The idea of a two-tier European Union has been the battle horse of the most integrationist politicians in the most integrationist member states for decades. No surprise, one feel suspicious to see it becoming the flagship proposal of the United Kingdom. But we better listen carefully to what the Chancellor of the Exchequer George Osborne said last Tuesday in Berlin in his speech in front of Germany’s BDI industry body presenting some of the UK government’s ideas to avoid a Brexit. What Osborne said makes real sense. “There is a deal to be made”: cooperate to change the EU treaties to enable closer economic and political integration for the euro area and looser integration for the others which, like the United Kingdom, are not prepared to take steps towards deeper integration at this point and any foreseeable future.
Proposals to differentiate the pace or the nature of European integration are as old as the European project itself. Behind the many labels attached to different proposals (core Europe, KernEuropa, variable geometry, multi-speed Europe, Europe of concentric circles, two-tier Europe, and so on as so forth), and behind some not irrelevant details, the rationale has always been the same: enable a core of countries to proceed with economic and political integration while allowing others to participate only in the Single Market. They were usually meant as a way to prevent the less integrationist member states from blocking further integration.
The most controversial of such proposals, like the ones in the paper produced by Wolfgang Schäuble and Karl Lamers for the CDU in 1994, or the ones of Joschka Fischer in his speech at the Humboldt University in 2000, caused a political earthquake at the time given the high profile of the proponents and because they came at times when the European Union was facing a particularly important junction, but not much of them became a political reality. More recent proposals for a “political union of the Eurozone”, particularly by some French circles like the Eiffel group and Thomas Piketty, or by some federalist movements, have generated some intellectual debate but no political initiatives.
Nevertheless, countless forms of differentiated integration have crept into the European treaties in the past two and half decades: the euro area integration limited to some EU member states, opt-outs, opt-ins, derogations, additional treaties, enhanced cooperations, etc. Along the way the least integrationist member states, first and foremost the United Kingdom, always found a way to enjoy exceptions, in one form or another, and they have always managed to put brakes to the ability of others to move ahead on their own towards more integration.
The acceleration of the Eurozone’s integration in the past few years has put the issue of differentiated integration back on the political agenda and has made it difficult to avoid giving an answer.
The economic and political integration of the Eurozone will inevitably continue. While there remain question marks about the pace, shape and form its advancement will take, it must inevitably come if we want to ensure the sustainability of the euro. At the same time, it is now clear that some EU member states will not be part of the euro area for any foreseeable future. Some may never be. For the governments of certain member states, it seems that a single market is more than enough. Some governments are clearly more and more at odds with the overall direction of the Union and the commitment to “an ever closer union”. “Quite frankly, the British people do not want to be part of an ever closer union” Osborne claimed in front of his German audience. But even the countries outside the euro area have an interest in its success. Again in Osborne’s words: “I have huge respect for the leadership Germany has shown, alongside other countries like France and Italy and the Low Countries in first creating the European Union and now the efforts you are making to ensure the common European borders work and the Eurozone is a strong and resilient currency area. Let me be clear. We want you to succeed in all these endeavours. It’s hugely in Britain’s interests, let alone Europe’s that you do”.
These two parallel trends need to be reconciled. But they can’t be reconciled other than by accepting a two-tier Europe. As Osborne said clearly in Berlin “There is a deal to be made. So let me be candid: EU reform and treaty change must include reform of the governance framework to put euro area integration on a sound legal basis, and guarantee fairness for those EU countries inside the single market, but outside the single currency. Rather than stand in your way, or veto the treaty amendments required, we, in Britain, can support you in the Eurozone make the lasting changes that you need to see to strengthen the euro. In return, you can help us make the changes we need to safeguard the interests of those economies which are not in the Eurozone”.
So where is the catch? The first and obvious one is what the UK would ask in return for losing its veto on further Eurozone economic and political integration. The most recent ideas mentioned by Cameron and Osborne are not outrageous. A formal exemption from the “ever closer union” principle and safeguards not to be discriminated in the Single Market are not unreasonable requests, but obviously the devil is in the details. The UK’s participation in the EU institutions (in particular the Parliament and the Commission when addressing euro area issues) are a complex issue to solve and yet one that can’t be avoided. The risk exists that any arrangement with the UK could pave the way to a Europe where each member state can pick and choose the elements of membership they find most attractive. A coherent two-tier EU with the euro area at its core and other members having an “associate status”, as Guy Verhofstadt and Andrew Duff have proposed, would be the ideal solution.
The real question mark is however what the euro area itself wants. The euro area has been pondering its future for the past six years. While recognition for the need of a fiscal, economic and political union has grown, political will remains very low and divergences between France and Germany are profound. The unlucky fate of the recent Five Presidents’ Report on Completing Europe’s Economic and Monetary Union is quite telling.
We need two sides for a meaningful negotiation of the kind outlined by Osborne. The UK has put some of its cards on the table. It is now up to the euro area, and particularly Germany and France, to take their responsibilities. As Osborne warned in Berlin “we [the UK and Germany] will not succeed as nations by ducking the big issues, or thinking we can avoid the key questions”.