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The Future of

THE EUROPEAN UNION


FINANCIAL TIMES SPECIAL REPORT | Wednesday May 9 2012
www.ft.com/eu-2012 | twitter.com/ftreports

Bloc faces Inside this issue


Eurozone
crisis
Many

stiffest
economists
believe fiscal
union is
essential
Page 2
Membership Currency

test in
troubles exacerbate
‘enlargement fatigue’
Page 2
Britain and the EU Public
scepticism masks efforts to
rebuild entente Page 2

its history
Single market There is
little agreement over what
finishing the EU’s internal
market entails Page 3
Foreign
affairs
Developing
Amid the turmoil, it is weaknesses combined with the
joint policies
rise of non-European powers to
easy to lose sight of place a question mark over the
is a slow
and difficult
the fact that the EU EU’s ability to maintain its job Page 3
influence in the wider world.
has booked some Amid the turmoil it is some-
solid achievements, times forgotten that the EU, for Institutions Painful treaty
all its troubles, has immense renegotiation is needed to
says Tony Barber achievements to its credit. beef up eurozone economic

F
With 27 member states (rising rules, Page 4
ifty-five years after the to 28 next year with the admis-
Treaty of Rome, which sion of Croatia) and more than Renewable energy Clean
founded the European 500m people, the EU is the power will require serious
Economic Community, world’s biggest common market investment Page 4
its successor, the EU is battling and trade bloc.
to prove to itself and the rest of Many of its citizens enjoy a Franco-German links
the world it can overcome its standard of living that is the Events have underlined the
most profound challenge. envy of much of the world. Its cracks in a
What started four years ago as social and economic model, relationship
a financial sector emergency, which blends capitalism and the that has
and then evolved into a sover- welfare state, is under strain,
always
required
eign debt crisis, expanded in but is adapting in response to second world war, permitting anti-establishment populist par- From France to Greece, the the upheavals in the banking work to
2011 into a full-scale threat to the financial crisis. the entry of 10 former commu- ties, on the far left and far right, UK and Hungary, more than a sector and debt markets since reconcile
European monetary union, the Moreover, the integration nist states in central and east- that exploit the public’s sense of few mainstream centre-left and 2007 have halted this develop- differences
cornerstone of the integration process that started with Bel- ern Europe. economic insecurity and frac- centre-right politicians have ment or even, in some seg- Page 4
project. gium, the Netherlands, Luxem- The desire of Serbia and other tured national identity. succumbed to the temptation to ments, thrown it into reverse.
The financial upheaval coin- bourg, France, Germany and countries in former Yugoslavia These parties share an rail against the EU, in an effort Many banks have retreated Guest Column Is Europe
cided with a recognition on the Italy in 1957 was dynamic to join testifies to the bloc’s instinct to make the EU a scape- to blunt the appeal of the into their home markets, rid- destined to become super
part of Europe’s leaders that the enough to attract ever more enduring attractiveness as a goat for everything from public extremists. ding themselves of debt issued Monaco, or a superpower?
EU’s institutions, redesigned by adherents in the following half- pole of liberty and prosperity. spending cuts and job losses to In economic terms, the impact by financial institutions and asks Radoslaw Sikorski,
the 2009 Lisbon treaty, were still century. Nonetheless, the present crisis weak immigration controls. of the crisis is no less marked. governments outside their own foreign minister of Poland
failing to deepen a sense of com- EU membership helped stabi- is tearing at the fabric of inte- While most extremists stand The launch of the euro in 1999 countries. Page 4
mon purpose and build the trust lise young democracies in gration so painstakingly woven little chance of entering govern- accelerated the integration of This process of “renationalisa-
of citizens. Greece, Portugal and Spain, over past decades. ment, their influence on Euro- Europe’s financial markets but, tion” was accentuated by the
At the same time, demo- and, later, reunited a continent In political terms, the damage pean politics is not to be dis- as the European Central Bank
graphic, military and economic divided in the aftermath of the is visible in the emergence of counted. observed in a report in April, Continued on Page 2
2 ★ FINANCIAL TIMES WEDNESDAY MAY 9 2012

The Future of the European Union

Currency crisis exacerbates ‘enlargement fatigue’ Bloc faces


stiffest
test in its
to 27. In the decade to 2017, how- ficient progress in areas such as The implications of an strongly in the credit boom against disappointment fanning
Membership ever, at best three or four mem- organised crime and corruption. enlargement slowdown are sig- before 2008, they have been slow the flames of nationalism again.
bers might join. So the bar was set higher for nificant. to emerge from the recession. Yet, paradoxically, if – as
A two-tier or multi- “The financial crisis is defi- subsequent prospective mem- The prospect of membership Joblessness across the region is seems increasingly likely – a
tier EU might ease
the path for new
nitely delaying enlargement,
and this is understandable,”
says Bozidar Djelic, who
bers – Croatia’s accession talks
took six and a half years.
But the global economic slow-
has been a vital spur to politi-
cal, judicial, and economic
reforms in the 10 former social-
high.
Mr Djelic admits it will take
Serbia far longer to gain full
two-tier or multi-tier
emerges after the crisis, that
EU

