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Key Controversies in
European Integration
2nd edition
Edited by
Hubert Zimmermann
and
Andreas Dür
© Hubert Zimmermann and Andreas Dür 2016
Individual essays in order © John McCormick; Jan Zielonka; Desmond Dinan; Mats Persson; Derek
Beach; Uwe Puetter; Richard Bellamy; Christopher Lord; Karen Alter and Daniel Kelemen; Jeremy
Rabkin; Ulrike Liebert; Jonathan White; Laura Horn and Angela Wigger; David Marshall; Henrik
Enderlein; Andreas Nölke; Tal Sadeh; Waltraud Schelkle; Jörn Carsten Gottwald; Daniel Mügge;
Ann-Christin Knudsen; Eugénia da Conceição-Heldt; Daniela Sicurelli; Mark Pollack; Rachel
Epstein; Christopher J. Bickerton; Anand Menon; Hanna Ojanen; Miguel Otero-Iglesias and Hubert
Zimmermann; Matthias Matthijs; Alan Sked; Martin Rhodes 2016.
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Second edition 2016
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Table of Contents
List of Figures viii

List of Abbreviations ix
Foreword xi
Notes on Contributors xii
Introduction: Key Controversies in European Integration 1

Andreas Dür and Hubert Zimmermann
1 The European Union: Success or Failure? 10

1.1 Why Europe works 11
John McCormick
1.2 The rise and fall of the EU 19
Jan Zielonka
2 The Political Efficiency of the EU 29

2.1 The EU as efficient polity 30
Desmond Dinan
2.2 The EU: quick to regulate, slow to adapt 37
Mats Persson
3 More Powers for Brussels or Renationalization? 45

3.1 A stronger, more supranational Union 46
Derek Beach
3.2 The new intergovernmentalism – the next phase in
European integration 55
Uwe Puetter
4 How Democratic is the EU? 64

4.1 The inevitability of a democratic deficit 65
Richard Bellamy
4.2 A democratic achievement, not just a democratic deficit 73
Christopher Lord
5 Too Much Power for the Judges 80

5.1 Understanding the European Court’s political power 81
Karen J. Alter and R. Daniel Kelemen
v
vi Table of Contents
5.2 A strange institution 91

Jeremy Rabkin
6 Can There Be a Common European Identity? 97

6.1 European identity formation in (the) crisis 98
Ulrike Liebert
6.2 A common European identity is an illusion 107
Jonathan White
7 Lobbying in the EU: How much Power for Big Business? 115
7.1 Business as usual – the EU is (still) driven by
corporate interests 116
Laura Horn and Angela Wigger
7.2 The diminishing power of big business 121
David Marshall
8 The Future of the Euro: Union or Disintegration? 128

8.1 Why the euro is a functional necessity in the process
of European integration 129
Henrik Enderlein
8.2 For a plurality of economic and social models!
Against a monolithic euro state! 137
Andreas Nölke
9 The Euro: Economic Success or Disaster? 145

9.1 Exit or differentiated monetary integration –
saving the euro by making it more flexible 146
Tal Sadeh
9.2 Unity in diversity: the unfulfilled promise of the euro 151
Waltraud Schelkle
10 Can the EU Tame Big Finance? 158

10.1 The merits of adaptive governance: the regulation of
financial services in the European Union 159
Jörn-Carsten Gottwald
10.2 The pitfalls of EU governance in financial markets 167
Daniel Mügge
11 The Big Waste? The Common Agricultural Policy 175

11.1 Europe’s common values and agricultural policy:
a defence of the CAP 176
Ann-Christina L. Knudsen
Table of Contents vii
11.2 The European agricultural fortress under attack 183

Eugénia da Conceição-Heldt
12 Does the EU Act as Normative Power? 191

12.1 The EU is a normative power in world politics 192
Daniela Sicurelli
12.2 Living in a material world: a critique of ‘normative
power Europe’ 198
Mark A. Pollack
13 Is EU Enlargement a Success Story or Has It Gone Too Far? 205

13.1 The benefits of EU enlargement: defending security,
democracy and prosperity 206
Rachel Epstein
13.2 EU enlargement: a critique 212
Christopher J. Bickerton
14 Towards a Common European Army? 219

14.1 Still flattering to deceive: the Common Security and
Defence Policy 220
Anand Menon
14.2 Defence integration in the EU: from vision to business
as usual 227
Hanna Ojanen
15 A New German Hegemony: Does It Exist? Would It be

Dangerous? 234
15.1 The failure of German leadership 236
Matthias Matthijs
15.2 A benign hegemon: Germany’s European vocation 243
Miguel Otero-Iglesias and Hubert Zimmermann
16 Should It Stay or Should It Go? Britain, EU Membership

and the Merits of Selective Integration 251
16.1 Brexit – a disaster for Britain and for the European
Union 252
Martin Rhodes
16.2 The case for Brexit: why Britain should leave the EU 258
Alan Sked
Bibliography 265
Index 294
List of Figures
2.1 The growth of EU legislation: cumulative count of acts in

force 38
3.1 Lines of conflict between and within levels of authority in
the EU 47
viii
List of Abbreviations
ASEAN Association of Southeast Asian Nations

BEUC The European Consumer Organisation
CAP Common Agricultural Policy
CARICOM Caribbean Community
CEEC Central and East European Countries
CFP Common Fisheries Policy
CFSP Common Foreign and Security Policy
CJEU Court of Justice of the European Union
COGECA General Confederation of Agricultural Cooperatives
COPA Committee of Professional Agricultural Organizations
CSDP Common Security and Defence Policy
DM Deutschmark
EBA European Banking Authority
EC European Community
ECB European Central Bank
ECE East Central Europe
ECHR European Court of Human Rights
ECJ European Court of Justice
ECOWAS Economic Community of West African States
ECSC European Coal and Steel Community
EDA European Defence Agency
EEAS European External Action Service
EEC European Economic Community
EFTA European Free Trade Association
EMU Economic and Monetary Union
EP European Parliament
EPC European Political Cooperation
ERM Exchange Rate Mechanism
ERT European Roundtable of Industrialists
ESDP European Security and Defence Policy
ESFS European System of Financial Supervision
ESM European Stability Mechanism
ESS European Security Strategy
EU European Union
FDI Foreign Direct Investment
FIDESZ Hungarian Civic Alliance
GDP Gross Domestic Product
GIPS Greece, Ireland, Portugal and Spain
ix
x List of Abbreviations
IGCs Intergovernmental Conferences

IMF International Monetary Fund
JHA Justice and Home Affairs Council
LDCs Least Developing Countries
MEP Member of the European Parliament
NAFTA North American Free Trade Agreement
NATO North Atlantic Treaty Organization
NGOs Non-Governmental Organizations
NORDEFCO Nordic Defence Cooperation
NPE Normative Power Europe
OECD Organisation for Economic Co-operation and
Development
QMV Qualified Majority Voting
R&D Research and Development
SRM Single Resolution Mechanism
SSM Single Supervisory Mechanism
TCE Treaty Establishing a Constitution for Europe
TEU Treaty on European Union
TTIP Transatlantic Trade and Investment Partnership
UKIP UK Independence Party
UN United Nations
WFP World Food Programme
WTO World Trade Organization
Foreword
When we published the first edition of this volume, it seemed very timely
given the troubles the EU was in at the time. The years since have proven
that rather than being an unusual situation, the crisis mode seems to
have become the new normal in EU politics. New areas of controversy
have emerged and we have tried to revise and expand the contents of
the volume accordingly. Almost all chapters have been rewritten exten-
sively and we added many new chapters. Those who follow the current
affairs of the European Union closely will be able to point to many other
controversies that might have merited inclusion in this book (e.g. on
migration policy). However, it is impossible to discuss every contested
issue in a slim volume such as this one. Additionally, many chapters
actually address issues that are not subject to a separate debate. Thus
we hope the debates that are played out in concentrated form in these
pages will give students and practitioners a concise, accessible and excit-
ing guide to the key controversies of European integration at a time in
which the EU is under attack as never before.
Our sincere thanks go to the authors, who have cast aside profes-
sional caution, taking clear and often risky stances in the debates that
follow. We are also grateful to the editors of Palgrave’s European Union
series, Neill Nugent and Willie Paterson, to the Palgrave team and to an
anonymous reviewer who provided excellent advice. Finally, we thank
Katja Lauth (Marburg) and Gerald Lindner (Salzburg) for their research
assistance.
Marburg and Salzburg, February 2016.
xi
Notes on Contributors
Karen J. Alter is Professor of Political Science and Law, Northwestern

University. Her scholarship investigates when and how international
institutions become politically important. She has written extensively
on the European Court of Justice, and its jurisdictional twin, the Andean
Tribunal of Justice. Fluent in Italian, French and German, she has held
many prestigious fellowships in France, Germany and the United States.
Derek Beach is Associate Professor in the Department of Political Sci-
ence at the University of Aarhus, Denmark. He is a specialist in the
constitutional politics of the European Union.
Richard Bellamy is Professor of Political Science at University College,
London, and Director of the Max-Weber Programme of the European
University Institute in Florence, Italy. He has authored eight monographs,
edited twenty-five more and published over a hundred articles and book
chapters on subjects ranging from the history of elite theory and liberal-
ism to studies of constitutionalism, democracy and citizenship.
Christopher J. Bickerton is Lecturer at Queen’s College, University of
Cambridge. With a doctorate from the University of Oxford, he has pre-
viously taught at Oxford, the University of Amsterdam, and Sciences Po,
Paris. He has published widely on international and European politics.
His most recent book is entitled From Nation-States to Member States:
European Integration and Social Change (Oxford, 2012).
Eugénia da Conceição-Heldt is Director of the Bavarian School of
Public Policy since July 2016 and was Professor of IR in Dresden. Her
areas of expertise include the European Union, negotiation analysis, and
international political economy. Among her most recent publications is
Negotiating Trade Liberalization at the WTO: Domestic Politics and
Bargaining Dynamics (Palgrave Macmillan, 2011).
Desmond Dinan teaches at the George Mason School of Public Policy
in Arlington, VA. He is the author of numerous popular textbooks on
European integration.
Andreas Dür is Professor of International Politics at the University of
Salzburg. He is a specialist in trade policy and interest group politics
and the author of Protection for Exporters: Power and Discrimination
in Transatlantic Trade Relations, 1930–2010 (2010) and Insiders versus
Outsiders: Interest Groups in Multilevel Europe (2016).
xii
Notes on Contributors xiii
Henrik Enderlein is Director of the Jacques Delors Institut and Profes-

sor of Political Economy at the Hertie School of Governance, Berlin.
He holds degrees from Sciences Po, Paris, and Columbia University,
New York. He prepared his PhD in Political Science at the Max Planck
Institute for the Study of Societies in Cologne. His research focus is on
the political economy of economic policy-making, with a special focus
on the euro, the ECB, the EU budget, fiscal federalism and sovereign
defaults.
Rachel Epstein is Associate Professor at the Korbel School of Interna-
tional Studies at the University of Denver. Her areas of interest include
the power and limits of international organizations, foreign ownership
in banking and the evolution of military–security institutions, including
the North Atlantic Treaty Organization. She is the author of In Pursuit of
Liberalism: International Institutions in Postcommunist Europe (2008).
Jörn-Carsten Gottwald taught at the University of Cork in Ireland and
experienced the meltdown of the Irish financial bubble first-hand. He is
now Professor for the Politics of East Asia at Ruhr-University Bochum.
Laura Horn is Associate Professor in the Department of Social Sciences
and Business, Roskilde University. Her main research area is the criti-
cal political economy of Europe. Her publications include Regulating
Corporate Governance in the EU (2011) and Contradictions and Limits
of Neoliberal European Governance (2008) and articles published in,
for example, Global Labour Journal, Globalizations and New Political
Economy.
R. Daniel Kelemen is Professor of Political Science and Law at Rutgers
State University in New Jersey and holder of a Jean Monnet Chair in
European Union politics. He has published extensively on the politics
of law in the EU. Among his books are the award-winning Eurolegal-
ism: The Transformation of Law and Regulation in the European Union
(Harvard University Press, 2011), and The European Union: Integration
and Enlargement, co-edited with Anand Menon and Jonathan Slapin
(Routledge, 2014).
Ann-Christina L. Knudsen is Associate Professor of European Studies at
the Institute for Culture and Society, Aarhus University, and holds a PhD
in History from the European University Institute, Florence. Among her
publications is Farmers on Welfare: The Making of Europe’s Common
Agricultural Policy (Cornell University Press, 2009).
Ulrike Liebert is Jean Monnet Chair for European Politics and Profes-
sor of Political Science at the University of Bremen, Germany. Her most
recent books include Multilayered Representation across the EU (with
xiv Notes on Contributors
T. Evas and C. Lord) and European Economic and Social Constitution-

alism after the Treaty of Lisbon (with D. Schiek and H. Schneider).
Christopher Lord is Professor at ARENA’s Centre for European Studies
in Oslo and a prolific contributor to the scholarly debate on the EU’s
democratic deficit.
David Marshall is a visiting scholar at the University of Stuttgart, and
teaches quantitative methods at the London School of Economics. His
research interests include the study of the political representation of
citizen and business interests, decision-making, research methods and
comparative politics. He has published in several peer-reviewed jour-
nals, including European Union Politics, the Journal of European Public
Policy and the Journal of Common Market Studies.
Matthias Matthijs is Assistant Professor of International Political Econ-
omy at SAIS in Washington, DC. He teaches courses in international
relations, international economics and comparative politics, while his
research focuses on the politics of economic crises, the role of economic
ideas in economic policy-making, the politics of inequality and the role
of fiscal and monetary policy in advanced democracies.
John McCormick is a Jean Monnet Professor of European Union Poli-
tics at the Indianapolis campus of Indiana University. His research inter-
ests currently focus on the global role of the European Union, and on
the implications for the Atlantic Alliance of the foreign policies of the
European Union and the United States.
Anand Menon is Professor of European Politics and Foreign Affairs at
King’s College, London. He currently heads major research projects on
the relationship of the United Kingdom to Europe and on EU security
policy.
Daniel Mügge teaches at the University of Amsterdam. He has pub-
lished numerous articles on European financial policy, and his disserta-
tion on this topic won the ECPR’s Jean Blondel prize in 2008 for best
European political science dissertation of the year. His current work
concentrates on accounting standard setting and the role of the EU in
global financial rulemaking.
Andreas Nölke is Professor of Political Science (International Relations
and International Political Economy) at Goethe-University, Frankfurt.
Hanna Ojanen is Researcher at the Finnish Institute for International
Affairs. Prior to that, she was Head of Research at the Swedish Institute
of International Affairs in Stockholm. Since completing her PhD at the
European University Institute in Florence, she has published widely on
European security policy.
Notes on Contributors xv
Miguel Otero-Iglesias is Senior Analyst in International Political Econ-

omy at Real Instituto Elcano in Madrid.
Mats Persson, a Swedish native, was the director of Open Europe, an
independent think tank which calls for radical reforms of the EU, and is
now special adviser to the British government on Europe. He has writ-
ten extensively on EU policy, including on the eurozone crisis, financial
regulation, employment law and the EU budget.
Mark A. Pollack is Jean Monnet Chair and Professor of Political Sci-
ence at Temple University. He has written widely on EU institutions and
policy-making, and on the politics of international law.
Uwe Puetter is Professor and Jean Monnet Chair at the Department of
Public Policy, Central European University, Budapest. He is Director of
the University’s Center for European Union Research (CEUR). His work
focuses on the changing character of intergovernmental relations in a
densely integrated European Union and the related processes of institu-
tional adjustment.
Jeremy Rabkin is Professor of Law at George Mason University and one
of the prominent voices cautioning against the perils of international
law in the United States.
Martin Rhodes is Professor and Co-director of the Colorado European
Union Center of Excellence at the University of Denver, Colorado. Until
2006, he was Professor of European Public Policy at the European Uni-
versity Institute in Florence, Italy. He has written extensively on EU and
comparative European politics and political economy.
Tal Sadeh is Senior Lecturer at the Department of Political Science at
Tel-Aviv University. He is the author of Sustaining European Monetary
Union: Confronting the Cost of Diversity and many other publications
on the euro.
Waltraud Schelkle is Associate Professor of Political Economy at the
London School of Economics. Her work concentrates on the evolving
economic governance of EMU and on social policy reforms directed at
financial markets.
Daniela Sicurelli is Associate Professor of Political Science at the Univer-
sity of Trento, Italy.
Alan Sked is Professor of International History at the London School of
Economics. He has opposed British membership of the European Union
for many years.
Jonathan White is Lecturer in European Politics at the London School
of Economics. He was also at Humboldt University in Berlin as an
xvi Notes on Contributors
Alexander von Humboldt research fellow. He gained his doctorate at

the European University Institute (EUI) in Florence, and has been a
visiting scholar at University College London and Harvard’s Kennedy
School of Government.
Angela Wigger is Associate Professor of Global Political Economy and
International Relations at the Radboud University. Her current research
focuses on the global economic crisis, crisis responses and power con-
figurations with respect to political resistance. She has co-authored
the book The Politics of European Competition Regulation: A Critical
Political Economy Perspective (2011).
Jan Zielonka is Professor of European Politics and Ralf Dahrendorf
Fellow at St. Antonys College, Oxford. His main research interests are
in the field of European integration and disintegration, geography of
power in Europe, return of empires, European foreign and security pol-
icy and media and democracy in Europe.
Hubert Zimmermann is Professor of International Relations at Philipp
University of Marburg. He also taught at Cornell University (Ithaca,
NY), Heinrich-Heine University, Düsseldorf, and Ruhr-University,
Bochum. He received his PhD from the European University Institute,
Florence. He has published on EU foreign economic and security poli-
cies, transatlantic relations, and international monetary and financial
issues.
Introduction: Key Controversies
In European Integration
Andreas Dür and Hubert Zimmermann
In mid-2005, French and Dutch voters rejected a proposal for a Euro-

pean Constitution that had taken the member states of the European
Union (EU) many years to negotiate. The resounding ‘No’ by two of
the founding nations of the EU immediately gave rise to a vivid debate
on the pros and cons of the European project. Had this visionary and
unparalleled achievement in international cooperation, which promised
to overcome the pattern of state rivalry characterizing Europe since the
Middle Ages, come to an undignified halt? Was this the beginning of
the end of an experiment which was presented by European leaders as
a shining example to other regions of the world? Or was the vote just
a temporary lull in a continuous process of reform? Many detractors
have likened the EU to a bicycle which can only work as long as it is in
motion.
In fact, while its designation suggested that the Constitution might
be the founding document of a true Union, the rather less grandiose
real purpose was to reform the governing structures of the EU. By
making these both more efficient and democratic, the EU tried to cor-
rect its increasingly negative image among many elites and the general
public and to get closer to its citizens. Notwithstanding many obituar-
ies, the member states quickly resurrected the idea of an institutional
reform with a less-charged set-up. Now they framed it as an inter-
governmental treaty which would not need to receive the uncertain
consent of a fickle populace. The Treaty of Lisbon went into force on
1 December 2009.
By this time, another crisis rocked the foundations of the EU. The
consequences of the global financial crisis of 2007/2008 led to a mas-
sive rise in the indebtedness of many European governments. Countries
such as Greece, Cyprus or Ireland were threatened with bankruptcy.
From 2010 onwards, one emergency summit followed the next. In the
first half of 2015, a stand-off between a newly elected left-wing govern-
ment in Greece and the rest of the eurozone brought the country to the
brink of a disorderly exit with unforeseeable consequences. And just
when the dust had settled (for the time being) on this issue, Europe was
overwhelmed by a sudden influx of hundreds of thousands of refugees
fleeing war and economic distress in Syria, Iraq, Afghanistan and many
1
2 Introduction
other countries in Africa and Asia. The plight of these masses cast grave
doubts on the capacity of Europeans to govern their borders and man-
age the stream of refugees. Bitter recriminations broke out on quotas
and the distribution of the resulting burden, as well as on the future of
the European border regime. Looming above all this was the prospect
of Britain leaving the Union with a popular referendum promised by the
Conservative government of David Cameron to be held in June 2016,
and armed conflicts in the Ukraine in 2015 which conjured up a new
Cold War between Russia and the West. And then, on 23 June 2016,
Britain voted by a slim majority to leave the EU, setting the stage for
years of complicated divorce proceedings.
This long state of emergency shows that the Union should not be
taken for granted. European integration is a political process which is
reversible once its output turns negative and/or the political support for
it vanishes. The often-predicted break-up of the EU has not yet hap-
pened; but that does not mean that it will never come. Doubts about the
future of the EU have never been so pervasive.
All this renders the second edition of this book particularly timely. Like
the first edition, it proceeds from the assumption that the European Union
is an open-ended and strongly contested project. It is both spectacularly
successful and deeply flawed. The politics of the EU are characterized by
numerous controversies which not only are pertinent to the EU itself but
also illustrate many of the most salient problems of international coop-
eration in today’s world. We tackle these controversies head-on in the
form of dichotomous debates. Some of the most prominent EU scholars
reflect on the current and future state of the EU against the background
of its enlargement to 28 members, the coming into force of the Lisbon
Treaty, and the many economic and political challenges the EU has faced
since then. The aim is to provide readers with an up-to-date account of
current issues in EU politics and to enable them to take sides in one of
the great debates of European politics: the future of the European Union.
While most of the books that provide information on the EU describe
its history, its institutions, its policy areas and its protracted govern-
ance procedures (Cini and Perez-Solorzano Borragán, 2013; Dinan,
2010; Hix and Høyland, 2011; Kenealy, Peterson, and Corbett, 2015;
McCormick, 2014; McCormick, 2015; Nugent, 2010; Wallace, Pollack
and Young, 2010; Yesilada and Wood, 2015), this book is different.
It focuses on the profoundly political core of the European Union. The
authors represent the whole spectrum of thinking about the EU, from
pro-European to openly Eurosceptic perspectives. Thematic chapters
address the most important issues in EU politics, with pairs of authors
presenting diametrically opposed views on each controversy. Our aim
in editing the book is to spark debate, in public and in the classroom.
Introduction 3
Can the EU survive? A community between crisis and revival

The recurrent crises and the intense debates about the EU indicate that
fundamental doubts existed since its earliest days whether a project that
transcends national borders in an unprecedented way can survive in a
world that is still dominated by nation states. The EU is (and has always
been) a fundamentally contested political project.
The idea of European integration has sparked the imagination of
Europeans since the nineteenth century. It represented a response to
the endless conflicts which plagued Europe for centuries and culmi-
nated in World War II, a tragedy that cost the life of up to 50 million
Europeans. Only six years after the war had ended, however, France
and Germany in 1951 set up the first European institution, the Euro-
pean Coal and Steel Community (ECSC). Italy, Belgium, Luxembourg
and the Netherlands joined. In 1957, the six original members of the
ECSC signed the Rome Treaties, establishing the European Economic
Community and Euratom, an organization aimed at fostering coop-
eration in the field of nuclear energy. Important economic reasons
sustained these organizations, above all the removal of trade barriers.
Right up to the present day, however, European politicians also use the
argument that integration has contributed to peace in Europe and thus
try to bolster the legitimacy of the Union. Jean-Claude Juncker, the
current president of the European Commission and one of the leading
politicians in EU affairs during the past decades, once stated: ‘Whoever
doubts Europe, whoever despairs of Europe, should visit military cem-
eteries’ (Juncker, 2008).
Additional motives have pushed the integration process: the rivalry
with the Eastern bloc during the Cold War, demands from economic
actors for better market access, the hope to catch up with the United
States in terms of economic and political power, and the protection of
vulnerable sectors of the European population from the vicissitudes of
world markets, for instance, through the Common Agricultural Policy.
Sustained economic growth and the increasing wealth of European
citizens led to an almost unquestioned support of the Community in
its early years, and they proved a big attraction for potential mem-
ber countries. And yet, already soon after the founding treaties were
signed in 1957, pundits predicted a break-up of the Community dur-
ing the so-called Empty Chair Crisis in the mid-1960s. The same hap-
pened during the global economic turmoil of the early 1970s when
exchange-rate chaos undermined economic cooperation among the
member states. Later in this decade, a new European malady was diag-
nosed, a status of stagnation called ‘eurosclerosis’. Eventually, how-
ever, member states agreed on the Single European Act (1986), which
4 Introduction
cleared the way for a genuine common market. The United Kingdom,
Denmark, Ireland, Greece, Portugal and Spain joined during the 1970s
and 1980s.
The Single European Act of 1986, the first major revision of the
founding treaties, exerted a pull which hardly could have been fore-
seen by its proponents. European legislation (the so-called Acquis Com-
munautaire) expanded precipitously, and European institutions such as
the Commission as the sole initiator of legislation in the EU, and the
European Court of Justice (ECJ) as interpreter of the treaties took on
ever-expanding roles. The need for cohesion within the Community, the
challenges posed by the breakdown of the Berlin Wall, and the effects
of an increasingly integrated market brought more and more policy
areas into the realm of European integration, among them security
and defence policy. In 1992, the member states gathered in Maastricht
(Netherlands) to decide on a new treaty, which consolidated previous
agreements and established a three-pillar structure for the newly named
European Union.
Most importantly, the majority of EU members embarked on the
path towards a common currency which, against many odds, became a
reality on New Year’s Day, 2002. However, as the EU spread its influ-
ence over more and more policy areas that had been the exclusive
preserve of nation states, contestation grew. In June 1992, the Danish
population voted against the ratification of the Maastricht Treaty by
its government. The EU’s political establishment reacted with shock.
The permissive consensus, that is the unquestioned support of the pro-
ject by Europeans, which had sustained European integration since the
1950s, had ended. The term ‘democratic deficit’, denoting the increas-
ing distance of citizens from EU decision-making processes and the
difficulties to hold EU policy-makers accountable, entered the political
vocabulary. Decision-makers have responded by progressively increas-
ing the powers of the European Parliament, for example in the treaty
revisions of Amsterdam (1997) and Nice (2001). Nevertheless, these
moves have often looked like a zero-sum game in which increasing
layers of democratic legitimacy inevitably impair the EU’s ability for
effective decision-making. In 2004 and 2007, the former Communist
countries of Eastern Europe joined, together with Cyprus and Malta,
prompting predictions that an already convoluted decision-making
process would now become completely unwieldy and that the still
fresh political and economic stability of these countries contained the
seed for major upheavals. The Union of 28, however, has continued
to take decisions across all areas of the EU’s competencies, and, as of
2016, several other countries are candidates at various stages of the
accession process.
Introduction 5
The scholarly debate

The incessant political debates about the EU since its founding have
their reflection in the big scholarly controversies that have character-
ized the literature on European integration since the 1950s. The most
long-standing of these was fought between intergovernmentalists and
supranationalists. In 1958, Ernst Haas in his book The Uniting of
Europe, building on the experience of the ECSC, argued that sectoral
integration had an inherent expansive logic, which would lead to an
ever-increasing integration among European states. Haas’s argument,
which has become known as neofunctionalism, was that the creation of
a central authority would lead to the emergence of supranational trade
associations, labour unions and political parties that would increas-
ingly pursue their interests at the European level. This shift in loyalty
and resources away from the national state and towards the emerg-
ing centre would strengthen the central authority and facilitate further
integration. The first crisis of the integration project in the 1960s, how-
ever, encouraged advocates of the so-called intergovernmentalist school
of thought, most prominently among them Stanley Hoffmann (1966).
Intergovernmentalists argued that nation states would remain the key
players in international politics, notwithstanding any efforts at regional
integration. In fact, according to these scholars, nation states were
the main obstacle to further integration; increasing diversity among
national states because of varying external and internal changes would
make integration even more difficult in the future. The core normative
issue behind the neofunctionalism versus intergovernmentalism debate
was the question of whether the nation state would and should have a
future in the twenty-first century.
Eurosclerosis in the 1970s and early 1980s meant that the schol-
arly debates on European integration lost much of their force. It was
only the Single Market Programme in the 1980s that shifted scholars’
attention back to the project of European unification. Supranation-
alists were quick to stress the role of the European Commission and
transnational actors in giving new impetus to European integration
(Sandholtz and Zysman, 1989). Reflecting the basic neofunctional-
ist logic, they suggested that economic integration in Europe increases
the demand for rules at the European level. This demand is met by the
European Commission. The supranationalist account of the revival of
European integration in the 1980s was immediately challenged by a
revised intergovernmentalist argument, however. Liberal intergovern-
mentalism, as proposed by Andrew Moravcsik (1998), argues that the
steps towards further integration in the 1980s and 1990s should best be
understood as a result of the convergence of member-state preferences.
6 Introduction
The Commission, according to Moravcsik, was of little help in produc-

ing this outcome. At the same time, the multilevel governance approach
emerged as a kind of compromise between intergovernmentalism and
supranationalism. It stresses member states’ partial loss of control over
the integration process, but also sees the Commission’s authority cir-
cumscribed owing to the need to cooperate with the Council of Minis-
ters and the European Parliament (Marks et al., 1996).
The 1990s also saw the emergence of a literature, less concerned
with explaining the process of European integration as such, and more
with capturing the dynamics of policy-making in the EU. Much recent
research has aimed at explaining legislative activity in this entity, the
inner workings of the European institutions, the strategies used by inter-
est groups in lobbying EU institutions, the adaptation of national politi-
cal institutions to the process of European integration, and specific policy
outcomes (Egan et al., 2010). The resulting literature offers a complex
picture of the EU, in which a multitude of actors try to shape policy out-
comes, and their success can vary from case to case. In many respects,
the problems faced by the EU and identified in this huge literature are
problems which are typical for an increasingly interdependent world.
They exemplify the political controversies underlying each attempt of
international cooperation, regardless of whether these are the high poli-
tics of global conflicts or the supposedly low politics of international
standard setting. While eschewing the normatively charged arguments
of the early years of European integration, the problems of efficiency
and legitimacy identified by this literature are inseparably linked with
the overall debate about the future course of the EU.
Structure and scope of this book

The EU is usually depicted as a mind-bogglingly complex political sys-
tem. Only a few European citizens can claim to have an at least fair
knowledge of how it works and how its major institutions, such as the
Council, the Commission, the Parliament, the CJEU (Court of Justice
of the European Union), and the European Central Bank, interact. The
Treaty of Lisbon has been widely ridiculed for the spectacular failure it
represents regarding the attempt to simplify the core texts of the Union.
Given the importance of the EU for global political and economic
affairs, it is not surprising that numerous textbooks – some of which we
list at the end of this introduction – are on the market which attempt
to describe in great detail the often cumbersome ways in which the EU
works. While it is indispensable to have an understanding of the pol-
ity and policies of the EU, the underlying politics are often not spelled
out. EU institutions are responses to problems of policy coordination.
Introduction 7
Their specific forms and the pattern of interaction are also shaped by
different visions and ideas about what the EU should, and should not,
do. Conflict abounds, ranging from seemingly irrelevant quarrels about
minuscule details of EU legislation to the grand question on whether the
EU is a visionary project offering hope for future world peace or rather
a historical dead end. This book takes up these debates, moving from
general debates to more specific ones.
The first chapter debates the overall value of the EU. While John
McCormick defends the importance and success of the EU, Jan Zielonka
offers a sceptical view of its future relevance. The debate about the EU’s
success is closely linked to the question of the political efficiency of the
EU (Chapter 2). Desmond Dinan argues that the EU is surprisingly effi-
cient regarding its policy output, whereas Mats Persson strongly disa-
grees by pointing to the EU’s inability to reform even in the face of clear
signals showing that some of its policies do not achieve their stated
purpose. ‘More Powers for Brussels or Renationalization?’ is the ques-
tion taken up in the third chapter. Derek Beach defends the argument
that the EU is becoming more supranational over time. By contrast, Uwe
Puetter thinks that a new form of intergovernmentalism prevails in the
contemporary EU.
The benchmark for judging political systems is the degree of their
democratic quality and their efficiency in delivering political solutions.
In addition, and on a more fundamental level, they have to evoke in their
citizens a certain feeling of belonging to a community united by a shared
purpose. Authors are sharply divided about the democratic quality of
the EU polity, and the two essays in Chapter 4 present the contend-
ing viewpoints. Christopher Lord argues that the Union is a democratic
achievement compared to the normal practices of international organi-
zations, even if it is in deficit to democratic states. A successful output
legitimates the transfer of sovereignty and helps member states to deal
with political and economic problems which they are unable to solve
alone. Richard Bellamy, by contrast, stresses the EU’s democratic deficit,
which is inevitable as soon as political competencies are delegated away
from the national level to a supranational level that lacks the prereq-
uisites for a truly democratic system. Crucial for an overall evaluation
of the EU’s democratic legitimacy is an assessment to the role of law in
European integration. Are binding laws promulgated by international
courts possible beyond the nation state? In Chapter 5, Karen J. Alter
and R. Daniel Kelemen take the stance that by giving member states
and individuals the possibility to resort to legal procedures against deci-
sions of the EU, the CJEU is a vital part of European democracy. Jeremy
Rabkin disagrees. He views the CJEU as an institution that has usurped
democratic decision-making in the EU. The issue of a common identity
8 Introduction
is taken up in Chapter 6, with contributions by Ulrike Liebert and Jona-

than White. While Liebert sees a common identity emerging, not least
because of the constitutional debate, White radically doubts that a Euro-
pean identity can ever exist outside a small circle of highly educated
and mobile elites. The political power of business interests in the EU is
another problem of relevance for an assessment of the EU’s democratic
quality. In Chapter 7, Laura Horn, Angela Wigger and David Marshall
take up this issue. Horn and Wigger argue that business lobbyists are far
too powerful in the EU, whereas David Marshall maintains that accusa-
tions that EU policies are dominated by big business are exaggerated.
Perhaps the most critical area in the current EU is European Mon-
etary Union. Doubts about this unprecedented experiment in monetary
integration are rampant, speculation about a break-up of the Eurozone
is frequent and the euro crisis has cast grave doubts on the capacity of
some eurozone members to deal with the challenges posed by a common
currency. In Chapter 8, Henrik Enderlein and Andreas Nölke debate the
political pros and cons of the common currency. Chapter 9 deals with the
economic rationale for the euro. Waltraud Schelkle argues that the euro-
zone should be understood as a community sharing risks. She maintains
that despite some flaws, risk sharing actually works. Tal Sadeh strikes
a sceptical note, pointing to the internal contradictions of the common
currency. He advocates a reduction in the number of euro members, or
a stronger emphasis on selective integration.
Financial markets in the EU remain highly segmented as the global
financial crisis of 2007–2009 amply demonstrated. Vigorous efforts
have been made in the past couple of years to remedy this situation
and to make the EU a global regulatory power in this area. In Chapter
10, Jörn-Carsten Gottwald argues that the EU has reacted with surpris-
ing speed and efficiency to the upheaval on the markets, while Daniel
Mügge thinks that these efforts have so far been ineffective. Few EU
policies have generated as much controversy as the reviled Common
Agricultural Policy. In Chapter 11, Eugénia da Conceição-Heldt writes
that it is a colossal waste with serious effects on the environment and
on developing countries, whereas Ann-Christina L. Knudsen points to
its positive features.
Chapter 12 takes up the question of what type of actor the EU is in
international affairs. While Daniela Sicurelli conceives of the EU as a
so-called normative power that bases foreign policy on a set of values
embodied in the treaties, Mark A. Pollack criticizes this characterization
and claims that the EU should be seen as a power just like others on the
international stage.
Chapter 13 assesses the EU’s experience with enlargement. Rachel
Epstein calls enlargement a big success that should be continued. She
Introduction 9
points to the advantages that accrue to acceding states. Christopher

