a disastrous con-�rmation of the �clash of civilisations�.European diplomats, for their part, hopethat admitting Turkey to the EU will bringcon�rmation that Islam is not incompati-ble with western values. They point outwith some pride that the prospect of EU

membership has already driven forwardreforms in Turkey such as increased politi-cal and civil rights for the Kurdish minorityand the abolition of the death penalty.

For geo-strategic thinkers sitting in for-eign ministries in London, Paris and Berlin,the arguments for using the EU to spreadpeace and democratic stability seem com-pelling. But ordinary European citizens�nd them much less convincing. Manyfear that rather than exporting stability,the EU will import instability. In westernEurope, public debate about EU enlarge-ment has tended to concentrate on fearsabout competition from low-cost labourand waves of immigration. So far suchfears have proved containable, and the ad-mission of the new members from centralEurope has not caused too much of a fuss.But the new central European members,though poorer than the European average,are smallish (except for Poland), and all arepredominantly Christian.

Turkey, which on current trends will

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Mitterrand and Kohl made history 1


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2 have a larger population than any currentEU member by 2020, is a di�erent proposi-tion. Because all EU citizens are free to liveand work anywhere in the EU, there couldbe serious resistance to Turkish member-ship in France, Germany and the Nether-lands, where the rapid growth of Muslimpopulations in the past 30 years is alreadya highly sensitive issue.

Even without such worries, the tradi-tional arguments for European integrationas a �peace project� have anyway been los-ing force with the passing years. The cur-rent generation of EU leaders still has somememories of the depredations of war inEurope. Gerhard Schröder, the Germanchancellor, never knew his father, whowas killed in the second world war;Jacques Chirac, the French president, livedthrough the war as a child. But for mostyounger Europeans, the threat of war inwestern Europe now seems almost un-imaginably remote.

The expansion of the EU beyond theoriginal six also added new countries withdi�erent historical experiences. Althoughsome Britons, such as Mr Garton Ash, takethe threat of a recurrence of war in Europeseriously, the British have generally ap-proached the Union in a very di�erent

spirit from the French and Germans.Whereas statesmen such as Monnet andSchuman considered the 1939-45 war asthe �nal proof that traditional Europeanpolitical structures needed to be radicallychanged, the British tended to see it as avindication of their own long-establisheddemocracy and as con�rmation of theiranti-continental prejudices. As MargaretThatcher, a famously Eurosceptic Britishprime minister, remarked: �In my lifetimeall our problems have come from main-land Europe and all the solutions from theEnglish-speaking nations across theworld.� The British are wary of dreams forpolitical union in Europe. Unlike theirFrench and German counterparts, Britishpoliticians have always wanted the EU tobe above all about free trade.

Changing the mixAs the EU has expanded, so Britain has be-come less isolated in its resistance to theidea that European unity is essential forthe maintenance of peace. When in 2003Sweden held a referendum on whether tojoin the euro, Goran Persson, the Swedishprime minister, used the peace argument,but watched it fall �at in a neutral countrythat has been at peace for nearly 200 years.

The Swedes voted �no�. The new EU mem-bers in central Europe also bring a di�erentperspective to the European Union.Whereas the traditional �builders of Eu-rope� were suspicious of nationalism andkeen to build up supranational institutionsat the expense of the nation-state, many ofthe central Europeans are still joyfully re-asserting their own national identitiesafter decades of Soviet domination.

Nonetheless, all these countries wereeager to join the EU. They saw member-ship as an assertion of their Europeanidentity, as well as a ticket to prosperityand some protection against any threatfrom a resurgent Russia. But they are alsomuch less enthusiastic than western Euro-pean federalists about an �ever closer un-ion� for Europe as spelled out in the Treatyof Rome. Vaclav Havel, the hero of the Vel-vet Revolution and former president of theCzech Republic, explains that for countriesthat have recently thrown o� Soviet dom-ination, �the concept of national sover-eignty is something inviolable�.

For a variety of reasons, then, the mostpowerful traditional argument for Euro-pean unity, peace, has been losing force.European federalists are beginning to lookfor new rationales for European unity. 7

IF EUROPEANS no longer feel that �evercloser union� is needed to avert war,

what new project might unite them? Formany European leaders the answer is ob-vious: the EU must strive to become aglobal power. In his opening address aspresident of Europe’s constitutional con-vention in 2002, Valéry Giscard d’Estaing,a long-serving former president of France,laid out his hopes: �If we succeed in 25 or50 years�Europe’s role in the world willhave changed. It will be respected and lis-tened to, not only as the economic power italready is, but as a political power whichwill talk on equal terms to the greatestpowers on our planet.�

The constitution drawn up by Mr Gis-card d’Estaing and his collaborators tries toadvance this ambition. If and when it israti�ed, the EU will have a �foreign minis-ter� in charge of his own diplomatic corps.The constitution also commits the EU tothe �progressive framing of a common de-

fence policy�. The British and other nation-staters protest that all this sounds more im-pressive than it really is. The foreign minis-ter will simply be a co-ordinator with afancy title who will have no power to over-rule national foreign policies. Decisionsabout troop deployment will remain inthe hands of national governments.

But the symbolism of choosing titlessuch as foreign minister and president forthe EU’s senior o�cials is both deliberateand signi�cant. In foreign policy, as in somany other areas, the EU’s powers tend tobuild up through a series of small steps,not in one massive leap. Ben Bot, the Dutchforeign minister, re�ects that only 20 yearsago EU ministers felt it would have beentoo controversial to have a formal discus-sion of foreign and security policy.

Yet even as Mr Giscard d’Estaing andhis conventioneers laid out their plans for�ever closer union� in foreign a�airs,events outside the conference chamber

mocked their aspirations. The constitu-tional convention took place against thebackdrop of bitter European divisionsabout the war in Iraq. With an anti-warcamp led by France and Germany and apro-war camp led by Britain and backed bySpain, Italy and Poland, the EU’s hopes of a�common� foreign policy looked forlorn.

The Iraq dispute was disturbing not justbecause of its bitterness, but also becauseit revealed that the EU was split betweentwo competing visions. One of them, mostclosely identi�ed with France, is known as�multipolarity� or �Euro-nationalism�. Inessence, it calls for the EU to become an in-dependent actor on the world stage tocounterbalance the United States. Theother vision, most closely identi�ed withBritain, is known as Atlanticism. Thisholds that the �western alliance�, forged inthe cold war, remains vital today. TonyBlair, Britain’s prime minister, argued thattrying to build up Europe as a counter-

E pluribus unum?