might ease the path for enlarge-


history
members, explains resigned as Serbia’s deputy
prime minister and chief negoti-
down and ensuing eurozone
debt crisis have exacerbated
ist bloc countries that joined in
2004 and 2007.
membership of the EU than had
been hoped just a few years ago,
ment.
Countries could be admitted Continued from Page 1
Neil Buckley ator on Europe last December, enlargement fatigue. The crisis If that prospect starts appear- but he says being on that path to a looser outer circle without
when EU ministers failed to not only tied up EU institutions ing ever more distant for spurs reform, as well as provid- full integration in all areas. enormous amounts of state aid –
Despite its problems, EU grant Serbia candidate status. with firefighting and made big ing foreign investors with a A multi-tier union might, on €1.6tn, or 13.1 per cent of EU
enlargement is not dead. In fact, there were signs of states more wary of accepting Heather greater sense of security. the other hand, warns Ms gross domestic product – that
In January, two-thirds of “enlargement fatigue” even smaller, poorer members. It also Grabbe, head of Zlatko Lagumdzija, foreign Grabbe, be less attractive to pro- national governments chan-
Croats voted in favour of joining before the financial crisis struck eroded the principles of Euro- the Open minister of Bosnia-Herzegovina, spective members – particularly nelled to banks after 2008 in the
the union, putting Croatia on in 2008. pean solidarity, and boosted Society adds that the facts that Slovenia Turkey, which began accession form of public loans, capital
course to become the 28th mem- The EU was increasingly support for populist and nation- Institute: ‘There is already in the EU – and the talks in 2005 but, as a Muslim injections and guarantees.
ber of the bloc by the middle of aware that it had not addressed alist parties calling, for exam- has been a loss euro, that Croatia is virtually country largely in Asia, faces Meanwhile, the gap between
next year. the issue of how to govern a ple, for limits on immigration. of solidarity’ there, and Serbia is a candidate deep divisions among EU states the 17-nation eurozone’s strong-
A month later, neighbouring bloc of 27 members. It knew the “There has been a loss of are “very positive signs for us”. over its membership ambitions. est and weakest economies
Serbia achieved its long-held next countries lining up for solidarity, in the sense of hav- ex-Yugoslav countries, officials But he is pushing for the bloc Istanbul, she says, has always yawns wider as the crisis drags
aim of gaining candidate status, membership, from the former ing to solve common problems and analysts fear at best they to release more funding to Bos- seen accession in terms of win- on. Unemployment fell in Ger-
putting it alongside Montenegro, Yugoslavia, were particularly together,” says Heather Grabbe, could lose the stimulus for nia and other western Balkan ning recognition as a member of many in March to 6.7 per cent, a
another former Yugoslav state. problematic – economic lag- head of the Open Society Insti- reforms – and at worst explode states ahead of formal member- an elite European club. two-decade low, but in Spain it
But the reality is that the gards still troubled by how to tute NGO in Brussels and a into violence again. ship, for transport and energy But one ambassador from a rose to 24.4 per cent. Roughly
enlargement process has slowed deal with war crimes and terri- former top official in the EU’s Countries such as Serbia and infrastructure projects that run western Balkan state says these half of Spaniards under 25 are
sharply. torial disputes enlargement directorate. Bosnia-Herzegovina still suffer through their territories, in countries, already closely linked jobless.
The last great wave of EU There was a sense, too, among “If you have lost that sense because of the damage to their recognition of their particular to the EU geographically and In the debt markets, borrow-
expansion between the end of older member states that Roma- between Germany and Greece, infrastructure and industry history. economically, are likely to ing costs for fiscally prudent
1995 and the start of 2007 saw nia and Bulgaria had been then how are you going to have from the wars of the 1990s. He says it is “important that accept whatever is on offer. northern European countries
the number of member coun- allowed to join – in January it between Germany and, say, Although they attracted Bosnia sees results from moder- “A multi-tier EU,” he says, “is have never been lower: Ger-
tries more than double, from 12 2007 – before they had made suf- Albania?” investment and began growing ate policies”, so as to guard better than no EU at all.” many’s benchmark 10-year gov-
ernment bond yield touched 1.63
per cent in mid-April, and that
of Sweden is also less than 2 per
cent. The yield on equivalent

Public scepticism Greek debt stands at about 20


per cent, and for Portugal it is
more than 10 per cent.
In fact, neither Greece nor

masks efforts to Portugal has access to the bond


markets, having received emer-
gency rescues from their EU
partners and the International

rebuild entente Monetary Fund that turned


them into wards of the global
financial system.
The same goes for Ireland –
which, however, is slowly
eurozone that was not helping returning to health. Cyprus
Britain and the EU itself. avoided a similar fate only by
“The [centre] of the problem turning to Russia last year for a
Government leaders now lies on our doorstep in €2.5bn loan.
know the UK’s Europe and with some of our
largest trading partners, includ-
Now the big question is
whether Spain, deep in reces-
economic fate is tied ing Ireland,” Mr Osborne told sion and with its banks devas-
to Europe, writes the House of Commons. “We
will not turn our back on the
tated by a property and con-
struction bubble, will also
George Parker IMF, or turn our back on the require emergency help.
world.” The conservative government
The move was the clearest of Mariano Rajoy, prime minis-
The 21-mile stretch of sea manifestation of the coalition’s ter, is adamant its €54bn plan
between Dover and continental attempt to rebuild bridges in for banks to increase capital and
Europe has seldom seemed Europe, which also included Mr bad loan provisions this year
wider in recent times, the divide Cameron’s attendance at a Nor- will avert the need for any EU-
encapsulated by the isolation of dic summit: the focus of his funded rescue of its financial
David Cameron, the British efforts to build a liberal, free- system.
prime minister and Conserva- trading alliance in Europe. However, in April the IMF
tive party leader, at last Decem- In spite of differences over expressed concern about the
ber’s European summit. European integration, Mr Cam- balance sheets and governance
While EU member states eron has worked hard on his of various Spanish lenders,
debated matters of economic life relationship with Angela Mer- notably Bankia, a collection of
or death for the eurozone, Mr kel, the German chancellor: the seven cajas – savings banks –
Cameron tried and failed to two have shared convivial week- floated last year on the stock
extract concessions for the UK ends at Chequers, the UK prime exchange.
financial services industry. The minister’s country retreat. More broadly, handling the
episode was portrayed by the Mr Cameron has tried to forge crisis will call for courageous
prime minister’s office as a Brit- relationships with two new leadership from Germany, the
ish veto – in reality the rest of European leaders – Mario Monti, most populous and economically
Europe just walked on by. Italy’s technocrat prime minis-
The “veto” lifted Mr Cameron ter, who is seen in London as a
Angela Merkel
in opinion polls and Euroscepti- liberal reformer, and Mariano
and her
cism has rarely seemed more Rajoy, Spain’s prime minister –
government
widespread in Britain. Recent as potential allies in trying to
were criticised
soundings have put the UK open Europe’s economy.
for a slow initial
Independence party – whose The UK prime minister also
response to
symbol is the £ sign – ahead of endorsed Nicolas Sarkozy who
the debt crisis
the Liberal Democrats, the pro- lost the French presidential
Europe minority party in Brit- campaign; Britain is braced for They agree with S&P: protests in Madrid against cuts. The rating agency wrote: ‘Austerity in Spain will likely exacerbate risks to growth’ AFP