J. Bickerton fears that accession to the EU has had many negative side
effects for the central and eastern European countries that joined the
EU in 2004. Since the turn of the twenty-first century, the EU has also
attempted to develop a military capability to supplement its economic
weight. This project has been beset by difficulties: member states are
unwilling to surrender sovereignty in this vital area of state activity, prac-
tical difficulties complicate the merging of different national military
traditions, many member states are doubtful about the whole under-
taking, and the capabilities gap vis-à-vis the United States is m assive.
In Chapter 14, Hanna Ojanen argues that, nonetheless, a common secu-
rity and defence policy is a worthwhile project, while Anand Menon
thinks that it will never work properly, and it will fail to live up to the
grandiose ambitions of European politicians in this field.
Chapter 15 takes up an issue that has a long, long tradition in Euro-
pean history and has acquired new salience in the wake of the euro
crisis: how does the largest state in Europe, Germany, fit into a com-
munity of equals? Matthias Matthijs thinks that Germany has abused
its hegemonic power, while Miguel Otero-Iglesias and Hubert Zimmer-
mann argue that Germany overall has behaved responsibly and increas-
ingly like a benign hegemon throughout the history of the EU.
A core reason for the current malaise of European politics is the atti-
tude of the United Kingdom. Since the earliest days of European integra-
tion, Britain has kept some distance from the EU. It managed to gain
admission only in 1973. Even after its entry, it remained a very reluctant
European, exemplified by Prime Minister Margret Thatcher famously
slamming her handbag on the table during EU meetings to recoup some
of the money Britain had spent on EU policies. The issue of Britain’s
membership has come to a head with the June 2016 referendum on its
future in the Community. In the final chapter, Alan Sked and Martin
Rhodes represent the sharp debate about the pros and cons of Britain
leaving the EU.
Chapter 1
The European Union: Success

or Failure?
Editors’ introduction
Is the European Union a success or a failure? Responses to this question

could not be more different. For a long time, the EU had been celebrated
and presented as a model for the rest of the world. It has been credited
with peace and prosperity in Europe. In the early 1950s, when the ori-
gins of the current union were laid with the creation of the European
Coal and Steel Community (ECSC), Europe had just emerged from
World War II. Germany and France had fought three major wars in less
than a century. Only five years after the end of World War II, the two
countries agreed to pool the production of coal and steel and thus make
any future wars less likely. Moreover, the shattered economies of the
countries participating in the ECSC and then the European Economic
Community (EEC) experienced high growth rates in the 1950s and
1960s, allowing Europeans to catch up, in terms of economic strength,
with the United States. The EU also claims a long series of success-
ful transitions of accession countries to democracy. Many of the newer
member states did not have a long tradition of democracy when entering
the EU. Nevertheless, their political systems have stabilized, with as of
now no country backsliding into outright dictatorship.
But the EU’s record is not all rosy, at least according to EU sceptics.
Among the many faults that have been noticed over a long time are
cumbersome decision-making, economic inefficiency, and undemocratic,
elite-driven political processes. Critics see the EU as driven by an unac-
countable bureaucracy that lacks democratic oversight and pursues poli-
cies far removed from the preferences of the citizens in the EU’s member
states. Rather than contributing to the wealth of the member countries,
EU policies are said to stifle growth and economic competitiveness.
Others view the EU’s economic policies as being too ‘neoliberal’, under-
mining the welfare state of continental European countries. Both of
these views have gained wide currency in the wake of the financial and
sovereign debt crisis that hit Europe from 2008 onwards.
In the first of two contributions on the overall pros and cons of the EU,
John McCormick states that it is a success. He argues that it has contrib-
uted to peace in Europe, has allowed its member states to gain power in
10
Why Europe works 11
international affairs, and has provided an institutional template that is

being imitated around the world. The euro crisis is an opportunity for
more and better integration. Jan Zielonka accepts that the EC/EU accom-
plished a lot in its six decades of existence even though many factors and
actors contributed to peace and prosperity in Europe and the EU often
wrongly claimed credit for these achievements. That said, the EU, accord-
ing to Zielonka, performs poorly at present and it has lost the support of
most of Europe’s citizens. The EU also seems unable to reform itself. In
effect, it has become a hindrance to, rather than a facilitator of, integration.
Several of the points raised in this pair of texts will be taken up in
more detail in later chapters, notably in the debates on efficiency in
Chapter 2, democracy in Chapter 4, integration by law in Chapter 5 and
the euro in Chapters 8 and 9.
1.1 Why Europe works

John McCormick
The past few years have not been happy ones for defenders of the Euro-
pean project. In the wake of accumulating charges that the process of
integration was flawed, elitist, and undemocratic, and of repeated decla-
rations that ‘Europe’ was dead, dying, or doomed, the criticisms reached
a new climax in the wake of the eurozone crisis that broke in late 2009.
Warnings that the euro could collapse were followed by suggestions that
even the days of the EU itself might be numbered. Previously located
mainly on the margins of the debate, Euroscepticism took centre stage.
Meanwhile, supporters of Europe – who had not even earned a handy
label for themselves (were they Euro-philes, Euro-enthusiasts, or pro-
Europeans?) – found themselves floundering. Prophecies of doom
became so mainstream that an exasperated José Manuel Barroso, presi-
dent of the European Commission, was moved to warn in 2010 of the
‘intellectual glamour of pessimism and constant denigration’ (Barroso,
2010) that was doing so much harm to Europe’s image.
To some extent, the EU has been a victim of circumstance. It has fallen
foul of the dictum that bad news attracts more attention than good
news, its problems often having the kind of awful qualities that make
for dramatic news headlines. Its successes, meanwhile, have tended to
evolve over a longer period of time and to attract less attention. The
EU has also suffered an identity crisis; no one can agree on what it is or
what it should become, and without such agreement it is impossible to
agree on whether or not it is on the right track. It does not help that the
EU is hard to understand; its treaties are long and often confusing, its
12 The European Union: Success or Failure
work can often seem coldly technocratic, and scholars of the EU have
made matters worse with their frequent inability to make Europe either
interesting or real.
Perhaps unsurprisingly, most Europeans know little about how the
EU works, making it difficult for them to objectively assess the claims
of the critics. They often misunderstand the powers of the European
institutions, which are often dismissed as perfidious ‘Brussels’ when they
can mainly do only as much as the treaties and the governments of the
member states allow. Europeans also often misunderstand the effects of
EU law, the tired old jokes about regulations on the curvature of cucum-
bers interfering with meaningful discussion about the substantive effects
of the vast majority of EU laws. Few Euro-myths have more staying
power than those surrounding the EU budget, routinely regarded both
as enormous and as a waste of taxpayer money when in fact it is no
bigger, and no more or less wasteful, than the budget of a typical large
national government department. In 2015, the EU budget worked out
at about five euros per person per week, barely the price of a good latte
in a Brussels coffee shop.
Building the EU was never going to be easy: it was a marked departure
from previous models of international cooperation, and it has since been
made up largely on the fly, often navigating unchartered territory and
being blown off course by changing political tastes. Jean Monnet long
ago warned that ‘Europe would be built through crises, and … would be
the sum of their solutions’ (Monnet, 1978: 417). He also noted rather
pessimistically – in what became known as Monnet’s Law – that ‘people
only accept change when they are faced with necessity, and only recog-
nize necessity when a crisis is upon them’ (Monnet, 1978: 109). This has
certainly often been true of the EU, but all systems of government and
governance have their problems, because they are the construct of the
human mind with its many flaws; that the EU should have had so many
problems is a reflection less of defects inherent in the European project
than of its sheer size and audacity.
If we think things are bad in Europe, consider the case of the United
States. We are often told that it is a beacon of democracy, one of the most
open and productive marketplaces in the world, a paragon of techno-
logical inventiveness, the ultimate military power, a cultural superpower,
owner of the most important currency in the world, and a magnet for
immigrants seeking to improve themselves. And yet its national debt is
spiralling out of control, its society is fractured along racial and ideo-
logical lines, the gap between the rich and the poor is large and growing,
its leaders are unwilling or unable to reach the compromises needed
to solve its long-term problems, much of its infrastructure is in need
of repair, its social security system is nearly bankrupt, and its military
Why Europe works 13
has had – at best – a mixed record on dealing with security threats.

In spite of these problems, few people would seriously suggest that what
the United States has achieved is anything short of remarkable, or that
Americans would be better off out of their union.
Returning to Europe, we find from Eurobarometer polls that faith
and trust in the EU has fallen in the wake of the eurozone crisis, and
yet that most people (80 per cent or more) are satisfied with the lives
they lead, and less than one in three believes – in spite of the EU’s recent
problems – that their country could face the future better outside the
EU. Levels of trust in the EU have long been greater than levels of trust
in national governments. And while its image has taken a battering of
late (the number of Europeans having a positive view of the EU fell
from 48 per cent in 2009 to 30 per cent in 2013, before climbing back
to 41 per cent in 2015; see Eurobarometer, 2015: 7), how much has it
really been to blame for the region’s recent economic problems? If noth-
ing else, it has been a handy punching bag.
We should also note that while the EU has faced numerous crises,
and has been counted out many times before, it has not only survived
but has proved adept at learning from its mistakes and moving on. The
eurozone crisis caps them all, to be sure, but it was also predictable;
Greece should not have been allowed to join (because it did not meet
the terms of entry), the European Central Bank was always going to be
working with one arm tied behind its back so long as it had no power to
shape fiscal policy, and it was long clear that eurozone states (even Ger-
many) were breaking their own rules on budget deficits. It would have
been surprising if the eurozone had not had problems; this was, after
all, the first time in history that a group of advanced liberal democracies
had voluntarily given up their national currencies and pooled the mon-
etary powers that went with them. The political response to the crisis
has been often confused and uncertain, but measures have been taken
that have made European integration stronger and better.
Having argued, then, that popular portrayals of the EU are often
flawed, that its character and powers are widely misunderstood, and
that every experiment in political organization faces problems, what is
there to defend in the story of the European project? A great deal, as it
happens. The list of benefits is too long to outline in a short few pages,
so this chapter focuses on just three: the roles of Europe as a peace-
maker, as a global power, and as an institutional model.
Europe as a peacemaker
To appreciate the greatest achievement of European integration, we
must first remind ourselves of its core original purpose: the ECSC was
founded in order to encourage peace between Germany and France as

a first step towards broader post-war European cooperation. Looking
back from our contemporary vantage point, it is hard to imagine the
antagonism, doubt, and foreignness with which Europeans regarded
each other in 1945, or the dark political and economic clouds that
hovered over the region, or the uncertainties about where Europe was
headed. And yet so successful has been the reconciliation of its two
major continental powers that the notion of European states ever going
to war with one another again is unthinkable. So unthinkable, indeed,
that we now take peace in Europe for granted; the region is living out
Kant’s notion of perpetual peace, and while the credit cannot be laid
entirely at the door of European integration, its role has been essential.
At the heart of its contribution lie the benefits of economic integra-
tion, and particularly of the European single market. This was a goal
with which even the most hardened of Eurosceptics could generally
agree. It always made sense that bringing down the barriers to the
movement of people, money, goods, and services would create new ties
and opportunities; would encourage competition and innovation; and
would discourage market-skewing quotas, tariffs, monopolies, and price
differentials. This is precisely what has happened, and on an entirely
voluntary basis. The task is not yet complete, but the EU today is the
world’s wealthiest capitalist marketplace, and the speed with which this
was built can be credited almost entirely to the European project. Even
if that project were to collapse tomorrow, economic integration now has
so much momentum that it would be near impossible to stop.
The European project has also helped promote peace through its role
in reducing the insidious pressures of nationalism. Where nationalists
once advocated potentially dangerous political and strategic interests,
they are today more interested in safely rediscovering what makes them
different within a broader community of Europe. Greater recognition
of – and easier access to – the multiple national cultures of Europe has
become one of the great pleasures of life in today’s EU. We have seen
the dual phenomena of macro-integration and micro-disintegration
at work, where Europe is coming together while there has also been
greater recognition of national identities. Yes, there are still nationalist
tensions in parts of Europe that involve violence or the threat of vio-
lence, and yes, there are still right-wing nationalist pressures sparked
by immigration (the volume of which – ironically – is a reflection of the
sheer success of European economic integration), but nationalism no
longer poses the threat to Europe that it once did.
Integration has also encouraged peace through its role in reducing
state-based patriotism and promoting broader notions of citizenship
and identity. We often hear the charge that Europeans have found it
Why Europe works 15
difficult to identify with the EU, but that is because the European pro-
ject has been too narrowly defined. Thanks in large part to integration,
Europeans have become less foreign to one another and have come to
realize how much they have in common. There is today a distinctive
European view of politics, economics, and society, which goes beyond
support for democracy, human rights, and free markets, and includes
support for welfare liberalism, cosmopolitanism (association with uni-
versal ideas), the collective society, sustainable development, secularism,
and civilian and multilateral approaches to international relations (for
more details see McCormick, 2010). If Europeans were to think of the
EU less as a network of institutions and a body of laws, and more as a
set of common values, they might better appreciate the changes wrought
by the EU and better understand the meaning of identity with Europe.
Europe as a global power

The second major achievement of the European project has been the
manner in which it has allowed European states to reassert themselves
in the world. This may seem a hollow claim given the EU’s many well-
publicized problems with foreign and security policy, or its repeated
crises of leadership (or lack thereof), but if we look past the headlines
and consider longer-term trends, we find substantial achievements.
The EU has collectively developed a set of alternative explanations for
the causes of key international problems, it offers a new set of mainly
civilian and soft prescriptions for the resolution of those problems (see
Sicurelli in this volume), it represents the distinctive set of values listed
above, its marketplace is both large and wealthy, it is the biggest source
of – and magnet for – foreign direct investment in the world, it is by far
the biggest provider of official development assistance, and while the
euro has had enormous problems, it is the first credible alternative to
the US dollar since the latter finally displaced the pound sterling in the
1950s. In short, Europe cannot be ignored.
Prior to World War II, the major powers were mainly European –
Britain, France, and Germany leading the way – and for better or for
worse they determined the pace and direction of economic and political
events. But they emerged from the war greatly weakened, and found
themselves carried along on a tide of Cold War tensions over which they
had little control; Eastern Europe did as it was told by the Soviet Union,
while Western Europe relied so much on the United States for military
security and economic leadership that its governments had to go along
with US policies even when they disagreed; the rifts over Suez in 1956,
over Vietnam in the late 1960s, over the end of the Bretton Woods sys-
tem in 1971, and over the Arab-Israeli problem come to mind.
With the end of the Cold War and the removal of the Soviet hegem-
ony, the political differences between the United States and Europe
became more apparent (as, it must be said, did the initial inability of the
EU to cover itself with glory on the foreign and security fronts, least of
all in the Balkans). Europeans fretted about their differences with the
Americans but became more willing to speak up where the two sides
disagreed, the breach spilling into the open with the fallout over Iraq in
2003. We are often reminded that European governments were divided
over the issue, with Britain, Spain, and Italy supporting the invasion
while Germany and France were opposed, but much less is usually said
about opinion polls that found 70–90 per cent opposition to the war
right across Europe. Other polls taken at the same time revealed – not
coincidentally – that majorities in every EU state were in favour of the
EU developing foreign policies independent of the United States.
It is in none of our interests to live in a world dominated by one or
two superpowers, because to do so is to risk being subjected to the
assertion of their political and economic agendas. The EU is the only
effective channel through which Europeans can make their collective
views heard, and it does this more often than we are led to believe. It has
done it, for example, through a common trade policy in which all 28 of
its states – representing more than 500 million of the wealthiest people
in the world, and accounting for a bigger share of global imports and
exports than any other trading bloc – work together. Its foreign policy
achievements have been limited, and the threats posed by Russia to the
east and by illegal immigration from the south are substantial, but its
abilities to speak as one continue to improve, aided most recently by the
redesign of the office of high representative for foreign affairs and the
creation of the European External Action Service.
Europe as an institutional model

The third major achievement of the European project lies in its institu-
tional impact: it offers the template for a new way of ordering politics,
economics, and society that contrasts with the deeply flawed model of
the nation state. In the grand sweep of history, the latter has not been
with us long: the oldest states date back to the Middle Ages, but most
date back no further than the mid-twentieth century. And even in that
relatively short time it has been fraught with problems: states create
artificial divisions among humans, they have often gone to war with one
another, they regularly fail to deal with other states without building
antagonistic alliances, and they often do a poor job of working with
other states to address cross-border problems such as terrorism, pollu-
tion, illegal immigration, and the spread of disease. The EU, by contrast,
Why Europe works 17
has helped Europeans rise above narrow interests, has encouraged them
to coordinate their responses to shared or common problems, offers
them a means of pooling knowledge and expertise and of reducing
duplication and overlap, and encourages them to take a more global
view of the needs of human society.
A prime example of the success of coordination is offered by the case
of EU environmental policy. Many environmental problems either have
common sources or are shared by multiple states, meaning that only
coordinated policy responses are likely to work. Like much else that it
does, the EU stumbled on to environmental policy almost by accident,
realizing that different standards posed a barrier to the single market,
and thus demanded a cooperative approach. EU law has since brought
laggard states up to the level of progressive states, has led to the intro-
duction of environmental standards in parts of Europe where few or
none existed, and has obliged a tightening of standards in non-EU states
wanting access to the European marketplace. A similar process of policy
spillover has been at work in several other areas of policy:
• Competition, where the EU has developed the most stringent anti-
monopoly laws in the world;
• Mergers and acquisitions, where the single market has encouraged
European corporations to reach across internal borders;
• Education, where efforts to ensure the mobility of qualifications has
gone hand in hand with efforts to encourage educational exchanges;
• Justice and home affairs, where cross-border police and judicial coop-
eration has been a vital addition to the set of tools used to fight crime;
• Transport, where coordinated European investment in trans-
European networks has helped build new highways and railways that
have improved links within the European marketplace.
Any claims that the EU works institutionally will inevitably come
up against charges that it was created by elites, that it suffers from a
democratic deficit, and that its bureaucracy is insufficiently accountable
(as though national bureaucracies are any different). But what we see
depends on where we look. If we think of the EU as an international
organization, then its decision-making processes are not unusual: it is
a club of member states whose interests are represented in the meeting
rooms of the European Council and the Council of Ministers. But while
it is clearly more than a conventional international organization, it is
also far from being a federal Europe. There is no European constitution,
and there is no European ‘government’ in the conventional sense of the
term. While the major EU institutions have responsibilities (as outlined
in the treaties), they are no more than what has been agreed by the
member states, and they can be restricted and even reduced by the work
of the member states. To say that the European institutions have too
much power (a common complaint of Eurosceptics) is to fundamentally
misunderstand how the EU works.
The EU is best thought of as a confederation, or a union of states
(see Lister, 1996). Citizens elect their state governments, who in turn
represent the interests of those citizens in the European institutions (the
European Parliament being the major anomaly). The cumulative inter-
ests of the member states dominate the EU decision-making process, the
EU institutions are limited by what the treaties allow them to do, and
the treaties have in turn been written and decided upon with the govern-
ments of the member states involved at every step. True, ordinary Euro-
peans have not been invited in most cases to vote on new treaties, but to
arrange for them to do so would be to push the EU closer to becoming
the kind of federal European superstate that so many Eurosceptics fear.
There is an exquisite irony at play here: while the EU is criticized for
being insufficiently democratic, it is also criticized for moving towards
the kind of federal arrangement that would make it more democratic.
The EU, it seems, is damned if it does and damned if it doesn’t.
Arguably the most impressive institutional achievement of the Euro-
pean project has been its role – through the legal and political demands
it makes of its members, its aspirant members, and even those who
wish simply to trade with the EU – in expanding and solidifying liberal
democracy. Indeed, the EU is the most effective force in the world today
for the peaceful promotion of democracy and capitalism. It encouraged
the six founding states (France, West Germany, Italy, and the Benelux
states) to work together in the 1950s and 1960s; it helped encourage
the transition to democracy in Greece, Spain, and Portugal in the 1980s;
it went on to encourage democratic and free-market change in post–
Cold War Eastern Europe; and it continues today to spread democracy
through the demands that it makes of neighbouring states that have
aspirations to join the EU, and of other states that seek access to the vast
European marketplace.
And if imitation is the sincerest form of flattery, then we have only
to look around the world at the other experiments in regional integra-
tion that have been inspired by the European case: ASEAN in southeast
Asia, ECOWAS in West Africa, Mercosur in South America, CARICOM
in the Caribbean, NAFTA in North America, and the African Union, to
name just a few. Not all of them have worked as well as the EU, to be
sure, and several face considerable political and economic handicaps,
but others clearly think that integration is worthy of emulation, and
there is almost no state in the world that is not involved in at least one
exercise in regional integration. If the EU is wrong, then so is almost
everyone else.
The rise and fall of the EU 19
Conclusion
To summarize, then, we have three main sets of achievements that show
why European integration has been a good thing, and why it merits
continued support and improved understanding. The first of these is
peace, which Europe might have been able to achieve without regional
integration, but it would have taken much longer, and who knows what
paths European states would have taken if they had not been moving in
the same overall direction. The second is global influence, which Europe
would have been unlikely to achieve if its governments had been work-
ing independently; even Germany, France, and Britain are no more than
middle-level powers, and the smaller EU states would have had trouble
making themselves heard. The third can be found in the institutional
benefits of regional integration, which even with its problems offers
many advantages over the shortcomings of the nation state.
In short, the European project deserves to be applauded for what it
has achieved and can continue to achieve. Its history has not always
been pretty, but its critics too often misunderstand how it works, base
their judgements on short-term difficulties rather than long-term gains,
and overlook the broader historical significance and pioneering nature
of the remarkable experiment in which Europeans have been engaged.
Europe is more peaceful, prosperous, and influential than it would have
been without the EU, and the best interests of Europe and the world
will not be served by undoing the achievements of integration. On the
contrary, what we need now is not a return to the nation state but both
more and better integration. Europeans need each other – they have
more in common than most of them realize. A strong and coordinated
Europe is needed to offset the power of the United States, the rising
influence of China and India, and the threats posed by Russia. Euro-
peans need to rise above the here and now and look to their long-term
future. That future must include the EU.
1.2 The rise and fall of the EU

Jan Zielonka
Enthusiastic supporters of the EU make three valid points. First, the EC/
EU has had numerous accomplishments over its six decades of exist-
ence. Second, the history of the EU offers various examples of crises
being successfully utilized in order to push the integration project for-
ward. Third, going back to nation states, as suggested by Eurosceptics,
will not necessarily make Europe a better place.
However, EU-enthusiasts also make three cardinal errors. First, they

suggest that history always moves in one direction: institutional con-
structs can rise, but not fall. This is at odds with our basic historical
knowledge (see e.g. Kennedy, 1989; Taylor, 2008). Second, they ignore
another general historical predicament: most crises have damaging rather
than healing effects, and they failed to prove that the EU is immune to
the former (Majone, 2014). Third, they assume that a possible collapse
of the EU would bring us back to Westphalia, but it is quite legitimate
to argue that it will lead to new, more efficient, and legitimate forms of
integration (see e.g. Friedman, 2015).
This part of the chapter will explore these points in more depth.
It will first examine whether the EU is living up to its historical promise:
does it still generate security and prosperity? We will then examine the
nature of the recent crisis and the way it was handled: was it a good
or bad crisis for the EU? In the end, it will examine whether the EU is
still the engine of integration, and if not, what kind of scenario is to be
expected? Is Europe likely to return to nation states or embrace a new
type of integration with less or no EU?
Historical record: good and bad

The EU’s sorry predicament of today can be summarized in one sen-
tence: it is no longer able to perform the wonders of the past. By the
same token, its basic utility is being questioned. We used to rely on the
EU to provide security, prosperity, and the rule of law. Can it still deliver
on these, and if not, what is it for?
The EU often claimed credit for which it only partially deserved. For
instance, peace in post-war Europe has been assured by many actors
and factors; the EU was only one of them. The same can be said about
Europe’s economic growth or propensity for transborder cooperation.
Moreover, in comparison with other political actors, the EU had some
characteristic flaws. Its complex governance structure and complicated
decision-making system hampered efficiency. Its relatively small bureau-
cracy was quite assertive, inflexible, and formalistic. Worse still, the EU
seemed detached from the concerns of ordinary citizens of its vast Euro-
pean remit. That said, it is impossible to write a post-war European
history without acknowledging the contribution of first the European
Communities and then the EU. The EU may not have been perfect, but
it has changed Europe beyond recognition, in most cases for the better.
The most acclaimed EU contributions were in the fields of foreign,
socio-economic, and legal policy.
The EU-led integration project seemed to get rid of power politics.
Large and rich states were no longer bullying small and impoverished
ones. Germany was one of many EU member states involved in collec-

tive bargaining with uncertain outcomes. The EU not only transformed
international politics within its borders, it also exported security outside
them. This was chiefly done through the process of enlargement, which
demanded from prospective members that they give up power politics
and embrace democracy and the free market.
The EU also helped Europe to create one of the most competitive
economies in the world. The single-market project and the common
currency were the key means for achieving these successes, and the
ambition was to promote ever greater socio-economic convergence.
Less-developed countries and regions were assisted in catching up with
Europe’s economic champions, and the term social Europe became the
EU’s trademark.
The EU was also very successful in creating societies based on law.
Successive EU treaties became milestones in European history. Laws
made transactions in Europe more structured, predictable, and account-
able. Law also contributed to the development of numerous formal
institutions, replacing shady informal deals with more transparent and
fair transactions.
These accomplishments made the EU a very sexy object; the EU
was desired, imitated, and admired by many people around the world.
Non-European politicians were adopting EU norms not just because
of the EU conditionality but because they wanted to emulate the EU’s
achievements.
However, over the past few years the situation has changed dramati-
cally. The EU has lost its sex appeal and the long-standing record of
accomplishments has been eroded if not destroyed altogether. Power
politics returned with a vengeance. Gone is equality among member
states. A few ‘triple A’ countries run Europe, with Germany in the driv-
ing seat. In the summer of 2015, respected commentators compared the
EU’s ‘diktat’ vis-à-vis Greece to the treatment of Germany in Versailles
by the victors of World War I (Balibar, Mezzadra, and Wolf, 2015). The
policy of enlargement has been replaced by the policy of containment.
The situation does not look better on the economic front. Even the
strongest European economies fail to generate growth, and Europe’s
welfare systems are collapsing. The common currency is continuously
in trouble and it undermines the achievements of the single market. The
euro was meant to help integrate Europe, but it achieved the opposite: it
exacerbated the gaps and conflicts between the surplus and deficit coun-
tries, the importers and exporters, and the North and South (see also
Nölke in this volume). Citizens within and across countries are also con-
flicted more than ever. Major divisions lie between the winners and the
losers of the common currency, between the advocates and opponents of
strict austerity, between the technocrats and the populists, and between
friends and foes of Syriza-led Greece.
The rule of law has also been seriously undermined (Joerges and Glin-
ski, 2014). Crucial decisions are being made in an informal mode in
Berlin, with little input from formal institutions in Brussels. New trea-
ties are written with only some states in mind, and they envisage numer-
ous forms of punishment and external forms of interference that are
widely seen as arbitrary. Institutions not properly grounded in EU law,
such as the Eurogroup, are playing a major role with no written rules
of conduct, let alone public scrutiny. When Greece’s Finance Minister
Varoufakis sought legal advice regarding the Eurogroup’s formal status
he was told that ‘The Eurogroup does not exist in law, there is no treaty
which has convened this group’ (Varoufakis, 2015).
On the one hand, the EU demands austerity, bans central-bank inter-
ventions, prevents parliaments from taking sovereign decisions, and
ejects democratically elected politicians. On the other hand, it does not
protect against unregulated markets, socialize debt, or allow citizens
to shape EU-level decisions (Leonard and Zielonka, 2012; Champeau
et al., 2014).
These developments could not help but have devastating implications.
Public trust in the EU has plummeted during the crisis in both creditor
and debtor countries. The euro is time and again subject to vicious mar-
ket speculation. The European Commission is no longer able to steer
global trade or environmental negotiations as it once did, leaving its citi-
zens exposed to global turbulence. Important neighbours such as Rus-
sia and Turkey felt free to challenge the EU’s position on vital security
matters. Radical Eurosceptic politicians are making headway. These are
undisputed facts and it is time to draw some painful conclusions.
The EU no longer generates security but instead instils insecurity. It is
no longer associated with prosperity but with recession and social hard-
ship. It is no longer a symbol of cooperation and solidarity but of con-
flict and sanctions. Indeed, one wonders whether the EU is nowadays an
engine of integration or disintegration.
A fatal crisis for the EU

How can we explain this extraordinary turnaround? The historical
fortunes of institutional constructs usually depend on their capacity to
adjust to ever-new economic, technological, and cultural environments.
The ability to withstand external shocks is particularly important. How-
ever, these basic laws of history tell us little about specific cases and sce-
narios. The Habsburg Empire was said to be mad, bad, and unfit to rule,
and yet it persisted for over 600 years. The Soviet Union was said to be
remarkably stable, and yet it collapsed with little advance notice, to the
embarrassment of Western Kremlin watchers.
The EU’s history shows a remarkable degree of institutional adjust-
ment since the early days of the Coal and Steel Community to the Treaty
of Maastricht. It also showed a remarkable resistance to all sorts of
external shocks. This made some politicians argue that the EU always
comes out stronger from each crisis (Barroso, 2011).
The truth is, however, that since the Treaty of Maastricht the EU
has found it extremely difficult to undertake any fundamental reforms.
The failure of the European Constitution project was the most spec-
tacular example of this, but equally revealing is the story of the 2012
European Fiscal Compact Treaty which strengthened the provisions
to sanction violations of the rules governing the euro. The treaty was
launched by French President Nicolas Sarkozy and German Chancel-
lor Angela Merkel, with little consultation with other EU members.
In order to avoid a possible veto by some EU member states, the Fis-
cal Compact was not formally part of the EU treaty framework and it
could thus enter into force with only 12 eurozone members ratifying it.
Not surprisingly, the treaty was seen as a means of marginalizing pos-
sible dissenters such as the United Kingdom. Parliamentarians in mem-
ber states also pointed out that the treaty undermined their budgetary
prerogatives because it obliged governments to follow strict budget-
ary rules independent of the outcome of parliamentary deliberations.
(The same principle seems not to apply to Germany, as the German
Constitutional Court has already ruled that the decision on revenue
and expenditure of the public sector must remain in the hands of the
parliament, the Bundestag.)
EU internal bargaining was always awkward and complex, but the
story of the Fiscal Compact suggests that meaningful changes are now
only possible through a kind of coup d’état organized in secret by the
most powerful states, ignoring the long-standing procedures and dis-
carding the spirit of collegiality. But a coup d’état cannot be orches-
trated every year, and so the EU has effectively abandoned any ambition
to undertake meaningful reforms, especially if they require changes to
the body of EU laws. This is notwithstanding the fact that the current
institutional arrangements proved grossly inadequate for preventing
and solving the latest crisis.
The EU is not only unable to undertake any serious reforms, it also
fails in adopting practical policies for coping with the most pressing
issues. Just before this chapter was written, two EU summits were held.
The EU summit in May 2015 devoted to its eastern neighbourhood in
the context of the ongoing violence in Ukraine ended with no tangi-
ble results. EU leaders were not even able to offer Ukrainians free visa
travel. The next EU summit in June 2015 devoted to migration has also
been a total failure, as member states refused to commit themselves to
sharing responsibility for migrants arriving at Europe’s southern shores.
After a stormy and at times nasty debate, member states rebuffed the
European Commission’s proposal to introduce mandatory quotas to
relocate a mere 40,000 migrants. In 2015 more than 1,000,000 people
sought asylum in the EU.
It is not that member states are unwilling to solve EU problems; they
are simply unable to do so. For instance, in 1966 General De Gaulle
refused to attend the European Council’s meetings, causing the so-called
empty chair crisis that lasted for seven months. Today there are no
empty chairs. EU leaders come to successive summits, smile to cameras,
make reassuring statements, but adopt solutions failing grotesquely
short of what is expected and desired. The most striking example is the
June 2015 decision of the Eurogroup to offer Greece yet another bailout
under yet severer conditions. Only few specialists believe that this last
expensive arrangement has solved the issue of Greek insolvency and put
Greece on a viable track to economic recovery. At the same time, many
specialists fear that social hardship imposed on Greece will elevate to
power much more radical (and anti-European) politicians than Alexis
Tsipras (see e.g. Stiglitz, 2015).
Two conclusions can be drawn from this analysis. First, the latest
crisis has been particularly multifarious and profound. Second, the EU
proved unable to handle this crisis in an effective and legitimate manner.
We can discuss why this was so and who ought to be held to account.
We can also speculate what the future will bring about. One thing is
certain: the EU has failed this vital test of maturity (Heisbourg, 2013;
Legrain, 2014).
In the past the EU was able to turn crises to its advantage, beefing up
its powers and fostering its vision of integration. However, the latest
spectacle of confusion, manipulation, and incompetence can hardly be
seen in the EU’s favour. In this sense it is a wasted or even fatal crisis.
The end of EU-led integration

