60 Years Treaties of Rome – Crisis of the EU and Reform Options

This year the Treaties of Rome have turned 60 years old. Through these contracts the European Economic Community (ECC), which entered life in 1958, was founded in 1957. The founding Members were Belgium, Germany, France, Italy, Luxembourg and the Netherlands. The Idea of the community was to build a European single market without tariffs (customs) that allows free trade. Another idea of said market was to integrate and fence in Germany, which caused the devastating second world war, into the European Community. To this end the coal- and steel industry of Germany was integrated in an European System already in 1951. This integration realized the Schuman Plan, named for the French minister of foreign affairs, Robert Schuman. As you can see the importance of the relation between France and Germany for the begin of the European integration cannot be overestimated.

European integration was, for decades, a success story (see chronicle A below). The European Union consists of – at present still including the United Kingdom – 28 member states and half a billion citizens. In the last 18 years, the European Union has undergone crises too and is still in crisis (see chronicle B). The United Kingdom’s exit from the European Union, the so-called Brexit, is expected to be consummated in March 2019. Thus, one didn`t know whether to laugh or to cry in the event of the 60 years’ celebration of the Treaties of Rome. Also due to other reasons, the future of the Union today is more uncertain than it was some years ago. The European Commission under the lead of Jean-Claude Juncker has presented a paper this year, which portrays five scenarios that reflect how the European Union could look like in the period until the year 2025 (the so called „White paper on the future of Europe and the way forward“, see below sub C).

But let us start with the beginning of the sucess story of European Integration.

I. The Success Story of European Integration

In 1993 the European Economic Community became the European Community (EC). The change of name shows that from then on the member states of the community should be bound by more than just their common economic interests. With the entry into force of the

Lisbon Treaty in the year 2009, the European Community became the European Union. This change of name also included a legal deepening of the relations between the member states. Also in the year of 2009 the charter of fundamental rights became a mandatory component of the EU law. This comprehensive catalogue of fundamental rights is even more detailed than the catalogue of fundamental rights of the German constitution.

This success story might be told even further: dismantling of tariffs (customs); stricter control of national protectionism, free single market, freedom of movement for Persons, coalescence of the European Community, common foreign and security policy, common trade policy. The former US Secretary of State Henry Kissinger once complained that Europe had no telephone number. Who is Europe’s foreign minister? That too, is clarified. One has only to dial the number of the Italian Mrs. Federica Mogherini. But today I want to focus on the Problems of the European Union, so the next topic will be:

II. Slowdown and Stagnation of the European Integration

The connection and integration of the Union was now so strong, that the next logical step would have been a European federal state. The European Union and its member states have obviously not yet reached that stage and it is unclear whether that stage will ever be reached. Such a European federal state faces – at least today – many barriers.

A new constellation too, is the sheer size of the European Union. An important step was the so called eastward enlargement in the year 2004. Ten states – especially from the former communist east Europe, among them Poland and Hungary – became members of the European Union. The European Union grew from 15 to 25 member states. It is obvious that it is more difficult to establish close ties between many states, than to establish such ties between only a few states. Therefore, the European Union partially reformed its methods of decision making before the eastward enlargement. In particular, many topics that previously required unanimous votes can now be decided on by majority decision. The eastward enlargement is of course a great success. The enlargement largely reunited Europe that had been divided by the cold war for decades. By way of the eastward enlargement the Union has become more heterogeneous too, which puts the likeliness of a European federal state further into the distance.

Since the referendum of the United Kingdom in the summer 2016 everybody is aware of the fragility of the European Union. A small majority of the British citizens voted in favor of withdrawal of the United Kingdom from the European Union, the so-called Brexit. Currently the conditions of the Brexit are negotiated. The withdrawal is not yet consummated. A general aspect is important for me here. The outcome of plebiscites can hardly be predicted. The European Union has since 1957 gone its way widely without plebiscites in its member states. (Also due to this fact) one could criticize the European Union as undemocratic but on the other hand this has led to that way being a success story for decades. In 2005 two plebiscites were held in which the peoples of France and the Netherlands were to decide on the reform of the European Treaties. The plebiscites concerned the Treaty establishing a Constitution for Europe. Here too, the peoples voted against a deepening of the European relations which was the aim of the Treaties which were about to vote. The Lisbon Treaty has later – with certain reservations – realized many aspects the former Treaty establishing a Constitution for Europe aimed for.

If the peoples of the member states were to decide on the reforms of the European Union the political process would stand on a democratic foundation. Nevertheless it is difficult, nearly impossible to reach a positive outcome of each plebiscite in every one of the (still remaining) 28 member states.

III. Problems and Crises of the European Union since 2000

Since the last few years, the European Union is more and more dealing with serious political problems. A reason therefore is inter alia that the European Union nowadays has lot more competences than it had several years ago.

1. Democratic Deficit

Democracy is regularly addressed in conjunction with state. Even though the European Union is not a state it is often demanded that it should be more democratic. This is understandable. Many European legal acts have – exactly like national legal acts – direct effect in the member states. Furthermore, the primacy of European law even leads to the circumstance that European legal acts may overrule national legal acts in case the national legislation opposes the European.