Markets fret that austerity


ain’s coalition government. a problematic cross-channel powerful member-state, as well
Yet behind the scenes, Mr relationship with François Hol- as from the ECB. Much is also
Cameron has been quietly try- lande, the socialist who won the expected of France, with a
ing to rebuild relations, in rec- vote. freshly elected president,
ognition that Britain’s economic “We don’t normally meet can- François Hollande, and new gov-
fate is inextricably linked to the didates in election periods,” said ernment due to take office after

medicine will kill patient


rest of the EU, which accounts Mr Cameron’s office after he June’s parliamentary elections.
for 60 per cent of its foreign declined to meet Mr Hollande on Angela Merkel, Germany’s
trade. his recent visit to London, Christian Democrat chancellor,
The UK economy, wallowing where he was campaigning for and her government have come
in a double-dip recession, needs votes among French expats. under criticism both for their
growth in Europe to offset an Mr Hollande’s identification of initially slow response to the
austerity programme at home. finance as “the enemy” threat- debt crisis and for their empha-
George Osborne, chancellor of ens more tension, as Mr Cam- Privately, eurozone officials tries, such as France and Lux- currency through the ECB, sis on national fiscal discipline
the exchequer, has no interest eron tries to defend the City of Eurozone crisis acknowledge the creation of effi- embourg, have argued that the could tackle panic in peripheral and structural economic
in making things worse. London from EU regulation. cient and effective monetary new rules must be accompanied bond markets, where traders are reforms as the essential policy
In April he agreed to an The UK premier’s covert Many economists union is far from finished. by pooling of financial resources worried they may not be repaid tools for overcoming it.
additional £10bn British loan to
the International Monetary
efforts to repair relations have
been spotted by his own party,
believe fiscal union is Although significant power
over eurozone government
if a workable fiscal union is to
be achieved.
for the debt they hold.
But Germany has objected,
In the long run, however, the
most important feature of Ger-
Fund, in spite of fierce com- which today is even more Euro- essential if the single budgets has shifted from Mario Monti, Italy’s techno- and the integrationist push that many’s behaviour in the crisis
plaints from Labour and many
of his own Tory MPs that the
sceptic than in the days of Mar-
garet Thatcher.
currency is to survive, national parliaments to Brus-
sels, the goal of fiscal and eco-
crat prime minister, and a
respected economist and vet-
enthused eurozone leaders in
2011 has largely stalled in 2012.
may turn out to be the intense
domestic debate over the past
money would be used to help a The former Tory leader’s says Peter Spiegel nomic union to accompany the eran EU official before he took In recent weeks, European two years over that country’s