While the EU often over-claims credit, it also attracts blame that it does
not deserve. The EU is not the only actor and factor responsible for the
current disarray in Europe. In fact, the financial crisis came from New
York, not from Brussels. Yet, it is also true that the EU put itself in the
driver’s seat to handle the crisis, and, so far, it has failed to bring Euro-
pean ‘passengers’ to the promised destination. Europe is a less secure,
prosperous, and united continent than before the crisis, although the
picture differs from place to place.
Staunch supporters of the EU tend to blame member states rather

than the EU for the sad course of recent events. The problem is that the
EU cannot be separated from these states. States have created the EU
and they control it. The EU-led integration project puts states in the
dominant position, with other actors such as cities, regions, NGOs, or
firms excluded from crucial decisions. Therefore, the failure of the EU to
successfully manage the last crisis heralds the demise of a certain model
of integration.
Supporters argue that this is not necessarily the case. They hope that
under the pressure of recent events, member states will reach a historic
compromise, a kind of a great deal to move integration forward (see e.g.
Tsoukalis, 2013). They also argue that there is no viable alternative to
integration as embodied by the EU. Either the EU goes on as ever, or else
Europe disintegrates with devastating implications. These are not very
convincing arguments.
If member states were unable to reach a meaningful compromise
under ‘good weather’ conditions, will they do so under ‘bad weather’
conditions? Before the crisis, the EU could rely on a ‘permissive pub-
lic consensus’, but now public trust in the EU is low in both creditor
and debtor states. Can a major leap forward be done without public
backing? Before the crisis, discrepancies between northern and south-
ern Europe were much less striking than today. For instance, Spain had
unemployment rates similar to German ones a decade ago, but now its
rates are five times higher. Can states in such diverse economic positions
embark on a common agenda? Before the crisis, Germany was seen as
an honest broker, but today it is seen as a selfish, if not imperial, player
(see Chapter 15 in this volume). Who will assume the leadership in forg-
ing the expected leap forward: France, Poland, Luxembourg, or Italy?
And will Germany, Finland, or Holland follow? These seem to be rather
rhetorical questions.
Supporters of the EU usually assume that the great leap forward
would be in a federal direction, but this is problematic for a variety of
reasons. States which control the EU would have to give up some crucial
powers, and the experience of the common currency shows that this
cannot stop half way. It is not enough to create common rules and sanc-
tions for breaking them; a common European government needs to also
be created with tax collecting powers, legitimate redistribution mecha-
nisms, and workable systems for common interest formation. There is
no evidence that member states are ready for that, if only because this
would effectively mean their demise (Habermas, 2012).
All this points to the essence of the current problem: the EU-led inte-
gration project has reached its limits. Member states are unwilling to
move towards a fully fledged federation but are unable to cope with
mounting pressures using their outdated and dysfunctional institutional

means. They can either dissolve the EU or allow for different forms of
integration with less EU. The latter scenario is more probable despite
the Eurosceptic pressure for the former one. This is not necessarily
because leaders fear the return to Westphalian politics of power and
conquest. This is chiefly because leaders know that states are not as
efficient and legitimate as they often claim to be. This is not the place
to discuss the evolution of nation states over the past decades, but it is
worth recalling Alan Milward’s study showing that after World War II,
states have launched integration with their own shortcomings in mind
(Milward, 1993; Bickerton, 2012). Since then, the process of ‘unbound-
ing’ has only progressed, constraining states’ ability to act on their own
even further (Zielonka, 2014a; Giddens, 2007).
What would alternative scenarios of integration imply? First, integra-
tion could evolve along functional rather than territorial lines (Zielonka
2014b). Different networks could integrate in different policy fields
such as trade, energy, human rights, immigration, or security (see e.g.
Castells, 2000). The current emphasis on territory lumps together states
regardless of their actual needs and situations. Moreover, it creates an
artificial border of Europe with privileged insiders and discriminated
outsiders. In reality, different tasks concern a different territory and
therefore require diversified spatial arrangements.
Second, integration could be carried out by multiple actors, not just
by states. For instance, mega-cities are currently chief generators of eco-
nomic growth, but the EU does not give them access to its decision-
making and resources. However, the failure of the EU may well break
the monopoly of states and allow cities, regions, professional associa-
tions, and NGOs to join old, or form new, transnational integrative
networks. States may well take part in these networks, to a lesser or
greater degree, depending on the issue handled by a given network.
Third, the structure of integrative schemes could be polycentric and
not hierarchical. It could resemble numerous horizontal rings rather
than a single vertical pyramid. This is because task-oriented integrative
networks would evolve without any overall institutional blueprint pro-
ducing a neat architecture (Mason, 2015). Networks would have a dif-
ferent scope and shape depending on the challenge they are supposed to
address. Networks would have to comply with European and national
laws, but there would not be a single European centre to oversee them,
let alone dictate specific policies.
Finally, governance of integrative networks could be much more flex-
ible, pluri-lateral, and diversified. This is because different policy fields
require different types of membership, different modes of engagement,
and different mixtures of incentives and sanctions. Some fields such as
the Internet are moving rapidly and they constantly require new innova-
tive solutions (Dunleavy et al., 2006). Other fields such as human rights
require clear benchmarks and consistent policies. In the fields of indus-
trial competition, taxation, or customs, sanctions are more appropriate
than in the fields of immigration or environment where incentives in
terms of training and material equipment are more suitable. Governance
in the present-day EU is largely about constructing and maintaining the
European centre of authority. The new type of integration could empha-
size problem-solving capacities, and this requires rules that are able to
cope with a complex and ever-changing environment.
Conclusion
The EU used to be a symbol of progress and integration, but it performs
poorly at present and it has lost the support of most of Europe’s citi-
zens. The EU also seems unable to reform itself. In effect, it became a
hindrance to, rather than a facilitator of, integration.
Citizens who have lost trust in the EU are not necessarily happy with
the performance of their nation states. Only a few of them ask for rais-
ing fences vis-à-vis other Europeans. For most, cooperation, rather than
conflict, is the preferred option. They also know that a divided Europe
is easy prey for non-European powers and global speculators. That said,
a dysfunctional EU is not worth investing in. Integration ought to be
given another chance, this time without the EU at the helm.
The problem is that the EU has become too big to fail. Policymakers
may not be happy with its performance, but they are unable to do any-
thing meaningful about this. They keep the EU on life support, but since
the prospect of success is small, they treat the rescue as a low-cost opera-
tion. Such a policy of muddling-through may delay the EU’s imminent
demise, but it will not address its structural deficiencies, while creating
a false feeling of security and stability.
A new project of integration is therefore badly needed and it could
utilize some of the EU’s structures (for details, Zielonka, 2014b). There
are currently more than 30 European agencies and bodies spread across
the entire continent, dealing with such diverse issues as vocational train-
ing, food safety, border controls, or judicial cooperation. Most of them
have regulatory tasks, but they also provide technical expertise and net-
working between national and European authorities. They receive some
funds from the EU, but they are independent bodies with their own legal
personality. Resources and prerogatives of these functional agencies
could be significantly beefed up, while the resources and prerogatives of
the EU’s central institutions could be downgraded. The European Com-
mission could be transformed into a kind of mega-regulatory agency
responsible for the single market. The European Council could con-
centrate on setting some basic standards of access, transparency, and
accountability for these various regulatory bodies. The European Parlia-
ment, possibly under a different name, could do what it does best, a kind
of auditing and monitoring of regulatory agencies with no pretensions
to act as a sovereign pan-European representative assembly.
Unfortunately, the EU resists any meaningful change, and especially
along the lines suggested. The European Commission may be down,
but it is not yet out; it still insists on acting as a quasi-government for
Europe. Powerful member states continue to use the EU as a vehicle for
their own national policies. Most of the weak member states keep the
EU because it gives them a seat at the decision-making table, however
symbolic. The body of EU law would be difficult to amend or repel.
Most likely, the EU will formally stay as it is, but it will gradually
lose its usefulness and vitality. It will become an institutional decoy to
rubber-stamp decisions taken outside of it. Unless there are some pow-
erful external shocks forcing dramatic changes, a spectacle of false pre-
tentions can continue for several more years. However, the arguments of
EU-enthusiasts are getting feebler with each day.
Chapter 2
The Political Efficiency of the EU
In 1988, German political scientist Fritz Scharpf published a seminal arti-

cle (Scharpf, 1988) in which he argued that the EU was characterized by
a situation which is typical of many federal systems: it had fallen into
a ‘joint decision trap’ in which the need for consensus and unanimous
decision-making among a large number of member states and institutions
at the supranational level would systematically hinder innovation and lead
to suboptimal compromise arrangements. Simplified versions of Scharpf’s
arguments have been part and parcel of many popular critiques of the
European Union ever since its foundations. From legendary French Presi-
dent de Gaulle’s 1962 denunciation of European bureaucrats as faceless
legislators, speaking in an incomprehensible ‘Volapük’ language, to more
recent attacks against EU regulatory policies in Europe’s popular press,
the efficiency of the EU has been and is a popular target of criticism. Suc-
cessive US administrations have chafed under slow decision-making by
Europeans. Industry associations lament the byzantine structures of EU
institutions. The euro crisis of 2010/2011 demonstrated only too clearly
the limited enforcement capacity of the EU against rule breakers.
And yet, the EU continues to be the major locus of common problem-
solving in Europe and it generates an increasing legislative output. In
successive rounds of treaty revisions, European politicians have tried
(and often failed) to simplify decision-making and thus enhance the
effectiveness of EU legislation (Finke et al., 2012). The most recent
attempt was the Lisbon Treaty of 2009 which had been negotiated with
a view ‘to enhancing the efficiency and democratic legitimacy of the
Union and to improving the coherence of its action’, as stated in its pre-
amble (Lisbon Treaty, 2009). The 2004/2007 enlargement of the Union
to 27 members, and the eurozone to 17 members in 2011, made such
reforms inevitable. Whether they are successful is a question open to
debate (see Chapter 13). It is also controversial whether the EU is worse
in problem-solving than countries like the United States with their
system of checks and balances, leading to frequent gridlock between
Congress and US presidents, or whether we should indeed hold the
European Union to the same standards as conventional nation states.
Desmond Dinan thinks that we should not, and he considers the EU
to be a surprisingly efficient organization. It has displayed a remarkable
29
30 The Political Efficiency of the EU
capacity for adaptation and its institutions continue to function com-

paratively well. Mats Persson argues that popular images of the EU as
bureaucratic juggernaut are not exaggerated, given its seemingly unstop-
pable capacity to churn out new laws and regulations, its less than
impressive record in policy fields such as defence or agricultural policy
and its limited accountability.
Several chapters in this volume deal with the efficiency of the EU,
whether it is agricultural policy (Chapter 11), financial regulation
(Chapter 10) or European defence (Chapter 14).
2.1 The EU as efficient polity

Desmond Dinan
Arguing that the EU is an efficient polity seems like an uphill task. The
EU is easy to caricature as ‘an inefficient bureaucratic monster’. Com-
pared to what? The EU is sui generis, neither a classic international
organization nor a familiar nation state. Instead, it is a unique polity
that combines elements of intergovernmentalism (traditional inter-
state relations) and supranationalism (shared sovereignty in various
policy fields). The EU is a transnational entity with state-like attrib-
utes, notably in the judicial and legislative fields. It exists because
its members agree that the EU benefits them in ways that could not
otherwise exist.
The EU enhances national welfare, broadly understood. The paradox
for sovereignty-conscious countries is that by sharing cherished sover-
eignty in the EU they advance their national interests. The EU enables
its members to enjoy vast economies of scale and scope in an integrated
socioeconomic-political space spanning almost the entire continent of
Europe. Governing such a space is a Herculean task. Any polity with 28
markedly different countries and 24 working languages – a necessity,
given that citizens have every right to understand EU decision-making
procedures, rules and regulations – is bound to be cumbersome. In view
of the obvious cultural, linguistic and organizational constraints that it
faces, as well as the fact that it is democratic, the surprising thing about
the EU is that it works as efficiently as it does. If looked at without ideo-
logical blinkers – free of the prejudice that supranationalism is inherently
evil – and without preconceived ideas about the intrinsic inefficiency of
government or dreariness of bureaucracy, the EU emerges not only as a
fascinating experiment in post-national politics and policy-making but
also as a remarkably capable, resourceful and resilient entity.
The EU as efficient polity 31
The European Council

At the top of the EU’s institutional architecture stands the European
Council, which brings together the highest political leaders of the mem-
ber countries, plus the Commission President and the European Coun-
cil’s own president. The European Council emerged in the 1970s as a
crisis-management mechanism, the crisis at the time being the severe
economic challenges facing European countries and the institutional
sclerosis besetting the then European Community. More recently, the
European Council has reverted to crisis-management mode, this time
dealing with the protracted eurozone crisis.
Beginning in the late 1980s, with the transformation of the European
Community, the European Council became the EU’s key decision-making
body, where national leaders could reach agreement on contentious issues
ranging from the budget, to enlargement, to treaty change. The fact that
national leaders meet so often in the European Council, either on regu-
larly scheduled or extraordinary occasions, testifies to the importance of
European integration in national political life and the interconnectedness
of national and EU policy-making.
National leaders often have widely different policy preferences. Agree-
ment is frequently difficult to reach. The leaders of France and Germany
tend to predominate in the EU, which reflects a fact of life in interna-
tional relations (the preponderance of the more powerful players) and
the origins of European integration (the centrality of Franco-German
rapprochement). It is not always easy for French and German leaders to
reach common positions, and common Franco-German positions some-
times irritate, even alienate, other national leaders. Nevertheless, the
efficacy of the Franco-German tandem helps to explain the effectiveness
of the European Council.
Despite complicated political dynamics, the European Council is
adept at finding solutions to seemingly intractable problems. Notwith-
standing the persistence and seriousness of the Greek situation, the
eurozone crisis comes to mind. At first glance, this would seem to be
an example of EU leaders behaving at their worst, dithering while the
eurozone teetered on the brink of collapse. Even if the eurozone was
ever in such dire straits, arguably EU leaders acted reasonably expedi-
tiously and efficaciously, given the enormous domestic constraints that
most of them faced.
The point about domestic politics is essential for understanding the
EU. National leaders do not operate in a vacuum when deliberating
at the European level. They cannot agree to do things as EU leaders
that would be politically suicidal at the national level, although their
rhetoric is sometimes extravagant. German Chancellor Angela Merkel
drew considerable scorn from fellow EU leaders for her initial hands-
off approach to the mounting Greek crisis. She seemed stunned by the
severity of the situation and unaware of its implications for German
creditors as well as for the stability of the eurozone. Yet Merkel was
highly sensitive to domestic opinion, which grew increasingly critical of
economic and monetary union and censorious of Greece. Merkel was
equally concerned about the constitutionality of the bailout, given the
negative tone of recent rulings by the German Constitutional Court on
EU issues.
Under the circumstances, it was impressive that the European Council
decided first to establish the (temporary) European Financial Stability
Facility, then to establish the (permanent) European Stability Mecha-
nism, and later to lay the foundations for a banking union. According
to European Council President Herman Van Rompuy, ‘the decisions we
have taken [with respect to the crisis], constitute the biggest reform of
the economic and monetary union since the euro was created’ (Euro-
pean Council, 2011: 6). The political salience of these and subsequent
decisions both constrained national leaders and required action at the
top of the EU executive pyramid, in the European Council.
Ideally, EU leaders would have acted faster and more decisively, and
the Greek crisis would not have spun out of control. But politics is the
art of the possible, and most political outcomes tend to be suboptimal.
That observation is as true at the European as at the national level of
governance. The ongoing response to the crisis, taken largely by national
leaders operating in the European Council, demonstrates that the EU
functions as well (or as badly) as can be expected for any political entity,
especially one of its extraordinary nature.
Everyday decision-making
The EU makes all kinds of decisions, such as on its composition
(enlargement), financing (the budget), competence (policy scope) and
institutional arrangements. Most EU decisions are of the regulatory
kind, taken with a view to managing a wide range of policy areas, nota-
bly agriculture, the environment and the internal market. The legislative
process requires a proposal from the Commission and ‘co-decision’ by
the Council of the EU (made up of national ministers and known simply
as the Council) and the European Parliament (EP), in a system called the
ordinary legislative procedure. The apparent complexity of the ordinary
legislative procedure drives critics to distraction. Yet legislative proce-
dures are inherently complex; they are neither simple nor easily compre-
hensible in any liberal-democratic polity. Given the nature of the EU, its
legislative process is astonishingly efficient and productive.
This was not always the case. In response to complaints about

tardy decision-making and the proliferation of unnecessary propos-
als, the EU has streamlined the legislative process in successive rounds
of treaty change and internal reform. The Commission now produces
fewer and better quality proposals; the Council acts expeditiously and
decisively through the widespread use of qualified majority voting;
and the EP has refined the seemingly arcane co-decision procedure to
the point that many of its own members complain that they do not
have adequate opportunity to comment on legislative drafts. In other
words, the problem with legislative decision-making may not be that
the EU is inefficient, but that it is too efficient, to the detriment of
careful parliamentary scrutiny and democratic openness (European
Ombudsman, 2015).
The Council meets in several formations, corresponding to the main
areas of EU activity (agriculture, environment, competitiveness and the
like). This allows most government ministers, spanning the spectrum of
issues covered by the EU, to conduct business in Brussels. Foreign min-
isters meet in two formations: General Affairs, to coordinate the work
of other formations and prepare meetings of the European Council; and
Foreign Affairs, to discuss the EU’s external relations, including security
and defence matters. The General Affairs and the sectoral Council for-
mations are engaged in legislative decision-making; the Foreign Affairs
Council is involved in an area that is still largely intergovernmental and,
given its extreme political sensitivity, remains a work in progress.
The fact that governments agree to the possibility of being outvoted
in so many important policy areas is one of the distinguishing character-
istics of the EU. Naturally, governments care deeply about the decision-
making rules in the Council because the political stakes are so high. The
system of qualified majority voting (QMV) is not as straightforward
as a simple majority system (50 per cent plus one vote). The EU is in
transition from having a threshold for a qualified majority set at about
73 per cent of the total number of votes around the Council table – the
sum of votes allocated to each country based approximately on popula-
tion size – to a threshold based on a ‘double majority’ of at least 55 per
cent of the countries (represented by their governments in the Council)
corresponding to at least 65 per cent of the EU’s total population. The
reason for using a qualified rather than a simple majority is to protect
the interests of countries in the minority by making it more difficult for
them to be outvoted. Nevertheless, complaints by the more populous
member states about the unfairness of the existing voting system, due to
the increasing number of less-populous member states in the EU follow-
ing successive rounds of enlargement, resulted in the new system being
introduced.
Regardless of the modality, voting is the key to speedy Council

ecision-making. One of the most serious political crises in EU history
d
broke out in 1965 when French President Charles de Gaulle withdrew
his country’s representatives from the Council in an effort, among other
things, to halt the use of QMV. The crisis ended with the Luxembourg
Compromise of 1966, a political agreement allowing national govern-
ments to prevent a Council vote from taking place whenever a ‘very
important’ (later understood as ‘vital’) national interest was at stake.
The subjective nature of ‘very important’ or ‘vital’ interests, and the pro-
pensity of governments to succumb to domestic pressure to claim that
such an interest was indeed at stake, severely impaired Council decision-
making in the years ahead. Only with the Single European Act of 1986
– a major treaty change intended primarily to facilitate completion of
the single European market – did governments recommit themselves to
using QMV, bringing the era of the Luxembourg Compromise effec-
tively to an end. Thereafter, with the spread of QMV to more and more
policy areas as a result of subsequent treaty reforms, the efficiency of
Council decision-making improved dramatically.
The Commission has an exclusive right to initiate legislation, although
proposals originate in a number of ways. As in any polity, interest groups
are active in promoting legislation as well as in trying to block initiatives
with which they disagree. National governments are a form of interest
group, often pushing the Commission to introduce particular proposals
or drop others. The Commission consults a variety of outside actors,
including national governments and traditional interest groups, before
fashioning a legislative proposal. It is eager to improve the quality of its
legislative proposal as well as increase the prospect that proposals will
pass successfully through the Council and the EP.
The Commission is empowered to make certain kinds of decisions on
its own. These include regulations enacted under overarching, frame-
work legislation – day-to-day executive decisions – and rulings in com-
petition policy cases. The purpose of competition policy is to police the
single market and prevent businesses and governments from getting an
unfair advantage. Businesses tend to complain about antitrust and other
competition policy measures, but generally appreciate that without a
vigilant watchdog the marketplace would likely be distorted to their dis-
advantage. In an integrated, transnational economic space, businesses
like dealing with a single competition authority. The Commission con-
ducts competition policy fairly and swiftly (there are strict deadlines at
each stage of the process). Most economic actors subject to EU compe-
tition rules view the Commission favourably, notwithstanding inevita-
ble complaints about specific rulings (Buch-Hansen and Wigger, 2011;
McGowan, 2010).
Caricatures of EU inefficiency: the Commission

and the Parliament
Many opponents of European integration caricature the Commission
as a bloated bureaucracy full of faceless officials meddling in everyone
else’s affairs. In fact, the Commission is a small organization, consist-
ing of about 33,000 staff, many of them interpreters and translators.
According to the Commission, this number of staff is ‘as big as the local
authority of a medium-sized European city’ (European Commission,
2015a). Arguably, there are too many commissioners (28) and too few
weighty portfolios. Having one commissioner per country may indeed
result in a Commission that is too cumbersome, but this organizing
principle has become sacrosanct following Ireland’s initial rejection of
the Lisbon Treaty – yet another example of the sensitivity of national
(domestic) politics in a supranational polity (O’Brennan, 2008).
In 2014, newly installed Commission President Jean-Claude Juncker
dealt with the challenge of the Commission’s large size by establishing a
matrix system, whereby four of the Commission’s Vice-Presidents, hav-
ing responsibility for broad policy fields rather than specific portfolios,
would lead ‘project teams steering and coordinating the work of a num-
ber of Commissioners’. This was intended to ‘ensure a dynamic interac-
tion of all Members of the College, breaking down silos and moving
away from static structures’ (European Commission, 2014b). Though
too early to assess the outcome, the new system illustrates the EU’s will-
ingness to innovate and eagerness to improve organizational efficiency.
Regardless, the commissioners are far from faceless – each has a wide-
ranging website – and the identities of Commission officials can easily
be obtained. By any standard, the Commission is compact, transparent
and hard-working. Some of its internal procedures are indeed highly
bureaucratic, a result of its transnational character and of tight finan-
cial controls put in place following well publicized cases of corruption
and mismanagement in the late 1990s. Most Commission officials are
capable, conscientious and highly professional. Not least because of the
prevailing climate of Euroscepticism, they are careful not to act irre-
sponsibly and exceed their authority.
The EP is another favourite target for EU-bashers. Politicians and par-
liamentarians (mostly the same thing in liberal-democratic systems) are
generally disliked in the current climate of anti-establishmentarianism
and political populism. The EP is especially unpopular because few people
understand exactly what it does and how it works. As a result, the turnout
in EU-wide elections for the EP, held every five years, has declined since
the first election took place in 1979. Most Europeans seem to view the
EP as a publicly supported leisure centre for politicians who, for whatever
reason, are out of favour at the national level. Unflattering media cover-
age of the EP tends to reinforce such a caricature.
Like most national parliaments, the EP has legislative, budgetary and
oversight responsibilities. These have increased over time, following
successive rounds of treaty reform, in an effort to strengthen the EU’s
democratic credentials. After all, the EP is the only EU institution that
is directly elected at the European level (the Council consists of govern-
ments that are directly elected at the national level), even if Europeans
do not turn out in large numbers for EP elections. With 751 members
operating in 24 official languages, the EP is bound to be unwieldy.
Despite its size and linguistic multiplicity, the EP carries out its respon-
sibilities remarkably efficiently. It has a powerful incentive to do so: it
knows that the Council is dubious about its capacity to perform and it
wants to be taken seriously as an institutional actor. The EP also hopes
that its institutional efficiency will favourably impress an inherently
sceptical public.
The EP owes its success in acquiring more power and exercising it
responsibly to a small but dedicated group of members in leadership posi-
tions (Corbett et al., 2014). Members of the European Parliament (MEPs)
sit in transnational political groups and on committees corresponding to
the EU’s areas of activities. The EP President and Vice-Presidents, together
with the heads of the political groups and chairs of the committees, form
a cohesive leadership cohort. The political groups are difficult to man-
age, given their transnational composition and the fact that the EU does
not have a government that depends for its survival on the s upport of a
single group or a coalition of groups in the EP. Nevertheless, the increas-
ing importance of the EP, especially in the legislative arena, has greatly
improved political group discipline. Going beyond ideological and politi-
cal group differences, MEPs in leadership positions use every opportunity
both to strengthen the EP’s power and carry out the EP’s responsibilities
as efficiently as possible (Hix et al., 2007).
In one obvious respect, the EP is intrinsically inefficient, however.
Monthly plenary sessions take place in Strasbourg; the EP’s secretariat
is in Luxembourg; and committee meetings (as well as occasional extra
plenary sessions) take place in Brussels. Having to maintain huge facili-
ties in Brussels and Strasbourg and move every month between them –
a distance of over 200 miles – is expensive, disruptive and damaging
to the EP’s public image. Keenly aware of those drawbacks, the EP has
been agitating to move its seat permanently to Brussels, where the Com-
mission and the Council are also located. But the EP is held in check
by the fierce opposition of the French and Luxembourg governments,
which want to maintain the status quo for economic and symbolic rea-
sons. Indeed, both governments insisted on the status quo being written
The EU: quick to regulate, slow to adapt 37
into the EU treaties, making any change extremely difficult. Many MEPs
want the EP to take a stand and stay in Brussels regardless, believing
that the ensuing constitutional crisis would benefit the EU, and espe-
cially the EP, by generating public interest and support (Banks, 2011).
Conclusion
The EU is a highly unusual, transnational polity. It has grown dramati-
cally in size since 2004, from 15 to 28 countries, with more waiting
to join. More members mean more languages, more cultural diversity
and more socio-economic differentiation. At the same time, the policy
scope of the EU has increased as well, with the original common mar-
ket developing into an integrated economic area including a monetary
union. Complementing the EU’s socio-economic policy remit, countries
have intensified cooperation in the fields of foreign policy and external
security, as well as justice and home affairs.
The EU’s system of governance has changed during this period of
major geographical and policy expansion in an effort to satisfy the twin
but sometimes competing demands of democracy and efficiency. Doubt-
less the EU is not as efficient as many would like it to be. It may not be
as efficient as it could be, despite the constraints that it faces. But the
perfect should not be the enemy of the good. Like any political system,
the EU should strive for improvement. It has a long way to go, but
deserves to be proud of how far it has come. Given the dangers posed
by divided Europe before 1989 and fragmented Europe before 1945, the
EU looks less like a bureaucratic monster and more like a miraculous
achievement: miraculous not only in its very existence but also in its
relative efficiency.
2.2 The EU: quick to regulate, slow to adapt

Mats Persson
Is the European Union efficient? The answer is both Yes and No. Yes,
if efficiency is understood to mean the rate at which the EU introduces
new rules, regulations, directives and initiatives. Yes, also, if we are
referring to the ability of the EU’s institutions to extend their own
powers at the expense of national, regional and local bodies – albeit
incrementally.
But the answer has to be No if we understand ‘efficient’ to mean the
EU’s capacity to adapt to the economic and political challenges of the
modern, globalized world, or its ability to alter its policies in light of new
evidence or changing economic circumstances. Alas, the EU’s emphasis

on process over substance often leads to sub-optimal policy outcomes.
An efficient regulator
The EU has substantial powers in the area of regulation, ranging from
regulating bank break-ups to working time and driving tests. Over
the last decade, the EU’s rate of producing legislation has significantly
increased, as shown in Figure 2.1.
In fact, the EU’s opaque structure makes it practically the perfect vehi-
cle for pushing through laws and regulations, often under the radar of
public scrutiny. As Thomas Jefferson famously observed, ‘democracy is
cumbersome, slow and inefficient’. By having designed a system which
works outside the constraints of national democratic processes, the EU
can push through laws and measures which would otherwise have been
caught by domestic opposition, most importantly national parliaments.
This tendency is both driven by, and then reinforces, the blurred line
between where the EU’s powers begin and where they end. Indeed, no one
is quite sure exactly how much of their sovereignty member states have
transferred to Brussels, illustrated by the fact that estimates on the share of
national laws now decided by the EU range from 9 per cent (House of Com-
mons Library, 2010: 16) to 84 per cent (Deutscher Bundestag, 2005: 15).
Here, the role of the European Commission must be fully understood.
The Commission combines the functions of an executive and a bureau-
cracy, with the sole right to initiate legislation in the European Union;
crucially, there are very few filters in place to ensure that the proposal is
viable and corresponds to a real demand in society (Open Europe, 2010).
30000
25000
20000
15000
10000
5000
0
1973
1974
1975
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1977
1978
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1982
1983
1984
1985
1986
1987
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1990
1991
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Regulations Directives Decisions Other acts
Figure 2.1 The growth of EU legislation: cumulative count of acts in force

The Commission therefore possesses agenda-setting powers enjoyed by

few other public bodies. And the appetite for new regulation is substan-
tial, stemming from a bias towards ‘ever closer union’. As former Industry
Commissioner Günther Verheugen once observed: ‘There are 27 Com-
missioners, which means 27 Directorate-Generals. And 27 Directorate-
Generals means that everyone needs to prove that they are needed by
constantly producing new directives, strategies or projects. In any case the
rule is: More and more, more and more, all the time’ (Der Spiegel, 2010).
Italian academic Giandomenico Majone (2005: 39) has rightly pointed
out that, ‘Under the Community method only the Commission is entitled
to set the legislative and policy agenda, and this monopoly allows it to
pursue objectives of political integration and self-aggrandisement while
pretending to solve specific policy problems – integration by stealth.’
It is true that the Commission’s proposals are often subject to drawn-
out negotiations between EU member states and the European Par-
liament. As UK Deputy Prime Minister Nick Clegg once observed,
‘Anything that takes 15 years to define what chocolate is, is not a model
of democratic efficiency’ (Beckford, 2010). But it is also true that once
tabled, a proposal tends to float around Brussels until finally adopted,
conjuring up images of a monster which if decapitated, quickly grows
two new heads. Proposals rarely die in Brussels.
This tendency is also driven by another asset that the Commission’s
thousands of civil servants have at their disposal: time. Verheugen again:
‘Too much is decided by civil servants … the whole development in the
last ten years has brought the civil servants such power that in the mean-
time the most important political task of the 25 [now 28] commission-
ers is controlling this apparatus. There is a permanent power struggle
between commissioners and high ranking bureaucrats. Some of them
think: the commissioner is gone after five years and so is just a squatter’
(own translation from: Hagelüken, 2010).
At the end stage of the regulatory process, the implementation phase,
the Commission again enjoys unusual powers in the so-called Comitology
phase, where it can add elements to a law once it has already been agreed
with very little input from national parliaments or even governments
(Guéguen, 2010). Comitology involves special committees consisting of
Commission and national experts deciding on how EU legislation should
be implemented – usually behind closed doors – after the proposal has
been agreed by the Council of Ministers and the European Parliament.
This gives the Commission a ‘second chance’ to add its flavour to what-
ever the member states and the European Parliament have agreed. All of
this makes the European Commission an ‘effective’ regulator.
For its part, the CJEU (Court of Justice of the European Union) has
a tendency to rule in favour of further integration, in that it tends to
reinforce the Commission’s ‘more Europe means more regulation’

approach to legislation rather than challenging it (Burley and Mattli,
1993). In fact, the EU Treaties explicitly commit the CJEU (Court of
Justice of the European Union) to practice ‘mutual sincere cooperation’
with the other EU institutions (TEU Art. 13.2). Alec Stone Sweet (2010)
has argued that the role of the CJEU and the national courts in monitor-
ing and enforcing member-state compliance with EU law ‘has provoked
a steady Europeanization of national law and policy-making’.
The EP could in theory shoulder the responsibility of balancing the
CJEU and the Commission, but too often it acts as a cheerleader for
further integration, rather than as a proper parliament with a ‘loyal’
opposition scrutinizing the executive and contributing to a vibrant
political debate. The EP has, for example, consistently pushed for inte-
grationist measures such as EU taxes, despite there being very little sup-
port for these among most electorates and governments across Europe.
But an inefficient reformer