Therefore, it is understandable that also the EU institutions shall have democratic legitimacy. Democratic legitimacy of the European Union is also a mandatory constitutional requirement for the integration of Germany in the European Union.

Of course the intensity of democratic legitimacy of EU institutions cannot be the same as democratic legitimacy in the respective member states. The direct election of the legislative by the citizens of the member states and thus the EU citizens is one important step in the direction of more democracy. The first direct election of the European Parliament took place in the year 1979. At that time, however, the European Parliament was not the legislative of the European Union. Particularly through the Lisbon Treaty the European Parliament today has more participation rights in the European legislative program. But the function of the legislative still is divided between Commission, Council and Parliament.

The problem addressed is not easy to solve. It is not clear what democracy between several states means. If democracy in this regard only describes the consideration of the member states the question arises whether political decisions in the European Commission or in the European Council have to be adopted unanimously or whether such decisions can be adopted by majority decision and thus member states can be overruled. Nowadays there are many political topics that only require majority decisions. The international law principle of unanimity is therefore no longer prevailing within the European Union. That applies a fortiori for the decisions of the European Parliament.

There have been reforms, but the problem was not solved. The problem had nevertheless been recognized and tackled. Future reforms will, however, be more difficult, due to the large number of member states

2. Budget Deficits

The member states of the European Union have committed themselves to budgetary discipline. This is because they belong to an economic and monetary union. The financial and budgetary policy of a member state may influence the architecture of the whole European Union. The debt of Greece is the best example therefore. Already in 1992 the Treaty of Maastricht stipulated that the annual budget deficit of the member states must not exceed three percent of the gross domestic product (GDP) of the respective member state. The member states are therefore not allowed to use too much debt.

However, it had been France and Germany that violated the European guidelines in the first place.

Those early violations by such big players in Europe really underminded the authority and the binding force of the budgetary policy. The violations of the European Law by France and Germany did not cause any special sanctions. The European Union has the competence to impose financial penalties in case of violation of budgetary guidelines. But until today the European Union has never imposed such financial penalties. This was and is a bad role model. Particularly because the European Union is a Union of law and not a state, it is important to obey the mandatory legal requirements and to sanction their violation. Otherwise the foundation of the Union is endangered.

The expected Frensh budget deficit will this year again exceed three percent of Frances GDP. It will be interesting to see if the European Union will impose sanctions on France due to the violation of the budget deficit guidelines.

3. Blockade on Austria

Another Episode in the development of the European Union is its dealing with political extremes in the governments of its member states. In the year 2000 a radical and xenophobic party was invited to join the governing coalition in Austria. The member states of the European Union (at that times 14 besides Austria) reacted by imposing sanctions. The member states decided that there shall be no bilateral relations between them and Austria. Such measures concerned only the relations of the member states to Austria but not the relation of the European Union to Austria. It was, however, clear that the European Union cares for the political direction one of its member states is heading.

Today’s dealing with the governments of Hungary and Poland, which have also moved quite far away from the center of the democratic spectrum is more cautious. I shall be coming back to this later.

4. Bank and financial crises

In the year 2007 the global bank and financial crisis started. It was caused by extensive trading of securities that embodied poorly backed loans for property purchases in the United States. The insolvency of the bank Lehman Brothers is closely linked to this crisis. Through

contagious effects European banks were affected, too. The European states have bailed out their banks multiple times during the crisis. Also the European Union took measures. There is a variety of new regulations relating to banks. For example, banks now must fix a “last will ”. They shall no longer be bailed out at any price.

5. State debt crisis and crisis of the Euro

Since 2010 the financial crisis is termed a state debt crisis. Especially Greece has become the epitome of this crisis. But also other states like Spain, Portugal, Ireland and Italy suffer high government debt. Because states could be tempted to return to their national currencies to reduce their debt independently by inflation, the Euro is endangered, too. The aforementioned leave of the Euro could lead to a massive loss of trust in the common currency. Also due to these circumstances the member states of the European Union tried to financially assist the states most affected by government debt. This financial assistance is performed by giving credits to the countries in debt. This strategy is chosen because a (partial) hair cut is suspected to encourage the countries in debt to go even deeper in debt. The law of the European Union, however, forbids that the member states or the European Union bear the debts of (other) member states. The European Union is furthermore not allowed to grant credits. The interpretation of the aforementioned provisions led to disagreements especially between the German Constitutional Court and the European Union that, however, did not end in an open dispute. As the European Central Bank (ECB) announced to buy government bonds of EU member states in debt, the German Constitutional Court – but not the European Court of Justice – assessed this announcement as problematic. The ECB continued its policy until today. It is viewed as one component of the policy to calm down the markets. The liability risk for the member states, caused by the unlimited acquisition of government bonds by the ECB, is, however, enormous and takes effect in case member states default on paying off their bonds.