A
famous 1988 Bruges speech, in single currency remains far off. office in Rome, has long urged voters have shown they are also vision of Europe’s future.
which she railed against a Euro- sk senior EU officials “European integration has the eurozone to issue common becoming more resistant to the This produced a consensus
pean superstate, now looks whether enough has brought peace and prosperity,” bonds backed by all 17 countries path the bloc is taking, demon- not only that Germany must do
Contributors more moderate. been done to stem the Mario Draghi, the ECB presi- in the currency union. strating a new willingness to what is necessary to save the
John Redwood, a former Tory two-year-old eurozone dent, said during a recent hear- By spreading lending risk back candidates who reject the monetary union, but that deeper
Tony Barber cabinet minister, said of the debt crisis, and many point to ing of the European parliament. among the 17 and including the status quo. political union is desirable, too.
Europe Editor
UK’s IMF contribution that the number of new rules and “While I hesitate to sketch out triple-A rated economic giant In the first round of the Ms Merkel’s CDU party
Alex Barker loans should only be made when institutions they argue would the long-term end point of the Germany, the whole bloc would French presidential election, for fleshed out this idea last
EU Correspondent recipient countries were “in a have been unthinkable before integration process, I am con- be able to borrow at lower rates, instance, nearly 30 per cent of November, adopting a resolu-
position to devalue or when the upheaval. vinced that we need to actively argue advocates of common voters supported candidates of tion that called for the direct
James Blitz they are withdrawing from the There is the permanent step up our reflections about the bonds, giving weaker countries the far left and right with firmly election of the European Com-
Defence and Diplomatic Editor single currency”. €500bn rescue fund; firm rules longer term vision for Europe as eurosceptic views. mission president and a bicam-
Europe may be low on the list with penalties for growing we have done in the past at Similarly, recent polls in the eral legislative system in which
Neil Buckley of concerns for most UK voters, budget deficits and a new Brus- other defining moments in the ‘Good intentions and Netherlands, where the govern- the European parliament would
East European Editor but Euroscepticism is an article sels-based head of a “euro work- history of our union.” sound policies are not ment fell because of disagree- represent voters and the Coun-
of faith for most Tory MPs and ing group”, among others. But achieving the fiscal union ments over Brussels-mandated cil of Ministers would speak for
Joshua Chaffin
EU Correspondent British newspapers. And it still But after three months of rela- that many economists believe enough. Ultimately, deficit targets, show that euro- member states.
has the capacity to divide the
party and ruling coalition.
tive calm at the start of the
year, thanks to the €1tn pumped
essential for the survival of the
euro, demands clearing several
[integration] must be sceptic populist and fringe par-
ties could make up nearly a
A more cohesive and demo-
cratically accountable EU is
Jonathan Ford
Chief Leader Writer Over the next 18 months, Mr into the region’s credit-starved hurdles that some worry may be supported by those for third of the new parliament attractive to politicians across
Cameron will try to channel banking system by the Euro- insurmountable. after elections in September. Europe, but it is open to ques-
George Parker Eurosceptic fervour into efforts pean Central Bank, markets The first problem, which has
whom it was made’ Indeed, eurozone leaders’ big tion whether all member states
Political Editor to contain the next seven-year have begun to wobble again, hindered responses to the crisis recent achievement, the fiscal would agree to such a political
EU budget. worried that the underlying so far, concerns how to create a time and resources to reform discipline treaty, is under attack union.
Quentin Peel
Chief Correspondent, Germany Britain’s EU membership is causes of the crisis have not yet fiscal union and has divided their economies and make them on many fronts: from the new The history of European inte-
also complicated by the prospect been addressed. north from south, new member more competitive. Socialist French president, gration suggests that a more
Peter Spiegel of a referendum on Scotland Indeed as Standard & Poor’s, states from old, and Germany German leaders have resisted François Hollande, who has probable outcome is the emer-
Brussels Bureau Chief separating from the rest of the the credit rating agency, said in from France. So far, integration the plan, arguing that cheaper vowed to revisit it, to Irish vot- gence of an avant-garde group
UK in 2014. A “yes” vote would its recent downgrade of Spanish has largely followed a path borrowing would also remove ers, who appear likely to reject of countries that would set the
Ursula Milton be seen by the separatist Scot- debt, there is increasing market backed by Germany and a like- the pressure on weak economies it in a referendum scheduled for pace while leaving the door
Commissioning Editor tish National Party as a prelude sentiment that the medicine – minded group of northern euro- to make improvements. the end of May. open for others to follow.
Steven Bird to the EU admitting it as a new tough debt and deficit limits zone countries whose creditwor- But Berlin has also resisted “No matter the outcome, this The EU long ago abandoned
Designer
Andy Mears member state. imposed by the new rules that thiness have been relied on in other less ambitious ideas, is a necessary and healthy infu- the idea that all members
Picture Editor Alex Salmond, Scotland’s first eurozone leaders have agreed to euro bailout efforts. including a Paris-backed push to sion of democratic legitimacy should proceed at the same
minister, wants his country ulti- – may kill rather than cure the This system has been largely give the €500bn eurozone rescue into our body politic,” says one speed along the road to integra-
For advertising details, contact: mately to adopt the euro – a patient, by stifling economic rule-based, culminating in the fund unlimited resources by Brussels-based EU diplomat of tion.
Robert Grange on: requirement of new EU mem- growth. new fiscal discipline treaty that linking it to the bottomless the raised profile of the “Europe In any case, the overriding
+44 (0) 207 873 4418; bers in any cases. Wisely, he “[W]e believe front-loaded fis- would forever enshrine balanced pockets of the ECB. question” in national elections. priority remains tackling the
fax: +44 (0) 207 873 4006; appears to be in no hurry cal austerity in Spain will likely budgets and low debt in The French government, with “Good intentions and sound financial crisis. Even the finest
email: robert.grange@ft.com Polls suggest a “no” vote is exacerbate the numerous risks national constitutions. backing of other G7 countries policies are not enough. Ulti- architectural plans for Europe’s
or your usual representative the more likely outcome in Scot- to growth over the medium Other countries, particularly such as the US and UK, has mately, [integration] must be future will amount to nothing if
land, but Mr Salmond is a wily term,” S&P wrote in its April 26 Italy and other southerners, but argued that showing the euro- supported by those for whom it the crisis inflicts irreparable
political veteran. downgrade statement. also some more northern coun- zone’s willingness to protect the was made.” damage on the bloc.
FINANCIAL TIMES WEDNESDAY MAY 9 2012 ★ 3

The Future of the European Union

Developing A single market Small steps, not big leaps


For an example of the sweat
and tears required to advance
pressures are rising. As Mr
Barroso admits, economic crisis

joint policies
the EU’s single market, look no provides “a strong temptation to
further than the epic squabble roll back the single market”.
over reforming the bloc’s patent So what is the current
system. situation? In some areas, such
The benefits seem clear: lower as goods the single market has

is a slow and
costs and a simpler life for matured against the odds.
entrepreneurs who must Some fiercely competitive
navigate the intellectual property sectors, airlines, for example,
regimes of 27 member states. have outpaced regulators in
Yet agreeing a unified EU bringing down market obstacles.

difficult job
system has taken almost four This is not the case for energy,
decades, and the talks are not health or indeed telecoms,
finished. A breakthrough is where national models and
close, but not certain. The most champions dominate.
divisive issue – language rules – In other areas, opening up has
were largely resolved when 25 only just begun. Services
countries agreed to move ahead account for 70 per cent of the
guard their role as world powers without Spain and Italy. EU economy, but
Foreign affairs at the United Nations Security Now all that is left is for Paris, implementation of the services
Council. Munich and London to resolve a directive is proceeding slowly.
James Blitz considers Meanwhile, Europe’s reputa- six-month tussle over where the Then there are the “new
the obstacles to tion as an international military
power is fading. In the throes of
new patent court will be.
A deal, which could come
frontiers”. These include areas
that are still almost entirely
common diplomatic the economic crisis, many states within weeks, will be hailed as national – several sectors are
and defence strategies are slashing military spending
to try to balance national budg-
proof of the EU’s determination
to boost faltering economies by
excluded from the directive,
such as digital services.