The pros and cons of becoming a superpower

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2 weight to the United States was a pro-foundly misguided and dangerous idea.

The very fact that the EU was dividedover Iraq might have been expected to dis-hearten the Euro-nationalists, and initiallyit did. But many Euro-nationalists ulti-mately took heart from the Iraq crisis, forbeneath the divisions between Europeangovernments they saw a fundamental un-ity in the anti-war sentiment of the Euro-pean public. For example, althoughSpain’s then prime minister, José MaríaAznar, supported the war, only 4% of theSpanish public agreed with him, and hisparty lost power at the subsequent elec-tion, albeit after a terrorist attack on Ma-drid just before polling day. Even in Britaina large majority of the public seemed op-posed to the war.

After a slew of anti-war demonstra-tions across Europe on February 15th 2003,Dominique Strauss-Kahn, a former French�nance minister and passionate pro-Euro-pean, proclaimed: �On Saturday February15th, a new nation was born on the street.This new nation is the European nation.�Mr Giscard d’Estaing also felt that the anti-war movement marked the birth of a�European public consciousness�.

The emotions stirred up by an impend-ing war, although powerful, can also beephemeral. But those who believe thatthere is enough common ground in time tounderpin a united European approach toworld a�airs have other evidence to drawupon. A poll carried out in Europe for theGerman Marshall Fund of the UnitedStates earlier this year found widespreadsupport for the idea that: �The EuropeanUnion should become a superpower likethe United States.� Not unexpectedly, 83%of French respondents and 73% of Ger-mans agreed, but so did over 50% in coun-tries whose governments had supportedthe Iraq war, such as the Netherlands, Po-land and even Britain (see chart 1).

Support for the idea of Europe as a su-perpower does not necessarily translateinto support for automatic opposition tothe United States. Asked if they supportedEuropean superpower status to �competemore e�ectively with the US�, only 36% ofFrench and 37% of British respondentsagreed. Support in Germany and the Neth-erlands was even weaker. But large major-ities in most of the countries supportedEuropean superpower status in order �toco-operate more e�ectively with the US� indealing with international problems.

This points to a less aggressive versionof Euro-nationalism which holds that Eu-rope alone is too small to be able to in�u-

ence a world soon to be dominated notonly by the United States but also by Indiaand China, superpowers with popula-tions of over a billion each. As DanutaHubner, the new European commissionerfrom Poland, puts it: �We should not forgetthat collectively we make up only about11% of the world’s population.� Seen inthat light, Europeans need to group to-gether to defend common interests.

Euro-nationalists believe that there is adistinctive European approach to theworld that needs to be defended. Europe-ans, they argue, are more individualistthan Asians but more collectivist thanAmericans. Opinion polls show that Euro-peans are generally less religious thanAmericans, less inclined to believe thatwar is sometimes necessary to achieve jus-tice, and more inclined to think that suc-cess or failure in the world is determinedby luck or social forces rather than per-sonal e�ort. Such attitudes have politicalconsequences. They mean that domesti-cally Europeans are more likely to supporta �European social model� with generouswelfare provision; and that internationallyEuropeans are more inclined to expresssupport for multilateral institutions suchas the United Nations or the InternationalCriminal Court. Euro-nationalists hopethat in time an EU foreign policy can de-velop on the model of European trade pol-icy, where the EU already acts as a blockand is taken just as seriously as America.

Yet there are strong reasons for doubt-ing that an attempt to turn the EU into a po-litical superpower will provide it with a

fresh impetus. Indeed, it is just as likely toend up splitting the Union.

True, the opinion polls do suggest a de-gree of consensus across the EU about thedesirability of aspiring to superpower sta-tus. But that raises the awkward questionof how to deal with the existing super-power. Undoubtedly discussion of theUnited States in France on the one handand Britain and Poland on the other has adi�erent quality to it. British left-wingersmay rail against �that cowboy Bush�, butthey do not believe that America repre-sents some sort of existential threat to theircountry, whereas in France that feelingpermeates the debate.

Although some leading European poli-ticians seized on the anti-war demonstra-tions to claim the birth of a European na-tion, others were much more sceptical.Jacques Delors, for example, dismisses thepolling evidence as much less signi�cantthan the history and the deep structureswhich he believes bind Britain to America.Similarly, Hans-Gert Pöttering, the leaderof the dominant centre-right group in theEuropean Parliament, has said that: �De-�ning Europe in anti-American termscould destroy Europe.�

The enemy withinThere is also the uncomfortable realitythat rivalries between EU countries are of-ten at least as serious as any rift across theAtlantic. Indeed, the European split overIraq was arguably as much about a strug-gle for control of the EU as it was about Iraqitself. The Spanish government’s decisionto align itself with Britain and the UnitedStates re�ected Mr Aznar’s belief that his

1Powerful ambitionRespondents agreeing with the statement“The EU should become a superpower like the US”, %

Source: The German Marshall Fund, surveyed June 2004

0 20 40 60 80 100

France

Netherlands

Spain

Germany

Italy

Poland

Portugal

Britain

United States

Turkey

Slovakia

Birth of a nation?

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2 country had too often allowed itself to bedominated by a Franco-German axis with-in Europe. And when Jacques Chirac, theFrench president, lashed out at centralEuropean countries that supported thewar, saying they had �missed a goodopportunity to shut up�, he was re�ectingFrench dismay at the realisation that in thenewly enlarged EU the French cockerelmight no longer rule the roost.

But it is not just rivalries within the EU

that will continue to bedevil e�orts to turnthe Union into a coherent global power. Itis also Europeans’ continued ambivalenceabout the whole idea of exercising poweron the world stage. Probe a little deeperinto the apparent support in the opinionpolls for the EU becoming a superpower,and it quickly becomes more ambiguous.

For example, Europeans are distinctlyreluctant to spend more money on de-fence, and markedly unenthusiastic aboutusing military force. The 2003 poll for theGerman Marshall Fund asked respon-dents whether they thought that in some

conditions war was necessary to obtainjustice. In America 55% agreed stronglythat it was, but in France and Germanyonly 12% felt that way. These public atti-tudes are re�ected in EU countries’ low lev-els of deployable military force comparedwith America.

Some Europeans argue that the EU’sopportunity lies in becoming a new sort ofsuperpower, using economic weight andskilful diplomacy as a form of �softpower�. They point out that the Union hasmanaged to bring about deep changes inthe behaviour of its neighbours throughEUenlargement. The carrot of EU member-ship is an extraordinarily e�ective foreign-policy tool; one Brussels o�cial jokes that:�Once a country applies to join the EU, itbecomes our slave.�

But it cannot be applied to countrieswithout any European connections, andthere is nothing much else in the toolbox.Eurocrats like to note, for example, that theEU spends far more on foreign aid thandoes the United States; but all the money

that the Union has thrown at the MiddleEast, and the Palestinian Authority in par-ticular, has done little to give the Europe-ans any leverage there.

