Challenges ahead for the European Union

It is a mild understatement that nowadays the EU is navigating in rough waters. Close to half of the member countries of the Euro area are in breach of their fiscal stability commitment – and some of them very substantially. Quite a few heads of government publicly criticise the ECB’s monetary policy. Germany and France are determined to water down the Bolkenstein directive on the implementation of a genuine single market for services (which amount to about two-thirds of the EU’s GDP), to which, incidentally, no major objections had been raised by the governments of the member states during the drafting stage. There is no agreement on the longer term EU budget. Only Ireland, the UK and Sweden accept the free movement of the residents of the ten countries which became members of the EU in May last year. Most important, France and the Netherlands, resorting to a referendum, refused the ratification of the constitutional treaty – which had been accepted unanimously by the Heads of State or Government. It is on this last, largely unexpected event that I propose to share some thoughts with the readers of Competitio – keeping in mind, however, the other manifestations of a crisis situation as well. Let me begin by bluntly stating that I do not believe a minute that all this foreshadows a fading away, let alone the implosion, of the EU, nor indeed of EMU. This is not the first crisis in the European integration process – remember the rejection of the European Defence Community initiative, France’s “empty chair”, or Mrs. Thatcher’s “I want my money back”. It will not be the last either. There are too many vested interests at stake which result from the exceptionally high degree of integration of our economies (and not only of our economies). They would surely prevent the realisation of a doomsday scenario. But there is a genuine risk that decision making within our very complex institutional arrangements will become more and more difficult. This would not affect necessarily the day-to-day management of our institutions, but could well paralyse badly needed new initiatives. It has become moreover reasonably clear that referendums organised in other member countries might well have also ended with a rejection (see the disappointingly unenthusiastic acceptance in Luxembourg). Hence the need for trying to understand what has led to the constitutional treaty debacle, or more generally to the European malaise. It will take quite some time and a lot of humble analytical effort to fully grasp the sequence of causalities. One thing, however, is already quite sure: a number of