T
ets. strengthening its single internal Areas such as the internet
wo years ago, the imple- As a result, there are fears market. But the agonisingly slow economy will be a priority when
mentation of the Lisbon that, by the end of this decade, progress on patents is an a second single market act is
treaty created some Europe will struggle to look important reality check. unveiled this year. But political
excitement that a new after its own security at a time As the single market – a constraints mean reform will
chapter was beginning in EU when the US is shifting its focus grand plan to free the proceed in small steps, rather
history, one that would see the away from the Atlantic and movement of people, goods, than big leaps and there are
bloc become a more coherent towards the Pacific. services and capital – limits to what even the most
and weighty actor in foreign Two years after she began as approaches its 20th birthday, pro-single market states will
affairs and defence. EU foreign policy chief, Baron- there will be no shortage of calls accept.
After years in which member ess Ashton’s team has put to tackle other bottlenecks. Take telecoms: the existence
states sometimes appeared together some diplomatic With Europe’s economy of “roaming” charges to
deeply divided over the diplo- achievements. labouring under high debt and customers who use their phones
matic crises of the age – most For example, the bloc has low growth, the project to abroad highlights that this is a
notably the Yugoslav wars of demonstrated the importance of In Somalia, the EU’s Operation Atalanta is playing a big role in fighting piracy Getty remove barriers to open markets national business.
the 1990s and the Iraq invasion its input, in what is arguably is a top priority and there is Before he became Italian
of 2003 – the hope was that the the biggest security problem of ing a crucial role trying to pean Reform, a think-tank. however, is the eurozone crisis. optimistic talk in Brussels about prime minister, Mario Monti
EU would become more able to the moment: Iran’s nuclear pro- widen dialogue between Serbia “José Manuel Barroso, the com- “Europe’s reputation has the initiative that José Manuel wrote a report calling for a
hold its own, for example, when gramme. and Kosovo. mission president sees the EAS taken a massive battering in the Barroso, president of the “seamless regulatory space” and
dealing with the US and China. Baroness Ashton won praise That said, many would point as something that needs to be past two years,” says Mr Val- European Commission, calls the a pan-European regulator in
Two years on, opinions about for the way she led diplomats to three large problems the bloc fought rather than something asek. “Its members are not seen “crown jewel” of the EU. charge of licensing and selling
the union’s progress on forging from six world powers in a first faces in forging a common for- that needs to be worked with.” to have managed the crisis well. The trouble is there is little frequencies. Yet the sovereignty
common diplomatic and defence round of negotiations with Iran eign and defence policy. Second, Europe is acting too They are seen as bickering and agreement over what finishing sacrifice, let alone the loss of
strategies are mixed. on April 14. First, there are big institu- slowly to maintain “hard selfish and that has damaged the single market entails. For revenues, is unacceptable to
It now has a foreign policy At a more detailed level, the power” and defence capability Europe’s reputation as a haven some it means adding a more many states.
supremo in Catherine Ashton, a EU’s 27 members met at the at a time of aggressive budget of responsibility and stability. “social” dimension, for others it Opening the healthcare
British former politician. It also start of this year to come up ‘The Lisbon treaty has cutting. “It is not an attractive model is liberalising markets or pooling market, which is also currently
has an “External Action Serv- with a package of tough energy triggered turf One of the biggest concerns of and that is becoming a burden more sovereignty. excluded, could bring substantial
ice”, a diplomatic corps that sanctions on Iran, despite the senior diplomats in the EU and on the EU’s ability to shape its “Everybody thinks the single gains. But would the UK,
numbers more than 3,000, half difficulties this has created for warfare between the Nato is that Europe’s national neighbourhood.” market is the answer but champion of the single market
of whom are posted in delega-
tions round the world. The EU
some member states, such as
Greece and Italy.
European Commission governments should pool and
share military capabilities to
Baroness Ashton’s staff would
contest this. “We’re certainly
nobody knows what to do,” says
one senior diplomat. “Nobody
but home of the state-run
National Health Service, accept
also has a huge aid budget that Acting as a bloc, the EU has and the External avoid duplication. Britain and not hiding behind the crisis,” know where the biggest more competition of this sort?
allows it to project influence in also been able to put pressure France, the Nordic states and says an aide. “EU foreign policy economic gains will come from. Michel Barnier, the internal
the world’s most troubled on the Assad regime in Syria.
Action Service’ the Benelux countries have means putting more money into Full integration is impossible for market commissioner, is duly
regions. It has also had an impact on taken some steps in this direc- our neighbourhoods such as the many member states. Who focusing on enforcement.
However, the development of other problems. In Somalia, its tional frictions inside the Brus- tion. Balkans and north Africa. We would make political sacrifices “The priority is not to extend
common policies is a slow and Operation Atalanta is playing a sels machine. But as one EU diplomat puts are certainly not seeing foreign for these uncertain gains?” the services directive, but to
difficult job. While many big role in fighting piracy and “The Lisbon treaty has trig- it: “The fact is, that while mil- aid being cut.” There are other challenges. ensure it applies in full to the
smaller member states want the union is attempting to forge gered a huge degree of turf war- lions of euros are being saved But for many people in the US Calls are growing for more sectors it covers.”
“more Europe” when it comes to a comprehensive approach to fare between the European sharing defence capabilities, and China, all talk about the EU border controls, rather than
foreign policy, some of the tackle the country’s political Commission and the External tens of millions are being lost for some time to come will be fewer and protectionist Alex Barker
bloc’s bigger nations – notably and economic difficulties. Action Service,” says Thomas through budget cuts.” dominated by the travails of the
Britain and France – jealously In the Balkans, the EU is play- Valasek of the Centre for Euro- Perhaps the biggest problem, eurozone.
4 ★ FINANCIAL TIMES WEDNESDAY MAY 9 2012