6. Refugee crisis

The refugee crisis took hold of Europe in 2015. In 2015 approximately over one million people came only to Germany. Not all stayed, some moved on. Most refugees came from Syria; some came from Iran or Afghanistan. Many people made their way over the Mediterranean Sea: 850.000 refugees came to Greece and 150.000 came to Italy. Especially

Greece was and is overstrained with the welcoming and providing for refugees. The distribution of the people among all member states of the European Union became a problem. Some member states refused to receive refugees even though the European Union adopted a binding decision on the distribution. The European Commission has therefore now sued the member states Poland, the Czech Republic and Hungary at the European Court of Justice. The court should find that said states violated European law.

7. Democratic deficits in the member states

In recent years, some member states of the European Union went through a swing to the right. Populist parties with partially xenophobic tendencies rose to power. Particularly the government of Viktor Orban in Hungary but also the government of Poland represent this development. Both countries frequently oppose the European Union and its politics more or less openly. In Poland, the competences of the polish constitutional court have been cut back. The European Commission imposed for the first time in history the so called “Dialogue on the rule of law” which in this case did not bear success. A remaining option is the suspension of Poland’s voting rights in the European Union. This so called “Nuclear Option” can under EU law be adopted in case the behavior of a member state causes a serious violation of the values of the European Union. It remains to be seen how this dispute will end. It is, however, already clear that the European Union is willing to continue the dispute with hard-hitting means.

8. Brexit

For the European Union, the most radical event of the last twenty years is the upcoming withdrawal of the United Kingdom from the European Union. The population’s decision for the withdrawal in June 2016 was very close. 52 percent voted in favor of the withdrawal. The withdrawal is currently negotiated. Although not bound by the decision of the British people the government of Prime Minister Theresa May is determined to carry out the withdrawal. The withdrawal will be consummated in March 2019, which is two years after the British government filed for a withdrawal from European Union in March this year. The withdrawal would be the first withdrawal of a member state in the history of the European Union. The European law provides for a clause that allows the withdrawal of a member state from the Union. Under international law this is a normality; states can join a club and they leave it.

The self-image of the European Union, however, is an image of a closer bond. Also the history of linear progress is damaged by the withdrawal of such a large member state. So far it was public domain that the European integration is crucial for peace in Europe. It is furthermore common view, that the European single market is – at least in the long run – for all member states a win-win situation. Now that the Brexit referendum had shown that there is an alternative, other member states could be tempted to hold a referendum theirselves. There is a great danger that weak or populist governments try and hold a referendum to strengthen their domestic political power.

9. Accession of Turkey

Turkey is participating in the Eurovision Song Contest. It is participating in the European football championship and it is a member of the European Convention on Human Rights. The rapprochement of Turkey and the European Union is, however, a long tale of woe. Since 1963 an association agreement between Turkey and the European Union is in existence. Since 1999 Turkey is officially a candidate country. Since 2005 accession negotiations are conducted. But the politics of president Erdogan, especially the – from a legal point of view questionable – reforms of the judicial system, the constitution and the media have made an accession of Turkey highly unlikely. These tensioned relations do not endanger the cohesion within the European Union but are a foreign policy issue. The cohesion within the European Union would presumably much more be endangered if an authoritarian Turkey would be a member of the European Union. The accession of a state with a predominantly Muslim population would also be a test on the consensus of values of the European Union.

IV. Reform Options

Under its president Jean-Claude Juncker the Commission has designed five possible scenarios for the period until 2025.

The motto of the first option is: Carrying on as before. Because the treaties do not need to be changed, this would also be the easiest option. The easiest option does not have to be wrong. The reasons why the United Kingdom wants to leave the European Union are based on a specifically British view on Europe. There are, however, internal European problems and dissatisfactions with the Union that cannot be solved by mere continuing as before.

The second scenario is a re-centering on the single market (motto: nothing but the single market). The European Union would be formed back to the European Economic Community. The European Union would be deprived of its competences on other policy areas. The European Union would no longer be competent on the areas of migration, security policy and defense. In these policy areas – to achieve cross-border solutions – the member states again had to coordinate their policy by way of laborious bilateral and multilateral treaty negotiations.

The third scenario is a Europe of different speeds (those who want more do more). Individual member states may deepen the European cooperation in specific areas under the umbrella of the European Union if they wish to. But not everybody has to participate. In this way, individual states may deepen their cooperation in relation to aspects of defense policy. Or individual states decide on a financial transaction tax for cross-border financial transaction, as has already occurred.

The fourth scenario is, the Union reduces its responsibilities but fulfills its tasks more efficiently than before. Of course, the first thing to decide is which responsibilities should be abandoned and which responsibilities the Union should exercise more efficiently than before. In the white paper of the commission it is proposed that the cooperation in the areas of trade, security policy, migration, border management and defense should be deepened and in contrast the European Union’s involvement in public health and social policy should be reduced or terminated completely.

The fifth option is: much more joint action. The member states will intensify and deepen their cooperation on all policy areas. The institutions of the European Union will adopt measures faster and more efficiently. A European defense Union is created. The European Union will have more money available to shape its own projects. Vis-a-vis others Europe speaks with one voice and is represented with one seat in most international forums.

As you can see, considering the development of the last few years many things seem to be possible. The European might not be able to reinvent Europe, but redefine what is meant by European and shape this understanding in creative and imaginative ways.

So, after 60 years, the European Union is much too young and too strong to retire.

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