Upcoming EU Debates and Reforms

I'm going to do something everyone loves and no one is good at. I'm going to try to predict what the next big debates in the EU will be given what little information we have now. My logic is that future reform will follow the same path as previously and as such will be economic and intergovernmental crisis driven, with a bit of a functional institutionalist steering. I propose that two main policy areas will be discussed and that one major institutional issue will be raised. The first two refer to economic governance and to defence. The latter reffers to the possibility of a dual presidency of EU institutions under the same president.

1) POLICIES

a)Economic Governance: This is the perennial EU reform, caused by some ongoing crisis, and typically is path dependent, in that it is the latest step in European economic integration. Looking back at the Greek crisis which has spawned it, one is faced with the fact that this was almost inevitable. The geographical proximity of European countries and the transaction and transportation costs of the mid 20th century tie European countries to each other through trade, despite Political and security fears. These in turn motivate the ECSC(1951) and the CAP(1960), which then lead to the Common market. This increased level of integration increases intra-European trade, which leaves national producers more exposed to competition.unable to restrict access, national governments turn to artificially increasing competitiveness through exchange rate manipulation. This then causes a number of attempts from high productivity countries to control the others. Alternatively in order to avoid a race to the bottom in exchange rates countries decide to cooperate and coordinate their exchange rates. Independently of the mechanism, increased trade brings the need to coordinate exchange rates and so in 1979 is born the Exchange Rate Mechanism (ERM). Incidentally the main lines of EMU are first proposed a decade earlier in the Werner Report of 1969. From this and the subsequent imperfect agreements it is only a matter of time before those imperfections are made evident by speculative attacks. This, supported by enlargement, the profits that it brings and the impetus it gives to further integration and the countries adapt their interactive institutional framework, perfect the common market into the Single Market and inevitably implement the Euro. However this is still an imperfect setting and requires fiscal integration and delegation to give the monetary union more credibility and shield the member states from speculative attacks.

b)Defence: This is the latest in a number of articles which seem to me as though they indicate a certain willingness to move towards a much more integrated defence system for the EU. First I noticed Italy had been pushing for this (here's some more info), then obviously so did France, (and France again), as well as Germany (and again here). It seems natural. The USA is repositioning itself in light of the emergent powers in the East, looking at India and China as the next big partners/opponents in the geopolitical scene. It is also in decadence (not the one that makes your country disappear, but the one that makes it close a couple of military bases around the world and rethink cowboying around the world in the future.). So it must make some savings. Russia wont invade Europe, despite CEECs fears. Energetic disputes are mostly regional beyond the interest and influence of the USA. At the same the EU is very stable within itself, so the USA don't need to worry about developments here. It's not just that we are too many to deal with. Obama does not come to Europe because he doesn't need to.Thus the USA start pushing for a NATO which is less dependent on their own expenditure and ask us Europeans to share the bill. I don't like war and war-related business but this is an argument I have some difficulty arguing against.

However there is a more fundamental reason for the EU to integrate it's military organisations better, Economies of scale. Basically, as this article argues, and as should be apparent to anyone aware of the EU's non super power role, we spend almost 9 times as much as the Chinese in the military yet we get absolutely no value for money. The extent to which there must be duplication of efforts must be ridiculous for a block of countries who will never fight against each other again. Plus if we all get together, we are bigger, and as economics tells us, bigger markets bring higher levels of specialization which in turn creates higher efficiencies. This is a typical case of being able to get much much more for the same amount of money. Plus if integration in the defence sector takes place, the European defence market becomes a monopsony of procurement with all the advantages that creates for bargaining power for the EU and for all the specialization it creates in the supply side. The obvious downside to this is that we'll create a bigger and newer interest group with more nefarious interests. I mean the last thing we want is a militaristic Europe 100 years after the first world war. So maybe it should be so that this further step in defence integration should follow fiscal integration thus allowing the EU to buy a veto in the administration of war related businesses. In this sense the Germans and the French could sell their shares in the EADS to the EU. Either way something ought to be done to at least try to prevent this sort of development from taking place. After all, it would be a pity to have to continue to follow the USA's initiative. Wouldn't it be amazing if the next internet-like invention came from Europe rather than the USA? (and yes I know the first version of the web came from CERN...).

I don't know how long all of this will take, but it shouldn't be much longer. How long will largely depend on the UK and on the next period of persistent economic growth. The UK is the EU's largest spender on defence. Without it France would have to prop Germany up more than what it might like to. The UK would provide the necessary tie breaker. Finally in order to go through this process it is necessary to have two things: Democratic support and the economic resources to pay for it, so getting out of the crisis would help. It seems to me that the momentum is there. All that's missing is an opportunity.

2)Dual Presidency

Here and here are some discussions of the possibility and implications of merging the roles of the Council and of the Commission presidents. On the face of it, it is not a particularly bad idea. It would decrease the number of Mr/Mme Europe, which seems to have become a major embarrassment for post-Lisbon EU. But is it really such a good idea?

I am on the fence on this. I think that there's that argument in favour of it, but are the roles really compatible? The only example of this is the present situation of Lady Ashton. She's a servant to two masters: The commission of which she is a vice president and commissioner for foreign affairs, and the Council of which she is the president of the committee for foreign affairs and defence and security. How is she handling it? Well it's still a bit early to tell, but she's struggling. The problem to me seems to be that the Commission is an executive body, who is fairly political, and follows or leads the parliament, which is also political. The council however is intergovernmental. Might there be some conflict of interests? Not forcefully and actually this position could actually help put an end to the rivalry between the two institutions. But it would have to be well done... Whoever would be in charge would have to have a lot of staff. Though I would add that in good truth it seems to me as though the best arrangement would be the one where all council "committees" are modeled after the Commissariates and the European Parliament's committees so that the council's meetings are all presided over by the relavant comissioner. Finally, I do agree that at one point or another, the concentration of power will be such that the president of the EU position should either be made to be directly elected or so that the relevant politician must be a member of the lists of the majority party in the European parliament. Both would have political legitimacy, but the latter would do so with added simplicity. It would only require the addition of a small number of articles redefining the role of the president of the commission as closer to the role of the prime minister of a federation (say Merkel or the Prime minister of Canada, India or Australia), to ensure that the candidates would be apparent to everyone, thus forcing him/her to actively campaign. The fear here is that if there is no such transparency incentive, then we may end up with no apparent leader during the campaign, leading to the president being chosen ex-post in the corridors rather than ex-ante or during the voting, as is supposed to be the case.

So what do you think?