The Future of the European Union

Problems point to path of closer embrace Clean power


Institutions needs serious
sis – and the need to hold
monetary union together –
have turned out to require
This is compounded by
the fact that the reforms
are largely to deal with
up the eurozone will simply
come apart, pitching the
euro back into crisis.
tion of democratic legiti-
macy, which Berlin’s pro-
posal for direct elections to
This would get around
the problem – much dis-
cussed at the time of the

investment
Painful treaty more decisive policy mak- problems facing a subset of While the Belgian govern- the commission presidency fiscal treaty – of EU institu-
renegotiation is ing than the treaty allows.
This has spurred calls for
the bloc – the 17 countries
that share the euro.
ment recently accepted
demands from the commis-
only partly answers.
The Lisbon treaty did
tions applying rules that
were only designed for a
needed to tighten further institutional change. Then there is the ques- sion for deeper budget cuts, pass greater powers to the subset of member states.
eurozone economic Angela Merkel last year led
the way, saying that for
tion of Britain. Since com-
ing to power in 2010, the
it is highly questionable
whether bigger countries
European parliament but
the “democratic deficit”
Arguably, Mr Piris’s
vision goes with the grain
rules, writes monetary union to work, UK’s coalition government such as France and Italy remains a serious issue for of EU history, which has energy grew after the disas-
Jonathan Ford tighter integration would be has introduced a law requir- would accept similar the EU, highlighted by pub- seen many “multi-speed” Renewable energy ter at the Fukushima
needed. ing a referendum on any demands unless these were lic apathy and low turnouts innovations – such as the nuclear facility in Japan.
The German chancellor EU treaty change transfer at European elections. Schengen border-free travel Joshua Chaffin European nuclear execu-
When leaders of the 27 EU
member states ratified the
acknowledged it would be
painful to reopen the insti-
ing further powers to Brus-
sels. ‘A community that The difficulty of achiev-
ing EU-wide treaty change
agreement.
But it would pose many
says spending on tives had been talking
about a renaissance in their
Lisbon Treaty three years tutional debate but argued Given the hostility of says, regardless of has led some to wonder problems, not least the risk infrastructure and industry, based on its low
ago, most of them fervently
hoped it would be the last
it must not be shirked.
“A community that says,
British public opinion to
integration, most observers what happens, it
whether another approach
is needed.
of a permanent split in the
EU if the other states never
overhaul of markets emissions and relative free-
dom from foreign suppliers.
time for a generation that regardless of what happens think this puts an EU-wide can never again In a recent book, Jean- caught up. are necessary to But the horror of Fuku-
institutional reform would
be on the agenda.
elsewhere in the world, that
it can never again change
agreement beyond reach.
The main reason to re- change its rules,
Claude Piris, a former head
of the European Council’s
Another worry is that the
avant garde might become
expand production shima damped such talk.
Germany, the biggest EU
The ratification sealed a its ground rules is a com- open the treaties is to beef legal service, proposed an a voting bloc that influ- economy, shuttered seven
painful eight-year effort to munity that simply cannot up eurozone economic gov-
cannot survive’ alternative. This would be enced the mainstream busi- Since the start of Europe’s older reactors right after
bring about a wide range of survive,” she said. ernance, giving the EU for an “avant garde” group ness of the EU. financial crisis, Greek- the accident and decided to
constitutional changes to However, further reforms institutions, principally the backed by real sanctions. of countries – broadly the 17 Whatever the EU decides, German relations have been accelerate a phase-out of
deal with the expansion of will not be easy to accom- European Commission but But it is hard to see some that form the eurozone – to institutional change is back marked by growing acri- nuclear energy. In Italy,
the EU from 15 members in plish. The tortuous course also possibly the European EU members (especially embrace closer integration, on the agenda. mony. plans to launch a revival
2003 to its current size. of the Lisbon treaty (and Court of Justice, the power non-euro countries) being while keeping the door open If the euro is to survive, But if Greece’s Helios were shelved.
Events, however, have the failed European consti- to review the finances of willing to swallow the sort for others to join later. there need to be faster ways solar energy project suc- The move away from
confounded this hope. The tution that preceded it) member states and impose of changes Germany is Such a subgroup might of responding to abrupt ceeds, the two nations nuclear to renewables has
sovereign debt crisis, which shows how difficult it is to and enforce sanctions when pushing for, which would create its own institutions – changes in financial and might provide a model for not been without problems.
blew up almost before the get agreement about far- they break the budget rules. involve strengthening even a council for heads of gov- economic circumstances. how Europe and the rest of Germany, for example,
ink on the treaty was dry, reaching changes among 27 Without these, there is a more the powers of the ernment, a parliamentary How this is accomplished the world can collaborate to has changed from big elec-
has exposed weaknesses in members – and that goes up risk that the fiscal treaty commission on national body, and an administrative will have a profound effect benefit from safe, clean and tricity exporter to sometime
the Lisbon settlement. to 28, when Croatia joins signed this year by 25 of the budgetary matters. authority distinct from the on the character of the affordable energy. importer. Less nuclear
The exigencies of the cri- next year. 27 member states to shore Not least, there is a ques- commission, for example. union. The idea behind Helios, power also means its grid is
named after the sun god of less stable – authorities nar-
Greek mythology, is that rowly averted a blackout in
thousands of solar panels in February that could have