Observers from outside Europe cansometimes shine a cruel light on the EU’spretensions. Max Boot, an American neo-conservative at the Council on Foreign Re-lations in New York, does not mince hiswords: �By the traditional measures ofpower, Europe is in decline: economicgrowth is anaemic, military budgets are infree fall, the fertility rate is declining.� He isputting his �nger on a real problem. It isnot just that Europeans are divided and re-luctant to spend on military force; it is alsothat Europe’s share of the world economyis shrinking as the United States constantlyoutstrips European growth and the Asianeconomies surge ahead.

Slow economic growth in the EU notonly makes it harder to project Europeanpower. It also threatens the second pillarof the European project: the promise thatEuropean unity will deliver prosperity. 7

WHAT do ordinary Europeans wantfrom the European Union? The opin-

ion polls provide an unambiguous an-swer: jobs. The heart of the Union isplagued by high unemployment. In theeuro area�the 12 countries that haveadopted the single currency�average un-employment is 9% of the workforce. Euro-pean leaders may be preoccupied withhigh-minded tasks such as enlargement ordrafting a constitution, but the voters’main concern is their livelihood. The earlyyears of European integration were helpedby rapid and sustained economic growthin western Europe, but recently growthhas become slow and intermittent. This isundermining one of the chief argumentsfor European unity: a reasonable expecta-tion of ever-growing prosperity.

In the 30 years from 1945 to 1975, westEuropean countries that had been devas-tated by war rebounded with astonishingspeed. From 1950 to 1960, German GDP

grew at an average of 7.9% a year. The num-ber of private cars in France and Germanyincreased 20-fold between 1950 and 1966.The spread of a�uence and the rise of theconsumer society became a familiar story

across the western world, but growth inwestern Europe was even faster than in theUnited States. Average income in westernEurope rose from about 40% of Americanlevels in 1950 to just over 70% by 1973.

Chicken or egg?Exactly how much of western Europe’seconomic development can be attributedto the merging of markets and thedismantling of tari� barriers that formedpart of the drive for European unity is amoot point. Many economists think theEU has played a crucial role by creating asecure legal environment for business andenabling European companies to reap theeconomies of scale previously availableonly in the United States. On the otherhand, it is striking that by the time the com-mon market was established, almost halfthe miracle years of 1945-75 had alreadypassed. Nonetheless, countries that hadstood aside from the European experimentwere soon casting envious glances at theeconomic success of the participants.

In his valedictory dispatch in 1979, SirNico Henderson, Britain’s ambassador toFrance, pointed out that in 1954 Britain’s

GDP per person had been well ahead ofFrance’s and West Germany’s, but by 1977it had fallen 41% and 46% respectively be-hind those of its big neighbours. Sir Nicoattributed much of this relative decline toBritain’s lack of enthusiasm for the process

Passport to prosperity

That was one of the EU’s big attractions; but is it still?

2The race to get richReal GDP, 1970=100

Sources: World Bank; national statistics

75

100

125

150

175

200

225

250

275

1970 75 80 85 90 95 2003

France

Germany

ItalyBritain

United States

1


2

through bold reforms have mostly proveddisappointing. The Single European Act,passed in 1986, was meant to light a bon-�re of trade-restricting regulation andcreate a true single European market by1992. The euro became a reality in 2002,launched in the hope that a single cur-rency would spur trade, competition andultimately growth. Yet neither the singlemarket nor the single currency have yetful�lled these hopes.

European policymakers are feelingglum. Guy Verhofstadt, the Belgian primeminister, recently summed up their mood:�Growth in Europe last year was 0.8%, inthe United States it was over 3%, in China itwas over 10%If we don’t change things,we risk turning Europe into a social andeconomic museum.� A senior EU econ-omic policymaker, noting that America’sproductivity has once again begun to surgeahead of Europe’s, muses: �Europe ur-gently needs to press ahead with structuralreforms. It is unsustainable, year after year,to fall behind in GDPper head because youdo not improve labour productivity.�

But are things really that bad? Some ob-servers think that the sense of gloom in Eu-rope is exaggerated. The Asian tigers maybe growing much faster than the Europeaneconomies, but then they started o� farpoorer. And much of the faster growth inthe United States simply re�ects the coun-try’s rapid increase in population: pro-ductivity per worker is actually fairly simi-lar to that in the EU. Any remaining gapbetween Europe’s and America’s econ-omic performance in recent years is duelargely to problems in Germany, which isstill trying to recover from the economic ef-fects of uni�cation. By contrast, some ofthe more peripheral European countrieshave done strikingly well. The World Econ-omic Forum last year rated Finland as theworld’s most competitive economy, withSweden coming third.

Perhaps, too, most Europeans have sim-ply decided to enjoy some of their wealthin the form of leisure, rather than workingever longer hours, as the Americans do.Their economies may be growing moreslowly, but their lives may be pleasanter.However, this theory of a European �pref-erence for leisure� is controversial. Someexperts believe that Europeans work lessbecause they genuinely prefer to take timeo�; others argue that it is high taxes thatdiscourage people from working and cre-ating jobs.

But this beauty contest between theAmerican and European models is ulti-mately beside the point. Miss Europe and

of European integration.Britain did not join what was then the

European Economic Community until1973, along with Ireland and Denmark.Since then successive waves of enlarge-ment carried the hopes of poorer Euro-pean countries to achieve the wealth lev-els of �core Europe�.

For many new EU members, entry hasindeed triggered rapid economic growth.The biggest success story is that of Ireland,where income per person was only 62% ofthe EEC average when it joined in 1973, buthad reached 121% of the EU average by2002. However, other late entrants havealso done well. Spain, a much larger coun-try, has emerged from the poverty and iso-lation of the Franco era and is now one ofthe fastest-growing and most dynamiccountries in Europe. The eight central Euro-pean countries that joined the EU this yearhave high hopes that membership of theUnion will work its magic for them too.

But whereas some peripheral Euro-pean economies boomed after joining, thecore European economies that they soughtto emulate began to stagnate. In Germany,France and Italy, the heart of the single-currency area, unemployment is now hov-ering around 10% and public �nances arein a mess. Germany in particular has had agrim few years: since 1996, it has averagedgrowth of just 1.3% a year. In fact, westernEurope’s economic miracle ended a longtime ago. Average income levels, havingrisen to 70% of America’s in the early1970s, have been stuck there ever sinceand are now declining in relative terms.

