EUROPEAN UNION: Enlargement brings reform into focus

Analysis

With the EU's largest ever wave of enlargement now safely secured, many in the EU will want to concentrate more firmly on the key priorities of economic regeneration and better defence and security cooperation. However, there are a number of obvious difficulties:

1. Constitutional treaty.Attention in the short term will turn back to the pressing question of the draft constitutional treaty, which spectacularly stalled at the December European Council (see EUROPEAN UNION: Constitutional summit ends in failure - December 15, 2003). Over the last few months, the mood has improved decidedly, facilitated by signs of changes of attitude by Spain (see SPAIN: Madrid massacre brings Socialists to power - March 15, 2004) and Poland towards the key stumbling block last year -- the qualified-majority voting (QMV) formula contained in the new treaty.

   Assuming that the draft eventually agreed is similar to the one rejected in December, the new framework will provide greater clarity, and also make a modest but significant contribution to decision-making processes:

   • more decisions will be taken under QMV, notably in the area of asylum and migration;

   • the voting system decided at Nice will be abandoned, facilitating a reduction of the incidence of blocking minorities;

   • the six-month rotating presidency system will be partially replaced by the European Council presidency;

   • a new post of EU minister/representative for foreign affairs will be created (see EUROPEAN UNION: Agreement near on key security reforms - March 31, 2004); and

   • it will be easier for a core group to forge ahead with greater defence cooperation.

   It would of course still have to be ratified in all 25 member states and the prospects there remain uncertain, particularly with referenda in prospect in a number of countries, including the United Kingdom (see UNITED KINGDOM: Blair makes European U-turn - April 20, 2004) and possibly even France (see FRANCE: EU referendum poses risks - November 12, 2003). Failed ratification in any one of these would be a huge setback, and cannot be excluded.

   Even if agreed, the treaty will not be a panacea for all problems. It does not fully counteract the impact of moving from fifteen to twenty-five member-states, and some of its provisions -- especially those further bolstering the role of the European Parliament -- will not necessarily make decision-making easier.

2. Budgetary negotiations.This year and next, the member states will be increasingly busy with negotiating the EU's next financial perspective (2007-13):

   • Net contributors (such as Germany and the Netherlands) are pitted against the net recipients (such as Spain and Poland), and all countries will take a tough stand to defend their positions (see EUROPEAN UNION: Budget talks may reinforce faultlines - February 12, 2004). EU budgets have always been hard fought and such negotiations are likely to be even more difficult in the EU-25, particularly given fiscal constraints operating at national level.
   • If anything, the EU's budget seems set to get smaller not larger. There is a strong desire on the part of several players to see a repatriation of key elements of both regional development aid and agricultural spending. The main pay-masters of the budget would like to see its share of EU GDP reduced from 1.2% to around 1.0% in the 2007-13 financial period.

3. Expanding borders.Further enlargement issues will continue to loom. Turkey promises to be a difficult candidacy, even if Romania, Bulgaria, and possibly some other Balkan states can be managed more easily. The recent failure of Greek Cyprus to endorse the latest version of the Annan Plan for a settlement on the divided island makes the Turkish candidacy potentially even more problematic (see EU/CYPRUS: Greek 'no' complicates enlargement - April 28, 2004), given the veto power of individual member states.

4. Iraq aftermath.The Iraq conflict continues to cast a shadow, with the challenge of overcoming the effects of divisions over Iraq policy formidable. On the positive side, despite the megaphone diplomacy of the last two years, the EU's two dominant military powers -- France and the United Kingdom -- have continued to cooperate extensively and reach agreement over defence collaboration issues. (see EU/NATO: US concerns over EU defence plans grow - October 27, 2003). More problematic may be the arrival of strongly Atlanticist new members (see EASTERN EUROPE/EU: New members reluctant on EU defence - November 13, 2003).

Integration realities.At the same time, there will probably be a greater sense of realism about what the Union now is. In an EU of 25 with huge disparities of size and wealth, it is clearer than ever that the institutions of the Union are an arena in which national positions compete for policy influence, and reach brokered compromises. After the difficulties of the Santer and Prodi Commission presidencies, acceptance of that reality is a better basis for rebuilding the still highly necessary central strategic role of the Commission than continuing arguments about the legitimacy of institutions. The last decade has seen major Union achievements -- monetary union and enlargement most notably -- but enhanced legitimacy of EU institutions has not been one of them.

Ultimately, in a number of key areas, very little can be forced on member states by the 'centre' and the advent of a constitutional treaty in this respect changes rather little. This is particularly evident with respect to the economic reform agenda. Member states have to be brought to cooperate in integration by the acceptance that international competitiveness for any single European economy depends on the competitiveness of the wider European economy. The experience of both the SGP (see EUROPEAN UNION: High stakes in SGP challenge - January 19, 2004; and see EUROPEAN UNION: SGP becomes more flexible, not 'dead' - December 17, 2003) and the 'open method of coordination' of competitiveness policy have been particularly illustrative in this respect.

If the supranational institutions (European Commission and European Parliament) lack control in the economic reform arena, this is also evident in realm of security and defence issues. The recognition, inherent in the draft constitution, that defence and security will remain an area of intergovernmental cooperation, is a realistic one. The institutional innovation of a semi-permanent Council presidency, and a quasi-minister for external affairs who will straddle both Council and Commission, although not without ambiguities, reflects fairly accurately the ambiguities that beset national governments. They are aware -- even the more Atlanticist ones -- that Europe needs much enhanced security cooperation. They also know that they have to reassure national electorates and parliaments that ultimately they retain a veto on action.

Disappointing outcomes?The architecture that emerges from enlargement and treaty reform disappoints and worries many, especially in the states where there are federalist ambitions. However, it is probably as much as the currently weak legitimacy of the EU will bear, and it may not even bear this much if the ratification process is mishandled. In this respect, the coming period represents one of choice not only for eurosceptics in member states unenthusiastic about integration, but also for federalists:

• The former have to decide whether, by opposition to the new constitution, they wish to risk the unpredictable consequences of rejection and the outside possibility of a break-up of the existing Union.
• The federalists also face this dilemma. However legitimate complaints about lack of vision and leadership may be, calls for the restoration of a grand institutional design risk making ratification of a constitution impossible.

Inner core?Failed agreement on a new treaty or failed ratification would lead to renewed pressure in some countries for a two-tier Union, with those countries wishing for faster integration leaving others -- especially the United Kingdom -- operating under present arrangements. However, despite recent rhetoric, such a move would be hugely time-consuming and difficult to achieve:

• Faster integration would only be worth having if it really did mean major institutional advance on the current draft constitution.
• It is far from clear that agreement on the essentials of inner-group decision-making could be agreed, especially since it would expose smaller countries to potential large-state domination.
• Unless the eurosceptic member states left the existing Union (which raises complicated legal issues, and sets a worrying precedent even for those who remain in), it presupposes an enormously complicated two-tier institutional framework
• A new inner core would certainly exclude the United Kingdom, currently one of the Union's largest and most dynamic economies, and one with extensive military capabilities.

The notion of a multi-speed Europe (ie several groups of member states pursuing areas of common interest) is also problematic, given the potential for institutional and policy incoherent resulting from different constellations of member states pursuing different sets of objectives (see EUROPEAN UNION: New members may find EU loses allure - May 3, 2004).