No time for
the sun-drenched Mediterra- had consequences across
nean will soak up energy Europe. Analysts also warn
that can then be trans- of rising prices.
ported by transmission The biggest bills may be
lines to power homes and yet to come, because fur-
factories in Germany. ther growth in renewables

two central
The project, which has will require huge invest-
become a favourite of the ments in infrastructure and
European Commission, the an overhaul of the conti-
executive arm of the EU, is nent’s electricity market.
symbolic of optimism about One challenge is building
renewable energy from the transmission lines that

nations to
sources including the sun, will allow electricity gener-
the wind and water. ated by offshore wind farms
Günther Oettinger, the in the North Sea to travel to
energy commissioner, said Munich, for example.
in Athens in April: “Renew- “Transmitting a big
able energy sources will amount of power over a

squabble
play a major part in long distance is not easy,”
Europe’s long-term energy says Jean-Michel Glachant,
development.” director of the Florence
The appeal of renewables School of Regulation, which
over traditional fossil fuels
is that they do not directly Günther
produce the greenhouse Oettinger, EU
gases that are by-products energy
Franco-German links fellow conservative leader in the
European People’s Party,
of burning coal and oil and
which have been linked to
commissioner,
hopes industry
Events have thrown although their personal relation-
ship has never been very close.
climate change. That is
vitally important, because,
will bring jobs

into relief the cracks in Ms Merkel declined to meet Mr among other things, the
a relationship that has Hollande in advance. In response,
he distanced himself from the
bloc has committed to virtu-
ally eliminating greenhouse
specialises in European
energy markets.
always required work, German emphasis on budget disci- emissions by 2050. The European Climate
writes Quentin Peel pline as the most important step
to solve the eurozone crisis.
Moreover, unlike natural
gas, for example, renewa-
Foundation has estimated
that the bloc’s transmission
He focused his campaign bles do not have to be capacity will have to double

F
instead on a call for less austerity imported from Russia. by 2030, at a cost of €68bn
or weeks, if not months, and more growth – and renegotia- Thanks to generous subsi- between 2020 and 2030.
the political establish- tion of the German-inspired “fis- dies, clean energy costs That does not include the
ment and business com- cal pact” to curb debt and deficits. have come down. hundreds of billions needed
munity in Germany have Ms Merkel’s offer to campaign The EU is also hoping, as for new generation projects.
been torn, anxious about the pros- for Mr Sarkozy did not help and Mr Oettinger observed in The cost would be lower
pect of victory for the socialist was put on hold when the former Athens, that the developing if countries took a Europe-
François Hollande, who is now French president decided it might industry will provide jobs wide rather than a national
the French president-elect. prove counterproductive with his and encourage innovation approach. For example,
Some feared the advent of a voters. in a recession-bound conti- locating projects where con-
leftwinger in the Elysée palace Indeed, having launched his nent. ditions are most suitable –
would upset the Franco-German campaign with a passionate plea At present, renewables wind in the North Sea and
tandem in the middle of the euro- for France to become “more Ger- account for 10 per cent of solar in the Mediterranean
zone crisis. man”, Mr Sarkozy dropped the Europe’s energy consump- – as opposed to the current
But long-time observers in the idea in favour of a much more tion – a share that the 27 practice of going where the
government have been more san- traditional Gaullist stance, ques- EU member states have subsidies are highest.
guine, insisting pragmatism will tioning further European integra- François Hollande, the new French president, focused his campaign on calls for less austerity EPA pledged to double by 2020. Financial support will
prevail in Paris and Berlin, even tion, and abandoning his pact But their contribution also be harder to come by
if relations take a few months to with Ms Merkel that neither forged close institutional rela- sion, they never overcame it. “We lost two years with Chan- could expand quickly, in an era of austerity.
get on an even keel. would seek to tell the European tions, with ministries exchanging Left-right political differences cellor Schröder, because he according to a long-term Mr Glachant is more opti-
“Some people seriously think Central Bank how to conduct views, and regular meetings of between Paris and Berlin have thought the Franco-German rela- energy “road map” devel- mistic about the prospects
that François Hollande will be a monetary policy. the full governments, under- usually been secondary to per- tionship was ancient history,” oped by Brussels policy in Europe for shale, which
very leftist and irresponsible pres- In German eyes, both French pinned by a big programme of sonal chemistry between the lead- says Sylvie Goulard, a French makers last year. has recently brought large
ident,” says Daniela Schwarzer a candidates were guilty of exploit- school exchanges and town twin- ers. Helmut Schmidt, the German MEP. The point was to identify quantities of gas to market
specialist in Franco-German rela- ing doubts and worries about ning, among other things. Social Democrat chancellor in the The two quarrelled over EU ways for the EU to meet its in the US.
tions at the German Institute for European integration and the “Franco-German co-operation is late 1970s, had an excellent rela- finances, and the Nice treaty and competing and sometimes Gas, which is less pollut-
International and Security Affairs emergence of Germany as the only important when we are not tionship with Valéry Giscard only patched up their relationship conflicting energy goals. ing than coal and oil, is also
in Berlin. dominant political force in the united, when we are capable of d’Estaing, the centre-right French when they found themselves on These involve leading the viewed as a way to address
“There are others who know eurozone, in order to win a partic- quarrelling,” says Claire Demes- president at the time. the same side in opposing the US- fight against climate one of renewables’ toughest
there have already been high-level ular type of voter. may, specialist in Franco-German Helmut Kohl, a centre-right led war in Iraq. change, while also limiting problems: unpredictability.
contacts with [Mr Hollande’s] dip- Both expressed a classic French relations at the German Council Christian Democrat, forged an The other factor in bringing costs for industry and con- As one commission official
lomatic adviser, who came to Ber- preference for interventionist and on Foreign Relations in Berlin. even closer bond with François France and Germany sumers and maintaining says: “There must be some
lin. [Mr Hollande] cannot afford to protectionist policies, and politi- The eurozone crisis has exposed Mitterrand, the most recent back together in 2003 was the secure supplies. kind of back-up when the
be irresponsible. He well knows cal involvement with the ECB the fundamental opposition French socialist president. desire for a big celebration of the One landmark moment sun is not shining and the
he will be judged by the markets.” that is strongly at odds with Ger- between Germany’s insistence Mr Kohl had a markedly more 40th anniversary of the Elysée for sustainable energy was wind is not blowing.”
For Angela Merkel, the German many’s insistence on independ- that the ECB must pursue an difficult relationship with Jacques treaty. the commitment by EU Gas-fired power plants
chancellor, the challenge of Mr ence for the bank. independent monetary policy Chirac when he was president in The 50th anniversary of the leaders in 2008 to set a bind- can be turned on and off to
Hollande’s success is swiftly to The reality of the Franco- focused on controlling inflation the 1990s, although both belonged same event may well help Ms ing target for 2020. That accommodate the intermit-
come to terms with a new and German partnership has been and maintaining a strong cur- to the same conservative camp. Merkel and Mr Hollande: prepara- gave industry the confi- tent nature of the wind and
potentially prickly partner, whom constant struggles to reconcile rency, and France’s belief – spelt One exception to the rule of tions are under way for celebra- dence to invest and encour- sun. Still, policy makers
she snubbed during the election. differences, with both sides forced out by both candidates – that the opposites mixing well was the tions in January, 2013. aged national schemes that puzzle over how to design a
From the start of the cam- to compromise in order to reach a ECB should also have economic relationship between Mr Chirac However, the concern in Brus- have helped fund solar pan- market where companies
paign, Ms Merkel had made it common European position. growth as part of its mandate. and Gerhard Schröder, the Social sels is that the eurozone crisis els on rooftops in Germany, will be willing to invest in
clear she was backing Nicolas Thanks to the Elysée treaty, Although Ms Merkel and Mr Democrat chancellor in Berlin means neither nation can afford Spain and Italy. plants that will only be
Sarkozy, the incumbent and her signed in 1963, the two have Sarkozy papered over that divi- from 1998 to 2005. to wait that long. The appeal of sustainable used occasionally.

