When the dust settles

When the dust settles

Bulletin article
Alasdair Murray
03 June 2005

The French and Dutch rejections of the constitutional treaty throw into stark relief the divisions between two groups of EU countries. On one side are countries - including Britain, Ireland, the Nordic three plus the majority of the new member-states - who (crudely put) favour a more economically liberal and diverse European Union. On the other is an integrationist group led by France and Germany, but also including Spain, Belgium and potentially Italy, that wants a more 'social Europe' and opposes further enlargement.

In the short-term the battle between these two camps is likely to paralyse the EU. But the European political system has been severely shaken and that also provides an opportunity to reshape and improve the EU. Three heavyweights are due to depart the European political landscape in the next few years - Blair, Chirac and Schröder - and their successors may, with luck, manage to forge a new consensus around an economically dynamic and outward-looking Europe.

On the surface at least, the No votes are hugely damaging to the EU's aspiration to play a greater role on the world stage. More infighting over EU institutions is the last thing Europe needs at a time when it is trying to develop stronger policies towards countries such as Iran, China and Russia. The principal security threats to Europe emanate from the instability in neighbouring regions, such as the former Soviet Union and the Middle East. But the EU will find it harder to develop effective foreign policies for these areas if its members are arguing over the shape of the Union.

Moreover, the No votes have thrown future EU enlargement into doubt, thus undermining its most powerful foreign policy tool - the prospect of membership. Bulgaria and Romania, having already signed accession treaties, should still join on schedule in 2007. But a new Christian Democrat government in Germany could oppose Turkish membership, while the unpredictable Jacques Chirac could also abandon his pro-Turkish line. The EU may well decide to begin negotiations with Turkey as planned, but they are likely to move extremely slowly. Furthermore, the uncertainty about accession will diminish the EU's ability to persuade its applicants to reform. What country would want to meet the exacting demands of EU membership without reasonable confidence of eventually being able to join? Can Serbia be persuaded to accept independence for Kosovo without the promise of EU accession?

However, enlargement notwithstanding, EU leaders may find that in the wider world they can renew their habit of working together. The EU has moved on since its divisions over Iraq. In recent months, EU leaders have worked effectively on problems as diverse as Iran and development aid to Africa. The EU has also begun to rebuild relations with the US, helped by the more constructive tone from Washington. If EU leaders can summon the political will to do so, they can build on these foundations, even without the creation of the foreign minister that was promised by the constitutional treaty.

In the short-term, the Non and the Nee will set back the EU's plans for economic reform. The French government has interpreted the No vote as a clear rejection of EU-driven liberalisation, such as the draft services directive. It may also demand that the Commission brings forward a raft of 'social Europe' measures. For example, France may push for a directive making it compulsory for companies to consult their workers before selling or closing a subsidiary. France could even propose that a 'core' group of eurozone countries pushes ahead with the harmonisation of taxes and social protection. However, the success of an integrationist core would be far from guaranteed: France has lost moral authority and other countries may be unwilling to follow a French lead into a core Europe.

France lacks the ability to impose new social or protectionist measures on the rest of the EU. Thus the real risk is not that France will force a change of direction of EU economic policy, but that it will block badly needed reforms. Yet the longer-term outlook may be less gloomy. The likely changing of the political guard in Berlin and, when Chirac finally steps down, Paris should usher in governments more favourable to reform. The Nice treaty voting rules will continue to make it difficult for the Union to reach agreement on key legislative measures. But it is at the national level that the crucial reforms on labour and pension markets must be forged. And it is at the national level that the arguments for change have to be ultimately fought and won.

was deputy director of the CER (2000-2005).

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