Somewhat paradoxically, however, the tendency of the Commission, the
CJEU and the EP to pursue so-called integration by stealth – in turn
making it ‘effective’ in introducing new laws – also makes the EU ‘inef-
ficient’ insofar as the term is understood to mean effective in producing
good, well-targeted policies. This is no small part due to the ‘commu-
nitarian method’ effectively favouring process over content. Although
Majone comes at this from a slightly different angle, he notes that this
owes to the fact that a central dilemma has never been satisfactorily
addressed: ‘whether European policies should be initiated in order to
solve specific problems in the best possible way, or whether they are to
serve, first and foremost, integration objectives’ (Majone, 2005: vii). He
argues that the EU’s tendency of pursuing several objectives simultane-
ously ‘tends to produce suboptimal policy outcomes’.
In practice, this means that the EU may be very good at moving in
one direction – towards more regulation, deeper integration and bigger
bureaucracy – but in terms of producing or changing policies in light of
evidence, experience, citizens’ demands or changing circumstances, the
EU’s ‘communitarian method’ simply is not fit for purpose.
There are of course areas where the EU has proven itself capable of
adapting: for example, the EU’s competition policy, with some excep-
tions, has served Europe well and acted as a counterforce to national
protectionist instincts that in the past have led several governments to
pursue dated agendas that play well with vested sectoral interests, at
the expense of wealth creation and growth. Several areas of the single
market, such as some financial regulation, would fall into this category
as well (but a large chunk would not).
However, in other areas, the EU has struggled tremendously to produce

optimal policy outcomes. Unlike national legislation, once an EU law is
decided it is often set in stone, even if it proves overly burdensome or inap-
propriate in light of evidence and experience (Scharpf, 1988). Changing an
EU law requires the reopening and successful conclusion of negotiations
with all 28 member states and the European Parliament, which is very
hard to achieve (and a government may even lose concessions it previously
has won). New and existing EU laws can therefore continue to cause prob-
lems or generate heavy costs year after year and still be left unaddressed.
A conspicuous example is the EU’s Working Time Directive, which
regulates working time, rest periods and holidays across Europe. First,
the very premise of centralizing regulation over working time – that is so
specific to local circumstances – for 28 member states with vastly differ-
ent labour market models and economic structures is not driven by best
practice or common sense, but by ideology (and a desire by some mem-
ber states to raise rivals’ costs). The CJEU’s judicial activism has since
added fuel to the fire; in the so-called SiMAP ruling in 2000, the Court
ruled that time spent by residents on call in a hospital or other place of
work should count as full working time, even if the worker is asleep for
some of that time (Sindicato, 1998). Member states have spent nearly a
decade trying to come up with an alternative definition of working time
and rest periods – one more in tune with the reality on the ground that
will cost taxpayers less – but they have failed to do so. The most recent
attempt in 2009 was blocked by the EP on largely ideological grounds.
Hence, despite a clear majority of member states seeing a need for revi-
sion, the Directive remains unchanged.
And the list can be extended into other policy areas as well. For exam-
ple, the European Arrest Warrant, intended to ease cross-border polic-
ing for serious offences such as terrorism and organized crime, remains
unreformed despite widespread evidence showing that it unnecessarily
undermines civil liberties and is frequently used to hunt down suspects
accused of minor crimes. A report by the EU Commission found that
in the four-year period following its inception, almost 55,000 warrants
were issued, and although it helped law enforcement agencies to catch
some serious criminals who operated across borders, the majority were
issued for minor, even trivial crimes including the theft of a bicycle or a
cupboard door (European Commission, 2011). Despite it being a fairly
easy exercise to tweak the European Arrest Warrant to make it more
proportionate, it remains unreformed.
Similarly, the EU still subsidizes biofuels, and encourages its produc-
tion under the EU renewables targets, despite plenty of evidence show-
ing that these fuels can be counterproductive, since as much emissions
are generated producing them as they save compared with traditional
fuels, while their production often involves substantial environmental

damage itself (Kutas et al., 2007).
The biofuels targets also illustrate another problem with EU decision-
making: its susceptibility to companies or organizations seeking to obtain
an economic gain for themselves at the expense of society as a whole, so-
called rent-seeking. This works in at least two ways: first by influencing
the Commission in the agenda-setting stage, in which lobbyists in Brussels
can have an unusually significant impact (for reasons partly described
above). And second, by entrenching interests in the EU’s agreed policies,
exacerbating the already considerable difficulties in reforming failed or
questionable measures (see Chapter 7 for a debate on lobbying in the EU).
Perhaps the clearest examples of this phenomenon are the Common
Agricultural Policy (CAP), which is dated and comes with a range of
negative side effects such as driving up domestic food prices, distorting
markets and hurting farmers in the developing world; and the Common
Fisheries Policy (CFP), which even the EU’s former Fisheries Commis-
sioner Joe Borg described as ‘morally wrong’ (quoted in the Financial
Times, 2007; on CAP, see Chapter 11).While attempts at reforming CFP
have a long history, the sheer length of time between identifying the prob-
lem and addressing it, as well as the ability of some member states who do
relatively well out of the policy (such as Spain) to block reform, serves as a
pertinent reminder of the EU’s infectiveness in reforming flawed policies.
Perhaps most strangely, the EP still travels between Strasbourg and
Brussels every month, at an annual cost of €180 million to the Euro-
pean taxpayer, while emitting 20,000 tons of carbon, as estimated by
the www.oneseat.eu campaign organized by many EU officials and
MEPs. This is due to French insistence for keeping the Strasbourg loca-
tion. The President of the European Parliament, Jerzy Buzek, defended
the arrangement by comparing the Strasbourg seat to a ‘monarchical
symbol’, while a recent attempt by MEPs to scrap one of the monthly
Strasbourg sessions was compared by the French government to a ‘knife-
attack’ and it threatened to take the European Parliament to Court.
The two-seat system is a running PR disaster for the EU – and a mas-
sive waste of resources – and yet it remains in place. The EP’s two-seat
parliament illustrates how the EU often puts unhealthy emphasis on
symbols, process and institutions, rather than focusing all its efforts on
producing effective policies that citizens actually have asked for.
Is the EU too unwieldy to succeed in the

twenty-first century?
The phenomenon described above is one major reason which has led
even senior European politicians to conclude that the EU is simply too
unwieldy and too diverse to adapt to and compete in the twenty-first

century. Former French Prime Minister Edouard Balladur gave a stark
example of this pessimism when he said in 2010 that, ‘Europe at 27 is
doomed to confusion and failure. It suffers from problems that the Lis-
bon Treaty has failed to correct. Lack of authority: the 1950s structure,
with the [European] Parliament, the Commission and the European
Council, is too heavy. We will witness conflicts between the Parliament-
Commission duo and the European Council in the future … Lack of
coherence: the 27 member states have very different social and juridical
regimes’ (own translation from: Le Monde 2010).
The eurozone crisis since 2010 is perhaps the most critical example
of how the EU’s ‘one-size-fits-all’ framework tends to foster subopti-
mal policy outcomes – in this case, a single monetary policy for a set
of economies that are structurally very diverse. Greece, for example,
should clearly not have joined the euro, given that it simply was not in
a financial position to share currency with stronger countries, such as
Germany and the Netherlands. However, there was so much political
momentum for closer union that it signed up. In a significant way, the
crisis has discredited the notion of ‘ever closer union’, espoused by Jean
Monnet and propelled forward by successive generations of political
elites (Browne and Persson, 2011).
The communitarian method works when applied to complex regula-
tions or institutions. However, the eurozone crisis is about key deci-
sions on spending and taxation – which strike at the heart of national
democracy – meaning that national preferences and positions will block
effective reform of the single currency. As a consequence, the single cur-
rency remains unreformed, and the eurozone crisis remains a major
threat to Europe’s economic growth. This is not necessarily an argu-
ment in favour of the eurozone pursuing more integration – which may
be necessary to compensate for the huge economic divergences that exist
within the monetary union – but a stark reminder of how the EU’s guid-
ing principles of ‘ever closer union’ and one-size-fits-all have failed to
produce a well-functioning and effective Union.
The EU’s inefficiency in terms of policy output is perhaps most con-
spicuous in the area of foreign affairs. For years, European leaders have
talked a good game on the need for the EU to speak with ‘a single voice’
and become a more efficient global player. The Lisbon Treaty was meant
to give the EU a ‘foreign minister’ and an ‘external action service’, which,
according to the plans, were meant to multiply Europe’s influence on the
global stage. However, since 2009 when the Treaty entered into force, we
have been reminded time and again that the EU’s processes, institutions
and bureaucracies cannot magically replace 28 individual foreign poli-
cies. As with the single currency, the communitarian method may give
the EU the tools to pursue ‘integration by stealth’ in the areas of regu-

lation and law, but in foreign policy, substance is king. Put simply, the
method is wholly unsuitable for rapidly responding to challenges arising
around the world. This is because the national interests of 28 member
states have to be amalgamated, so as not to prejudice any of their diver-
gent interests in wider international affairs (see also Chapter 14).
As Belgian Foreign Minister Steven Vanackere said about the EU’s
response to the various popular uprisings across North Africa and the
Middle East in 2011: ‘In the absence of a central player that reacts,
makes analyses and conclusions quickly, it is the Germans today, the
French tomorrow or the English who partially take up this role … The
result is centrifugal, not centripetal’ (Le Soir, 2011). The events sur-
rounding the ‘Arab Spring’, in particular, demonstrated the need for fast
and flexible decision-making, something the EU’s bureaucratic machin-
ery is not suited to – though the EU did manage to reach a common
position at the early stages of the Libya conflict, for example. Former
British diplomat Charles Crawford has used the laws of physics to illus-
trate that momentum in foreign policy is often achieved by increasing
‘velocity’ and not ‘mass’. He argues that: ‘The key point about an EU
Foreign Policy is that it certainly adds heavy Mass (lots of countries
intoning the same thing), but it significantly reduces Velocity (i.e. the
speed with which positions are formulated and then the nimbleness of
actual real-life responses and associated resource deployments). The
result is uncertain and often much reduced impact’ (Crawford, 2009).
The failure to both agree and subsequently implement a common
position at the EU level is widely evidenced by the lack of a coherent
policy towards Cuba, the Middle East peace process, or even pressing
issues on its door step, such as Kosovo or relations with Russia.
Such reasoning reflects a more general conclusion about the nature
of EU policy-making: in areas where mass matters, such as enlarge-
ment and creating a single market for trade, the EU is efficient – in the
positive sense of the word. However, in combination with the opaque
‘community method’, mass makes the EU inefficient in some of the very
areas where it urgently needs reform, but efficient in areas that, frankly,
should be left to member states.
Note: This chapter is reprinted from the first edition of this volume. It
was written when the author was director of Open Europe, an inde-
pendent think tank.
Chapter 3
More Powers for Brussels

or Renationalization?
One question has been at the forefront of research on the EU ever since
its creation: would there be a steady shift of authority away from mem-
ber states and towards the supranational institutions or would mem-
ber states retain or even claim back their powers? The neofunctionalist
theory of European integration was the first response given to this ques-
tion: its proponents expected that national actors would increasingly
shift their loyalties and expectations away from the national level and
towards the new centre set up in Brussels (Haas, 1958). It did not take
long for intergovernmentalists to respond that national governments
would not be willing to give up their control of the speed and direction
of integration (Hoffmann, 1966). The debate gained particularly broad
attention with the acceleration of the process of European integration in
the late 1980s, this time pitting supranationalists (Sandholtz and Zys-
man, 1989) against liberal intergovernmentalists (Moravcsik, 1998).
Real-world events have not offered clear-cut support for either of the
two extreme positions. Observers were still bemoaning eurosclerosis in
the 1980s, when the EU’s member countries agreed on the completion
of the single market, a project that led to a period of exceptional supra-
national activism. The amount of legislation passed by the EU institu-
tions radically increased at that time. Only few years later, governments
agreed upon Economic and Monetary Union (EMU), effectively del-
egating monetary policy – a core competence of the nation state – to the
European level. But just when events seemed to spell victory for supra-
nationalism, intergovernmentalism came back with a vengeance. Voters
rejected the Treaty of Maastricht (1992) in a referendum in Denmark,
requiring the Danish government to negotiate a series of opt-outs in
areas such as monetary union, security and defence policy, and justice
and home affairs. More recent events have followed a similar pattern. In
2003 and 2004, first a convention and then an intergovernmental con-
ference discussed a treaty text that was supposed to become something
close to a constitution for Europe. Voters in France and the Netherlands,
however, rejected the resulting treaty, forcing governments to draw up
the less ambitious Treaty of Lisbon (2007). The position of President
45
46 More Powers for Brussels or Renationalization?
of the European Council that was created by this treaty has been seen
as contributing to the Commission’s ‘loss of strategic clout’ in the EU
(Emmanouilidis, 2011: 183–184).
The following two texts, while focusing on the changes introduced
in the Treaty of Lisbon, reflect this long-standing controversy between
intergovernmentalism and supranationalism. Derek Beach questions
the often-stated position that recent events in the EU signal a renation-
alization of competences and a return to intergovernmentalism in EU
decision-making. He argues first that an increasing number of policy
areas are dealt with at the EU level. Moreover, the new policy areas
are slowly but steadily covered by the so-called community method of
decision-making that grants substantial influence to the supranational
institutions by assigning the monopoly to initiate legislation to the
European Commission and allowing the European Parliament to decide
together with the Council of Ministers. Uwe Puetter, by contrast, empha-
sizes the growing importance of intergovernmental procedures in the
EU. Even day-to-day policy-making, according to him, is increasingly
dominated by intergovernmental routines that establish a new intergov-
ernmental method of decision-making. The question of more powers to
Brussels or renationalization, taken up in this chapter, is of major rel-
evance to the controversies tackled in Chapter 1 (The European Union:
Success or Failure?), Chapter 4 (How Democratic is the EU?) and the
contributions on the euro (Chapters 8 and 9).
3.1 A stronger, more supranational Union

Derek Beach
Are we witnessing a transformation of the EU from a strong suprana-
tional institution into a weaker Union dominated by governments? This
chapter analyses developments in the past two decades, investigating
whether we have seen a shift towards a new, more intergovernmental
Union with significant policy areas being renationalized. The argument
in this chapter is that the policy areas dealt with at the EU level are
expanding instead of retreating, and that many of the new policy areas
often tend to be governed by intergovernmental or hybrid procedures;
over time the rules are made gradually more supranational until the
policy area is fully within the supranational community method.
Like most aspects of the EU, any discussion of who governs is com-
plicated. Here it is important to note that there are actually two lines of
conflict that are typical in federal-like political systems – within levels
of authority and between levels of authority. In the US federal political
A stronger, more supranational Union 47
system, there is the constant theme of federal powers versus states’ rights
(between levels), while at the same time, the three branches of authority
and decision-making within the federal government jockey for power
and position (within levels). The main conflicts in the EU fall along these
same lines, and are illustrated in Figure 3.1.
First, at which level are policies dealt with? Is policy-making exclu-
sively at the ‘federal’ (EU) level, a shared competence or reserved to
member states? This dimension can be thought of in terms of, more or
less, Europe. Second, who governs within the EU level of authority? This
dimension is primarily related to the conflict between intergovernmental
institutions (European Council) and supranational institutions (European
Commission, European Parliament (EP), European Central Bank (ECB)).
This chapter deals first with conflicts on the first dimension, inves-
tigating whether we are witnessing a scaling back of the policies dealt
with at the EU level. Are member states reasserting themselves, adopting
national solutions instead of EU measures? I contend that the core of the
Union is remarkably strong, and that the scope of EU decision-making
is still expanding, with banking Union the most recent example.
Regarding the second dimension, are we witnessing a more intergov-
ernmental Union, or are supranational institutions maintaining and/or
increasing their powers? The argument here is that developments in the
past two decades actually indicate a strengthening of the Union’s supra-
national dimension, although the expansion of the role of the European
Council marks an attempt by governments to reassert themselves in the
governance of the most sensitive and high-level discussion in the EU.
EU level
Intergovernmental Supranational
(European Council, (Commission, ECB,
intergovernmental, CJEU, EP strong roles
‘Union method’ in ‘community method’
decision-making) decision-making)
1) Level at which policy dealt with? 2) Who decides at the EU level?

(between => EU or MS level) (within => institutional battles)
Member state level
Figure 3.1 Lines of conflict between and within levels of authority in the EU
However, even in the highly salient and sensitive EMU reform negotia-
tions that began in 2009, the Commission has played a key, behind-the-
scenes role, while the ECB has exploited its powers to help save the
euro. Further, a look at day-to-day EU policy-making shows that while
the ‘Union method’ has been used when new policy areas like Freedom,
Security and Justice (e.g. police cooperation in Europol) are introduced,
this has for the most part been a transitory phenomenon on the way
towards the eventual use of the supranational, community method (see
below).
Conflicts between levels – a renationalization of powers to

the member states?
Are we witnessing a scaling back of the policies dealt with at the EU
level, with member states reasserting themselves by repatriating pow-
ers to the national level? Based upon empirical developments in the
past two decades, the answer to these questions is that despite the mas-
sive economic downturn in the wake of the financial crisis of 2009,
there has been a remarkably stable core of policy competences at the
EU level dealing with the single market and flanking policies related to
the free movement of persons, capital, goods and services. Furthermore,
while the core areas of the national welfare state are only peripher-
ally impacted by the EU, a series of treaty reforms in the past 20 years
has substantially increased the scope of policy-making at the EU level
in flanking areas to the single market, for example through common
immigration and asylum policies within the so-called Area of Freedom,
Security and Justice.
The single market is the flagship of European integration, creating
enormous economic benefits for member states – benefits that act as a
strong centripetal force binding the EU together into a web of mutual
gains. Commission experts have estimated, for example, that the single
market in 2006 was responsible for an increase of EU Gross Domestic
Product (GDP) by 2.2 per cent and a rise in the level of EU employ-
ment by 1.3 per cent (Ilzkovitz et al., 2007: 56). A study by the Bertels-
mann Stiftung found that German GDP/capita was 2.3 per cent greater
in 2012 than it would have otherwise been without the single market,
whereas GDP/capita was 1 per cent greater for the UK (Bertelsmann
Stiftung, 2014).
There are few indications that this legislative core of policy areas dealt
with at the EU level is under attack by national governments; indeed,
over the past decade we have witnessed a number of new legislative
measures that attempt to strengthen the single market in areas like the
free movement of services and the creation of a digital single market.
Certainly, there is increased scrutiny within the strengthened subsidi-

arity procedure that was introduced in the Treaty of Lisbon, where each
piece of new legislation at the EU level is assessed for whether it is war-
ranted or not. However, there have only been a few isolated instances
in which this subsidiarity scrutiny has resulted in findings by national
parliaments or EU-level authorities that the matter should be dealt with
at the national level (see Blockmans et al., 2014).
One could also point to the ongoing debates about restrictions on the
free movement of workers in many Northern member states in recent
years. They were triggered by the combination of the increase in labour
migration (especially to the UK from Central and Eastern European
countries) and an expansive interpretation of the term ‘work’ by the ECJ
that has allowed EU nationals residing in other member states to gain
access to social benefits despite only having marginal connections to the
labour market, with potentially far-reaching financial implications for
national welfare systems. But despite these pressures, there have been
few calls for reintroducing national controls or otherwise moving the
regulation of free movement of workers to the national level, with the
notable exception of the British Prime Minister Cameron’s demands
for restrictions in connection with the June 2016 referendum on British
EU membership. Instead, most proponents of reforms simply want to
narrow the scope of the term ‘work’ to ensure that only EU nationals
who live and work full-time in another member state can gain access to
national social benefits.
Beyond the stable core of EU policies dealing with the single market,
the story of the last two decades has actually been a steady increase in
the scope of policy competences dealt with at the EU level through suc-
cessive rounds of treaty reform, followed by EU-level legislation using
the new competences. The Treaty of Amsterdam moved policy-making
on a range of policy areas relating to justice and home affairs to the EU
level, and increased the powers of the EU in issues like environmental
protection. More recently, the Treaty of Lisbon increased the scope of
EU policy-making further, for example creating legal bases for Euro-
pean intellectual property and for creating a European Public Prosecu-
tor (see Craig, 2010; Piris, 2010).
Perhaps the best recent example of an expansion of competencies to
the supranational level is the adoption of a series of legislative measures
that together have been called ‘Banking Union’, which has moved bank
supervision and rescue from the national to the EU level. The creation
of Banking Union followed a typical neofunctionalist spill-over logic.
Governments wanted to have free movement of capital in connection
with completing the single market in the late 1980s. Once national
banks were free to operate throughout the EU, many banks in countries
like Ireland and Spain became so big and complex that they could not
be effectively supervised by national authorities, nor could national
authorities afford to rescue them when they ran into problems after the
financial crisis started (e.g. saving Irish banks cost the Irish government
so much money that it was forced to ask for a rescue package from the
EU and the IMF). As a result, responsibility for bank supervision and
rescue was moved to the EU level in a Commission-led legislative pro-
cess (Howarth and Quaglia, 2013).
A counterargument often raised is that EU rules do not really mat-
ter if they have no real effect upon government behaviour, for example
when governments do not comply with EU rules that run counter to
their national interests (Treib, 2014; Conant, 2002). However, there is
a remarkably high level of compliance by governments with EU law
(see Treib, 2014 for a discussion). For example, the number of open
infringement procedures by the Commission against governments has
fallen steadily in the past five years (European Commission, 2014g: 13).
There have also been isolated instances where governments have bla-
tantly flouted EU rules. The most spectacular instance was France’s and
Germany’s violation of the rules of the euro’s Stability and Growth Pact
(SGP) by running budget deficits that exceeded the 3 per cent maxi-
mum in 2003. This infringement resulted in the undermining of the rules
holding the eurozone together, is often cited as evidence that the EU is in
crisis because the big member states can do what they want (e.g. Rosato,
2011). Yet the reality is that after the euro crisis started, there has been
a significant strengthening of the rules of the SGP, along with a broader
expansion of EU-level surveillance and supervision of member state fis-
cal and structural policies (Bauer and Becker, 2014) (see Chapter 8 for
more information).
Concluding, there are few indications that we are witnessing a shift
of authority from the EU level back to national governments. Even in
policy areas in which there was momentum towards renationalization,
such as the Common Agricultural Policy, there has been little devolu-
tion of powers to national authorities. Remarkably, while the economic
crises in the 1970s resulted in the stagnation of EU policy-making, the
recent crisis has spurred legislative efforts at the EU level to complete
the single market and engage in major reforms of the EMU. Here it
is useful to compare developments in the EU with the United States
in order to see what a major shift between levels of political author-
ity actually looks like. In the United States, the election of Republican
President Ronald Reagan in 1980 spurred a ‘devolution revolution’ that
involved the transfer of significant political authority from the federal
to the state level. While Reagan did not achieve the far-reaching shift
that he envisioned, he was able to grant states significant discretion in
the interpretation of national standards, thereby shifting considerable

authority back to the state level (Gerston, 2006).
Compared with developments in the United States, no such ‘devo-
lution revolution’ is apparent in the EU. Indeed, as will be discussed
below, the most likely medium- to long-term scenario is actually one of
increased policy-making authority at the EU level in areas of economic
governance to save the euro.
Conflicts within levels – a return to intergovernmentalism at

the EU level?
The second argument about a weakening Europe is that we have wit-
nessed the emasculation of the supranational institutions, with a con-
siderable shift in power to intergovernmental institutions, particularly
at the cost of the Commission (Bickerton et al., 2015). Observers point
to the creation of the new ‘President’ of the European Council as a case
in point (Puetter, 2014). Yet is there evidence that we are witnessing a
return to intergovernmental decision-making at the EU level?
The answer to this question depends upon what type of decision-
making is being referred to. Simplifying slightly, there is a hierarchy of
decision-making levels, ranging from the history-making reforms that
change the workings of the EU, over the setting of the long-term direc-
tion and agenda for the EU, to the daily policy-making process. The
argument here is that while we have seen a slight increase in the power
of intergovernmentalism at the highest levels, in daily policy-making
process, there are few signs that intergovernmentalism becomes more
important. And even at the highest levels, when we examine the pro-
gress of EMU reform negotiations in the past five years, EU institutions
like the Commission and ECB have played vital roles in both drafting
reform proposals and helping to resolve the crisis by exploiting their
powers creatively (see below).
At the very highest level, major reforms of the EU have always been
dominated by governments, although the Commission and EP exerted
influence at the margins (Moravcsik, 1998; Beach, 2005; Christiansen
and Reh, 2009). Given the fact that EU governments are legally the ‘Mas-
ters of the Treaties’ and given that past reforms involved major treaty
change within Intergovernmental Conferences (IGCs), anything else
would be very surprising. However, recent reforms of EMU have been
conducted in a piecemeal fashion instead of engaging in major treaty
reforms that would result in difficult domestic ratification processes
similar to what doomed the Constitutional Treaty in 2005. While there
have been some minor treaty changes (e.g. the creation of the European
Stability Mechanism (ESM)), most of the reforms have involved either
secondary legislation that fleshes out what the treaties actually mean, or
the use of delegated powers that de facto change what the rules mean.
In managing the EMU reform process, the intergovernmental European
Council President has collaborated with both the Commission and ECB
in the Four Presidencies framework (it became Five Presidencies in the
course of 2015), and both the Commission and ECB have played sig-
nificant roles in drafting reform proposals and in exploiting delegated
powers. The Commission, as is its prerogative, drafted the legislative
measures in both Banking Union and the two-pack and six-pack that
both reformed the SGP and that created the so-called European Semes-
ter of a series of coordination and limited enforcement mechanisms for
supervising member state fiscal and macroeconomic policies, whereas
the ECB had significant input in the drafting of Banking Union (Bauer
and Becker, 2014; Niemann and Ioannou, 2015). Furthermore, both
institutions have exploited their powers in what can be seen as ‘implicit’
reforms of the EMU. For instance, the ECB pronounced in 2012 that
it reserved the right to purchase government bonds of ailing member
states through open-market transactions (the so-called big bazooka),
and in the spring of 2015 it engaged in ‘quantitative easing’ to help push
the eurozone out of a deflationary recession. Another example of a crea-
tive exploitation by institutions of delegated powers was the attempt by
the Commission to spur domestic structural reforms aimed at enhancing
competitiveness through the introduction of a degree of ‘flexibility’ in
how the Commission interprets the rules of the SGP. Here the Commis-
sion has claimed that some flexibility in the rules for domestic budget
deficits can be accepted if the member state is engaging in major struc-
tural reforms (European Commission, 2015c).
Regarding the setting of the long-term agenda of the EU, the three
institutions that take responsibility for this are the European Council,
the Commission and the Council of Ministers. The conclusions of the
European Council set the long-term agenda for the EU, which are then
translated into legislative proposals by the Commission in its annual
Work Program. Here the Commission is a crucial facilitator upon which
governments are dependent on to flesh out their often vague ideas about
policy priorities into actual EU legislative proposals.
If we turn to look at the conflict within institutions in the day-to-day
policy-making in the Union, there is little evidence of an expansion of
intergovernmental decision-making. In this respect, the Lisbon Treaty
that went into force in 2009 marked a major expansion in strength-
ening the supranational institutions of the EU vis-à-vis the Council of
Ministers. Beyond the introduction of the community method in the
sensitive areas of the former third pillar, the Treaty also significantly
expanded the powers of the supranational EP in sensitive policy areas
by extending the use of the ordinary legislative procedure. By expanding

the ordinary legislative procedure, the powers of the EP are strength-
ened at the expense of the Council of Ministers, given that the later has
to agree upon a proposal together with the EP. The list of sensitive issues
in which the ordinary legislative procedure has been extended includes
agriculture and fisheries, the liberalization of services, and external trade
matters – all very sensitive issues in which governments previously were
unwilling to extend EP powers (Beach, 2005).
In addition, over the past two decades, when new policy areas have
been introduced they tend to be governed by intergovernmental deci-
sion-making. However, most policy areas follow a typical trajectory.
New policy areas are introduced when governments believe the benefits
of coordination exceed the sovereignty costs (the costs of giving up sole
control over a policy area). In sensitive issues that are at the core of
national sovereignty, member states such as France have traditionally
wanted to ensure that they retain a strong hand in decision-making, to
avoiding being outvoted by other governments in the Council and over-
ruled by supranational institutions (Commission, EP, CJEU). Over time,
as governments get used to taking decisions on these issues at the EU
level, they become less sceptical regarding moving the policy area to the
community method.
A prime example of this trajectory has been the trajectory of the area
of Freedom, Security and Justice that includes immigration and asy-
lum policies, along with police and legal cooperation. This policy area
was incorporated by the Treaty of Maastricht as the ‘third pillar’ of the
EU, with decision-making dominated by intergovernmentalism, with a
very weak role for the Commission and no role for the EP or Court.
The Treaty of Amsterdam moved the immigration-related parts of the
policies into the community method, albeit with a five-year transition
period and certain institutional safeguards to assuage governments that
were still concerned about their ability to block unwanted develop-
ments. With the Lisbon Treaty, all of the remaining third pillar has been
emptied, with all of the policies governed using the community method
with few restrictions. This includes the Commission right of proposal, a
strong role of the EP as the ordinary legislative procedure is used, and
the full extension of the jurisdiction of the CJEU to the policy area. This
of course does not mean that just because the supranational EU has
competences to create a common policy that there is de facto an actual
common policy. For example, existing treaties have granted the EU the
competences to create a common asylum and immigration policy. But
for a common policy to actually exist, these treaty-based competences
have to be fleshed out through EU secondary legislation, which has only
happened to a very limited extent in asylum and immigration policies.
The overall picture is therefore a reduction in the use of intergovern-

mentalism in daily decision-making, although there remain significant
exceptions in areas such as foreign and security policies, and some of the
most sensitive issues relating to eurozone governance. Given the sensi-
tivity of these issues, it remains to be seen whether they also will follow
the same trajectory as issues such as Freedom, Security and Justice.
Conclusion – a stronger, more supranational Union

The conclusion based upon the preceding analysis is that the Union is far
from moribund, as some authors otherwise claim (e.g. Rosato, 2011).
Indeed, we have seen a considerable increase in the scope of political
authority at the EU level and surprising levels of compliance with EU
rules despite the economic crisis. There has been a shift of political
authority within the EU, with the European Council becoming increas-
ingly predominant in the setting of the EU’s long-term agenda, but at
the same time, the use of the community method has been expanded
to include sensitive policy areas such as Freedom, Security and Justice,
while the powers of the supranational EP have increased considerably at
the expense of governments within the Council of Ministers. And even
in the recent highly controversial reforms of EMU, the Commission and
ECB have played key roles in facilitating agreement and exploiting their
powers to provide de facto solutions to key problems.
These conclusions raise the question of whether a stronger, more
supranational Union is a normative good. Given the high level of eco-
nomic, political and cultural interdependence between EU member
states, one can argue that a stronger supranational level ensures that
policies are enacted that have the European ‘common’ good in focus will
be adopted, instead of nationally egoistic solutions. While sensitive to
national circumstances, supranational institutions like the Commission,
ECB and CJEU are mandated with thinking about what serves the com-
mon EU good instead of a ‘only what’s good for me’ type of reasoning
that results when national governments attempt to formulate solutions
to EU-level challenges.
On the other hand, there are legitimate concerns about EU-level
democracy – indeed, whether it is even conceivable to have a democratic
system spanning such a large territory and population with very differ-
ent constituent units. Some cite the 2014 EP election results as evidence
of mass dissatisfaction with the state of affairs in EU-level democracy.
Here one can argue that the recent strengthening of the role of demo-
cratically legitimated national parliaments in EU decision-making is at
least a partial solution to the problem. Additionally, only 30 per cent of
voters across the EU voted for Eurosceptic parties, with a large majority
The new intergovernmentalism 55
opting for pro-EU parties, suggesting that there is not widespread dis-
satisfaction with EU-level democracy.
And while EU-level democracy is not perfect, returning to a much more
intergovernmental Union would only result in policies that reflect what
citizens of the largest member states want, leaving a vast majority of EU
citizens residing in smaller and weaker member states non-represented.
3.2 The new intergovernmentalism – the

next phase in European integration
Uwe Puetter
It is hard to ignore the constantly growing activism at the top-level of
intergovernmental decision-making in European Union (EU) politics.
The meetings of the European Council, of the Eurogroup of euro area
finance ministers and of the Foreign Affairs Council are at the centre of
media interest. Monthly, bi-weekly and, at times, even multiple weekly
gatherings of ministers dealing with economic, financial and foreign
policy issues in standard and in crisis situations have become a rou-
tine feature of EU governance. The Commission, it appears, is just one
among the many voices which air ideas about Europe – in particular
when it comes to the most pressing and politicized subjects. The enquiry
what next step the EU will take is directed towards the capitals rather
than the Brussels-based bureaucracy. When the euro crisis started to hit
the EU in 2008, it was not the Commission which was at the centre of
political action but the European Council. The crisis triggered frenetic
meeting and coordination activity involving the most senior political
decision-makers of the member states and the EU institutions. Even as
the most immediate threat of a spiralling sovereign debt crisis and the
potential break-up of the euro area resided, this dynamic did not change.
The Juncker Commission, which took office after the 2014 European
Parliament elections, largely failed in playing a more visible role in eco-
nomic governance (Flora et al., 2015). Instead, Juncker worked with the
five presidents of the European Council, the Eurogroup, the ECB and
the EP on a report on ‘Completing Europe’s Economic and Monetary
Union’ (Juncker, 2015). As the situation in Greece deteriorated again
in the summer 2015 and the country came close to leaving the euro
area, it was the Eurogroup, the informal decision-making forum of the
finance ministers of the euro area countries, and the Euro Summit, the
euro area formation of the European Council, which eventually stuck a
deal on the continuation of ESM financial assistance in mid-July 2015
(Eurogroup, 2015).
EU crisis diplomacy in relation to the war in Ukraine, which peaked in