Is Europe destined to become super Monaco, or superpower?


guarantee of a happy If trade policies The EU retains its current and single parliament. all areas where economies Only then would there priorities to the Pacific:
Guest Column progression to an ever renationalise, would labour shape. Member states take I call this “utopian,” but of scale apply: completion be an EU president who Europe has to assume
RADOSLAW SIKORSKI more prosperous, peaceful mobility, or even the decades to repair their another word might be of the single market in could negotiate as an equal greater responsibility.
EU. Instead, we are looking freedoms of the Schengen public finances. We cling “impossible”. I cannot services and internet trade, with the leaders of the US We need more
If Marx had been right and at several possible passport-free zone – to our standard of living imagine the parliament of the implementation of a and China. Only then co-operation and
political relations were outcomes. already under pressure by imposing external any member state, competitive energy market, could we begin to punch specialisation of defence
determined by the The first is from populists across the barriers but fail to regain including Poland’s, voting joint protection of the EU’s internationally in industries. In compliance
economic base, the EU disintegration. If the effects continent – be exempt? global competitiveness. for a treaty that would external border so as to proportion to our economic with the Treaty of Lisbon
would be a superpower. of the European Central If a sense of common Reforms of the EU are transfer national protect the Schengen weight. we should launch
We are the wealthiest Bank’s relief for the future and pan-European delayed and community sovereignty to Brussels. freedoms within, and joint A European political permanent structured
market in the world, with banking sector fizzle out solidarity erode, how soon institutions continue to There is also a fourth representation at the G20 union would need a serious co-operation.
half a billion rich and the financial crisis before countries cease weaken. We acquiesce in possibility – Poland’s and OECD. defence policy too: you There is nothing
consumers and an deepens, the risk of the payments for common comfortable decline. proposal – of a permanent The European cannot wield power in the inevitable about our
educated workforce. We eurozone’s collapse would agricultural policy or Europe becomes a political union that Commission should be world if your diplomacy decline. We still have
account for the biggest become real – and if it cohesion funds? continent-sized Monaco – a preserves national powers firmly at the centre of can never by backed by reserves of strength and
share in international were to disintegrate or An EU in which wealthy retirement home in many areas. decision making, so that force. areas of excellence that are
trade, have a vast shrink, the single market community institutions with a few tourist In a federal but not decisions are the product Poland pushed for the the envy of the world.
combined military budget would be hard to salvage. atrophy would quickly attractions. centralised Europe, matters of transparent discussions development of a common But if we are to retain
and we are collectively the The impoverished and slide into geopolitical The third scenario, of culture, religion, way of and not backroom deals. security and defence policy not just influence but
biggest donor of still uncompetitive irrelevance. The vacuum sometimes proposed as an life, and principal tax rates The posts of president of during its EU presidency leadership, drift is not an
international aid. countries pushed out of would be filled by a alternative to the first two, would remain in the the commission and of the last year, but progress is option and disintegration
But the economic crisis Europe’s core would be resurgent Russia and an is the imposition of purview of member states. European Council could be too slow. would be a catastrophe.
has brought home the tempted to hit back with assertive China. utopian federalism: a While respecting merged and elected by the The US is scaling back
fragility of the European competitive devaluations or The second and more unitary supranational state subsidiarity, integration European parliament, or its military budget and Radoslaw Sikorski is
edifice. There is no even trade barriers. plausible scenario is drift. with a central government would be strengthened in even more broadly. reorienting its defence Poland’s foreign minister

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