E�orts to re-launch the EU economy

Miss America may each have their admir-ers, but Miss Europe is at a huge disad-vantage because she is growing old farmore rapidly. Because Europe’s society isageing, the EU’s real economic problemsare yet to come. Suppose, for the sake of ar-gument, that Europeans collectively haveindeed made a choice to accept lowereconomic growth in return for more socialprotection and leisure time�the so-called�European social model�. The troublewith this model is not that it is illegitimate,but that it is unsustainable.

An old problemAt present, the EU has 35 people of pen-sionable age for every 100 of working age.But Europeans are not having enough chil-dren to replace today’s workers. A Deut-sche Bank report in 2002 calculated that,on current demographic trends, by 2050there will be 75 pensioners for every 100workers in the EU. More immigrationmight ease the problem, but the numbersneeded to o�set the e�ect of ageing wouldprobably be politically unacceptable.

State pensions in the EU are mostlypaid for out of current tax revenues, so ei-ther taxes or national debts, or both, mayhave to rise steeply. In a recent report onthe �scal implications of ageing in Europe,Standard & Poor’s, a credit-rating agency,predicts that the EU countries with themost serious pensions problems�includ-ing France and Germany�could see theirpublic debt grow to more than 200% ofGDP by 2050. For comparison, countriesthat want to join the euro are supposed to

3Mostly jobless growthUnemployment rate, %

Source: OECD *West Germany only

0 2 4 6 8 10 12

Spain

Germany

France

United States

Italy

Britain

Ireland

Netherlands

2003 1970

*

4

*West Germany up to 1991

Europe’s dolce vitaAverage annual hours workedper person in employment

Source: OECD

1,400

1,500

1,600

1,700

1,800

1,900

2,000

1970 75 80 85 90 95 2003

United StatesBritain

Germany*

ItalyFrance

1


2 keep their public debt below 60% of GDP.EU policymakers realise that some-

thing has to give. According to an authori-tative report commissioned by the EU andled by André Sapir, an economics profes-sor at the Free University of Brussels, �Thecurrent combination of low growth andhigh public expenditure is not sustainableand will become less so in the future.� Asthe Sapir report makes clear, the majorEuropean economies have become lockedinto a vicious circle: low growth has led tohigher unemployment, which has led tohigher social expenditure, which has ledto higher taxes and thus to lower growth. Itstates bleakly that: �The sustainability ofthe European model(s) of development isincreasingly challenged, without a viablealternative in view.�

The EU’s demographic problem isworsened by the number of working-ageEuropeans relying on welfare. The unem-ployment statistics of 9-10% in the eurozone are just the tip of the problem. Muchlarger numbers of potentially working-agepeople are not at work but are drawingsome sort of welfare bene�t, perhaps be-cause they are single mothers or are classi-�ed as disabled or have retired early. In theNetherlands, for example, around 1m outof a working-age population of less than9m are now classi�ed disabled, many withpsychological ailments.

Raymond Torres of the OECD, an econ-omic think-tank, reckons that around 40%of Europeans of working age are economi-cally inactive, compared with 29% ofAmericans. He says that Europeans mustget more people back to work, both by rais-ing the pension age and by reducing wel-fare rolls. The alternative is that �welfaresystems will collapse and there will be aforced and chaotic reduction of bene�ts.�

There is hope that it may not come tothat. Already calls for structural economicreforms have become a staple of Europeanpolitics, and even some of the trade un-ions are becoming more realistic. Big Ger-man employers such as Bosch, Siemensand DaimlerChrysler have recently nego-tiated agreements to extend workinghours without increasing pay, whichshould sharply increase productivity. Theenlargement of the EU, and the knowledgethat just across the border there are work-ers willing to do the job for far less money,has clearly acted as a spur to reform.

Some European governments have in-troduced successful policies for getting theunemployed back to work. In Britain andDenmark the ratio of the population atwork is higher than in America. Such suc-

cesses have spurred other European gov-ernments to try harder. Gerhard Schröder,the German chancellor, has pushedthrough a package of reforms, includingthe �rst cuts in the level of unemploymentbene�ts in Germany since 1945.

Reasons for doing nothingBut reform remains fearsomely di�cult.Mr Schröder’s reward has been to see hisparty slump in recent regional elections,and to be told by economists that his ef-forts are inadequate. The political climateelsewhere is equally discouraging. In Italy,the government of Silvio Berlusconi re-cently had to call a vote of con�dence toforce through a reform to raise the coun-try’s retirement age. In France, nobody hasattempted a bold pension reform since thegovernment of Alain Juppé was fatallydamaged by street demonstrations in 1995.The memory still lingers.

But however menacing the demo-graphic time-bomb may be for Europe, is itreally a problem for the EU? After all, wel-fare and pensions are still run by nationalgovernments, not by the EU�and it isthose governments that will be punishedat the ballot box if things go wrong.

All the same, the EU is unlikely to es-cape the consequences. It has deliberatelytied together its members’ political andeconomic fates. Twelve EU countries nowshare a currency, and all 25 members arelinked by a dense network of economicand social policies. If economic problemsmount, so will political tensions amongEU members.

These tensions could be most seriousinside the euro zone (see box, next page),but some consequences of a deterioratingeconomic climate will be equally felt by allEU members. In particular, this is likely toa�ect the direction of economic policy.Over the past few decades, EU countrieshave united behind big joint projects suchas the creation of the internal market. Butdi�erent countries have interpreted the�single market� in di�erent ways.

The British complain that it has been in-troduced with too much Brussels-inspiredregulation attached to it, and call for fur-ther and faster market-opening and lessred tape. The French grumble that the in-ternal-market programme has promoted�liberal Europe� at the expense of �socialEurope�. They want to redress the balanceby introducing more Europe-wide sociallegislation on such things as workers’rights and minimum wages. The Germans,for their part, fret that zealots in the Euro-pean Commission have been hurting Ger-man industry, and are campaigning forless onerous environmental legislationand a more relaxed attitude to state subsi-dies. A new element has been added bythe arrival of the new central Europeanmembers, who are anxious to preservetheir competitive advantages: low wages,low taxes and light regulation.

Historically, the genius of the EuropeanUnion has been that it has managed to ac-commodate and contain such di�erent tra-ditions and priorities. But things couldsoon get much more di�cult. Enlargement

5

*65 and older, as % of total population

Grey outlookEU-25 age dependency*

Source: United Nations Population Division

0

5

10

15

20

25

30

1950 60 80 2000 20 40 50

F O R E C A S T

A mature perspective


2

MANY predicted chaos when the eurowas launched on January 1st 2002.