2014, was led by the Foreign Affairs Council, not the Commission. The
French president and the German chancellor were crucially involved
in the 2015 Minsk ceasefire negotiations rather than the Commission
president. The European Council and the foreign ministers were the
ones to make the ultimate decisions on sanctions. This is not to say that
the Commission was absent in all this. Yet, it played a supporting rather
than initiating role. It followed requests from member-state governments
in the European Council, and the Council and did not push member
states to authorize new competence transfers to Brussels. This is evi-
dent from Juncker’s close cooperation with the presidents of the other
core EU decision-making bodies, as in the case of the above-mentioned
report of the five presidents. Moreover, the Commission supervised the
implementation of bailout conditionality in the framework of the so-
called troika or the institutions, and it assisted in compilation of the list
of suitable sanctions against Russia. However, it were the most senior
representatives of member-state governments themselves who set the
agenda and agreed collective EU action.
The Lisbon Treaty did a lot to reinforce this pattern of contempo-
rary EU governance, of which the origins can be traced back to the late
1990s when the European Council rushed to kick-start a stream of high-
level policy coordination arrangements in new areas of EU activity such
as economic governance, foreign affairs and social and employment
policy. The so-called Lisbon agenda was one of the prominent examples
in this context, yet the related coordination mechanisms became deeply
institutionalized within the overall framework of the EU’s governance
architecture. The Lisbon Treaty provides ample evidence for this as it
included the European Council in the list of the EU’s core institutions.
The Treaty created the office of a permanent European Council presi-
dent and explicitly denied the possibility of legislative action under the
community method within the domain of foreign, security and defence
policy (TEU, Art. 24.1), instead emphasizing intergovernmental policy
coordination as main governance mode. The Lisbon Treaty also incor-
porated the Eurogroup as an informal forum for the euro area. The
group, too, has a permanent president. Similarly, the High Representa-
tive became the permanent chair of the Foreign Affairs Council, thus
establishing a distinct working method for these three forums, which
differs from arrangements which are valid in other traditional domains
of Council decision-making which are focused on legislative activity
instead.
Indeed, key political actors are suggesting that the character of EU
governance is changing. The first full-time president of the European
Council, Herman Van Rompuy, spoke of a ‘new institutional balance’
(Van Rompuy, 2011). The German chancellor Angela Merkel saw a ‘new
Union method’ emerging, which blends elements of the classic com-
munity method and an intergovernmental method of decision-making
(Merkel, 2010). Most importantly, the growing focus on close intergov-
ernmental policy coordination and the European Council’s tight grip on
policy initiative – a domain typically associated with the C ommission –
has not come at the expense of closer European integration so far. Quite
to the contrary, EU policy activity has been expanding at pace over the
last two decades, and core domains of national sovereignty such as
budgetary policy and diplomacy are closer to EU-level decision-making
than ever before in the history of European integration.
This suggests that contemporary European integration is marked by a
new intergovernmentalism, which is different from both classical supra-
nationalism which is associated with the empowerment of the Commis-
sion and the Court as the main drivers of integration and from a type
of intergovernmentalism, which is considered to constitute an obstacle
to further EU authority rather than its main catalyst. Why is this so?
How can we then understand contemporary European integration as
a dynamic and evolutionary process? What does all this imply for EU
governance more generally?
This chapter presents a threefold argument on the evolution of the
EU’s institutional architecture. It argues, first, that the most fundamental
institutional changes are not driven by a further supranationalization of
member state competences but through a new form of intergovernmen-
talism, which is the prevailing mode of governance in highly prominent
areas of EU activity such as economic governance and foreign and secu-
rity policy. Second, this new form of intergovernmentalism is not under-
stood as a rejection of or scepticism towards European integration. It
is, rather, an alternative form of governance which prevails over the
classic community method as the main mechanism of decision-making.
Although it is concentrated within specific policy fields, the repercus-
sions of this institutional dynamic impact on the overall character of
EU governance. The new intergovernmentalism is consolidated through
particular institutional mechanisms and practical routines which ensure
that member states remain in constant dialogue over policy decisions.
This institutional dynamic is reflected in the transformation of the role
of the European Council and the Council, which gain even greater
prominence in EU governance (Puetter, 2014). Governance routines are
based on the permanent generation of consensus at the highest politi-
cal level – a dynamic which is referred to as deliberative intergovern-
mentalism (Puetter, 2012). Third, the new intergovernmentalism can be
understood as a novel phase in European integration which exhibits
institutional and political features which are not limited to the sphere
of intergovernmental decision-making forums but which are detectable

in all institutional domains and with regard to all aspects of EU politics
(Bickerton et al., 2015). Fourth and finally, a normative debate about
the limits of this new institutional trend is developing from two different
and not necessarily compatible perspectives. Whereas some advocate
acknowledging the new intergovernmental order by introducing a fairer
and more inclusive system for intergovernmental decision-making, oth-
ers call for the renewed empowerment of the Court and the Commission
as the guardians of the Union. The argument here is that the new inter-
governmentalism is likely to prevail in the foreseeable future as options
for alternative constitutional settlements are highly limited.
The integration paradox

The Union is confronted with the dilemma that because of the high
degree of integration it has achieved already, any further transfers of
competences to the supranational level following the traditional model
of the classic community method may be conceived as de facto chal-
lenges to formal member state autonomy. Member state governments
are fearful of being no longer able to claim ultimate control over the
integration process as such. This dilemma informs institutional choices
in contemporary EU governance. The classic community method is
defined here as the mechanism to produce legally binding decisions in
areas in which the EU has been assigned the competence to do so. This
mechanism thus creates supranational authority to legislate and to per-
form executive functions independent of immediate member state influ-
ence. For the past two decades, member-state governments have been
firm and almost unanimous in rejecting the idea that the expansion of
community method decision-making could be pursued indefinitely. Yet,
they have equally insisted that major contemporary policy challenges
require collective EU-level action and cannot be addressed unilaterally.
The 1992 Maastricht Treaty marked a watershed in this regard. For
the first time, member-state governments agreed on a substantial expan-
sion of the scope of EU policy activity without giving the green light
for a simultaneous expansion of community method decision-making.
Though Economic and Monetary Union (EMU) involved the creation
of a supranational monetary pillar around the novel European Central
Bank, budgetary policy and other aspects of economic governance were
organized within a decentralized governance framework which was
based on the coordination of national policies rather than centralization
of fiscal resources and decision-making authority. Equally, foreign, secu-
rity and defence policy was based on policy coordination rather than
centralization, and so was justice and home affairs cooperation. Instead
of breaking up this trend, the subsequent Treaties of Amsterdam, Nice

and Lisbon, including the failed Constitutional Treaty, have confirmed
this new base logic of integration. Except for the field of justice and
home affairs governance, which was vested with legislative decision-
making powers, albeit in a modified format, the model of decentralized
governance prevailed in new areas of EU activity. It was even expanded
further so to include policy coordination mechanisms in the spheres of
employment, social policy and social inclusion. Other domains of EU
policy-making which are normally assigned to the core of single market
governance and, thus, subject to community method decision-making
also exhibit features closely linked to the new intergovernmentalism.
Environmental policy and global action against climate change, higher
education or energy policy including the aspect of energy security are
prominent examples.
This paradoxical combination of a principled resistance towards a
further transfer of formal decision-making competences to the supra-
national level, and the strongly shared conviction that the EU needs to
act collectively in major policy fields constitutes the integration paradox
(Puetter, 2012). It characterizes European integration since the Maas-
tricht Treaty and marks a new and distinctive phase within the inte-
gration process. In other words, since Maastricht, EU integration has
progressed significantly, yet not following the trajectory of the commu-
nity method.
Deliberative intergovernmentalism
The new intergovernmentalism has been deeply institutionalized in post-
Maastricht EU governance. A complex coordination machinery has been
built up, and it seems that little can stop this machinery. The regular
and often intense controversies about policy decisions lead to the fur-
ther refinement of this machinery as well as more frequent interactions
between the relevant actors. Again, this is explained by the underlying
conviction that closer cooperation is of key importance. In other words,
contemporary decision-making at the EU level is consensus-driven. The
most senior representatives of the member states argue it out and collec-
tively determine what the EU does next. This new governance method
is therefore best conceptualized as deliberative intergovernmentalism
(Puetter, 2012).
Political action is concentrated especially within the European Coun-
cil, the Eurogroup and the Foreign Affairs Council. All three forums for
intergovernmental decision-making have undergone significant institu-
tional engineering in the post-Maastricht period (Puetter, 2014). The
reason for the centrality of these forums in current EU affairs is the need
to mobilize political support within the domestic arenas of member

states. As the Commission and the Court cannot play their traditional
roles in policy implementation and enforcement within the new areas of
EU activity, as they are banned from exercising such competences; con-
stant attempts by member-state governments to mutually reassure each
other the support of joint initiatives are the only viable option. Even
in areas where member states agreed to grant the Commission greater
surveillance and reprimand powers such as in the domain of budgetary
policy following the reform decisions in the wake of the euro crisis,
the Commission finds it extremely difficult to assert itself (Hodson and
Puetter, 2016). In other words, it lacks both the formal authority and the
legitimacy to unilaterally correct non-compliance on the part of individ-
ual member states. In the context of post-Maastricht EU politics, only
the European Council and the Eurogroup have enjoyed such authority,
though both institutions have been careful to exercise formal sanction
powers beyond the enforcement of bailout conditionality.
While intergovernmentalists in the past (Moravcsik, 1993) have mainly
focused on how member states exercise control over the EU’s legislative
and constitutional process and compete for influence in ensuring that
EU-level decisions reflect what they understand as domestic preferences,
deliberative intergovernmentalism as an analytical framework instead
sees the question of how political consensus between the member states
is organized, as determining institutional choice in post-Maastricht EU
politics. The consensus dependency of EU policy-making in economic
governance and in foreign and security policy is internalized by the key
actors. They endorse and actively search for institutional settings which
are conducive towards consensus oriented intergovernmental policy
dialogue. Therefore, deliberative intergovernmentalism expects that the
way how core EU institutions operate is transformed as these institu-
tions face increased demand for coordination.
A new phase in EU integration

The new intergovernmentalist turn in EU governance has continuously
become more pronounced from the late 1990s onwards. The EU was
under pressure to find responses to unemployment, social exclusion
and lacking economic reform efforts. These matters became even more
pressing as the single currency was launched. Similarly, the EU’s failure
in the 1990s to play a more decisive role in taming conflict in former
Yugoslavia was a trigger for greater political determination to increase
the Union’s foreign and security policy profile. The open method of
coordination and so-called new modes of governance which function
without the instrument of legal constraint were introduced to the fields
of employment, social inclusion and structural reform policy next to

the original domain of EMU economic governance (Armstrong, 2010;
Pochet, 2004; Trubek and Mosher, 2003). Similarly, the coordination
infrastructure expanded at great pace with powerful senior coordina-
tion committees such as Economic and Financial Committee and the
Eurogroup Working Group (Grosche and Puetter, 2008) as well as the
Political and Security Committee (Duke, 2005) occupying a lead role
in policy implementation and initiation. In all these settings, the Com-
mission has remained a crucial actor but it does not control the bureau-
cratic output.
Indeed, the new intergovernmentalism is a broader institutional and
political dynamic which marks a new and distinct phase in European
integration. It depicts a set of particular features which have impli-
cations for how the EU is governed and for how scholars can make
sense of post-Maastricht integration (Bickerton et al., 2015). Next to
the deliberative character of intergovernmental policy coordination
and institutional orientation of the EU’s most senior forums for inter-
governmental decision-making towards consensus generation, the new
intergovernmentalism is also characterized by the way how traditional
supranational actors position themselves towards these developments.
Rather than fundamentally opposing the rise of intergovernmental
bodies and coordination structures, the Commission has been largely
complicit in these developments and, for example, lends its resources to
the above-mentioned committees. Its president coordinates closely with
the European Council. Moreover, member states’ reluctance to further
empower the Commission and to transferring policy-making resources
to the supranational level has translated into the proliferation of a range
of de novo bodies in EU governance which are located at the interface of
supranational and intergovernmental governance mechanisms, such as
the European External Action Service. These bodies are mainly focused
on engineering the collective use of decentralized member state and
also Commission resources for achieving common goals. The European
Stability Mechanism or the EU’s border agency Frontex are prominent
examples in this regard.
Yet, these institutional developments are inherently political. The
post-Maastricht period is marked by growing contestation of EU inte-
gration within the member states. National governments have been
repeatedly challenged for their (pro-) European policy stance and could
not rely on public endorsement even though they had a clear election
mandate. Such problems in domestic preference formation have become
standalone inputs into the European integration process itself. Public
concerns about EU integration thus inform the EU’s institutional make-
up. The empowerment of the European Council is a crucial aspect of
this development as heads of state and government seek to portray

themselves as exercising tight control over EU policy-making.
Intergovernmentalism and its limits – the normative debate

The above developments are not without contradictions. The new inter-
governmentalism originated from a paradoxical attitude towards inte-
gration and a context within which popular support for integration is
often uncertain. A frequently voiced argument in favour of a revision
of the EU’s institutional set-up is that the application of the classic
community method within new areas of EU activity such as economic
governance and foreign affairs would correct the often non-transparent
and secretive way of intergovernmental decision-making and the lack
of judicial control. Yet, such proposals overlook the very origins of
the new intergovernmentalism. The new institutional dynamics pre-
cisely emerged because the community method had been profoundly
discredited.
In contrast to this supranational critique of new intergovernmental-
ism, Sergio Fabbrini (2015) takes a different stance. He acknowledges
the conflict between centralization and greater member state autonomy,
which is inherent to post-Maastricht integration, yet he warns that the
new decision-making dynamics have given ground to hegemonic rela-
tions within the EU as they, for example, advantage creditor countries
over debtor countries in EMU economic governance. To cure this asym-
metry between member states, Fabbrini proposes that the EU acquires
a similar constitutional structure to the ones which he sees present in
the cases of Switzerland and the United States. A quasi-federal EU cen-
tre would enjoy the competence to make financial interventions while
member states still run their own budgetary policies. The power of the
centre would not be constituted unilaterally by the Commission as the
sole supranational executive but rather through different institutions
which represent respectively supranational and member state interests
and which divide power between them.
Although Fabbrini’s argument addresses a key normative concern in
multilayer political systems, namely that questions of power distribu-
tion can trigger new constitutional settlements, it rests uneasily with
the analysis of the new intergovernmentalism, if understood as an ana-
lytical rather than normative theoretical framework for understanding
post-Maastricht integration (Bickerton et al., 2015; Puetter, 2014). Seen
from the latter perspective, the expectation is rather that EU govern-
ance remains to be characterized by an institutional disequilibrium for
the time to come. The options for an alternative constitutional settle-
ment seem to be limited given paradoxical attitudes towards European
integration on part of member state governments and a pronounced

Euroscepticism in EU member countries.
Conclusion
The Lisbon Treaty further strengthens the intergovernmental dimension
of EU decision-making in areas not governed by the classic community
method. It rejects a redistribution of supranational and member-state
competences to the benefit of the supranational level. More specifically,
this implies that two of the now most prominent fields of EU policy-
making – economic governance and foreign and security policy – will
not become areas of supranational competence for the foreseeable
future. Yet, the Lisbon Treaty does not lack ambition to further develop
EU action through strengthening intergovernmental policy coordina-
tion. It adapts key EU institutions to this challenge. Not coincidentally,
the partial abolition of the rotating presidency system is concentrated
on the European Council, the Foreign Affairs Council and the Euro-
group. This reflects the scope and complexity of the new intergovern-
mentalism, which emanates from two policy sectors but has far-reaching
consequences for the EU’s general institutional architecture.
An underlying feature of the new intergovernmentalism is its con-
sensus orientation. The concept of deliberative intergovernmentalism
helps to understand this method of EU governance as a dynamic and
evolutionary one, which transforms the way how core EU institutions
work. This particular feature of the new intergovernmentalism does not
imply that it is free of contradictions and democratic challenges. Quite
to the contrary, the new intergovernmentalism rests on paradoxical atti-
tudes of member state governments towards European integration. By
attempting to exercise direct and collective control over some of the
EU’s most prominent policy fields, governments have made decision-
making (even) more opaque and secretive. Neither a supranationaliza-
tion of the new areas of EU activity nor a new constitutional settlement
which would formalize the role of the European Council as the second
chamber of the EU seem to be likely institutional fixes.
Chapter 4
How Democratic is the EU?
Talk about the EU’s democratic deficit started in the mid-1980s, in the
midst of the implementation of the single-market programme. The fear
arose that this programme involved a step change in the integration pro-
cess that would undermine democratic accountability at the member-
state level without providing any compensation for this loss through
improved forms of democratic oversight of policy-making at the EU
level. The failed referendum on the Maastricht Treaty in Denmark
(1992) was the first visible rejection of EU policies by an electorate. Ever
since, the critics have denounced a shift in power away from national
parliaments and towards national governments and the Commission, as
a result of European integration (for example, Føllesdal and Hix, 2006;
Weiler, 1991). The EU’s decision-making rules foresee that policies are
first elaborated by the Commission, a bureaucracy that is not subject
to electoral control. When these policies then are debated by national
governments in the Council of Ministers, a lack of transparency impedes
control by national electorates. Moreover, the critics argue that the only
directly elected institution at the European level, the European Parlia-
ment, lacks the powers to counterbalance the Commission and Council
in the decision-making process.
Several counterarguments have been made to this critical assess-
ment of the EU’s democracy (for example, Majone, 1998; Moravcsik,
2002). For one, it is argued that the policies decided upon by the EU
are mainly of a regulatory nature, that is, they do not create distribu-
tional concerns. In this view, regulatory policies improve the economic
wellbeing of all citizens and thus do not require democratic input to
be considered legitimate. Others have posited that the EU’s institu-
tional structure is much more benign than portrayed by the critics.
Since national parliaments directly control national governments, and
national governments are the dominant actors in the EU’s decision-
making process, citizens continue to control EU policies. Proponents
of this view also stress the increasing powers that have been conferred
on the European Parliament, to the detriment of the Commission and
the Council, in a series of treaty revisions starting with the Treaty of
Maastricht.
64
The inevitability of a democratic deficit 65
In this volume, Richard Bellamy and Christopher Lord take up this debate.
Bellamy criticizes the EU’s record as a democratic political system, mainly
stressing the lack of a European demos. Lord defends the EU’s democratic
credentials, arguing that public control of the EU, while limited, is still use-
ful. The two texts take up issues that have been introduced in Chapter 1, but
also relate to Chapter 2 on the political efficiency of the EU, Chapter 5 on
the role of the CJEU (Court of Justice of the European Union) in the process
of European integration, and Chapter 6 on a European identity.
4.1 The inevitability of a democratic deficit

Richard Bellamy
Abraham Lincoln famously defined democracy as ‘government of the
people, by the people, for the people’. In many respects, the key debates
over the EU’s democratic deficit can be categorized in terms of which
of these three elements they focus on. Thus, the traditional debate has
centred on whether the weaknesses of government ‘by’ the people at the
EU level reflect the absence ‘of’ a European people with a shared iden-
tity and interests capable of ruling itself, or the absence of appropriate
institutions with suitable powers through (or ‘by’) which such a people
might rule. This discussion has given rise in turn to a second debate
alleging that for the highly technical and limited policy areas covered by
the EU, government ‘for’ the people need not involve government ‘by’
the people at all. Responsible and reasonable administration suffices. So
long as the EU delivers policies that benefit all in an efficient, effective
and equitable way, no deficit exists. The sections that follow will explore
each of these debates in turn.
Democracy ‘of’ and ‘by’ the people: ‘no demos’ vs

demos creation
The ‘traditional’ debate regarding the EU’s democratic deficit can be
characterized as being between those that deny the EU possesses a peo-
ple, thereby making government ‘of’ the people ‘by’ itself an illusion at
best – what Joseph Weiler has termed the ‘no demos’ thesis (Weiler, 1995:
225), and those who believe that the presence of the requisite democratic
institutions will bring a demos into being, rendering a government ‘of’
the people possible through facilitating government ‘by’ the people (Hix,
2008). By and large, these two positions have talked past each other.
Those commentators who emphasize the lack of a pan-European
demos argue that strengthening the democratic credentials of EU
66 How Democratic is the EU?
institutions – particularly the European Parliament – will deepen rather

than lessen the democratic deficit. Unless the citizens of the various
member states possess a sense of belonging to a single European peo-
ple, who share certain common values and collective purposes, then a
pan-European democracy will not produce a system of popular self-
rule, whereby a people rules itself. Rather, it will be the means whereby
certain peoples rule over other peoples (Abromeit, 1998: 32). Because
even the tightest-knit societies contain disagreements, democracy gener-
ally involves majority rule rather than rule by unanimity. However, the
legitimacy of majority rule rests on both majority and minority sharing
sufficient interests and values for majority tyranny to be unlikely. To be
legitimate, majority rule must not be the rule of one section of society
over another, so much as what ‘most of the people’ in a society believe
is in the general interest. When ethnic, cultural, social or other divisions
prove so deep that they consistently take precedence over any sense
of commonality, then majority rule and democracy break down – as
Belgium’s recurring difficulties in forming a government due to the deep
and persistent divisions between the French and Flemish sections of the
country vividly illustrates. Proponents of the ‘no demos’ thesis argue
that in the context of the EU, democracy as rule ‘by’ the people likewise
proves unworkable. So long as citizens feel more French, British, Ger-
man and so on than European, they will regard rule by a pan-European
majority as illegitimate as the French Belgians would view government
by a predominantly Flemish majority.
Those inclining towards the ‘no demos’ thesis favour the continu-
ing intergovernmental features of EU policy-making and the require-
ment for a consensus among the member states on key issues. These
processes ensure all the European peoples agree to any EU-level policy.
By contrast, they see the increased use of even Qualified Majority Vot-
ing (QMV) within the Council of Ministers and the enhanced powers
of the European Parliament under the co-decision procedure as inap-
propriate uses of the democratic method. However, many advocates of
improving the democratic quality of the EU’s institutions contend such
initiatives will bring about a European demos and improve the average
citizen’s attachment to the Union. They believe that popular disaffection
and lack of identification with Europe stems from the European peo-
ples’ frustration at the limited opportunities available for them to have
a democratic say in EU affairs as a people, not from these small steps
in that direction (Hix, 2008). So, what is a socio-cultural constraint on
any true EU-level democracy for the first group of scholars, becomes a
product of the failure to create an EU democracy for the second group.
Prima facie, the evidence supporting the ‘no demos’ thesis is unde-
niable and consistent over time. For example, Eurobarometer surveys
consistently indicate that less than 10 per cent of EU citizens have a

strong sense of EU identity, with only around 50 per cent feeling even
a weak attachment – and that strongly secondary to their local and
national ties. Although a bare majority of European citizens believe
their country has benefited from membership, only 3 per cent of citi-
zens generally view themselves as ‘Europeans’ pure and simple, with
a mere 7 per cent regarding a European identity as more important
than their national one. By contrast, approximately 40 per cent describe
themselves as possessing a national identity only and 47 per cent place
nationality first and Europeanness second. Indeed, though 91 per cent
of these citizens usually declare themselves attached to their country and
86 per cent to their locality, only 53 per cent feel attached to the EU.
(Figures drawn from EB 61 May 2004 and EB 68 Autumn 2007, with
few changes in this regard since the 1990s, e.g. compare EB 33 1990,
where 51 per cent of those polled say they never feel European.)
These comparatively low levels of identification with the EU appear
confirmed by the figures for actual participation in EU politics. Aver-
age turn-out in elections for the European Parliament runs at below
50 per cent and in many countries is as low as 25 per cent. One might
expect identification with the EU to be higher among those who had
moved for work or other purposes to another EU country to their
own. However, the figures are even lower for EU citizens resident in
another member state and exercising their right to vote in EU-level
elections. According to a Commission study of 2002, the proportion
of non-national EU citizens even bothering to register to vote ranges
from a mere 9 per cent in Greece and Portugal to just 54.2 per cent
in Austria.
Those advocating strengthening EU-level democracy counter that
Europeans have more in common politically than ‘no demos’ argu-
ments allow. For example, much the same left-right divide exists in all
ember states, allowing ideological groupings within the European
the m
Parliament to be formed reasonably easily (Hix, 2008). There is also
evidence that debates about EU matters within each of the member
states follow parallel lines to a considerable extent (Risse, 2010). Like-
wise, they note that the member states share similar constitutional and
democratic principles. For example, all are signatories of the European
Convention of Human Rights, to which the EU itself may eventually
accede, while Lisbon incorporated the Charter of Fundamental Rights
of the European Union into the Treaty. Consequently, they surmise
that little stands in the way of a genuinely pan-European politics based
on majority rule. They suggest that identification with and participa-
tion in EU politics would increase if the European Parliament had the
positive power to elect Commissioners from among MEPs and propose
EU legislation, rather than simply the negative power to vet member

state nominees to the Commission, sack the Commission en masse and
amend or reject Commission legislative proposals. Citizens would then
feel their vote counted, and elections would be fought on European
issues by trans-European political parties rather than being second-
order domestic elections fought by national parties on predominantly
national issues (Hix, 2008). However, the EU has steadily increased
its competences and the European Parliament its powers over the past
50 years. Yet, identification with the EU and political participation has
declined in tandem with each increase in the European Parliament’s
power. Thus, turn-out in EU elections has steadily fallen from the high
of 61.99 per cent in 1979 to the low of 42.61 per cent in 2014. Mean-
while, European Parliament elections continue to be ‘second-order’ and
fought on domestic rather than European issues – usually the record of
the incumbent government.
Notwithstanding the similarities in political culture, the dominant
trend within all the member states has been towards a greater devolu-
tion of self-government downwards towards national minorities rather
than upwards to supranational institutions. National and cultural senti-
ments have increased in political salience rather than diminished and
been replaced by post-national or pan-European attachments. First, lan-
guage matters. There is no pan-European media or public sphere, despite
the growth of English as a lingua franca of the educated classes of most
European countries. Even in well-established multilingual states, such
as Switzerland or Belgium, central government is weak, with regional
government strong and growing stronger and organized increasingly on
linguistic lines. Second, size matters. A citizen rarely influences the out-
come by his or her vote alone even in local elections. However, within a
vast electorate, where the centre of power lies hundreds of miles away,
one person’s vote risks being worth so little that no individual would
feel engaged at all. Finally, language and size also map on to common
interests and political values. The more people share in both the way
policies affect them and their reasoning about them, the more legitimate
and easier majoritarian decision-making becomes. There are fewer dan-
gers of permanent or intense minorities. An equal share in the voting
process is more likely to yield decisions that show citizens equal concern
and respect precisely because they share common concerns and norms.
Yet, the larger the state, the more socially, economically and culturally
diverse it will be, with fewer common interests and values, with collec-
tive decision-making consequently harder and more prone to majority
tyranny.
Even if the citizens of all the member states share certain abstract prin-
ciples, such as human rights, they value them in diverse ways and weigh
and implement them differently. They have different penal and welfare
systems, give different priorities to education, health and defence spend-
ing and so on. There may be a number of areas where they either have an
interest in supporting a common market or in promoting collective goods,
such as a clean environment. But even in these areas, controversial issues
abound because a common policy may have a differential impact on dif-
ferent countries – a point that has been revealed in a dramatic way by the
euro crisis. For example, the politicians of solvent states have clearly felt
they lack the domestic democratic support needed to undertake a bold and
potentially redistributive EU-level policy to help the debtor states within
the euro zone.
Some commentators have argued that such problems cannot be over-
come by forcing the creation of an EU demos – indeed, such a policy
may actually be the source of anti-EU sentiments rather than a means for
transcending them. Instead, analysts and policymakers must accept what
they call the demoi-cratic character of the European Union (Nicolaïdis,
2003; 2013). On this account, the EU consists of the distinct national
peoples or demoi of the member states. Its purpose is not to merge these
demoi into a single European demos but to encourage their mutual rec-
ognition and cooperation, so that none dominates or is dominated by
the others (Cheneval and Schimmelfennig, 2013; Bellamy, 2013). As a
result, they welcome the increased role of national parliaments in EU
policy-making as guardians of the proportionality of action at the EU
level and its compatibility with subsidiarity. From this perspective, the
Fiscal Pact and the EU’s Six-Pack regulations prove illegitimate because
they institutionalize a system of domination of the creditor over the
debtor states. Measures that undermine the fiscal autonomy of the mem-
ber states cannot be legitimate because they are incompatible with the
demoi-cratic structure of the EU (Bellamy and Weale, 2015). However,
others have argued that none of this necessarily matters – democracy
can be ‘for’ the people without being ‘of’ or ‘by’ them. We now turn to
these arguments.
Democracy ‘for’ the people: regulatory and deliberative

This ‘new’ debate is associated with Andrew Moravcsik (2002) and
Giandomenico Majone (1998), though certain elements were intro-
duced by Fritz Scharpf (1999). Scharpf argued that it is not always the
case that popular rule, or democracy ‘by’ the people, generates policies
that are in the public interest, or democracy ‘for’ the people. As liberals
have long feared, tyrannous majorities and powerful minorities can dis-
tort the democratic agenda so that democracy fails to favour the people
as a whole.
On the one hand, majorities may oppress minorities because of misin-

formed prejudice, blind passion, self-interest or myopia. Minorities may
also be ignored through being too small or insufficiently concentrated
for their voice to register. On the other hand, powerful minorities can
gain unfair advantages by exploiting their wealth or influence. They may
be important donors to political campaigns, or a major employer in a
key constituency, or own a large share of the media. Some over-powerful
minorities may be the swing voters in a crucial marginal constituency.
These two types of distortion result in passion, ignorance or selfishness
undermining a reasoned and impartial appraisal of policy. The solution
has been to depoliticize certain key policy areas which are deemed to be
particularly important or especially susceptible to these kinds of distor-
tion, limiting ‘input’ democracy ‘by’ the people so as to provide a more
effective democratic ‘output’ that delivers rule ‘for’ the people. While
counter-majoritarian mechanisms, such as constitutional courts, have
been the traditional means for guarding against majority tyranny, non-
majoritarian mechanisms, such as independent expert regulatory bodies
and ombudsmen, have become increasingly deployed to guard against
powerful minorities.
Such mechanisms are familiar within the domestic politics of all the
member states. The view of Majone and Moravcsik is that so long as
the EU operates in areas where ‘output’ democracy offers a more effec-
tive and efficient mechanism for rule ‘for’ the people than rule ‘by’ the
people, the EU’s democratic deficit can be viewed as a myth. The so-
called shortcomings of EU democracy simply reflect the sort of con-
straints on majoritarian democracy that are familiar within states. The
federal arrangements typical of most large and diverse states, such as the
United States, usually mix majoritarian, counter-majoritarian and non-
majoritarian mechanisms – such as an elected president, a constitutional
court, a senate that equally represents the constituent units regardless of
their population, and a central bank – in an effort to balance unity with
diversity in the making of federal policy. The EU does much the same,
with the majoritarian element considerably more constrained than in
most federal systems to reflect its limited competences. In particular, the
EU’s economic policies are regulative rather than redistributive. They
seek solutions that are Pareto-optimal – that is, which make everyone
better off and nobody worse off. Being both highly technical and win-
win, they are of low electoral salience. Sufficient democratic account-
ability is provided by the dual oversight of the European Parliament,
on the one side, and the Council of Ministers, on the other. The main
concern is how far the EU is moving beyond policies for which such
arrangements are suited. While Scharpf (2009) now fears the line may
have been breached, Moravcsik (2002) feels that it is simply a matter
of preventing overenthusiastic Europhiles pushing the boundaries of the

