‘Brexit’, Macron and the future of the EU

The result of the UK referendum in June 2016 on continued EU membership and the election of Emmanuel Macron as President of France in May this year, are two significant recent events that are providing renewed impetus and urgency to the debate about the future of the European Union.

The outcome of such a debate could be critical in minimising the risk of the EU unravelling because of ‘Brexit’.

There are two conflicting sides to this debate. One approach argues that the unravelling of the EU could be averted by a process known as ‘less Europe’. This is the idea that the process of economic and political integration in Europe has gone too far and moved too fast and it should be put on hold or even reversed. This may involve re-visiting and revising some of the fundamental principles of the EU such as ‘free movement of people’.

An alternative approach favours ‘more Europe’ as a means of preventing the unravelling of the EU. This is based on the belief that many of the current problems of the EU stem from the slow progress in achieving greater political integration. Emanuel Macron is a firm supporter of the ‘more Europe’ approach and his election raises expectations that the move towards greater political integration in Europe is about to receive a significant boost.

Which reform agenda should the EU pursue post-Brexit? What must be kept in mind in attempting to answer this question is that the EU is not just an economic union but is also a political project. It is generally known as the ‘European Project’.

A central element of the ‘European Project’ is the aspiration, expressed in the opening sentence of the Treaty of Rome in 1957 and repeated subsequently in all important EU treaties, of ‘an ever-closer union among the peoples of Europe’. Although never precisely defined, this aspiration is generally assumed to mean the prospect of establishing greater economic and political integration in Europe which may eventually take the form of a European ‘super’ national or federal state.

In the 60 years since the signing of the Treaty of Rome, Europe has gradually evolved from a free trade area and a customs union of six nations, to a single market of 28 nationstates and 500 million people, to the complete free movement of people, the abolition of border controls and an economic and monetary union with a common currency. Throughout this process of European transformation an ‘implicit’ federal structure was put in place but without any clear indication or road map of whether or how this ‘implicit’ federal structure is to become an ‘explicit’ or complete political union. The abolition of national currencies (Economic and Monetary Union) and national borders (Schengen Treaty) and the establishment in 1992 of European Citizenship (‘free movement of people’) without political unification has proven a risky undertaking, especially in dealing with crises.

The euro-zone crisis and, more recently, the refugee crisis have exposed the fundamental flaws of operating a system in which political integration lags behind economic integration. There is a voluminous literature on the so called ‘design faults’ of the economic and monetary union in Europe. These ‘architectural’ shortcomings usually refer to the absence of mechanisms that can monitor and prevent ‘imbalances’ from emerging in one country and spreading to the rest of the monetary union, the absence of a banking union and the lack of ‘lender-of-last-resort’ assistance to sovereigns. In the short-run, these problems have been dealt with in an ad hoc manner usually following acrimonious ‘crisis’ meetings. There is a consensus that in the long-run this is not a satisfactory model of EU governance, but there is no clear shared vision of an alternative model. The so called ‘five Presidents report’ and the more recent EC white paper “On the Future of Europe” recognise the challenge but there seems little follow-up.

Since 1992, the two pillars of the European Project, ‘free movement of people’ and a ‘single currency’, became a reality in the EU. Neither is essential for the workings of a single market in Europe, but the long-term viability of both is now being questioned because of lack of progress in the process of political integration. The euro-zone crisis demonstrated vividly the immense problems that can emerge by operating a monetary union without a political union while the ‘Brexit’ crisis is now raising similar concerns about ‘free movement of people’. Many of the current problems that threaten the stability and the very existence of the EU, such as fiscal transfers, sovereign bail-outs and free unrestricted movement of people, would not be so intensely divisive issues in a federal political system. In this sense, an ‘ever closer union’ is part of the solution and not part of the problem with EU membership. The shock of the ‘Brexit’ decision in the UK brought to the fore the existing tensions in the EU as to how the European Project is to be completed.

The problem is that there is no clear road map as to how this is to be achieved. In the USA political union preceded monetary union; in the EU the process has been reversed. The establishment of a Federal Europe is currently unpopular and therefore unlikely to be achieved through normal democratic means. Without popular support, radical reform of the political system in Europe is not possible. It is equally true, however, that without political reform the existing status quo in Europe will continue to be in crisis. The most realistic pathway to reform would be some intermediate outcome between the ideal but ‘utopian’ federal Europe and continuation of the existing crisis-prone status quo. This intermediate outcome would entail slow, gradual and incremental reforms involving treaty changes something that Germany is now reportedly prepared to accept if it includes strengthening the eurozone.

It remains to be seen whether a common Franco-German understanding on EU reform would result in the kind of pragmatic reforms that would strengthen the EU and ensure the survival of the Eurozone. Such reforms could include the creation of European Finance ministry, an EU social budget and pan-European social insurance, deeper cooperation among some member states in key policy areas, the reform of the ESM or even some modifications to the ‘free movement of people’ principle. If that were to happen Macron’s presidency would be truly ‘historic’.