Withdrawing 12 national currenciessimultaneously and replacing them witha new single currency was fraught withlogistical and political risks. In the event,the transition to the euro went like clock-work. Watched over by its guardian, theEuropean Central Bank (ECB), the newcurrency swiftly established itself withconsumers and the international moneymarkets. It has become the single mostpowerful symbol of European unity.

But as the old joke goes, whereas theeuro clearly works in practice, there arestill question marks over whether itworks in theory. Theoretical doubtsabout the euro have almost always cen-tred on the long-term problem of main-taining a single currency without a singlegovernment behind it. The early years ofthe euro have not yet answered thesequestions: if anything, they have madethem more intriguing�and troubling.

When an individual country runs into�nancial problems, it may be faced withhigh interest rates, a threat of in�ationand a run on its currency. But when anumber of independent countries share a

currency, the risks are spread, so somecountries may become �free-riders�. Evenif they fail to tackle their own �scal pro-blems, they may escape the full conse-quences of their lack of action�but onlybecause other, more responsible coun-tries pick up some of the tab.

It was this prospect that persuaded theEU to draw up a �stability and growthpact� which required all euro countries tokeep their budget de�cits below 3% ofGDP at all times, on pain of huge �nes forrepeat o�enders. Unfortunately the pactproved unworkable. Portugal, the �rstcountry to exceed the 3% de�cit, obedi-ently slashed public spending, thus deep-ening its recession and pushing upunemployment. But when France andGermany broke the 3% barrier, they leanton the other EU members not to enforcethe pact. In e�ect, despite a ruling by theEuropean Court of Justice, the stabilityand growth pact is now in abeyance.

But the �free-rider� problem remainsunresolved. Indeed, it is likely to becomeincreasingly troublesome as the ticking ofthe demographic time-bomb becomeslouder. It may not be entirely coincidentalthat the three EU countries that have cho-

sen to stand aside from the single cur-rency for now�Britain, Sweden andDenmark�have gone further than mostto put their pensions systems on a sound�nancial basis.

One for all

The perils of a single currency

Watch out for free-riders

has greatly added to the diversity of theEU. How do you design rules that make asmuch sense in Sweden as they do in Slova-kia? One answer would be simply not totry. But the EU has a terrier-like record ofnever retreating from any policy area thathas become part of the acquis communau-taire, the body of laws, rules and regula-tions agreed on by the member countries.

The clash between the di�erent politi-cal philosophies within the EU could alsobecome sharper in the next few years. TheFrench and the Germans, for example,have made it clear that they would like theEU to do more to develop a pan-European�industrial policy�. Yet that would beanathema to the market-based policies oncompetition and state aid that have in re-cent years been pushed by Britain and in-deed by the European Commission itself.

When economic times are hard, suchproblems become more di�cult to glossover. In the past, with a prosperous Ger-

many at the heart of a self-con�dent Un-ion, many tough problems were eventu-ally resolved by the German governmentreaching for its cheque book. In the 1960s,as European integration got going, the Ger-mans agreed to the common agriculturalpolicy, a baroque system of farm subsidiesthat has always bene�ted France dispro-portionately, almost as a form of war rep-arations. In the 1980s, when Spain andGreece hesitated to agree to the single mar-ket because they feared their industriescould not cope with the competition, hugeEU regional-aid programmes, again under-written by Germany, smoothed the way.

But modern Germany is no longer will-ing or able to be this generous. Other tradi-tional big payers such as the Dutch are alsoin a much meaner mood. The next EU bud-get round, which starts in earnest later thisyear, will be extremely tricky.

The real risk, however, will not be thatEU negotiations become harder. It will be

that European citizens, facing di�culteconomic times and the erosion of theirmuch-loved �European social model�, de-cide to put some of the blame on the Un-ion itself. The opinion polls already maketroubling reading. The latest Eurobarome-ter polls, taken in the 15 countries thatmade up the EU before enlargement, asks,�What does the EU mean to you per-sonally?� Although the EU’s most far-reaching powers are over the economy,�prosperity� came way down the list, citedby 19% of respondents; more (26%) said theUnion was a �waste of money�.

On the main economic issues facingthe EU��ghting unemployment, contain-ing in�ation and protecting pensions�those that give it good marks are outnum-bered by the critics. The strains of reform-ing the �European social model� couldexacerbate what is perhaps the EU’s mostprofound problem: the lack of genuinepopular support for �ever closer union�. 7

1


�THIS is what you have to do if youwant the people to build statues of

you on horseback in the villages you comefrom.� Valéry Giscard d’Estaing was tryingto sti�en the resolve of his 12 colleagues onthe committee that was drafting a constitu-tion for the European Union. He wasdoubtless joking, but the joke made a seri-ous point. European unity has been drivenforward by people such as Jean Monnet,Robert Schuman, Jacques Delors and MrGiscard d’Estaing himself (all of themFrench, as it happens).

Many of the �founding fathers� of Euro-pean unity emerged from the secondworld war with a profound suspicion ofpopulism. Germany has consistently re-fused to hold referendums on crucial stepstowards European unity such as the euro,citing Hitler’s misuse of referendums as areason for leaving such decisions toelected politicians. Some committed Euro-philes frankly acknowledge that, at times,they have deliberately disguised quite pro-found changes as mere technical adjust-ments to avoid causing popular alarm.Jean-Claude Juncker, the prime minister ofLuxembourg and the EU’s longest-servinghead of government, explains: �We decideon something, leave it lying around andwait and see what happens. If no one kicksup a fuss, because most people don’t knowwhat has been decided, we continue stepby step until there is no turning back.�

Carried to extremes, such an approachcould be sinister and undemocratic. Butthose in favour of an elite-led Europe pointout that all these decisions are made byelected leaders. If ordinary voters object,they can always take their revenge at theballot box. But the hope is that each step to-wards �ever closer union�, although po-tentially controversial at the time, willeventually come to seem inevitable and agood thing.

In many ways this method has worked.Plenty of European Union policies seemedvisionary, or even reckless, when �rst sug-gested, but have come to be accepted withthe passage of time: the abolition of fron-tier controls, the establishment of a singlecurrency, even the admission of relativelypoor countries such as Spain and Portugalin the 1980s or Poland today.

Visionary leadership is all very well ifthe statesmen get it right. But if they make abig mistake without having �rst securedpopular backing, they could be in deeptrouble. And even if voters are prepared toaccept individual steps in the process ofEuropean integration, they may eventu-ally object to the cumulative e�ect.

