Jean-Claude Juncker, President of the EC, presents the White Paper on the Future of Europe at the European Parliament.

TWO-SPEED EUROPE: THE WAY FORWARD?

From the “White Paper” on the Future of Europe to the European Mini-Summit in Versailles

President Hollande did not mince his words. “Europe will explode,” he warned, if the idea of a two-speed Europe is not accepted.

He was referring to what is diplomatically called multi-speed Europe where core countries go forward with European integration in areas they agree on, leaving dissenters behind – not a particularly new idea, after all, that was how the Eurozone and the Schengen area (dispensing with border controls) were born in the 1990s. There has been, over the years, considerable debate and pushback against the idea of a multi-speed Europe, seen as going counter to the “core values of the Union”. But, increasingly, it is viewed as the only realistic way to move forward, abandoning the unattainable ideal (for now) of a United States of Europe and moving instead to a practical “Europe à la carte”, where each EU member gets what he wants at his own pace.

But what is different this time is Hollande’s insistence that core countries should not be prevented from moving forward by other EU members. He further elaborated this at the “mini-summit” he hosted in the lavish Versailles palace on March 6, with his three guests, German Chancellor Angela Merkel, Prime Minister of Italy Paolo Gentiloni, and Prime Minister of Spain, Mariano Rajoy.

 Versailles (0)

In the Photo: In the Main entrance to the Chateau de Versailles, Grille d’honneur – Photo Credit: Ronaldieya

While the immediate pretext for the Versailles mini-summit was to prepare the celebrations for the 60th anniversary of the Union to be held in Rome on March 25 with all 27 EU members (with the UK already excluded), there were two other things far more notable about this event:

  • the inclusion of two more countries, Italy and Spain, a suggestion that the famous German-French duo that has historically guided the EU was about to expand, and
  • the message that a “multi-speed” Europe had a backing of all four countries that together form the economic lead of the Union.

Expect this last fact to be reflected in the “Rome Declaration” to be adopted by the 27 EU leaders in Rome on 25 March.

So what did Hollande and his three guests say at the Versailles press conference? The video (here) in all four original languages is unfortunately not available with English translation.

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In the Photo:  Four Leaders at the Versailles mini-summit, March 6  2017 Press conference: Starting from left, Rajoy (Spain), Merkel (Germany), Hollande (France) and Gentiloni (Italy). Note the mistake as they moved in, it was quickly corrected. Gentiloni and Rajoy are standing behind each other’s desk, at that moment Hollande became aware of it and grabbed Gentiloni’s arm. – Photo Credit: screenshot from video of conference Youtube

Unity is not uniformity

Acknowledging that the “status quo is not the solution, especially after Brexit”, and that Europe needed to “learn to live at 27”, Hollande said:

“Unity is not uniformity, that is the reason that I plead for new forms of cooperation, new projects, what is called ‘differentiated cooperation’. Some countries could go faster and further,” he said, “in such areas such as defense; the euro zone through the deepening of the economic and monetary union (EMU); social and fiscal harmonization; or youth and culture.”

But, as both Hollande and Merkel clarified, the move to go “faster than other countries”, while it did not mean setting aside others, did mean they would not be allowed to oppose it. Merkel underlined that “Europeans should find the courage” to accept the idea. What Europeans was Ms. Merkel referring to?

This is easy to explain: Four days before, on March 2, the so-called Visegrad countries (Poland, Hungary, the Czech Republic, and Slovakia) had issued a “joint statement intended to be an “input to Rome Declaration 2017” calling for a “Union of Action and Trust” . It had this to say about multi-speed:

“Regardless of the speed of integration, we all need to pull in one direction, have a common objective, vision and trust in a strong and prosperous Union. However, to ensure a necessary flexibility, we can take advantage of enhanced cooperation, as stipulated in the Treaties. Yet any form of enhanced cooperation should be open to every Member State and should strictly avoid any kind of disintegration of Single Market, Schengen area and the European Union itself.” (highlight added)

So it would seem the Visegrad group, however reluctantly, had in fact given the green light to go forward with a multi-speed process towards European integration. Because, indeed, the European Treaties do not forbid “a necessary flexibility”, as demonstrated by the Euro which covers 19 EU countries and the Schengen area 22 (plus four non-EU members).

Rajoy and Gentiloni who also spoke at the Versailles press conference manifested their support in a more general way, skirting around the multi-speed issue and calling for “more integration”. But they both pointedly referred to the EU Commission’s White Paper on the future of Europe that had been presented six days before (on March 1) at the European Parliament.

For Gentiloni, the five scenarios presented in the White Paper provided a “good framework to enable policy choices” while Rajoy indicated his preference for scenario # 5 which calls for “doing much more together across all policy areas”- in clear: “more Europe” until you have a United States of Europe by 2025.