EU beyond what most European citizens desire – hence the rejection of
the proposed Constitutional Treaty.
This thesis has attracted much criticism (Føllesdal and Hix, 2006;
Bellamy, 2010). For a start, many doubt that such matters are ‘purely’
technical or even if they can be viewed as subject to an expert consen-
sus. Even very technical questions can raise normative issues of the kind
that regularly and reasonably divide political parties and electorates.
They are also likely to involve a number of broad assumptions about
future human behaviour and risks that are largely unknowable, and
that again are matters on which citizens often legitimately disagree. We
know, for example, that differing economic theories and divergent best
guesses about how the world economy is going lead economic advisors
to central banks often to diverge in their views on interest rate increases
or decreases. Given that such decisions can have huge impacts on those
subject to them, as the current euro crisis reveals, a good case can be
mounted for allowing citizens some influence over them. In the member
states, the presence of a strong public sphere and a degree of majoritar-
ian political control over appointments to such bodies by national poli-
ticians ensures some popular accountability exists, at least to sustained
national trends in public opinion. But, as we saw, no such European
public sphere exists within the EU. As a result, democracy ‘for’ the peo-
ple is far more detached from democracy ‘by’ the people compared to
the member states.
Meanwhile, such bodies are subject to distortions of their own. Con-
straining access to them may make them more susceptible to regulatory
capture by powerful interests, thereby heightening the risk of distor-
tion by a minority. For example, devolving the setting of interest rates
to central banks can insulate them from public scrutiny. As a result, a
policy such as prioritizing low inflation with a high impact on the lives
of citizens and that is often debated by economists on broadly ideologi-
cal grounds gets falsely presented as the product of ‘sound’ economic
management, even though no expert or political consensus exists. Yet,
such a choice may serve financial institutions better than the economy
at large and be overly skewed to serve their interests.
Moreover, similar effects arise from the counter-majoritarian influ-
ence of the CJEU. For example, the constitutionalization of market
freedoms through its judgments – often prompted by the large corpo-
rations which, given the cost of bringing cases, are the most likely to
go to court – has in a number of cases steadily eroded the majoritar-
ian decisions of national parliaments that have sought ‘public interest’
restrictions on the marketization of key services. Likewise, the super-
majorities de facto required by co-decision by the European Parliament
and the Council of Ministers, even with the rarely used qualified
majority voting (QMV), mean that decision-making controlled by that
venue favours the status quo and established vested interests.
Some have argued that the democratic credentials of these forms of
governance can be improved through direct consultation with citizens
and transnational civil society groups. They have also emphasized the
deliberative qualities of these depoliticized bodies (Joerges and Neyer,
1997). However, such selective consultation, often with unaccountable
groups that are invariably part-funded by the EU or with commercial
lobbyists, tends to reinforce rather than overcome the dangers stem-
ming from special interests to which such mechanisms are susceptible.
Likewise, if the decision is not one that can be decided on technicali-
ties alone, as is often the case, a deliberative consensus is as likely to
be the product of ‘group’ think or skilful manipulation by the chair or
others, as a reasoned convergence on the best possible position. Thus,
even in the restricted competences of the EU, there can be no substitute
for conventional rule ‘by’ the people and so the EU continues to suffer
from a democratic deficit. These problems, though, are greatly amplified
by the euro crisis. As former advocates of this approach have argued,
monetary policy is not a purely technocratic matter and it is doubtful
that a common policy can be imposed across the very diverse economies
of the eurozone unless there is some pan-European democratic support
and control for redistributory rather than the solely regulatory policies
currently on offer (Majone, 2011). Yet, as we saw, without a European
demos, it is doubtful a pan-European democracy would be sustainable
or have the legitimacy to make such decisions.
Conclusion
The EU has major difficulties in providing government ‘of’ and ‘by’
the people. Although many of its policies are ‘for’ most of the peoples
much of the time, they cannot be guaranteed to be so and will invari-
ably damage some minority interests. As such, they require democratic
legitimation of a kind the EU seems unable to provide. We noted how a
number of theorists have tried to rethink EU democracy as demoi-cracy
– g overnment of, by and for the various peoples of Europe (Nicolaïdis,
2003; 2013). They praise the complexity of the EU – its multiple levels of
government and its compound systems of representation – for bringing
together the regional, national, transnational and supranational inter-
ests of citizens (Cheneval and Schimmelfennig, 2013). However, if this
complexity renders the EU system a better representative ‘of’ the peo-
ple, it also makes government ‘by’ and ‘for’ the people harder to obtain
(Bellamy and Kröger, 2013). The more complex a system, the easier it is
A democratic achievement, not just a democratic deficit 73
for minorities to block measures that majorities favour and the harder
it is to know who is responsible for what and to hold them to account –
hence the difficulties in framing policies that might benefit the euro zone
as a whole but involve predictable transfers from certain member states
to other member states. Inevitably, therefore, a European democratic
deficit of some kind seems the price of the EU’s many benefits – though
one that presently risks becoming too costly for many citizens to be
willing to pay.
4.2 A democratic achievement, not just a

democratic deficit
Christopher Lord
Democracy requires a state. Democracy requires a people. The European
Union has neither. Yet, each of what I argue here are the three defin-
ing elements of democratic rule – namely, public control with political
equality and justification – is to be found in some measure in the Union’s
own internal arena. Let me be clear. I am not making a Panglossian
claim that all is for the best in the best of all possible worlds. I merely
want to suggest that the Union’s ‘democratic surplus’ over international
organizations needs to be identified, as well as its ‘deficit’ to the demo-
cratic state. While this is not a particularly original argument, I aim to
make it in an original way.
Among the questions that can be asked about democracy and the
European Union are: how democratic is it? How democratic can it be?
And ought it to be democratically controlled? As I hope to show as I
go along, these questions are too interconnected to be answered other
than simultaneously. For starters, it is unclear whether it makes sense to
ask ‘how democratic is the EU?’ if there is no reason why it ought to be
democratic (Lord, 2004). In the view of some, there may even be a lot
to be said for a European Union that is not democratically controlled.
After all, there are some decisions that we might justifiably put beyond
democratic politics, among them so-called Pareto-improving decisions
which depend more on the use of expertise to identify uncontrover-
sial benefits than on political competition over values. So, the argument
goes, why not make a virtue of the unsuitability of the European Union
for democratic politics and make it a repository for decisions where
democracy could even get in the way of realizing what we can all agree
are mutual gains? (Majone, 2005).
I doubt, however, that debate about a democratic deficit in the Euro-
pean Union can be shut down so easily. To me it seems neither here nor
there whether the Union’s decisions are value-neutral, redistributive or

contested. For Union decisions need to be democratically controlled sim-
ply because they have the force of law. If freedom and equality are the
defining values of democracy, individuals must be free as equals to con-
trol the making, amendment and administration of any laws by which
they are bound (Rawls, 1993: 38; Habermas, 1996: 67). Of course, there
are some who would say I am being utopian here. Surely, they would say,
single individuals never author their own laws in mass modern socie-
ties? But that response is the reddest of herrings. For one hardly needs to
believe that single individuals can control the making of their own laws
to believe there is a world of a difference between all individuals being
free to control their laws as equals in a collective democratic process –
whether at the Union level or in its member states – and a situation in
which administrators, judges or even governments may sometimes be
able to decide Union law with limited public control.
Still, the idea that publics should be able to control the making of
their laws is plainly challenging. Consider the conditions that may be
individually necessary and collectively sufficient to realize it. They might
plausibly include all the following: a) freedoms of speech and associa-
tion; b) free and fair elections; c) appointment of the legislature and
leading executive positions by popular vote; d) a form of political com-
petition that offers voters choices relevant to the control of the political
system; e) a civil society in which all groups have equal opportunity to
organize to influence the polity; f) a public sphere in which all opinions
have equal access to public debate; and g) a defined demos, or, in other
words, agreement on who should have votes and voice in the making of
decisions binding on all.
Let’s now make a further assumption: namely that ‘ought implies
can’, or, at least, it does if we want to avoid being utopian. From this
point of view, any debate on whether there is a democratic deficit in
the EU cannot just depend on ideals of democracy. It also requires us
to take a view on how those ideals can be realized at European level,
assuming that we want to continue with some kind of EU at all. Per-
haps the key challenge of feasibility is this: the demanding list of con-
ditions set out in the previous paragraph may be difficult to achieve
simultaneously without certain attributes of statehood. The capacity
of the state to concentrate power, resources and legal enforcement has
been useful in all kinds of ways to democracy: in ensuring that the deci-
sions of democratic majorities are carried out; in guaranteeing rights
needed for democracy; in drawing the boundaries of defined political
communities; and in motivating voters and elites to participate in dem-
ocratic competition for the control of an entity which can manifestly
affect their needs and values.
So is the EU able to achieve all of this, even though it is not a state,

and even though its publics seem limited in their willingness to associ-
ate together at the European level as a single democratic people? In
what follows, I consider three possibilities: one which would return the
Union to closer democratic control by its member states; a second which
would move it closer to a democratic political system in its own right;
and an intermediate solution which, I argue, has already been attempted
in important ways. Under that intermediate solution, the Union uses
certain forms of self-limitation on the part of its own member states to
develop an innovative approach to the democratic control of a multi-
state structure.
View 1: member state democracies could exert more

control over the Union
Many suggestions have been made for how national democracies could
do more to control Union decisions. For example, more governments
could be required to follow the Danish example in agreeing the posi-
tions they take in the Council of Ministers with their national parlia-
ments. Maybe this could even be done without diminishing the Union’s
capacity to solve collective action problems. If there are international
public goods (that is, benefits that accrue to all member states) that
can be realized at the Union level, then it will always be in the interests
of all member states to cooperate by consensus to secure those goods.
Indeed, any decision-rule other than consensus would only encourage
redistributive decision-making for which several commentators argue
the Union has no democratic authorization (Majone, 2005). If there are
choices of value to be made – perhaps in the way in which the surplus
from cooperation should be spent – then, say the defenders of national
democratic control, let those questions be contested in the one arena
that does meet the conditions for competitive and majoritarian demo-
cratic politics: namely, the domestic arena (Lord, 2011).
It seems to me, however, that argument identifies a democratic deficit
in the response of national democracies to the European Union, rather
than a democratic deficit in the Union itself. I doubt that the main con-
straints on national democracies doing more to control and scrutinize the
participation of their own governments in Union decisions are located
at the Union level. To the contrary, it seems to me that the Union is fairly
well structured for the control of its decisions by national governments
and parliaments. While the Commission doubtless retains significant
control over the detail of proposals, the Union’s overall agenda-setting
powers depend on a consensus of the European Council for what Lis-
bon terms ‘strategic direction’. Even where the rules allow for majority
voting in the Council of Ministers, most decisions are in practice taken

by an overwhelming consensus of member governments. Nor is it easy
to see how things could be otherwise. Given that member states lend out
their enforcement structures to EU policies, the Union depends on the
day-to-day cooperation of elected national governments. It, arguably,
even has to allow for some ‘real-time’ adaptation of existing policies to
shifting member state preferences through such procedures as comitol-
ogy, that is, committees that oversee the implementation of EU legisla-
tion by the Commission (Sabel and Zeitlin, 2007).
View 2: the Union’s own political system could be more

democratic
According to a contrasting claim, the EU could be made more demo-
cratic through the medium of its own political system. Maybe it is not
enough that the EU has an elected parliament? The leadership of the
executive, and not just a part of the legislature, should be elected in
any fully democratic system. Those who propose such an arrangement
(Føllesdal and Hix, 2006) typically invite us to take a kind of ‘gamble
on endogeneity’: a gamble that any missing ingredients of democratic
politics – such as political community or parties prepared to structure
voter choice in ways relevant to the public control of the Union itself –
will develop within institutions designed to expose more of the Union’s
leadership to competitive elections.
Among difficulties with this proposal, one stands out. The leader-
ship position which can most plausibly be directly or indirectly elected
– namely, the Presidency of the Commission – is not the leader of an
integrated executive. Rather, as suggested earlier, the Union has to
negotiate much of its agenda and even its policy-enforcement with its
member states. If an elected Commission Presidency is to be justified
as a means of allowing the Union’s policy agenda and the administra-
tion of its laws to be controlled by a competition for the people’s vote,
then two further things would have to change too. First, any proposals
on which the Commission is elected would have, if necessary, to trump
those items on its agenda it has agreed with a consensus of the Euro-
pean Council. Second, the Commission would need to tighten its direc-
tion over the national administration of Union policies to the point
at which it can avoid being put in the impossible position of having
electoral responsibility without power. Any perception that an elected
Commission President is a poorly clothed emperor would make it less
likely that an opportunity to elect a ‘chief executive’ really would trans-
form voter participation in European elections or persuade parties to
contest them on European issues.
View 3: a limited but useful form of democratic control

So far I have considered two arguments that the Union is in democratic
deficit. Both attempt to take the problem of feasibility seriously. One
suggests that any need for a demos or attributes of democratic statehood
at the European level could be avoided by simply improving democratic
control of the Union by its national demoi organized in their member
states. The other predicts that greater political competition for office
in the Union’s own political system will of itself stimulate the develop-
ment of a democratic people willing to engage in a democratic politics
with one another. Against the first view, I have argued that it identifies
deficits in how national democracies have adapted to the Union, rather
than deficits in the Union itself. Against the second, I have argued that
it overstates the potential for political and executive centre-formation in
the Union in its present form.
Yet, it seems to me that both views also have related weaknesses.
The second underestimates how far the Union remains an association of
states and how far that, in turn, constrains its capacity for a democratic
politics of its own. The first view, on the other hand, understates the
Union’s distinctiveness as an association of states, and how that, in turn,
means the Union is less constrained than other international bodies to
rely only on the institutions of its component democracies for demo-
cratic politics and control.
Here my central claim is that EU member states have chosen to asso-
ciate on the basis of certain qualifications to their own statehood. Thus
member states mostly tolerate the supremacist claims of Union law.
They pre-commit themselves to certain methods of cooperation, for
example by agreeing only to act on a proposal from the Commission in
certain matters. They have, arguably, also qualified their own statehood
in relation to the Union’s representative system. Rather than follow the
common practice of claiming a monopoly on the representation of their
own publics in international bodies, member state governments typi-
cally claim that the Union is legitimated by multiple channels of rep-
resentation, including a directly elected European Parliament, national
parliaments and governments themselves, and arrangements for the rep-
resentation of sub-national territorial units and civil society actors (see
for example Lisbon Treaty A8).
This pattern of representation is, in turn, supported by two forms
of self-limitation on the part of member states. First, member states
effectively commit themselves to support the Union’s own representa-
tive system with certain preconditions and infrastructures needed for
democracy. Democratic rights are primarily secured by national law.
European elections are administered in member states. National parties
aggregate and mobilize votes. Second, member states share powers at

the Union level with a directly elected European Parliament which has
significant powers to co-decide legislation, annual budgets and the des-
ignation of the political leadership of the European Commission. (Even
if the European Parliament does not elect the Commission, it does have
a veto on its appointment, and, of course, European elections do have to
be taken into account in designating the Commission President.)
The anchoring even of the Union’s own representative system in
national democratic infrastructures lessens the need for the Union to
have the attributes of either a democratic state or people. But does the
sharing of powers between elected governments and an elected European
parliament really add value? Might it be better to rely only on national
democracies to control the Union after all? Consider the values of public
control, political equality and justification from which I started out.
1. Public control. A difficulty with relying only on national democ-

racies to control the Union is that there is a long chain of delegation
from national publics to the participation of their governments in EU
decisions. This may lead to ‘agency loss’ or even what James Bohman
describes as ‘reverse agency’ (2007: 70), where, instead of exercising
control on behalf of their publics, national governments use interna-
tional bodies to operate with greater freedom from the controls their
publics normally exercise on them. Thus it is important to the role of
democracy in avoiding arbitrary and unchecked forms of domination
that the Union does not allow the executive branches of member state
governments to control EU decisions on their own. Under the ordi-
nary legislative procedure, much legislation has to be co-decided with
a directly elected European Parliament which member state executives
do not themselves control. Moreover, this check and balance does not
depend for its value and effectiveness on European Parliament elections
being ‘about Europe’. Even assuming European elections are second-
order, the European Parliament is elected and organized along left-right
lines which correspond to the central choices of value in most European
societies. Second-order elections also favour national parties of opposi-
tion, which, of all parties, are most likely to use the European Parlia-
ment’s powers to check and balance the governments in the Council.
2. Political equality. A further problem with relying exclusively on con-

trol of the Union via national democracies is that the latter are repre-
sented in decision-making via governments that are highly unequal in
their bargaining power. Co-decision with the European Parliament pro-
vides something of a corrective to this by requiring the concurrent con-
sent of a second majority which is formed more often along left-right
ideological than national lines. Representatives from member states
which are weak in intergovernmental bargaining may be mainstream in

European Parliament coalition formation.
3. Justification. I have sketched a somewhat unheroic arrangement in

which a European Parliament which contributes little to ‘popular will
formation’ at least provides some checks and balances. But justifica-
tion does not require a full-blown process of popular will formation.
Mutual accountability between mutually suspicious representatives will
do. Since the European Parliament specializes in accumulating expertise
on EU matters, it is less likely than national parliaments to be disad-
vantaged by asymmetries of information in demanding and evaluating
justifications for Union decisions. Moreover, absence of shared political
community at the European level does not imply that European publics
are without responsibility to consider the effects of their own views and
behaviours on one another. After all, they participate in a Union whose
shared policies have significant external effects on individuals from other
member states. Given that common responsibility, a European Parlia-
ment that allows representatives from across the Union to consider the
effects of shared policies on one another is a desirable complement to
any segmentation of debate that would be likely to follow from relying
only on national democracies to scrutinize Union decisions.
Conclusion
Bohman has remarked that ‘democracy is that set of institutions by
which individuals are empowered as free and equal citizens to form and
change the terms of their collective living together, including democ-
racy itself’ (2007: 66). Citizens can no more be said to be able to ‘form
and change the terms of their living together’ where they lack the insti-
tutional means to solve collective action problems that deeply affect
their life chances than where they have no means of exercising public
control as equals over the laws that bind them. Thus the ‘input’ and
‘output’ conditions for democracy need to be solved simultaneously.
Some have suggested that this implies a dilemma as much as a deficit:
a dilemma in which the Union lacks the input conditions for democ-
racy, while member states, acting alone, lack capacities to produce some
policy outcomes their people have come to associate with self-governing
peoples (Scharpf, 1999). Yet I have attempted to suggest here that the
Union already has some modest achievements in lessening the predica-
ment. It has innovated beyond what is normal for international bodies
in providing elements of public control, political equality and justifica-
tion through a representative system that does not depend entirely on
member states.
Chapter 5
Too Much Power for

the Judges
For a long time, the European Court of Justice (ECJ), founded along
with the other core EU institutions in the 1950s and seated in the
tiny Duchy of Luxembourg, has operated below the radar of public
consciousness. Since the 1990s, however, researchers, and increas-
ingly also European politicians and citizens, have realized how con-
sequential the rulings of this court are. Since the Lisbon Treaty, the
Court of Justice of the EU (CJEU) consists of a Court of Justice, a
General Court and a Civil Service Tribunal. The CJEU is now rec-
ognized as the ‘most effective supranational judicial body’ (Stone
Sweet, 2004: 1) that ever existed. To a varying extent, it has jurisdic-
tion over the entire range of EU policies. The existence of an effective
court is indispensable in a Community of 28 member states which
often manage only to agree on vague compromises, leaving the inter-
pretation of the details to lawyers. Convinced that strict adherence
to agreed laws and rules is necessary for the functioning of a political
body such as the EU, the 28 judges of the CJEU have consistently
asserted the supremacy of Community law, following the landmark
Costa v. ENEL ruling of 1964 (Costa v. ENEL, 1964). They have not
hesitated to rule against powerful member states and to pursue their
own interpretation of the ‘spirit’ of the treaties. Member states have
generally complied with their rulings. The CJEU also has emerged
as an indispensable actor in the EU’s political system of checks and
balances, often strengthening the powers of the European Parliament
against the dominant executives of the Commission and Council.
Nonetheless, the increasing activity of the Court has led to intense
criticism: is the CJEU guilty of wilful judicial activism, violating the
prerogatives of elected representatives? Has it pushed a specific vision of
European society behind closed doors, inaccessible to popular control
and democratic oversight? Can the Court legitimately rule on deeply
contested interpretations of human rights and other normative con-
cerns, given pervasive doubts about a common European identity and
value system (see also Chapter 6)? Above all: can supranational law be
fully legitimate in a world of national jurisdictions?
80
Understanding the European Court’s political power 81
Karen J. Alter and R. Daniel Kelemen show how the Court emerged as
a response to the abuse of law in European history and how it evolved
as a check against a new wave of authoritarianism. They argue that
claims of ‘judicial activism’ are misplaced since the CJEU only does
what it is asked to do by governments and private litigants. The Court
is increasingly controversial because the issues on which it has to rule
are increasingly controversial. Jeremy Rabkin argues that the CJEU is
a strange creation since its character as ‘court without a state’ under-
mines the legitimacy of its rulings and impairs its effectiveness. It can-
not answer the most pressing issues of the European Union while it
pursues its own particular vision of Europe, which is not shared by the
European population.
The central role of law in a political entity such as the EU, which in
its policy-making relies heavily on regulatory policies, makes the debate
about the power of the CJEU a core controversy in European integra-
tion. This debate further deepens the discussion in Chapter 3 on a rena-
tionalization of EU politics and on the democratic credentials of the EU
in Chapter 4.
5.1 Understanding the European Court’s

political power
Karen J. Alter and R. Daniel Kelemen
The Court of Justice of the EU (CJEU) is the most influential international
court in history. An American landing in Europe will undoubtedly be sur-
prised that what began as an international court has become p owerful
enough to exercise supreme legal authority over national law, overruling
the decisions of elected governments and even of European governments
acting in concert through the European Union’s Council of Ministers.
Critics accuse the CJEU of unbridled judicial activism in the pursuit of
deeper European integration and suggest that the growth of the Court’s
power is a threat to national democracies across Europe. Yet, despite
their occasional complaints about the CJEU’s judicial activism, mem-
ber-state governments have repeatedly expanded the Court’s powers.
National courts, too, have been largely supportive of these developments
and worked in concert with the CJEU to establish the EU legal order.
Rather than seeing the Court as an out-of-control judicial Frankenstein,
it is more accurate to see it as a body that member states have relied on
to shoulder a tremendous burden in the governance of the EU. Because
the EU pursues an expansive policy agenda despite having extremely
limited administrative capacity, EU governance ends up relying heavily
82 Too Much Power for the Judges
on the CJEU, working together with national courts. This approach has
served the EU well, but as EU policy-making has extended to ever more
sensitive fields, the Court’s rulings have become more controversial and
have been met with greater resistance from some national courts, gov-
ernments and citizens.
The formal history of the ECJ/CJEU is certainly extraordinary. The
ECJ started out as a modest institution. The member states had granted
the Court only a limited competence to address legal questions con-
cerning European Community law. It was composed of seven judges,
two Advocates General and a handful of staff members working in
obscurity in a villa in Luxembourg on the handful of cases they occa-
sionally received. In the 1960s, most realms of policy and politics were
still decided nationally, and it was hard to imagine that the ECJ could
become an important legal and political body. Yet today, the ECJ is a
powerful institution, sitting atop an EU judicial system composed of
63 judges sitting on three courts (the Court of Justice, the General Court
and the Civil Service Tribunal – collectively referred to as ‘the Court of
Justice of the European Union’), employing over 2000 staff members,
hearing hundreds of cases every year, and wielding a huge influence over
public policy and politics across the EU. This contribution explains why
the ECJ/CJEU has become the institution it is today. We return to his-
tory to better understand the situation political leaders were trying to
avoid when they created a powerful Court. The chapter then explores
why in recent years it has become enmeshed in so many controversial
issues and what implications this has for the future role of the Court in
European governance.
The European Court steps into a political vacuum

Europeans emerged from World War II shell-shocked. They had wit-
nessed elected governments and ‘civilized’ countries commit unbelievable
atrocities. These atrocities took place under the guise of democracy and
the rule of law. Germans chose Adolf Hitler, and Italians chose Benito
Mussolini through democratic means; government officials in Germany
and occupied Europe followed formal administrative procedures as they
certified the documents sending innocent people to death; when official
orders were challenged, judges confirmed that the law had been followed;
and many ordinary people dutifully followed the law, reporting on fellow
citizens and tacitly supporting the deportation and murder of political
opponents and innocents alike. The new leaders who assumed office at
the end of World War II were those who had been fighting against fascism
and Nazism. They no longer trusted governments to do the right thing.
The task of subordinating European governments to a supranational
rule of law began with the Council of Europe, which drafted a Euro-
pean Convention on Human Rights in 1950, creating a blueprint for a
European Court of Human Rights. The European C ommunity’s Court of
Justice was created as part of the European Coal and Steel Community
(ECSC). Its job was to ensure that the strongest member governments
did not capture the powerful High Authority, the supranational body
that would oversee state compliance with ECSC rules. Smaller countries
and even firms were authorized to bring to the ECJ legal challenges to
High Authority actions. The ECSC was meant to be a first step towards
building a European constitutional order, one that would force European
governments to work together and be bound by the rule of law. Support
ers of a federalist vision for Europe expected the European Court of
Justice to merge with the European Court of Human Rights, ensuring
that Europe became a constitutional space governed by the rule of law
(Friedrich, 1954). Then everything fell apart.
The French Parliament rejected the draft treaty for a European
Defence Community in 1954, which had the effect of ending any hope
for a European Political Community. European governments did man-
age to agree to the Treaty of Rome, a charter to establish a common
market, but then General De Gaulle assumed office in France and the
entire European project came into question. De Gaulle rejected the
agreed-upon roadmap for building a common market, and he eventu-
ally boycotted Council of Minister negotiations and demanded that the
European Community not shift to decision-making by qualified major-
ity voting. On the home front, De Gaulle also curtailed civil liberties
and the rule of law with respect to his highly controversial actions
in the Algerian War of Independence. De Gaulle repeatedly circum-
vented the French P arliament, orchestrating a referendum to change
the C onstitution so that the office of the President would become an
elected office, thereby allowing him to become a strong democratically
elected leader governing, through political manoeuvring, a fractious
French politics (Hoffmann, 1966). In short, in the 1960s it looked like
France was turning to a path of democratic authoritarian nationalism,
and effectively thwarting European integration.
We need to remember a few things at this juncture. First, the architects
of European integration were lawyers, diplomats, scholars and politi-
cians who had personally suffered through the disaster that was World
War II. Second, European integration has always been about binding
the fate of European countries so that fascism could not gain a footing
to spread across the continent. Third, although they are formally dis-
tinct entities, the European Union project has always been linked to the
human rights project of the Council of Europe. It is linked in spirit, and
in the very individuals who worked to build both projects.
The European Court of Justice stepped into multiple vacuums when

it launched its legal revolution of the 1960s. The European Community
was faltering as the deadlines inscribed in the Treaty of Rome passed with
little progress made towards building a common market. The European
Court of Human Rights was politically paralysed because so few mem-
ber states agreed to its authority. It was in this context that the French
judge on the ECJ authored the Court’s bold rulings suggesting that the
Treaty of Rome constituted a binding agreement that created obliga-
tions for European governments and rights for European citizens. In
1962 the ECJ declared the direct effect of European law in national legal
orders, thereby authorizing private litigants to invoke European law in
national courts (Van Gend en Loos, 1962). In 1964 the ECJ declared
the supremacy of European law over conflicting national law (Costa v.
ENEL, 1964), and in 1977 the ECJ demanded that national judges set
aside any national rules that conflicted with European C ommunity law
(Simmenthal II, ECJ 1978). The ECJ then worked to build support for
its vision of the Treaty of Rome as a constitution for Europe.
Most national judges were not very impressed with the ECJ’s bold
claims in the 1960s. National judges had their own rules governing the
relationship between national and international law. Moreover, conti-
nental lawyers generally believed that the role of judges was to apply
the law to concrete cases, and that the ECJ’s supremacy doctrine went
beyond this limited role. But they were sympathetic to the argument
that someone had to make sure that the decisions and actions of the
European Commission and the Council of Ministers respected the rule
of law. National judges knew that they were poorly placed to serve as
guardians of the rule of law at the European level. First, they knew very
little about technical European Community laws. Second, there were
many legitimate interpretive questions about European rules, and it
would undermine legal certainty and perhaps disadvantage their coun-
try’s firms and citizens if judges in different countries answered these
questions differently. Third, governments had set upon an important
project of European integration; national judges needed to find a way
to live with this political choice. At the time, it did not seem likely that
the European Union would come to be the largest producer of economic
rules or that European regulations and directives would end up affecting
so many areas of national policy. The ‘sovereignty’ transferred through
European integration appeared limited; it hardly jeopardized the ability
of French, German, Dutch or Italian citizens to determine their coun-
try’s fate. Since the ECJ was clearly best placed to adjudicate disputes
involving European law, national judges went along, largely deferring
the hard questions about the ultimate locus of sovereignty that would
later arise. Moreover, many national judges believed that the ECJ might
serve as an ally in expanding judicial power vis-à-vis elected branches

of government.
It took years for the ECJ to build support for its vision of European
law within national legal communities. A new generation of lawyers had
to accept that ‘community law’ was different than international law, and
that ‘community law’ was part of national law. And the ECJ had to build
trust within national judiciaries by showing a willingness to respond to
the concerns of national judges. This relationship of cooperation, if not
always trust, is the font of the ECJ’s political and legal power (Alter,
2009: chapters 4–6). While some ECJ rulings may provoke controversy,
the reasons national judges provide support for the European legal sys-
tem are largely the same today as they were in the 1960s and 1970s.
We can now answer how the European Court became so powerful
and why it remains powerful today. The ECJ built relationships of sup-
port within national legal communities, and among those groups and
governments that wanted to make sure that European integration did
not fall victim to governments that were tempted to renege on their
commitments. Meanwhile, governments greatly expanded their role in
national economies, and they increasingly passed European laws reg-
ulating more and more domains of national policy. These expansions
meant that there were more national and European level rules subject
to judicial review (Maduro, 1998). Private litigants brought cases to
national courts and the ECJ, thereby allowing the ECJ to develop doc-
trines that sought to balance individual rights, states’ rights and Euro-
pean integration (Cichowski, 2007; Stone Sweet, 2004). The rise of ECJ
authority dovetailed with the rising power of supreme courts in many
European countries (Stone, 1995), and the growing understanding that
although supreme courts are counter-majoritarian institutions, they are
also key defenders of the rule of law. In short, growing judicial power at
the national and EU levels reinforced one another, and gradually consti-
tutional democracy subject to judicial review supplanted the parliamen-
tary supremacy model of democracy across most of Europe.
The ECJ is the guardian of European Union law. It has stepped into
legal and political vacuums to weave together disparate national prac-
tices, creating bodies of law to guide European and national policy-
making. For example, since the European Community had very few
formal rules guiding administrative procedure, the ECJ built a European
equivalent of the American Administrative Procedure Act, insisting
that the European Commission follow certain due process procedures
as it implements European policy (Lindseth, 2010). The ECJ has also
built human rights doctrines to address national judicial concerns that
European law, and the European political process, did not sufficiently
protect the rights of individuals (de Búrca, 2011). As we discuss below,
some ECJ rulings do attract intense criticism. Nevertheless, many of

the ECJ’s judicial creations garner wide support and public trust in the
Court remains remarkably high – higher in most countries than public
trust in national political or legal institutions (Kelemen, 2012).
Why is the CJEU so criticized? The challenge of governing