A transformation too far?Step by step, the EU has expanded its fron-tiers and its activities so that in its presentshape it is unrecognisable from the modestcoal-and-steel community of the early1950s. Whether or not the EU is intent onturning itself into a �United States of Eu-rope�, as some critics claim, it has alreadyacquired a great many state-like charac-teristics: a currency, a central bank, a par-liament, a civil service, a supreme court, amilitary sta�, a diplomatic corps, even a�ag and an anthem.

So far, it has managed to do all thiswithout exciting much popular opposi-tion. No national government in the EU

has ever lost power because of an electoralrevolt against European integration. Evenso, there is growing evidence that Euro-fatigue and Euroscepticism are spreadingfrom traditionally critical members suchas Britain to countries that used to be muchkeener on the European project.

Nearly half a century after its birth, theEU’s approval ratings remain pretty feeble.In the most recent Eurobarometer, just 43%of EU citizens said they had a positive im-age of the Union, against 21% with a nega-tive image. Even in Germany, one of theweightiest founder members, only 39%thought the country had bene�ted fromEU membership, against 38% who thoughtit had not. A previous Eurobarometerfound that almost half of EU voters wouldnot mind, or indeed would be �very re-lieved�, if the EU were simply to disappear.

Evidence from the ballot box is notmuch more encouraging. Sweden andDenmark both voted in referendumsagainst adopting the euro. (Most countriesembraced the euro without a referendum.)Even Ireland, which has arguably bene-�ted more from EU membership than anyother nation, initially voted to reject theNice treaty that paved the way for EU en-largement, and had to stage a second ref-erendum before coming up with the�right� answer.

Recent elections to the European Parlia-ment have not been heartening either. Al-though the parliament has steadily gainedmore powers over the years, voter turnouthas fallen equally steadily. It reached anew low of 45.7% in the elections in Junethis year; not bad, perhaps, by anaemicAmerican standards, but much lower thanin national elections in Europe. The parlia-ment was meant to connect the EU directlyto the European public, but most Europeanparliamentarians remain much less wellknown than national politicians. More-over, there may be no institutional �x forthe EU’s �democratic de�cit�, becausethere is no real European demos�a popula-tion with a su�ciently strong Europeanidentity to breathe life into commondemocratic institutions.

A comparison with the United States ofAmerica clearly shows up where a puta-tive United States of Europe is missing out.

No love lost

The EU is becoming ever bigger and more powerful�and ever less popular

Pandora’s box?

1


2 America has a common language, na-tional media, a national identity forgedthrough a couple of centuries of sharedhistory and a population that is famouslywilling to move from state to state. None ofthis applies to Europe. According to one EU

survey, about half of all citizens of the pre-enlargement Union speak only theirmother tongue. That rules out any realpan-European media, which in turn en-sures that political debate across the EU re-mains staunchly national. And althoughalmost all barriers to Europeans workingor studying across the Union have been re-moved, most EU citizens remain deter-mined homebodies: only 1.6% of them livepermanently in an EU country other thantheir own. No wonder that national identi-ties remain much stronger than any loy-alty felt towards the EU.

So what?, ask the defenders of the EU.The whole point of the Union is that itdoes not pose a threat to national identity.Instead, it is a forum for European coun-tries to co-operate in, while preservingtheir national identities and democracies.Yet even some of the architects of Euro-pean unity are beginning to wonderwhether integration has been overdone. Ina recent speech in Berlin, Ben Bot, now theDutch foreign minister and before that oneof the longest-serving ambassadors inBrussels, argued that the EU had de-veloped too fast for many of its citizens,causing many of them to fear a loss of na-tional identity and yearn for the �familiarold world, the nation state�.

Individual member countries worry

about di�erent aspects of the EU. In Aus-tria, Euroscepticism has been fed by therules on free movement of goods, whichallow endless convoys of huge lorriesfrom other EU countries to grind acrossfragile Alpine passes. It may seem petty,but many Austrians feel that the EU isthreatening the very look and feel of theircountry. In France, people are concernedthat an organisation invented by Frenchstatesmen, and until recently largely fran-cophone and run on French adminis-trative lines, has been captured by thedreaded Anglo-Saxons. Rather than serv-ing as a bulwark to preserve French cultureand in�uence, the EU is now being por-trayed as part of an assault against them.

Yet there is also a more general problemwith the political underpinnings of the EU.The steady advance of European integra-tion has taken the EU into some of themost sensitive areas of national politics, atprecisely the time when the traditional jus-ti�cations for European union�peace andprosperity�have become less compelling.

Bones of contentionIn their day-to-day interactions with gov-ernment�in schools, hospitals or welfareo�ces�most Europeans are still dealingwith national rather than European insti-tutions. But the creation of the euro, with asingle interest rate and monetary policyfor the euro area, has put the EU at theheart of economic life. It has also made na-tional budgets subject to EU supervision:

Portugal imposed swingeing budget cutsat the behest of the EU, and Italy may beabout to do the same, despite the weaken-ing of the stability pact.

The regulations introduced to make thesingle market work have also sometimesdelved deep into what the British call the�nooks and crannies of everyday life�, oc-casionally making the EU an object ofscorn and anger. British market tradershave been prosecuted for failing to intro-duce metric weights and measures, as re-quired by EU law. Dutch window cleanerswere outraged to discover that their stan-dard ladders were too long to comply withEU health-and-safety regulations. Suchfeelings are exacerbated by the wide-spread belief that EU institutions andspending programmes are corrupt andwasteful.

Over the past decade the European Un-ion has also increased its hold on socialpolicy, leading to a clash of political phi-losophies between free-market Anglo-Sax-ons and welfare-minded continentals thatcan leave both sides unhappy. It is an arti-cle of faith in France that Britain practises�social dumping�, undermining French in-dustry by refusing to impose decent mini-mum standards on employers. The British,for their part, are convinced that the Frenchand the Germans, �nding themselves un-able to reform their welfare systems, areseeking to impose their own ine�ciencieson everybody else through EU regulations.

The expansion of the EU into foreign

6Lukewarm to coolRespondents with a positive image of the EU, %

Source: Eurobarometer, spring 2004

0 10 20 30 40 50 60

Italy

Spain

Portugal

Turkey

France

EU 15

Slovakia

New EUmembers

Poland

Germany

Netherlands

Britain

Waiting for a common immigration policy

1


2

�GENTLEMEN, you are trying to nego-tiate something you will never be

able to negotiate. But if negotiated, it willnot be rati�ed. And if rati�ed, it will notwork.� Those were the words of the Britishrepresentative at the negotiations fromwhich the European Economic Commu-nity eventually emerged in 1957. Nearlyfour decades later the British were stillsceptical about European integration.Writing in The Economist in 1993, John Ma-jor, then Britain’s prime minister, deridede�orts to form a single currency as having�all the quaintness of a rain dance andabout the same potency�. Wrong again.

