The coming of the two-tier EU
Much to the disappointment of euro-sceptics and headline-hungry media across Europe, the European Union project is here to stay. But there is a real concern, even a realisation, among senior diplomats, decision-takers and policymakers in Brussels that the proposed institutionalisation of the Euro zone will lead to a two-tier or two-speed Europe.
One senior EU diplomat close to the discussions in Brussels told this column that “there is a real possibility of a rise of the euro at the expense of the EU”.
“But nobody in the Commission, European Parliament or Council (EU member states) will allow the EU as a whole to fail. It is too big to fail. There will just be a first and second division,” the diplomat added.
EU Council President Herman Van Rompuy will bring forward later this month proposals for strengthened euro zone economic governance. EU leaders will discuss the preliminary plans for deeper euro zone fiscal integration and other issues on a better euro zone rule book at a summit on October 17-18.
The core of Van Rompuy’s proposals will be to make the euro zone more efficient, robust and streamlined in its decision-making process. At the heart of this new decision-making process will be the introduction of formal regular euro zone summits at leaders level at least twice a year, but possibly more. These summits would be chaired by Van Rompuy – the new Mr Euro and would relegate the current monthly meetings of euro zone finance ministers – known as the Eurogroup – to merely technical and preparatory meetings.
“The euro will run more like the G20. The current euro zone/ecofin (full EU 27) system did not convince the markets. It is too slow and cumbersome. The markets want decisions taken in the euro area more quickly and those decisions to be implemented more quickly. This can only be done by euro zone leaders themselves,” another EU official said.
This ultra institutionalisation of the 17-member currency is driven by Germany and France. In fact Berlin favours tweaking the infamous EU Lisbon Treaty to gold plate the euro zone elite. So what about the other 10 non-members of the euro club ?
The normally euro-sceptic Britain, the biggest member state outside of the Euro, has worryingly been preaching more euro integration in recent months. So on paper, Berlin and Paris have the support of London, therefore as is the case at most EU summits, if the “big three” agree, it’s a done deal.
Some commentators in Brussels will say that such a two-tier euro zone/EU set-up is the perfect solution for the big three. The pro-European Germans and French can plough ahead with the other 15 members of the euro. Sources say that the legal services in the EU executive European Commission are already working on how the euro zone 17 could forge ahead without consulting the rest of the EU under so-called enhanced cooperation.
Conservative-led Britain will say that the new institutional set up will allow it on the other hand dip and out, opt-in and opt-out of EU policies once it does not affect its economy.
The more cynical view would be that the institutionalisation of the euro and any potential treaty change allowing Germany and France to use the weight of the euro zone 17 to influence bank regulation and other legislation that would apply to all 27 member states is the perfect backdoor exit for Cameron’s UK government to leave the EU.
But the greatest concern is being expressed among diplomats of the so-called mid and small sized nations not in the euro, notably the seven central and eastern European states, including Poland, Hungary and the Czech Republic which are expected to eventually join the euro but have not yet done so. These countries are so worried about being diluted in the decision-making process, they held a secret meeting in Brussels last month to air their grievances and devise a plan.
They accept the need for euro zone leaders to discuss their problems in a tight circle, but not at the expense of the greater EU good.
Writing in the Frankfurt Allgemeine Zeitung, Carl Bildt and Anders Borg, Sweden’s foreign and finance ministers, said they were “worried that we are seeing the emergence of a new divide in Europe, a divide that would, in the long term, undermine the strength of the union”.
The ministers cited the theory of a “two-speed Europe” in which the core countries surge toward greater integration leaving the rest behind.
“Rather, we would see the reverse when it comes to growth and competitiveness,” they wrote, adding that the euro zone 17 might grow even closer, leading to more protectionist policies that could weaken the EU’s coveted single market.