today’s Europe
The early ECJ’s case law focused primarily on technical aspects of mar-
ket integration that attracted little public attention. But today, the CJEU
no longer operates under the radar. As EU law has expanded further
into politically charged policy areas ranging from healthcare, to educa-
tion, to immigration, to fundamental rights, to fiscal policy, the ECJ
can hardly avoid ruling on cases that are likely to prove controversial.
For many critics of the Court, the main problem is that unelected CJEU
judges sometimes overrule the actions of democratically elected govern-
ments. This view reflects an age-old critique of ‘government by judges’
at the expense of democracy, but the critique is heightened in a con-
text where the judges in question operate at a supranational level, far
removed from the national democracies whose policies they judge.
As EU law has expanded to more controversial areas, the CJEU has
found itself attacked from across the political spectrum. While the Court
had long been criticized by some on the Right for undermining national
sovereignty (Rabkin, 2007), more recently it has been attacked by social
democrats on the Left who see CJEU case law as a threat to national
welfare states, and by advocates of international law who are upset
about the ECJ’s lack of deference to the UN and the European Court
of Human Rights (ECHR). Consider for instance the no-win terrain the
ECJ found itself in recent string of cases – the so-called Laval quartet –
in which the ECJ was asked to weigh national social rights defended by
some governments against the EU’s market freedoms favoured by others
(Blauberger, 2012). In the leading case in this field, Laval v. the Swed-
ish Building and Electrical Unions, the ECJ condemned the Swedish
unions’ tactics of blockading all worksites of a Latvian company, Laval,
which had won a construction contract to renovate a public school in
Sweden. Swedish unions wanted Laval to follow the Swedish collective
agreement process of negotiating labour contracts, which would have
made its labour costs more equal to Swedish labour costs. The company
instead reached a lower cost deal with Latvian unions to do the work
in Sweden. The ECJ found that the European Posted Workers Directive,
which set clear minimum standards for Europe, precluded the Swedish
unions from using certain tactics against firms that had followed the
European procedures. The Swedish government naturally took the side
of its unions, though arguably it would have been nearly impossible for
a Latvian firm to successfully navigate the opaque collective agreement
process used in Sweden. In short, the ECJ held that the Swedish union’s
tactics against the foreign company were excessive and unacceptable
under European law (ECJ, 2007). This ruling, and others like it, led to
widespread denunciation of the court by critics on the Left who saw
the jurisprudence as undermining established European social models
(Joerges, 2011).
The reference recently sent to the CJEU by the German Constitutional
Court in the Gauweiler et al. v. Deutscher Bundestag (pending) case is
forcing the Court into even more explosive terrain. The reference asks
the Court to rule on whether the European Central Bank’s Outright
Monetary Transactions (OMT) bond-buying programme designed to
defuse the eurozone crisis is compatible with the EU treaties (Jones and
Kelemen, 2014). If the Court upholds the OMT, it risks angering fiscal
conservatives in Germany and elsewhere, but if it declares the OMT
illegal, it risks destabilizing the Eurozone.
Beyond the sphere of socio-economic rights and policies, the
increasing intervention of the EU and the CJEU in the field of fun-
damental human rights since the formal adoption of the Charter of
Fundamental Rights in the Lisbon Treaty has already generated many
controversial new cases (de Búrca, 2013). In Kadi v. the European Coun-
cil of Ministers and Commission of the European Communities (2008),
the ECJ invoked fundamental rights to reach a controversial ruling that
upset many supporters of international law (who are normally strong
supporters of the ECJ). In the ruling, the ECJ called into question an EU
regulation that was passed by the Council of Ministers to implement
a binding United Nations Security Council resolution, which required
governments to seize the assets of individuals identified as ‘supporters
of terrorism’ (Kadi, 2008). Many governments and observers were out-
raged that the ECJ would claim authority to question the validity of an
act of the UN Security Council, which required governments to seize
the assets of those who are fingered as ‘supporters of terrorism’ (Kadi,
2008). O thers questioned whether a mysterious UN committee domi-
nated by the United States should be able to put individuals on a list
that no one could then scrutinize. Thus one could see the decision as
an example of the ECJ overreaching by questioning a decision that was
overwhelmingly endorsed by Europe’s democratically elected govern-
ments, or one could see the ECJ acting as the guardian of due process
and the rule of law (de Búrca, 2010). Finally, if, as national leaders have
agreed, the EU accedes to the European Convention on Human Rights,
this would likely bring new fields of controversial human rights cases
before the CJEU and potentially provoke clashes between the Court and
the European Court of Human Rights over who is the ultimate suprana-
tional arbiter of human rights in Europe (Lock, 2009).
It is not hard to find ECJ rulings that have gone beyond what some
member states expected or desired, but the fact that the Court gets
involved in controversial fields is not simply a product of judicial
activism. National governments and other EU political bodies are
equally responsible for enlarging the role of the CJEU in European
politics. The reason the Court ends up developing the law is because
European political bodies use a regulatory style that empowers it.
R. Daniel Kelemen (2011) shows how the EU’s style of governance,
what he calls Eurolegalism, is much like its US counterpart a dversarial
legalism, and that it is the product of a number of specific policy
choices. The key choice is that policy-makers empower private actors
to oversee implementation and compliance with common rules. There
are many reasons why European political bodies repeatedly fall back
on governing through private litigant enforcement. One reason is that
the goal of ‘subsidiarity’ – letting local officials determine the most
appropriate means to comply with European rules – entails setting
clear E uropean goals but allowing significant discretion in how the
goals are achieved. Another reason is that Europeans want to have a
small European bureaucracy, and they also want common rules to be
respected. Since the European Commission lacks sufficient resources
to monitor and enforce its regulatory rules in the ever-growing number
of member states, it instead sets clear European Community require-
ments and demands national- and firm-level transparency so that the
Commission can rely on enforcement by private litigants’ suits raised
in national courts. The result is legal suits challenging arguably illegal
local practices. The CJEU, as a consequence, ends up as the forum in
which debates about the application of contested rules play out. There
is no way for the Court to avoid these controversies, as it must offer
rulings in the cases that are presented to it. In other words, the height-
ened controversy surrounding its rulings is not the fault of the CJEU,
but rather a result of the fact that member states rely on the Court to
serve as the adjudicator and ‘fill in’ the holes of an increasingly con-
troversial body of law.
Certainly, member-state governments have occasionally sought to
limit the ECJ’s efforts to promote deeper legal integration. But, in a
larger sense, member-state governments have been great enablers of the
Court, repeatedly acting to expand its powers. In every round of EU
Treaty revision, the member states have extended the ECJ’s jurisdiction
to new fields of law, including to sensitive areas such as Justice and
Home Affairs and fiscal surveillance. Likewise, member g overnments
have granted the CJEU new enforcement powers – including the ability
to impose fines on noncompliant states. Finally, the member govern-
ments have dramatically increased the Court’s capacity to process cases
by adding judges to the Court and by establishing subsidiary courts (the
General Court and the Civil Service Tribunal) below the CJEU. Member-
state governments have repeatedly empowered the ECJ because, despite
their occasional complaints about the Court’s activism, they know they
need a robust Court to make their commitments credible and to main-
tain the rule of law within the Union.
Looking to the future, we can expect the CJEU to remain a power-
ful force in EU governance. In addition to the sources of CJEU power
discussed above, the fact that the Court is so well insulated against
political attacks will help it preserve its central role. It may well be the
most independent court in the world. In part, this is due to the process
through which its judges are appointed (Kelemen, 2015a). Because each
country gets to nominate national judges to the ECJ, no one country or
group of countries is able to control the body of judges being nominated
and appointed. The CJEU also decides cases in smaller chambers the
composition of which the judges themselves determine. These design
features make the CJEU impossible for governments to stack or con-
trol. Meanwhile, legislating at the European level is already so difficult
that it is hard for governments to change European rules if the Court
interprets them differently than intended. This extremely high level of
judicial independence is by design; small countries do not want a CJEU
that large states can dominate, nor do newer member states want to let
older member states say what European law requires (Alter, 2006; Kele-
men, 2012).
While the Court will retain its central place in EU governance, it
faces a number of new challenges. The EU’s 2004 enlargement added
to the EU a number of relatively new democracies whose commitment
to judicial independence and the rule of law is not well established. The
EU legal system relies heavily on cooperation between the CJEU and
national courts, and the effectiveness of that model depends on inde-
pendent national judiciaries that are willing to enforce EU law. How-
ever, some new member states, Bulgaria and Romania in particular, have
been plagued by judicial corruption and generally poorly functioning
judiciaries. In Hungary, the Orbán government has recently undermined
the independence of the judiciary and systematically flouted EU law,
sparking tensions with Brussels.
More generally, though national courts have been crucial allies of
the ECJ throughout its history, there remain considerable tensions
between the CJEU and some national courts. The long simmering
tensions between the German Constitutional Court and the ECJ over
judicial supremacy seems to be coming to a head in the context of
the Outright Monetary Transactions (Gauweiler) case. The German
Court has referred the case to the CJEU for a ruling – its first ever such
reference – but has implied that if the Court fails to rule as it deems
necessary the German Court may defy its ruling (Jones and Kelemen,
2014). Meanwhile, courts in a handful of member states, particularly
Nordic and East European states (Wind, 2010; Bobek, 2008) continue
to be reluctant to use the preliminary ruling procedure. National court
resistance to CJEU assertions of supremacy have won increasing back-
ing from legal academics who support a vision of ‘constitutional plu-
ralism’ that challenges the CJEU’s understanding of the supremacy of
European law (Avbelj and Komárek, 2012).
The bottom line is that a legal and political union requires constant
balance. Critics suggest that democratically elected governments should
determine the balance, but the separation of powers gives judges a say
in determining whether or not governments are adhering to the rule of
law. Just as it is increasingly hard for the European Union leaders to cre-
ate a political balance that can satisfy all member states alike, so too it
is difficult for the CJEU to create a legal and constitutional balance that
can satisfy all of its constituencies.
Conclusion
The ECJ/CJEU may have started as an international court, but today it
is the Constitutional Court of Europe, overseeing the balance between
European integration, national rights, citizen rights, and the many inter-
national commitments that European governments must also respect.
Its primary constituency in this process is not the national governments,
who often pander to populist sentiments. Rather, the Court worries more
about finding legal solutions that can satisfy national judges, who are
also struggling to balance European integration with national constitu-
tions in the many complex cases that citizens bring. Sometimes judicial
rulings seem unfair and even wrong. Then again, since legal rulings pro-
duce winners and losers, it is hardly surprising that losers – and those
who sided with them – would be disappointed. CJEU rulings, like the
law the CJEU applies, surely cannot please everyone, and governments
who end up on the losing side of a ruling will understandably complain.
But the alternative – letting governments do as they please, or turning
the issue entirely over to national courts – is not a solution, especially
for a continent where democratically chosen leaders have repeatedly
displayed a willingness to let security concerns and national interests
trump individual rights and European objectives.
A strange institution 91
5.2 A strange institution

Jeremy Rabkin
All modern states enforce law in their own territory and maintain some
system of courts to see that this law is enforced correctly. Almost all
modern states also acknowledge obligations under international law.
But most states, most of the time, are quite cautious about allowing
their international obligations to be enforced in their own territory by
outside courts. Most states do not allow outside courts to compete with
their own legal systems.
The Court of Justice of the European Union (CJEU) is the great excep-
tion to this general pattern. The rulings of the court reach directly and
pervasively into national court systems. That would not be unusual if
one regarded the European Union as a fully integrated, federal state.
The CJEU would then be the supreme court of the federal legal sys-
tem. But Europeans have not been willing to entrust full federal powers
to Brussels, so the power exercised by the Court of Justice (based in
Luxembourg) remains rather strange.
Most of the time, when states agree to submit disputes to international
arbitration, they do so by specific agreement in regard to the particular
dispute. So, for example, the UN’s International Court of Justice (some-
times called ‘the World Court’) will not hear a case unless both parties
agree to be bound by its decisions and states do commonly decline to
answer claims before the ICJ. When it comes to the CJEU, EU member
states have no choice about allowing other parties to sue them.
A few international organizations do require member states to respond
to claims in their associated tribunals. The World Trade Organization
is the most important example. But only trade disputes between actual
member states can be submitted to the WTO’s arbitration system. At the
CJEU, the European Commission, private corporations and private citi-
zens can also pursue claims against national governments. The differences
are immediately apparent in the contrasting case load: where the ICJ
decides two or three cases a year and the WTO’s Appellate Body a dozen
or so, the CJEU has averaged some 600 rulings a year in recent years.
The European Court of Human Rights does hear suits by private
citizens against national governments and also hears hundreds of cases
each year. But even the human rights court remains international in a
fundamental sense: it rules on the obligations of governments under
the European Convention on Human Rights, but its decisions do not,
by themselves, render the disputed national law or policy invalid and
they do not directly bind national courts. Judgments of the CJEU, by
contrast, usually have an immediate effect on national law. Most cases
actually come to the EU’s Court of Justice by way of national courts,

asking the CJEU to resolve questions about European law that have
been raised in cases already before national courts. The CJEU’s rulings
on European law then bind the national courts in their resolution of
particular cases.
So the EU’s Court of Justice looks, in fundamental respects, like a
supreme court in a federal system. But it retains many of the limita-
tions of an international institution. Rather than being chosen by an
organ of the European Union, for example, EU judges are supposed to
be appointed by ‘the common accord of the member states’ (TFEU Art.
253). In fact, each member state gets to nominate one judge and other
governments do not generally challenge a particular state’s nomina-
tion, for fear of having their own challenged (de Waele, 2015: 26). Since
the passage of the Lisbon Treaty in 2009, the nominating state must
‘consult’ with an advisory panel, established by the presiding judge of
the CJEU (Art. 255) but the panel’s advice about nominations remains
confidential and non-binding. So each government decides what sort of
judge it wants, without any public debate about what judicial qualities
or legal philosophy would best serve the EU overall.
The short term of office for judges on the CJEU – six years – also
suggests a degree of distrust that is more characteristic of international
institutions than national courts. US Supreme Court justices have

life tenure, as do justices on the UK Supreme Court (with mandatory
retirement at 70). Judges on the German constitutional court serve for
12 years. By contrast, judges on the WTO’s Appellate Body serve for
four years, judges on the International Court of Justice for nine years. To
compensate for the short term, CJEU judges are eligible for reappoint-
ment, which national governments have often chosen to grant, though
governments have not embraced proposals for longer continuous terms.
The precariousness of appointments may account for the strange
suppression of differing views in the court’s rulings. Decisions of the
European court are always announced in a single opinion. No dissents
or concurring opinions are published. If governments distrust the court,
the court protects its members by requiring them to speak with one
voice. It is the court that tends to prevail.
Or at least, the court’s general orientation towards promoting
European integration tends to prevail. Since internal deliberations

among judges are conducted in French, not all judges have equal capac-
ity to argue their own country’s concerns. The judges are provided a
staff of assistants – référendaires. Unlike the recent law graduates who
serve as clerks to US judges and justices (usually for one year), staff
assistants for judges on the European Court tend to be older, more expe-
rienced and usually have specialized training in EU law. They usually
serve for extended periods, helping new judges in Luxembourg to adapt

to the court’s ways (Kenney, 2000).
Most cases are heard in ‘chambers’ of three, five or seven judges.
Appeals to the ‘Grand Chamber’ – comprising all judges of the Court of
Justice – are granted at the discretion of the judges. In principle, a state
which has lost its case before the court can urge that the relevant regu-
lations, directives or treaty provisions be changed by political organs
of the EU. But that is much harder than persuading a national parlia-
ment to undertake changes in national law to reverse a judicial ruling
disfavoured by the government. The core problem is that it is hard for
a diverse community of member states to reach the required majority
to reverse decisions of the Court. The quasi-constitutional character of
decisions by the CJEU removes political issues that should have been
decided by governments and parliaments in member states to the Euro-
pean level, where they are very hard to reverse (for more on this, see e.g.
Grimm, 2015).
In the first decade of the European Economic Community, all cases
concerned disputes between governments and the European Commis-
sion, so there was some prospect of offsetting an unfavourable ruling by
political pressure on the Commission when applying the precedent in
future cases. National governments could hope that the Court of Justice
would set limits on overreaching by the Commission, even if that pros-
pect required governments to submit to the Court’s rulings when they
upheld the Commission (which was much more common).
Beginning in the 1960s, the Court of Justice encouraged national courts
to ‘refer’ cases brought by private litigants. And the Court added incen-
tives to bring such cases by insisting that in the event of conflict, European
law would prevail over national policies, national statutes, even national
constitutions. Eventually, the Court even held that governments could be
liable to pay damages to aggrieved litigants, when national courts failed
to refer a case to the Luxembourg court (Koebler, 2003).
So in recent decades, the overwhelming majority of cases come to the
Court of Justice as a ‘reference’ from cases brought by private parties
in national courts. Governments may have less means of influencing
private parties to accept compromises than they do with the European
Commission (particularly when private claimants are firms or advocacy
groups based in other countries).
In the 1970s and 1980s, the Court of Justice used its independence to
restrain national policies limiting the free movement of goods within the
Common Market. In effect, it pressed economic integration more vig-
orously than the Commission. US commentators noted that the Court
has often adopted a more sceptical view of national regulatory schemes
than the US Supreme Court in reviewing state measures charged with
obstructing the flow of goods within the United States. Meanwhile, the
Luxembourg court also allowed private challengers to demand imple-
mentation of European standards of labour protection, thus facilitating
the free movement of workers. Some scholars argued that the Court was
pursuing policies favoured by the largest states (Carrubba et al., 2008:
435). Most scholars have since concluded that the Court is not much
subject to political control and pursues policies that the judges regard as
most suitable, even where governments have doubts (Kelemen, 2010).
Whatever the mix of motives behind them, the rulings of the Court
cannot be explained simply by the requirements of law. Court opinions
have spoken of a ‘teleological jurisprudence’ – oriented by the telos (or
goal) of perfecting European integration (de Waele, 2010). At times, the
Court’s legal reasoning is simply opaque. Joseph Weiler, one of the lead-
ing commentators on European law, calls the court’s decisions on rights
derived from EU citizenship ‘oracular’: ‘It is so because we say it is so.
And what it means – well, you will find out’ (Weiler, 2013: 249).
Admirers of the court often depict it as a safeguard against the lawless
violence that brought so much death and destruction to Europe before
1945. But advancing the authority of the European court does not mean
the same thing as advancing the authority of law in general. In 2008, the
Court rejected direct application of UN Security Council resolutions,
which had directed UN member states to freeze the bank accounts of
accused terrorists or terrorist sponsors. The Court acknowledged that
under the UN Charter, resolutions of the Security Council are legally
binding obligations on UN member states but insisted that independent
EU procedural safeguards must be developed before EU states could
comply with this obligation (Kadi, 2008). The Court has been notably
wary about applying rulings of the WTO’s Appellate Body into European
law or rulings of the European Court of Human Rights. Plans for sub-
mitting the European Union to the European Court of Human Rights
have been bogged down for years in technical negotiations between the
EU Court of Justice and the Human Rights Court, because the CJEU is
more concerned about maintaining its independence than any national
court (Craig, 2013). The Court of Justice has been quite cautious even
about citing rulings of constitutional courts of member states, though
it has already clarified that such national rulings would not take prec-
edence where European judges disagreed (de Búrca, 2013).
None of the CJEU’s reticence about entanglement with outside courts
is necessarily objectionable. It is a reminder, however, that disputes usu-
ally turn not on abstract notions of ‘law’ but on more focused questions
about which law and whose interpretation of that law. In extending the
reach of European law – and its own interpretation of European law –
the CJEU has undermined the authority of national judicial systems.
In particular, by facilitating appeals from various national courts to

Luxembourg, it seems to have undermined the authority of national
constitutional courts. Critics claim the CJEU is ‘atomizing’ national
judicial systems, as specialized national courts develop their own rela-
tions with the Luxembourg court, displacing some of the authority of
constitutional courts at home (Bobek, 2013: 226).
Whether this leaves Europeans better off is open to question. The
Constitutional Courts in Germany (and courts in a number of other coun-
tries) have warned that they do not accept the claim of the Luxembourg
court to have the last word. But having deferred to the European Court
in practice for so long, national courts may not feel they have the moral
authority to fight back. There are some signs of covert resistance, how-
ever. Where the Belgian constitutional court referred 30 cases to the
European Court over the course of its history (down to the end of 2014),
the French and German constitutional courts referred one case apiece,
the Italian constitutional court only two. Overall, British courts referred
only 573 cases, French courts only 906 cases – while German courts
referred 2137 cases (Court of Justice, 2015: 117).
Most people may not care which specialized courts decide which
issues. When the European Community was largely concerned with
trade regulation, particular decisions of the Court of Justice may have
been noticed by few people, outside those connected with specialized
commercial interests. The Court has expanded its reach along with
the European Union, however. In recent years, for example, the Court
has invoked citizenship guarantees in the Treaty of Lisbon to make
rulings on how EU states deal with migrants and what welfare ben-
efits they can receive. These rulings have provoked great controversy
in the UK and were an important topic in the campaign prior to the
Jun 2016 referendum on British EU membership.
When the European Economic Community was founded, in 1958,
the European Court was expected to ensure that the European Com-
mission remained within the limits of the Treaty of Rome. But what
started as a forum for national governments to challenge the European
Commission soon developed into a machine by which private claim-
ants could press for ‘development’ of European law against national
governments. Rather than a guarantor of agreed limits on European
regulation, the Court became an instrument for extending European
law and imposing it on national legal systems. In practice, the court does
not so much guard the authority of European institutions as it draws
on the prestige of ‘Europe’ to advance its own preferred policies. The
bureaucracies in Brussels are often seen as remote and mysterious. The
court in Luxembourg is also remote and mysterious. It may not arouse
more popular suspicion than authorities in Brussels but it does not stand
apart from ‘Europe’, as some national courts have stood apart from
national governments.
Europe may face great challenges in coming years – from terrorism,
from large flows of refugees and migrants from outside Europe, from
disparities among member states that seem to be widening rather than
narrowing, from economic dislocation in the face of changing pat-
terns of trade in the world. If governments embrace extreme measures,
Europeans might benefit from courts with the confidence and strength
to raise questions about new policies. The danger is that the Court of
Justice – which makes supreme law something remote and technical and
unconnected to the traditions of any actual political community – won’t
have the moral authority to resist. But having undermined national
courts, the CJEU may make it harder for national courts to guard fun-
damental principles.
The EU’s Court of Justice shares the basic challenge of all European
institutions. The court exercises great powers on behalf of a political
structure that is vague and bureaucratic. The Court won’t be the institu-
tion to force second thoughts about the future of European integration.
The Court makes it harder for elected governments to act clearly or rea-
sonably on their choices and their responsibilities to their own nations.
Chapter 6
Can There Be a Common

European Identity?
Preoccupation with European identity emerged in parallel with con-

cerns about the EU’s alleged democratic deficit (see Chapter 4). Many
political theorists see a common identity as a prerequisite for a function-
ing democratic political system. To the extent that democracy is defined
as government ‘by the people’, it requires that citizens feel part of the
same collective entity. The EU’s member states have reacted to this per-
ceived need for a European identity by introducing the concept of a
European citizenship, which was expected to help in the creation of a
political community. In a declaration attached to the Treaty of Lisbon,
16 EU member states declared that they would use the informal EU flag,
anthem (‘Ode to Joy’), motto (‘United in Diversity’) and Europe Day ‘to
express the sense of community of the people in the European Union’.
Despite these valiant – some say, pathetic – efforts, both the extent
to which a genuine European identity has emerged and the possibility
for and desirability of a common identity are deeply contested (Bruter,
2005; Cram, 2012; Fligstein, 2008; Risse, 2010). The Eurobarometer,
a survey carried out on behalf of the European Commission, regularly
asks respondents whether they feel that they are European citizens. In
2015, across the 28 member states of the EU, 27 per cent of respondents
indicated that they ‘definitely’ feel that they are a citizen of the EU, with
another 40 per cent picking the answer ‘yes, to some extent’ (Euroba-
rometer, 2015). In a 2014 survey, 9 per cent of respondents said that
they felt ‘very attached’ to the EU and another 36 per cent felt ‘fairly
attached’ (Eurobarometer, 2014). While proponents of the view that a
European identity exists use these figures to show that a majority of
citizens have a feeling of belonging to the EU, doubters point to the fact
that in response to the question on attachment, approximately 90 per
cent of respondents indicated that they were fairly or very attached to
their country, city and region – which is many more than the 45 per cent
that feel attached to the EU.
In the following, Ulrike Liebert argues that as a result of external
challenges, European norms, discursive contestations, and citizenship
practices, a European identity has indeed emerged over time. Jonathan
97
98 Can There Be a Common European Identity?
White counters that not only are there few signs that a European iden-
tity is emerging, but the pursuit of a European identity may even be
problematic from a normative point of view. This controversy is of rel-
evance to Chapter 1 on the success or failure of the EU and Chapter 4
on the EU’s democratic deficit.
6.1 European identity formation

in (the) crisis
Ulrike Liebert
Eurosceptics usually suspect that the idea of a European identity at best
appeals intellectually to European elites but fails to gain traction among
ordinary citizens. As a matter of fact, despite several decades of European
integration, the majority of citizens continue to bond primarily – that is
emotionally – with their respective nation state or region of origin, and
identify with the EU only in a second place. Moreover, several enlarge-
ment rounds have greatly enhanced the diversity of national historical
and cultural identities in European societies. Many fear this diversity to
act as an impediment to ‘unity amidst diversity’ aimed at an ‘ever deeper
Union’, the leading principles of the European project now regarded
as illusions and out of touch with popular sentiments. Cases in point
include the failures of EU constitutional treaty ratification in 2005 and,
even more so, the rise of anti-European populist parties in national elec-
tions and the 2014 European elections in the wake of the international
financial, sovereign debt, and social crises. In this context, Europe seems
‘entrapped’ because ‘what urgently needs to be done is also extremely
unpopular’, in particular given that the EU is ‘becoming increasingly disu-
nited’ (Offe, 2015).
Yet, if it is true that this European dilemma has cast the emerging
European identity in doubt, the existential crisis of the EU has also pro-
vided a new impetus to European identity formation. To develop this
argument in the present contribution, first a conceptual and analytical
clarification is on order. Collective identities are contentious categories
of people in so far as these differ among themselves on the extent of
their agreement and disagreement about the meanings this category
entails. In this context, the formation of common patterns of identifi-
cation is possible depending on the factors that shape what it means
to identify with Europe. I argue that over the past five years, the EU
crises have significantly contributed to the emerging European identity
along two dimensions, i.e. by shaping its contents and by mobilizing
would-be Europeans cognitively through contestation and politicization
European identity formation in (the) crisis 99
of the EU. Regarding the formation of European identity, Europe’s cri-

sis is a double-edged sword: it has triggered new antagonisms between
Europe’s peoples through national uses of the past and antagonistic
stereotyping; but it has also promoted popular awareness of the val-
ues of EU policies and institutions for citizens’ daily lives. The crises
have brought politics back into EU matters that formerly have gone
unnoticed in domestic politics, and it has enhanced the Europeanization
of national public spheres (Risse, 2015). The emergence of a European
identity will therefore be a question of contestations over Europe as
much as of the choice of contents by which Europe is structured and
represented.
The following explores the emergence and evolution of a European
identity in relation to the crisis through four specific lenses: Europe’s
external relations, the constitution of Economic and Monetary Union,
the emerging European polity and European citizenship practices. Taken
together, I do not claim that these distinct processes will empirically or
should normatively lead to a uniform European identity. But, arguably,
they might converge towards a pluralist and dynamic – and that means
open – space for European identity formation.
Emergence of ‘European identity’ in EU external relations

A European identity in terms of shared norms and objectives has been
conceived (first?) by political elites in the context of the European
Community’s (EC) external relations vis-à-vis the USSR and the United
States. As early as 1973 amidst the Cold War, the foreign ministers of
the then nine member states of the EC first proclaimed the existence of
a European identity. Under the threat of the world economic crisis set
off by the second oil shock, they adopted the ‘Document on the Euro-
pean Identity’ (Document 1973), characterizing European identity by
shared norms of representative democracy, rule of law, social justice
and human rights. These shared norms were to serve the EC’s practi-
cal interest in achieving ‘an active role of European foreign-policy in
world politics’. Hence, European identity was conceived of as a mecha-
nism to achieve the unity of the EC-9 in its external relations and as
a precondition for improving its place in world affairs: ‘International
developments and the growing concentration of power and responsi-
bility in the hands of a very small number of great powers mean that
Europe must unite and speak increasingly with one voice if it wants to
make itself heard and play its proper role in the world.’ Hence, the EC’s
external relations to other countries and international organizations
were crucial for shaping but also testing the power of a value-based
European identity.
As a matter of fact, the collapse of the Iron Curtain in 1989 proved

that this approach bore fruit: first, by reshaping its external relations
the EC brought the bi-polarization of Europe and the world to an end.
Second, although Eastern enlargement had been at the heart of the EC’s
identity since the founding Treaty of Rome (Fierke and Wiener, 2009:
100), the EU’s Eastern enlargement in 2004–2007 was driven by the pull
of a collective European identity. As Frank Schimmelfennig and Ulrich
Sedelmeier argue, the East Central and Eastern Europeans’ aim ‘to
return to Europe’ was motivated ‘by their desire to cast off an “eastern”
identity and to be recognized by the European Community as “one of
us”’ (Schimmelfennig and Sedelmeier, 2009: 20). The appeal of a values-
based European identity in opposition to communist regimes – and in
the case of the Ukraine crisis that escalated in 2014, a challenge to Rus-
sian hegemony – helped mobilize mass popular movements that drove
newly democratizing East Central and East European countries to apply
for EU membership. In turn, by bringing together in the EU historically,
politically and socio-culturally ever more diverse national identities,
Eastern enlargement enhanced the contentious strains on what it meant
to share a European identity.
Reconstituting ‘European identity’ from Maastricht to Lisbon

In the aftermath of the breakdown of the communist regimes of East
Central Europe and the reunification of Germany, the treaty reforms
establishing the EU’s economic and monetary order must be counted
as another elite-driven approach to reconfiguring the European iden-
tity (Schiek et al., 2011). More specifically, the Maastricht Treaty
(1993) transformed the ‘would-be European polity’ (Lindberg and
Scheingold, 1970) into a ‘European Economic and Monetary Union’
(EMU), coupled with a thin notion of European citizenship. It estab-
lished the single European currency as a uniquely important key for
the project of a European identity. The euro was by no means con-
ceived only as a technical matter facilitating economic exchanges. It
was also meant to serve as a political symbol with relevance to citi-
zens’ everyday lives. The launch of the euro in 11 member states in
1999 was the most visible threshold towards an ‘ever closer Union’
within the ‘eurozone’. As Amy Verdun and Thomas Christiansen
(2000) have argued, the EMU relies on the creation of a set of power-
ful institutions with direct and executive authority in policy-making,
which, however, preceded the emergence of a political community
in which such decisions could be grounded. As a consequence, the
euro became a contested symbol of European unity, meaning col-
lective identity and social solidarity to some, while being perceived
by others as a symbol of misled European centralism and of forced

social and cultural homogeneity (Liebert, 2001).
The EMU design chosen at Maastricht was flawed, as the financial
and sovereign debt crises after 2008/2010 confirmed. It failed to comple-
ment the monetary union with the necessary underpinning by a financial
regulatory regime and with fiscal and economic policy coordination.
Neither did it provide for democratic accountability, social cohesion
and the sustainability of EMU. The so-called Lisbon Agenda (2000–
2010) – proposing to make the EU the most dynamic and competi-
tive knowledge-based economy in the world – promised but ultimately
failed to realistically frame European aspirations and identifications.
Moreover, the ‘Treaty establishing a Constitution for Europe’ failed to
attract sufficient popular support to take roots as the foundation for a
pan-European constitutional patriotism. Finally, the ‘Reform Treaty of
Lisbon’ (taking effect in 2009) succeeded at least formally as another
elite-led approach to European political identity formation. This latest
treaty reform acknowledges European identity alongside national and
religious identities in the EU: on the one hand, an independent European
identity is aimed at promoting ‘peace, security and progress in Europe
and in the world’ and, for that purpose, a common foreign and secu-
rity policy and a common defence policy are developed for the EU. The
preamble refers to ‘the democratic life of the Union’ and the ‘Charter
of Fundamental Rights’ that lay out the common values, principles and
goals to which the EU commits itself, its member states and the citizens.
On the other hand, the Union is called to respect the equality of mem-
ber states under the treaties as well as their national identities, inherent
in their fundamental political and constitutional structures, including
regional and local self-government. At the same time, the treaty also rec-
ognizes the identity of churches and their specific contribution to which
the Union shall maintain an open, transparent and regular dialogue.
However, for the project of European identity formation, while formal
constitutional norms may be necessary, they will not be sufficient. What
the treaty provisions mean for European identities will depend on a
variety of factors, including on how Europe is discursively framed in
national public spheres. European identity will be shaped by the diverse
ways in which the EU’s constitutive norms are interpreted and linked to
national narratives of the past, present and future, hence by intellectual
debates on Europe (Lacroix and Nicolaïdis, 2010).
Developing a European identity through polity building

While makers of European foreign policy have conceived a European
identity based on shared values in Europe’s external relations, EU treaty
reformers have reconstituted European identity by establishing the single

currency. Both approaches were elite-led and have not been able to forestall
the EU’s current existential crises – neither externally nor internally. A third
approach to foster a European identity took shape at the Laeken summit
(2001), namely the attempt at democratic European polity building. This
led to the birth and death of the EU’s Constitutional Treaty (TCE). Aimed at
a more democratic institutional setting for a Union of States and Citizens,
it proposed bolstering European identity with proper symbols, including
a flag, anthem and the Charter of Fundamental Rights. Popular ratifica-
tion success (in Spain in 2004 and in Luxembourg in 2005) and failure
(in France and the Netherlands in 2005) were, fundamentally, a matter of
positive vs negative discursive frames applied to the TCE’s polity building
project. Why did national ratification referendums on the TCE fail? Argu-
ably, the key factors were two: the lack of politicization of EU institutional
politics and the fragmentation of European political communication along
national lines. Thus, citizens hardly communicated across national bor-
ders, rarely understood their neighbour’s languages, and diverged in their
memories of the past. The national ratification debates sparked discursive
contestations and controversial ideas, pitting ‘(neo-liberal) market Europe’
against the ‘European Social Model’; a ‘Christian Union’ against a ‘secu-
lar multi-religious Europe’; a ‘Europe of national democracies’ against a
‘Democratic Federal Europe’ or a ‘cosmopolitan regional Union’ (Liebert,
2010). While opponents feared a centralized European state that would
loom behind the TCE to the detriment of the peoples’ national and demo-
cratic identities, others put their trust in the EU’s constitutive multinational
democratic identity. Whereas some opponents believed that the EU’s new
institutional architecture would harm the free play of the markets, others
suspected the TCE of being a plot against ‘Social Europe’. Since the idea
of a foreign European identity – ‘European civilian power’ – either open
to its neighbours and the world or defined in opposition against some
other – did not take off among European mass publics, Eurosceptics found
ample opportunities for voicing nationalist, xenophobic and racist stances.
In sum, the public debates about the Constitutional Treaty have undeni-
ably enriched the European identity project in terms of content as well as
contentiousness (Liebert, 2007), but have ultimately exacerbated diversity
at the expense of unity.
By contrast, the EU’s financial and sovereign debt crisis has fuelled
the politicization of EU policies in ways to transcend the nationally
fragmented public spheres (Risse, 2015). A comparison of media and
parliamentary discourses in different countries shows that, increas-
ingly, the same issues of euro-crisis management have been debated
by national publics at the same time and, given their more often than
not diverging lenses, have provoked contestation and controversy
across national boundaries. Paradoxically, it was the claim ‘that there

is no alternative’ to the austerity based regime by which eurozone
leaders responded to the crisis that has fuelled politicization and
the search for radical alternatives (Liebert, 2016). Politicization has
sparked both polarization and the horizontal Europeanization of
national public spheres. By fostering transnational political commu-
nication, the EU in its crisis mode has bridged nationally fragmented
public spheres. Yet by no means did this lead to the emergence of a
unified supranational pattern of identification that would overrule
the diversity of national identities. The elite-led approaches to Euro-
pean identity construction in external relations, through the single
currency and by European polity building, had all been constrained
by the missing European public sphere. The multiple crises of the EU,
as a matter of fact, did enhance transnational communication and the
Europeanization of national public spheres. Yet would this matter for
European identities?
Evolving European identity through citizenship practices