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Though it never was the intention of the EU Commission to present its White Paper as a document to be adopted by EU member states – a nice, diplomatic touch: Member states are sensitive about their sovereignty, they don’t like the Commission to run all over them – it will come up for debate at the March 25 meeting in Rome and is likely to shape discussions for the rest of the year.

The EU Commission White Paper: Five Options for Europe

Why should we pay attention to Juncker’s White Paper? First, because of what the EU Commission does: It proposes EU laws, acts as the bloc’s antitrust authority, administers its 140 billion-euro ($148 billion) budget, negotiates trade accords and runs a foreign service. Second, because of who Juncker is: a former Prime Minister of Luxembourg and a convinced federalist, he has consistently played a major role in buttressing the European Project, first as Eurogroup President (it brings together the Eurozone finance ministers), and since 2014  as EU Commission President.

Extract from the State of the European Union Speech 2016 by Jean-Claude Juncker in the European Parliament in Strasbourg on 14 September 2016 – This is focused on European core values: “Europe means peace”.

Also, Juncker is the author of the famous “Five Presidents Report”, so called because of inputs from Donald Tusk (Euro Summit President), Jeroen Dijsselbloem (Eurogroup President), Mario Draghi (European Central Bank President) and Martin Schulz (European Parliament President, now running against Merkel in the September elections in Germany). Published in 2015, the Report sketches a 10-year “roadmap” to “deepening” the Economic and Monetary Union (EMU), culminating in the establishment by 2025 of a European Treasury anchoring the Euro. Here is where you find the suggestion to “build on the European Fund for Strategic Investments as a first step”, which became the currently successful “Juncker Plan” aiming to unlock €315 billion over a three year period (2015-2017).

And here is then the explanation for the (at first sight) odd timeframe given to the White Paper five scenarios: they all end by 2025.

There are other oddities, but before exploring them, we need to realize that Juncker never meant the White Paper to be a definitive document providing sure answers. What he wanted, obviously (and that is what he said to the EU Parliament), is to open a debate on Europe’s future – a debate he hopes will take place at all levels of European society, from parliamentarians to citizens. And he sees it going through the rest of the year, punctuated by the release of five additional EU Commission “reflection papers” on key issues: the social dimension of Europe, deepening the Economic and Monetary Union (EMU) on the basis on the Five Presidents Report, harnessing globalization, the future of Europe’s defense and the future of EU finances.

The first is closest to Juncker’s heart. “It is time to establish the European Pillar of Social Rights,” he has said and organized an event to be hosted by Sweden in November: the Social summit in Gothenburg on “fair jobs and growth”.

A convinced federalist, he told reporters after his speech in the EU Parliament that he would not reveal which option he preferred but he would “exclude the option according to which the European Union would just turn into a single market and nothing else.”

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Screenshot of EU President Juncker delivering his speech to the EU Parliament on March 1 to  present his White Paper (Source: http://www.europarl.europa.eu/news/en/news-room/20170301STO64425/future-of-europe-meps-debate-the-five-scenarios-outlined-by-the-commission)

So what is this White Paper about? First a general comment: this is not an academic brick, it is a short, highly readable paper – some 30 pages with “illustrative snapshots” and not one boring diagram – that anyone can download from the Internet (here the link is at the end of the press release).

Second, why 5 scenarios? The Paper suggests that this was deliberate to avoid a “binary choice between more or less Europe”, while admitting “there are many overlaps between each scenario and they are therefore neither mutually exclusive, nor exhaustive.” The door is open to more ideas…

Here is what each scenario implies and, in my view, how realistic each one is:

  • Scenario 1: Carrying on THE EUROPEAN UNION FOCUSES ON DELIVERING ITS POSITIVE REFORM AGENDA. In other words: the status quo that nobody likes. It necessarily stumbles on because of the (lack of) resolve of EU members, with few concrete results by 2025, except perhaps some incremental progress on trade, foreign policy or such issues as the climate and sustainable development. A highly likely scenario given the helplessness of our political class, though hardly desirable.
  • Scenario 2: Nothing but the single market THE EUROPEAN UNION IS GRADUALLY RE-CENTRED ON THE SINGLE MARKET. Dubbed a “race to the bottom”, it amounts to a full retreat down to the lowest common denominator. There is a very real risk of collapse of the European Project as any anti-European populist government could put a stop to the experiment. Ask Marine Le Pen.
  • Scenario 3: Those who want more do more THE EUROPEAN UNION ALLOWS WILLING MEMBER STATES TO DO MORE TOGETHER IN SPECIFIC AREAS The model follows the Schengen area and the Eurozone. Several outcomes are possible, depending on which policy areas countries can agree on: defense, taxation, social, security and justice etc. This scenario is politically realistic, because its premise is a “coalition of the willing”. That coalition could end up being very small – maybe only the original six founding countries (Benelux, France, Italy and Germany) – but the will to go forward would be there. This is of course what the Versailles mini-summit backs.
  • Scenario 4: Doing less more efficiently THE EUROPEAN UNION FOCUSES ON DELIVERING MORE AND FASTER IN SELECTED POLICY AREAS, WHILE DOING LESS ELSEWHERE This is a positive sounding scenario: “The EU27 steps up its work in fields such as innovation, trade, security, migration, the management of borders and defense.” But how can the EU27 “select” such policy areas since it can’t agree on anything?  Politically this is highly unrealistic.
  • Scenario 5: Doing much more together THE EUROPEAN UNION DECIDES TO DO MUCH MORE TOGETHER ACROSS ALL POLICY AREAS Why would the EU27 ever do this when it can barely stumble forward under scenario 1 and scenario 4 is totally unrealistic? Clearly, of all the scenarios, this is a federalist’s dream but hopelessly unrealistic.

A lot of people instantly took issue with this, like the French journalist specialized in European matters, Jean Quatremer in Liberation, saying it was an outdated, weak approach – for him the White Paper looked “sickly pale” (“pâlichon”); others felt they were not proper scenarios: For example, how is doing something “more efficiently” an alternative when surely, doing things “less efficiently” would not be something to consider. In short, “much ado about nothing”.

The EU Parliament’s reaction to Juncker’s White Paper was covered on its news site (interestingly, one outside news outlet that picked it up was the Chinese media Xinhua net). It found strong support among the largest political group in the Parliament, the center-right European Peoples Party (EPP, Juncker’s party) and disappointment among the second largest group, the Socialists and Democrats (S&D) who wanted “more Europe” while the third largest group, the European Conservatives and Reformists (ECR) wanted neither a breakup nor a super state but a “community of nations cooperating in shared institutions”, a way to give space to nationalistic desires for sovereignty.

The EU Parliamentarians, in short, won’t budge from their usual positions – at least for now. This is a shame because the White Paper did try to open doors, indicating that even within the straightjacket of the European Treaties, there are various ways forward. To obtain change, you don’t need to take the whole house down and burn the Euro as populists like Beppe Grillo, Marine Le Pen and Geert Wilders are itching to do.

There is however a problem with this approach (in my view): What is missing from the White Paper’s analysis is a ranking of the priorities that need attention. It does not address the biggest and most immediate threat to Europe’s survival, the ill-functioning Euro. This is something most serious economists who have studied the question, from Stiglitz to Varoufakis, all agree on. The Euro is the problem.

 


RELATED ARTICLE: DEATH OF THE EURO, THINKING THE UNTHINKABLE – Book Review “How a Common Currency Threatens the Future of Europe” by Joseph Stiglitz http://impakter.com/death-euro-thinking-unthinkable/


The Paradox of Scenario 5 Tasked with Solving all the Problems

A close reading of the White Paper shows that the Euro issue is only solved under scenario 5.

This is paradoxical: scenario 5 is, politically the most unrealistic of the options. If we have to wait for scenario 5 to happen, the Euro problem will never be solved. We need to fix our common currency asap so that it does the work it is supposed to do: sustain economic growth and ensure full employment. Other problems will automatically become much easier to solve in a more prosperous environment, such as integrating immigrants in the economy or supporting a digital Europe or paying for an expanded defense system should President Trump decide to push NATO on the backburner.

There could be a 6th scenario: firming up scenario 3 so that it includes straightening the Euro and making it function as a matter of priority.

Put another way: this requires making sure the roadmap sketched in the Five Presidents Report is followed step by step. Remember that report? It called for doing everything that is needed to establish by 2025 a European Treasury, exactly what the Euro needs to function – just as the US dollar has the Federal Reserve. I suspect Mr. Juncker himself has a special fondness for scenario 3 but he is taking great pains to distance himself from the debate.

Of course, the EU Commission has to stay clear of any actual policy choices in its White Paper. The options presented are merely a series of modus operandi, not to be confused with goals (such as a European defense or a common plan to fight terrorism or regulate immigration). But it is the importance attached to these goals, i.e. the political pressure to achieve them, which will ultimately drive European integration.

Where there is a will, there’s a way, as the saying goes. Which is probably why nobody can stop scenario 3, the “coalition of the willing”.

Cover photo: Jean-Claude Juncker, President of the EC, presents the White Paper on the Future of Europe at the European Parliament. © European Union , 2017   /  Source: EC – Audiovisual Service   /   Photo: Etienne Ansotte

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