Given this long British record of loftyand mistaken predictions that Europeanintegration cannot work, a British newspa-per should be especially cautious in ex-pressing scepticism about the future of theEuropean Union. Yet to this writer at least,it does indeed seem that the EU is about toenter a particularly troubled period. It stillseems highly unlikely that the Union willcollapse. What is much more probable isthat it will split.

The likeliest immediate cause of a splitin the Union would be a failed e�ort to rat-ify the EU constitution. But the groundwould have been prepared much earlier

by the developments described in this sur-vey: the waning of the forces that origi-nally propelled the drive for European un-ity; the growing diversity of views andinterests introduced by EU enlargement;and the increasing di�culty of maintain-ing popular support for the European pro-ject as the EU’s powers expand.

Just how much new power the con-stitution gives the EU remains a matter fordebate. It clearly does increase the EU’s sayin sensitive areas such as immigration andcriminal law. It also strengthens the Un-ion’s foreign-policy role and puts down amarker for the development of a commondefence policy. Moreover, the constitutionincludes a detailed charter of fundamentalrights, which could mean that the Euro-pean Court of Justice will play an increas-ing role in de�ning social, political andeconomic rights across Europe. It also ad-vances EU powers in many other smallways, for example by creating an explicitEU role in the promotion of sport and tou-rism for the �rst time.

Some defenders of the constitutionnonetheless insist that it is not a very radi-cal document, certainly compared withthe Single European Act of 1986, which setup the single market, or the Maastricht

treaty of 1992, which created a single cur-rency and a common foreign policy. Thatis probably true, but it may be beside thepoint. Countries such as Britain and theNetherlands did not hold referendums onthe internal market or on Maastricht, so avote on the constitution will be the �rstopportunity for their voters to expresstheir cumulative misgivings about whatthe EU has become. Even in France, whichdid have a referendum on Maastricht, vot-ers may still take the opportunity to voicediscontent with recent developments inEU policy�say the European Commis-sion’s �ultra-liberal� economics, or the un-popular promise to admit Turkey to EU

membership.Eleven of the 25 EU countries�Belgium,

Britain, the Czech Republic, Denmark,France, Ireland, Luxembourg, the Nether-lands, Poland, Portugal and Spain�havenow promised or all-but-promised to holdreferendums on the constitution, and evenGermany is thinking about it. For most ofthe countries involved, this desire to con-sult the people about European integra-tion is new, and itself re�ects growing un-easiness about the popularity of theEuropean project.

The constitutional referendums will

Europe à la carte

With many more members and increasingly diverging interests, a one-size Europe may no longer �t all

policy has broadened the scope for dis-agreements and bitter feelings, as demon-strated over Iraq. And the �progressiveframing of a common defence policy�promised in the new EU constitutioncould, in time, become equally conten-tious. Historically neutral countries suchas Ireland and Sweden were given an opt-out from the defence aspects of the Euro-pean Union, but that may not be enoughto allay concerns about the �militarisationof the EU�.

The new European constitution alsogives the EU a role in what may now be themost fraught political issue in Europe: im-migration. Over the past 30 years immigra-tion from developing countries, and par-ticularly the Muslim world, has changedthe face of western Europe. The number ofMuslims in France is estimated at 4.5m, orabout 7.5% of the population. In the Neth-erlands’ four biggest cities�Amsterdam,Rotterdam, The Hague and Utrecht�the

majority of those under 14 are the o�-spring of immigrants from non-westerncountries, most of them Muslim. Suchstriking social changes had provoked po-litical reactions even before September11th 2001 and the al-Qaeda attack on Ma-drid this year. But the terrorist threat hasmade race relations in Europe worse andfuelled the rise of anti-immigration andfar-right parties.

In Austria, the Freedom Party led byJörg Haider managed to force its way into acoalition government. In France, Jean-Ma-rie Le Pen, the leader of the far-right Na-tional Front, came second in the presiden-tial election of 2002, eliminating thesocialist candidate. In the Netherlands,Pim Fortuyn caused something of a politi-cal revolution by running on an anti-immi-gration ticket in the 2002 election before hewas assassinated.

Might the EU itself aggravate this anxi-ety about immigration? Any commitment

to admitting Turkey may get a hostile re-ception in Austria, France and the Nether-lands, mainly because of the likely conse-quences for immigration. The new Euro-pean constitution could also cause troublebecause it gives the EU the beginnings of acommon immigration policy, in particularthrough common rules governing politicalasylum. This matters because in recentyears most new immigrants from the de-veloping world in countries such as Britainand the Netherlands have been asylum-seekers. Although there is no provision inthe constitution for European countries tolose control over the level of immigrationthey are prepared to accept, such nuancesmay be lost in any referendum campaign.

Eleven countries have already prom-ised to let their people vote on the Euro-pean constitution. These referendumscould throw the EU into the sort of crisisthat puts the integration process into re-verse or even causes the EU to split. 7

1


2 carry a heavy risk for the EU. In theory atleast, if even a single country refuses to rat-ify the treaty the constitution cannot comeinto force. But as Giuliano Amato, a vice-president of the constitutional conven-tion, puts it, �Legally we could not proceed,but politically we could not stop.� It is di�-cult to imagine more than a score of EU

members meekly abandoning a politicalproject to which they have committed somuch energy just because one or twocountries have turned it down. For the mo-ment they have simply agreed that if thereare problems with rati�cation, EU leaderswill meet in two years’ time and decidewhat to do next.

Leaving some wiggle-room is probablywise, because much would depend onhow many countries had rejected the con-stitution, and who they were. The biggestquestion marks hang over Britain, Den-mark, France, the Netherlands, the CzechRepublic and Poland, but at the momentthe outcome is impossible to forecast. Forexample, the latest polls would suggest aneasy victory for the �yes� camp in France,where opinion is running 2:1 in favour ofthe constitution, and a big defeat in Britain,which is split roughly 2:1 against. ButFrench supporters are palpably nervous,recalling that the Maastricht treaty onlyjust squeaked through with a �yes� vote of50.5% in 1992. With the French socialists di-vided about the constitution, PresidentChirac unpopular with the electorate andthe extremes on left and right likely to takea share of over 20% of the vote, a French�no� is certainly possible.

In the same way, Britain may change itsmind. Europhiles there are currentlydeeply gloomy, but cheer themselves upby recalling that when Britain held its onlyother European referendum back in 1975,on whether to remain in the EEC, the �yes�camp started way behind and ended up

winning by a respectable margin. The outcome in the other battleground

states is equally hard to call. The Daneshave a record of rejecting European trea-ties in referendums, but seem to be buck-ing the EU trend by becoming less Euro-sceptic. Poland was always deeplydoubtful about the constitution; on theother hand, Polish farmers will soon beginreceiving large cheques from the EU,which could turn opinion around. TheDutch have tended to be solidly in favourof European integration, but have been ina funny mood ever since Pim Fortuyn seto� a wave of populism. The Czechs haveno overriding grievance, but the country’spresident, Vaclav Klaus, is opposed to theconstitution.

It remains possible that the constitutionwill be approved everywhere. For exam-ple, if sceptics such as Britain and Polandvote last, after a string of �yes� votes else-where, they may end up approving theconstitution, fearing that otherwise theymay have to leave the EU altogether. But itseems much more probable that one ormore members will say �no�. What hap-pens then?

From unity to divisionIf only one or two countries reject the con-stitution, they might simply be asked toleave the Union. There is already a livelydebate in the French press about whetherBritain should be thrown out if it votesagainst the constitution. But ejecting Brit-ain (or any other country) might not be sostraightforward. Under current EU law,Britain would have every right to insist onstaying in the Union under the existing le-gal framework. And many of the smallerEU countries might be reluctant to see Brit-ain leave because they see British in�u-ence as a valuable counterbalance toFranco-German dominance.

One outcome might be that Britain andother sceptics establish a semi-detachedrelationship with the EU. At one extremethis could be similar to the one Norwayhas negotiated. Norway is not a memberof the EU and opts out of policies it dis-likes, such as those on agriculture and �sh-eries. However, it is a member of the Euro-pean Economic Area, which gives it accessto the EU’s single market. In return, it has toaccept single-market laws on which it hasno vote, and it also has to contribute to theEU budget. For Britain, a semi-detachedrelationship with the EU might be evenmore complicated. For example, as a majorEuropean power it might press for contin-ued participation in EU summits and dip-lomatic activity.

If a larger number of countries said�no�, the EU could evolve into two blocks,with an integrated �political union� at itscore and a looser economic union aroundit. The �core� countries would push onwith integrationist projects that the Britishhave traditionally rejected, such as the in-troduction of direct EU taxes and the estab-lishment of an independent EU militaryforce. They would also try to persuade Tur-key to enter the looser economic �outer�Europe, which might include Britain, Po-land and much of Scandinavia.

The most di�cult scenario to predict isthe aftermath of a putative French �no�.The French have always been so crucial tothe EU that this would kill the constitution.That might bring about a sullen period ofEurosclerosis in which the EU remained inits current form but was increasingly by-passed by the bigger member countries infavour of bilateral deals, condemning it toincreasing irrelevance.

Niall Ferguson, a British historian atHarvard, suggests that it might end up asjust another big international organisa-tion, like the International Labour Orga-nisation in Geneva or the OECD in Paris.Alternatively, there could be a dramatic at-tempt to relaunch the EU and save thedream of European unity. In France itself,the political elite, already disenchantedwith EU enlargement, has long fantasisedabout dissolving the present EU and start-ing again with a political union of the orig-inal six members; or perhaps just withFrance and Germany.

All these scenarios share a commonfactor: they envisage some sort of split inthe European Union. Some observers �ndthis prospect alarming. �Anyone with anyknowledge of European history would bewary of seeing Europe split into rivalcamps,� says Oxford University’s Timothy

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Garton Ash. The Iraq crisis provided ataster of how disturbing such a scenariomight be. The sight of the German chan-cellor and the French and Russian presi-dents issuing joint statements on an inter-national crisis sent shivers down a fewspines in London and Warsaw. Mid-Atlan-tic meetings between the British and theAmericans also stirred a few memories.

It is certainly conceivable that the Euro-pean Union will split into rival, mutuallysuspicious camps, but the eventual out-come is likely to be messier and less fright-ening. Instead of two clearly de�ned alli-ances�an inner and an outer core, or an�old� and a �new� Europe�there will be arange of overlapping structures dependingon the form of co-operation. Countriessuch as Germany, France and Italy arelikely to belong to everything�the euro,the border-free area, the internal marketand any future EU military force or judicialzone. Others, such as Britain and Den-mark, will try to pick and choose, takingpart in the single market and perhaps anew military structure, but avoidingmonetary or judicial union and perhapstrying to slip out of participation in suchareas as social or �sheries policy.

A Union of sortsAs it happens, this is the sort of EuropeanUnion that has already been evolving overthe past decade. The assumption that allEU countries would eventually join theeuro has gradually eroded as �rst Den-mark and then Sweden voted to rejectmembership of the single currency and aBritish decision moves ever further intothe future. The passport-free Schengenarea operates on a similar multi-tieredmodel: Britain and Ireland have stayed outand the central European countries havenot yet been allowed to join, but Norwayand Iceland, which remain outside the EU,are members of Schengen.

The evolution of defence co-operationwill further blur distinctions. Certainly aslong as Tony Blair is prime minister, theusually stand-o�sh British are likely towant to be part of an inner defence core.However, some countries that are mem-bers of the single-currency zone buttraditionally neutral on defence matters�such as Ireland, Austria and Finland�willprobably stay out. Attempts to impose asingle economic model on the EU are alsolikely to stall. The central Europeans are de-termined to follow the Irish model of lowtaxes and light regulation and to fend o�e�orts to impose a Franco-German-in-spired �European social model�. Under

the current legal and political arrange-ments, they will probably succeed.

In the short term, a failure to ratify theconstitution may actually disrupt theemergence of the multi-tiered EuropeanUnion described above. In the long run,however, a constitutional crisis wouldcon�rm that the emerging European Un-ion is simply too diverse to contain withina single uniform structure. The federalistdream of a �United States of Europe� willslide into irrelevance. A shell of an orga-nisation called the European Union wouldprobably be preserved, but some of its cur-rent members might even quit and negoti-

ate new association agreements. The result would be messy and hard to

understand, and might cause new fric-tions. But it would also have two strongbene�ts. First, a more diverse EU would al-low countries and their citizens to adoptdi�erent levels of European integration tosuit their national preferences. Second,diversity would allow some useful com-petition between di�erent economic andsocial models within Europe.

With peace and prosperity established,the European Union can safely abandonits old aim of an �ever closer union�. Thenew motto might be vive la di�érence. 7

Can I see the menu?

outgrowing the union

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