In the final step, we adopt a citizen-centred perspective to explore how the
crisis has impacted the evolution of European identity, making it still more
elitist and exclusive or more popular and inclusive. Looked at through
the lenses of individual perceptions, popular identifications with Europe
depend on subjective awareness of the implications EU policies have for
one’s daily life. The question is whether and to what extent this is the case,
for instance regarding European citizenship rights and practices.
During the first two decades, the building of the EC was an exclu-
sive domain of elites. Paradoxically, albeit having introduced ‘Union
citizenship’, the Treaty of Maastricht (1993) set off the erosion of
the alleged mass popular ‘permissive consensus’: Public support for
the EU decreased by nearly one-third, protest movements mobilized
against Brussels, and Euroscepticism rose in a number of national
referendums on the EU. The 2004/2007 Eastern enlargement sparked
the further politicization of Treaty reform negotiations. In sum: these
trends starting in the aftermath of Maastricht and culminating with
the TCE indicated a shift in the nature of the EU. The EU’s identity
that started as an elite-driven project that took little roots in mass
popular sentiments has evolved into a contentious process of polity
building that increasingly involves popular attitudes – and identifica-
tions. A few years on, the impacts of the EU’s crisis show that these
trends towards the emergence of a popular European identity have
not been short-lived but become more manifest. Empirical evidence
supports this claim in three respects:
1. National identifications as such do not necessarily constitute an

impediment to a common European identity, unless they are prac-
tised in an exclusive manner. During the time span from 1992 to
2010, ‘national identity only’ has oscillated between 33 per cent
(1994) and 46 per cent (1996; 2010). After five years of crisis, it
stood at only 38 per cent (2015). Hence, it had decreased signifi-
cantly. Therefore, European identities did not experience bitter
defeats due to rampant renationalization.
2. Europeans are simultaneously citizens of their home country and
of the EU. Measuring individuals’ identification ‘as national and
EU’, ‘EU and national’ or ‘only EU’ over the period 1992–2010,
these figures have not stagnated at low levels but have fluctuated,
in some cases weakening and in others strengthening. Despite the
EU’s massive enlargement, overall levels have remained surpris-
ingly high over this time period. For instance, between 41 and 48
per cent of all respondents from the EU-9 to the EU-27 believed
that in the near future they will see themselves ‘as national and EU’,
with highs in 1992, 2001 and 2005, and lows in 1997 and 2010.
By 2015, the share of those holding multiple national-European
identities had even reached an unprecedented high of 52 per cent
(Eurobarometer; 19 different reports). Over the same time period,
between 9 and 17 per cent of respondents reported to identify first
or exclusively with the EU, with a peak in 1994, lows in 2001 and
2005, and reaching 10 per cent in 2010, but only 8 per cent in 2015.
Albeit with some variation between member states, 60 per cent of
EU-28 respondents share national-European, European-national
and only European forms of identifications (Eurobarometer, 2015).
Yet, in 2015, member states with a majority of citizens claiming a
‘national identity only’ include only three outliers: the UK (64 per
cent), Cyprus (57 per cent) and Greece (51 per cent). It is equally
true that by 2015 most others have developed high levels of multiple
national-European identifications, with increases from 34 to 51 per
cent (Hungary), 36 to 61 per cent (Sweden) or a fairly stable share
of 58 per cent (Germany). In sum, despite the intake of 16 new
members since 1990, with unprecedented numbers of new citizens
having become part of the multilevel EU polity, more than 60 per
cent identify as ‘national and European’, ‘European and national’ or
‘European only’ in 2015.
3. Finally, if asked what European identity in 2015 meant to them,
67 per cent of the EU-28 respondents ‘feel as citizens of the EU’,
indicating ‘to know their rights as citizens of the EU’. Asked about
what it is ‘that most create(s) a feeling of community among EU citi-
zens’, a variety of topics are named, from culture (27 per cent), the
economy (22 per cent), history (21 per cent), to values (19 per cent),
sports (19 per cent), the rule of law (18 per cent) and solidarity with
poorer regions (15 per cent). Regarding more specifically values that
‘best represent the EU’, human rights (36 per cent), peace (36 per
cent) and democracy (31 per cent) lead the list, followed by indi-
vidual freedom (19 per cent), respect for human life (17 per cent),
solidarity/support for others (15 per cent) and equality (12 per cent)
(Eurobarometer, 2015).
In sum, the evolution of European identity patterns is motivated first
of all by European citizenship feelings, values and rights. Respondents
understand the term ‘citizen of the EU’ to mean anyone who is, or
who becomes, a citizen of any EU member state. EU citizenship is
also seen as closely related to having similar rights and obligations
in each member state. It is felt to encompass the freedoms within the
European Single Market; that is, the rights to mobility among mem-
ber states that EU citizens enjoy. If these rights are ‘taken for granted’,
they affect how people see themselves as citizens of the EU, whether
they practise the rights of working and studying in any member state
or not. Increasingly, more people gain the personal experience of
living, working or studying in another member state or of knowing
other people who practise these rights (Eurobarometer, 2010). Inter-
estingly, the EU’s Eastern enlargement of 2004 has not reversed but
rather intensified and accelerated these trends. After all, the citizens of
the new Eastern and Central Eastern EU member states may not think
and feel that different from people in the older EU member states,
despite recent authoritarian developments in some of these countries.
But they are definitely more mobile across borders, more aware of
Union citizenship rights and practices and, thus more disposed to
Europeanize their national identifications (Góra and Mach, 2010).
Finally, part and parcel of European citizenship practices is also the
politics of European civil society (Liebert and Trenz, 2010). EU-level
civil society organizations act as citizens’ representatives; as a con-
sulted partner or critical watchdog; and occasionally as participants
in EU politics and policy-making. The ‘European citizens’ initiative’,
which was introduced by the 2010 Lisbon Treaty and which allows
EU citizens to ask the European Commission to deal with a specific
topic, opens new windows of opportunity to that aspect.
The unfinished journey of European identity

To conclude, it can be stated that although the global financial crisis of
2008/2009 and the 2010/2011 crisis of the eurozone have threatened
people’s material prosperity and security, these threats have lent a new
impetus to Europeans’ awareness of the rights and values the European
Union provides them with, especially in times of crisis.
Some analysts hold that if a collective European identity is not
only an illusion, but exists, it is the province of the European elites,
the better-off, educated, younger and mobile professionals who ben-
efit most from the EU (Fligstein, 2008). This essay has provided evi-
dence that over the course of four decades of European integration,
a European identity has indeed emerged as an elite project, along
three venues: in its initial phase it was conceived of as an agency
for overcoming the Cold War; following that, it was restructured by
the Economic and Monetary Union; subsequently, it was modelled by
developing European polity. Yet, ultimately, European identities have
evolved from European citizenship and civil society practices tran-
scending the Single Market as well as national borders. Therefore,
more than 50 years after the Treaties of Rome, the manifestations of
a multiple European identity demonstrate that the conventional wis-
dom according to which Europeans lack a sense of community has
to be reconsidered. Thomas Risse has argued this case at the onset of
the euro crisis: ‘It is true that we do not observe the emergence of a
uniform and shared European identity above and beyond the various
national identities. Rather the available data show the Europeaniza-
tion of collective local, national, gender, and other identities. Europe
and the EU are integrated in people’s sense of belonging’ (Risse, 2010:
5). Five years on, evidence about citizens’ feelings and perceptions
corroborates this claim about the progressive Europeanization of col-
lective identities to have taken root not only in abstract EU norms,
but in citizens’ practices and feelings.
In view of the global financial crisis of 2008/2009 and the
2010/2015 crisis of the eurozone, this trajectory of European identity
seems to be far from having reached its end: skyrocketing sovereign
debt, economic stagnation and mass unemployment in far too large
a number of EU states threaten the sustainability of the European
Economic and Monetary Union and, thus, the EU. Popular dissatis-
faction with the EU and with many member governments is rooted
in deepening social and economic inequalities. Demands for stronger
common European policies range from European economic and fis-
cal union with larger EU resources to an energy union and common
defence capacity. Thus far, European identities have proved resilient
under the challenges of the EU’s crises. Whether or not this lends
the EU’s political elites a new impetus in search of a new European
social contract capable of better coping with market and government
failures remains to be seen.
A common European identity is an illusion 107
6.2 A common European identity

is an illusion
Jonathan White
There is a simple idea at the heart of discussions of ‘European iden-
tity’. It is that some kind of social underpinning is required for a politi-
cal community to survive and prosper. The argument may be mainly
empirical – that some kind of collective bond is required if a polity is to
be unified, strong and able to provide public goods, particularly in crisis
moments – or it may be mainly normative – that only where such a bond
exists will the polity meet the standards of legitimacy the modern world
expects. Where ‘identity’ is present, coherence, common purpose and a
disposition to solidarity are said to be forthcoming. Where it is absent,
lack of direction and fatal divisions are expected to follow. Be it for
empirical or normative reasons, ‘identity’ is posed as a polity’s necessary
foundation, and its absence as a reason for scepticism. As readers will
know, it is in the context of exactly such hopes and doubts regarding
the prospects of the EU that the question of European identity has been
consistently raised.
This gives us an indication of the intended function of a collective
identity, but what of its particular form? What does the term denote?
A misleading question perhaps, for ‘identity’ is often used with little
descriptive intent, instead as a casual means to reference all those ‘soft’
dimensions of human existence left over once the ‘hard’ issues of econ-
omy and institutions have been considered. When interested actors such
as the European Commission speak of ‘European identity’, generally
they are not so much referring to a clear-cut entity as gesturing vaguely
towards the solution of a problem, to that elusive substance which can
oil the system’s parts. ‘European identity’ presents itself as a word which,
if spoken enough times, can place distance between the EU and its crit-
ics, warding off charges that the EU faces a crisis of legitimacy (Shore,
2000; Stråth, 2002). Likewise for the EU’s critics, European identity and
its alleged weakness is a nicely-shaped stick with which to bop Brussels
on the head. The concept’s ambiguity can be a plus, as it inhibits closer
inspection. Alternatively, when ‘European identity’ is used by scholars,
it is often as a means to cluster a range of narrower issues and debates,
projecting them as part of a larger research programme. Those study-
ing such diverse matters as trends in European media reporting, EU
public policy, institutional discourse, practices of EU citizenship, public
attitudes to the EU institutions, support for European integration in
principle, attitudes to fellow citizens, or commitment to a range of value
orientations have a tendency to frame their research as the study of
‘European identity’, presumably so as to broaden their readership, and

no doubt encouraged by their publishers, for whom the term is a reli-
able selling point. In other words, in deployments of the phrase ‘Euro-
pean identity’, the structure of the thing described is often secondary to
the political or scholarly agenda behind it. Form follows function, one
could say.
To assess European identity as real or illusory requires us to suspend
these doubts about its analytical worth and sketch out a sharper mean-
ing. What might this be?
Conceiving identity
In general terms, those invoking ‘European identity’ apparently wish to
make reference to the oneness and stability of a social grouping. Identity
in this context implies a set of people united by common dispositions,
and who exhibit continuity in what they share. Two variations on this
idea can be distinguished, one more objectivist and one more subjectiv-
ist. Rather than as fully distinct, they are best approached as differing
alloys of the same ideas, for most thinkers of identity combine elements
found in both.
In the first view, identity is objectively real. That is to say, the com-
mon dispositions which individuals share are taken to be grounded in
realities beyond their choosing, and can never fully be cast off, even if
they can be accentuated, de-accentuated and contested. So, for exam-
ple, it might be said that ‘Europeans’ are those who share a distinctive
set of Judaeo-Christian ideas which shape how they see the world, and
that this holds true even if they are unaware of this fact, or if they
choose to ascribe it different meanings. Despite the nod to subjective
understanding, the privileged perspective is that of the observer – it
is (s)he who determines the existence or absence of identity, and it is
against his or her standard that the relevant individuals are assessed. In
this view, people can be mistaken about their identity: they might, for
instance, be ‘European’ without knowing it, or believe they were Euro-
pean when they could not be. That people may be misled in this way
is well captured in the concept of ‘false consciousness’, which would
be the standard Marxist interpretation of national identity. The chal-
lenge for all objectivist perspectives lies in how to ground the observ-
er’s knowledge. If mistakes are possible, why trust in the observer’s
omniscience? Why see their account as immune to the peculiarities of
personal interpretation? And which observer – whose word should be
taken as final? While an objectivist conception of European identity
is sometimes advanced (e.g. Siedentop, 2000), it is difficult to endorse
with confidence. In any case, its rather rigid understanding of identity is
likely to make it a blunt tool for responding to the underlying political

question of governability.
In the second, more interpretivist perspective, identities stand or fall
by people’s willingness to express them. They cannot exist in latent form.
Here, identity refers to reciprocal feelings of attachment, or p ractices of
identification as one might call them, so as to emphasize the open-end-
edness of the process (Brubaker and Cooper 2000: 14). Diffuse feelings
of sympathy towards others are the focal point, whether tied in with
cultural attributes or, as in civic approaches such as ‘constitutional patri-
otism’, political values. While the spotlight is on people’s interpretations,
still one generally finds a nod to objectivism in the notion that these
practices of identification are supported, stabilized and given v isibility
by various extra-cognitive phenomena: for instance, the repeated deploy-
ment of key concepts and social categories (e.g. ‘Europe’, ‘Europeans’),
of narratives which build on these, and by the cultivation of symbols
(e.g. flags and constitutions). Importantly – a point which the language
of identification brings out more clearly than identity – these latter
elements (words, narratives, symbols, etc.) are resources for identifica-
tion but not constitutive of it: the research object cannot be reduced
to these visible manifestations. The emphasis is on meanings – on how
these resources are used and interpreted.
This conception of identity, more than the first, invites empirical
investigation to establish its content. For some, this necessitates the use
of opinion polls – European identity is then studied as the willingness of
individuals to respond favourably to questions concerning how Euro-
pean they feel. For others, it points to the use of qualitative research
methods such as interviews, the anthropological study of everyday-life
situations, or the analysis of legal and political texts. Given that, in
contrast to objectivist accounts, these practices of identification are not
treated as a function of long-term historical truths, they are potentially
quite unpredictable. Accordingly, some would argue the term ‘identity’
should be replaced with one that does not presume continuity across
time (‘self-understanding’ has been a suggested alternative); but where
continuity is suspected, ‘identity’ would seem a valid description.
In this latter sense, then, and postponing certain further ambiguities,
a common European identity would exist when people express mutual
sympathies to one another as ‘Europeans’, and undergird this with
appeal to signs and discourses that refer to ‘Europe’. (Whether such
sympathies would be compatible with enduring national ties is a mat-
ter of much debate – cf. Duchesne, 2010.) This conception’s advantage
is that, to a degree, it avoids reifying ‘identity’ as something stable and
irrevocable. One avoids the problem of ‘latent’ identities, and allows
individuals greater scope to shape and revise the identities they ascribe
to (since identity is then something which depends on their assent,

rather than a fate to which they are consigned). This conception is not
without its own problems – chiefly, the epistemological one of how to
establish when these practices of identification are present, given they
may be viewed as little more than traces in the individual brain, but
also the conceptual one, that the further one moves in the direction of
open-ended practice, the less appropriate a static term such as iden-
tity becomes. There will also be plenty of boundary problems, given
the emphasis on reciprocal recognition: what does one make of those
individuals who claim allegiance to a grouping yet whose membership
is questioned by others? Involuntary membership is the same problem
in reverse. Still, it is broadly this conception of a common European
identity which presents itself as the kind worth examining for its real or
illusory character.
A question remains: how many people would need to engage in
these practices of reciprocal identification before they would amount
to something one could feasibly call ‘European identity’? What would
their necessary scope be? Given the identity question tends to be posed
in the light of concerns about a polity’s governability, the assumption is
generally that a common European identity would need to encompass
all EU citizens, or at least a sizeable majority of them. In other words,
it is expected to extend widely across the inhabitants of a politically-
defined territory. (Note here the ambiguity of the word ‘common’, which
denotes both something shared and something banal, something of the
‘common people’.) Yet in principle it need not be an inclusive, mass
phenomenon: one might equally conceive it as the reserve of an elite, a
form of distinction perhaps, functioning like French aristocratic culture
in the early modern period as a basis for reciprocal recognition among
Europe’s elites. Access to European identity would then be exclusive to
the best. That the matter is seldom cast in this way is testament to the
origins of the identity debate in political concerns at least partly shaped
by modern ideas of universal citizenship and political equality.
European identity: a foolish myth?

The most defensible conception of a common European identity has
something to do then with stable and reciprocal practices of identifi-
cation between all or most inhabitants of a given territory. Alternative
conceptions are either dogmatic, incoherent or best captured with a dif-
ferent vocabulary. As we switch to the empirical question of whether
such practices of identification currently exist on a European scale, we
are confronted with largely negative findings. Despite clear efforts by the
EU institutions to cultivate them, they remain rather thin on the ground.
The absence, or at least marginality, of something one might call Euro-

pean identity seems apparent however one investigates it empirically.
For those who seek its traces in Eurobarometer opinion polls, popular
willingness to declare attachment to ‘Europe’ and ‘Europeans’ generally
emerges as weak (Kohli, 2000; Duchesne, 2008; van Ingelgom, 2014).
There are notable differences across countries and social groups (Flig-
stein, 2008), but this merely reaffirms the absence of mass regularity of
the kind ‘identity’ would suggest. While there are certainly those willing
to declare that they ‘feel European’ (Risse, 2014), how far this translates
into meaningful practices of identification away from the polling con-
text is unclear. For those using interview techniques, the finding tends to
be that ‘Europe’ rarely provokes an emotional response, instead being a
point of indifference or resignation (Duchesne et al., 2013; White, 2010,
2011; van Ingelgom, 2014; Hurrelmann et al., 2015). Only those with
extensive factual knowledge feel themselves qualified to discuss Europe
in depth: it is a topic one learns (in schools, or in the financial press)
rather than an object of spontaneous affection (Gaxie et al., 2010; cf.
chapters by Throssell and Bozec in Duchesne, 2010). For scholars taking
an ethnographic approach, for instance studying the self-understanding
of mobile elites as they move across Europe in search of jobs, romance
or adventure, the finding tends to be not that they have subsumed them-
selves within a European collective, but rather that they have taken mod-
est steps towards ‘de-nationalization’, i.e. towards freeing themselves of
existing territorial ties (Favell, 2007). Researchers of border communi-
ties meanwhile report that the removal of physical barriers to movement
has often been accompanied either by forms of symbolic ‘rebordering’
(i.e. new forms of separation, e.g. between the Poles and Germans of
Słubice/Frankfurt an der Oder), or the development of discourses of
local exceptionalism (e.g. consciousness as a ‘border region’ that tran-
scends the usual categories of allegiance) (Asher, 2005; Meinhof, 2004).
Clearly, the uncertainty regarding which research methods are best
suited to studying collective identity leaves scope for those dissatisfied
with a negative finding to argue that it is the method rather than the
object which is faulty; still, there does seem to be a broad convergence
of results across these varied approaches. In short, while changes in the
self-understanding of Europeans seem to be happening, they are not
generally happening under the European sign, and do not entail patterns
of reciprocal identification co-extensive with a pan-European space.
Of course, it may be premature to conclude where such changes are
leading. Perhaps these practices of identification will emerge. In the
meantime, one option is to revise our conception of European identity
in a more realist direction. Diffuse feelings of sympathy towards others
as Europeans are, it might be argued, admittedly hard to discern, and
in the most literal sense European identity is illusory. Yet perhaps the
idea is meaningful nonetheless. Even if individuals themselves show few
signs of such an identity, and can discern no such thing when plumb-
ing the depths of their consciousness, if they can be persuaded others
feel such a thing, at least at critical moments, then it might exist in
virtual form. As a feeling people project onto others rather than them-
selves, a concept they assume must have meaning even if it means little
to them, the effect of ‘European identity’ might be to encourage people
to act as though they shared in such a thing, even when they did not.
Identity might then be seen as a fiction in the strict sense, but a use-
ful fiction. Such a position represents a third, inter-subjective concep-
tion of E uropean identity. Although it is little discussed in debates on
European identity, such a conception has equivalents in the theory of
public opinion (Noelle-Neuman, 1984). It implies an interesting and
feasible research question: how far people think others subscribe to a
European identity (or how far they are willing to be persuaded by such
a claim). Possibly the results would mirror those found by conventional
approaches, but possibly not: certainly these second-order beliefs may
be more susceptible to manipulation than the brute feelings of individu-
als. European identity would probably not be the first collective identity
to exist primarily as a dubious but widely held conviction.
Whether this back-door variant has purchase or not, sooner or later
a normative issue arises: is a common European identity such a benevo-
lent notion that it is worth rehabilitating even in this rather mythical
fashion? Arguably, at least some versions of the idea constitute not only
an illusion but a dangerous illusion. First, if, as we have argued, any
meaningful application of the term ‘identity’ requires the supposition of
a stable pattern of reciprocal practices of identification encompassing all
or nearly all members of a given realm, it points to a rather consensual
image of social relations. One sees this in particular in those conceptions
of European identity which focus on shared cultural traditions inher-
ited from the past. Such images have little to say about the diversities
and adversarialism one associates with a pluralist political community:
antagonisms are likely to be denied within the community and turned
outward on the world beyond it. Identity-talk is generally a means to
convince people that they are alike and that their relations are harmoni-
ous, often with the purpose of making them easier to govern. As a model
of citizenship, it has clear tendencies to conformism, complacency and
acquiescence. Of course, defenders of the concept will say this is a mis-
conception: that they have in mind something far more polysemic, with
individuals free to disagree on what European identity means and how
they will enact it. Yet the further one emphasizes fluidity and disagree-
ment, the less reason one has to speak of identity at all. As Brubaker
and Cooper put it (2000: 11), ‘it is not clear why weak conceptions of
“identity” are conceptions of identity. The everyday sense of “identity”
strongly suggests at least some self-sameness over time, some persis-
tence, something that remains identical, the same, while other things
are changing. What is the point in using the term “identity” if this core
meaning is expressly repudiated?’
Second, by setting the bar so high on the kind of social integration
needed for a viable polity, the concept can also acquire conservative
connotations, acting as a resource for those who wish to argue a popu-
lation is ungovernable and that certain political initiatives must there-
fore never be attempted. Here again, there is a performative dimension
to appeals to European identity. The notion that Europeans lack a
common identity can be used to delegitimize transfers of wealth from
affluent parts of the EU to poor parts, or the strengthening of the Euro-
pean Parliament vis-à-vis other EU institutions. Fair enough, one might
say, if reciprocal practices of identification are indeed the precondition
for such initiatives. Yet such a sweeping claim can be no more than a
hypothesis, and an extremely difficult one to test at that. One should
be sceptical of those bearing decisive evidence in its favour. When it is
observed that ‘Europeans’ are reluctant to see the supranationalization
of taxation powers because they ‘lack a sense of European identity’,
the listener might ask themselves whether it is not rather that there are
powerful individuals who wish to prevent such an outcome, and who,
rather than debate the merits of such an initiative, wish to give people a
reason why it is impossible.
Beyond European identity

To criticize notions of European identity is not to underestimate the
importance of the political question we began with. There are those who
would rubbish the idea of European identity on the grounds that the EU
institutions need nothing but the coercive force of the law to govern,
and nothing but a trail of constitutional transfers of power to guarantee
their legitimacy. But these are bad grounds on which to reject the notion.
Social integration of one kind or another seems both empirically and
normatively necessary if the EU is to persist in an acceptable form – just
not the kind ‘European identity’ implies.
There are various ways of conceiving transnational political com-
munity without appeal to European identity. One is to emphasize the
variety of perspectives people take on Europe as opposed to the singular
view conjured by the term ‘identity’. This type of ‘narrative diversity’
has been proposed as an already existing reality for Europe’s intellectual
elites (Lacroix and Nicolaïdis, 2010), even if questions remain regarding
how far it permeates European societies as a whole. Another possibility

is to avoid altogether the search for a diffuse set of sympathies towards
‘Europeans’ in general, looking instead to non-territorial forms of sub-
jecthood which draw together some but not all. Political categories such
as Left and Right, and ideological labels such as conservatism, liberal-
ism and socialism, are of potential relevance here (White, 2012). So too
are social categories which evoke equivalence of experience according
to occupation or socio-economic status (e.g. ‘public sector workers’,
‘farmers’, ‘journalists’), and the practices of cross-national comparison
which may generate receptiveness to them (White 2011). Issue-specific
concerns and relations of adversarialism seem as plausible a basis for
cross-national allegiances as the widely inclusive ties of European iden-
tity, and are arguably more consistent with political pluralism. Rather
than an entity reified and made the target of identification, ‘Europe’ and
its political arenas are best seen as a terrain on which events, actions
and diverse experiences unfold – the stage rather than the heroic actor.
‘European identity’ as a phrase is likely to be with us for some time,
as various actors have reason to use it. Even empty phrases can be real
in their consequences if enough people take them seriously, but it is not
clear that we are at that point, or even heading in that direction. As
something more substantial, the notion is yet more remote. European
identity is an illusion, and some would say a foolish one. But it has been
invented to respond to a genuine problem, one that will persist as long
as efforts persist to govern Europe as one.
Chapter 7
Lobbying in the EU: How much

Power for Big Business?
A large number of interest groups aim at influencing EU decision-

making (Greenwood, 2011; Dür and Mateo, 2016). More than 1000
Euro-groups now have an office in Brussels, including business asso-
ciations, such as BusinessEurope; labour unions, such as the European
Trade Union Confederation; professional associations, such as the
European Medical Association; and public interest non-governmental
organizations (NGOs) such as the World Wide Fund for Nature. Many
more groups send lobbyists to Brussels to influence specific policies. The
EU’s Transparency Register, a voluntary register of organizations that
try to influence EU decision-making, now contains over 9000 entries.
Many of the actors that engage in lobbying at the EU level represent
business interests. This concerns business associations but also firms
that directly lobby the EU institutions to defend their interests. Business
interests not only overshadow other interests in terms of sheer numbers
of organizations that engage in lobbying. Much evidence also suggests
that business interests enjoy better access to EU decision-makers than
other interests (Dür and Mateo, 2016). Does this mean that (big) busi-
ness has undue influence on the decisions taken in the EU? The response
to this question is of major importance for our normative assessment of
European integration. Business dominance of decision-making would
create the danger of socially inefficient policies that serve the interests of
a few. Such policies, in turn, would likely undermine public support for
European integration.
Laura Horn and Angela Wigger argue that corporate interests indeed
drive the EU. They submit that not even attempts at making the EU more
transparent were successful in curtailing business power. On the contrary,
according to them the response to the financial crisis illustrates the partic-
ular role played by business interests in the EU. David Marshall takes the
opposite stance and defends the position that business influence in the
EU is actually much more limited than commonly assumed. The reason
for this, he submits, is that neither the European Commission’s interests
nor the European Parliament’s interests coincide with business interests
on many issues. Instead, both of these institutions tend to align with
115
116 Lobbying in the EU: How much Power for Big Business?
public interest NGOs, meaning that business engages in a defensive bat-

tle on most issues currently discussed in the EU. This debate about busi-
ness power is of relevance to Chapter 4 on the EU’s democratic deficit.
7.1 Business as usual – the EU is (still)

driven by corporate interests
Laura Horn and Angela Wigger
The European Union (EU) has a notorious reputation for being domi-
nated by the interests of ‘big business’. Negotiations behind closed doors,
aggressive corporate lobbying practices, revolving doors between institu-
tional posts and corporate positions – there is hardly a policy field where
these dimensions are not highlighted by critical observers, irrespective
of their political persuasion. The EU institutions, most importantly the
European Commission, have responded to these allegations with piece-
meal efforts to increase lobbying transparency. A voluntary lobby regis-
ter has been put in place in 2011, and broader access for interest groups
to policy-making processes has been facilitated. Indeed, alongside the
intensification of the integration process after the Lisbon Treaty, a wider
range of interest group representation can be observed in Brussels – also
non-commercial interest groups; yet, does this also imply that there is a
fundamental change in the role played by business interests in the EU?
In this contribution, we insist that corporate actors and their market-
making postulations continue to form the linchpin of the European pro-
ject. In order to grasp the role of ‘big business’ in the EU, we argue in the
first section that it is imperative to understand the historical emergence
of the European project as being heavily influenced by business interests,
both in terms of its institutional form and socio-economic content. In the
following section, we present a nutshell version of critical political econ-
omy perspectives on the role of business in shaping a specific project of
European integration, which we argue is most suitable for understand-
ing the EU as a social terrain. This then forms the background against
which ‘lobbying’ is being discussed, drawing on illustrations from the
context of current EU crisis responses and economic governance. We
close with an urgent plea to take the role and dominance of corporate
interests in the EU seriously at both academic and political level.
A brief history of business influence on the European

project
The role of (corporate) interest groups and lobbying is gaining ever more
prominence in the literature on European integration (see Coen and
Business as usual – the EU is (still) driven by corporate interests 117
Richardson, 2009). (Neo)functionalist perspectives have been emphasiz-

ing the particular role of transnational business interests in driving eco-
nomic integration (Sandholtz and Zysman, 1989). Other authors have
pointed towards the ‘logic of access’ for lobbying various institutions
(Bouwen, 2002; Greenwood, 2011), and the importance of taking into
account the role of ideas and strategies to determine concrete business
interests in specific policy fields (Woll, 2008). Most of the institutional-
ist literature on lobbying in the EU is based on neo-Weberian pluralist
assumptions about the nature of the EU social terrain, premised on a
plurality of aggregate interests that are competing on equal terms on the
basis of which an autonomous state takes rational and fair decisions.
Such an approach is problematic, as the emerging state apparatus of
the EU is not a ‘neutral’, non-hierarchical transmission belt for a diverse
range of interests, nor is it equally accessible to all groups in society. The
EU and its complex ensemble of institutional mechanisms and political
practices has an in-built, form-determined structural bias that serves ‘to
advance (or obstruct) particular fractional or class interests’ (Jessop,
2008: 127). This ‘strategic selectivity’ means that corporate influence is
not so much limited to ‘who gets to lobby whom, and how often’ but it
concerns the condensation of power asymmetries over time and hence,
the very direction, content and form of the EU itself. The focus should
hence be on the socio-economic content of policies, and not just dimen-
sions of institutional form and access. As we will elaborate below, it is
crucial to bear in mind that ‘business’ as a catch-all term needs to be dif-
ferentiated along various ‘fractions’ or groups of capital whose various
interests do not necessarily always correspond.
The influence of business representatives has been pivotal for the
direction of European market integration since the onset of the com-
mon market project that started with the European Coal and Steel
Community in 1951, and the subsequent European Economic Commu-
nity in 1957. As early as 1951, the Council of the Federation of Euro-
pean Industries had been established, uniting several national industry
associations under the joint goal of opening up the highly fragmented
European marketplace and to abolish trade-related quotas and tariffs.
European business was confronted with large, technologically far more
advanced and more competitive US companies with a strong export ori-
entation. To cope with what later has been referred to as ‘the Ameri-
can Challenge’, the gradual reconfiguration of several national markets
into one European common market can be seen as a political response
of a state–business alliance to create analogous conditions to the large
homogeneous US home market, which by virtue of a single currency and
one language had created the prerequisites for US business to reap the
benefits of economies of scale and scope production. As the President
of the Commission Walter Hallstein noted at the time, the goal of ‘the
transformation of the market relations in the European Community as

a whole was to build a new giant big enough in a world of giant pow-
ers’ (in Buch-Hansen and Wigger, 2011: 60). European business pushed
for neo-mercantilist industrial policies to boost industries considered
‘strategic’ to overcome the lack of competitiveness vis-à-vis the US and
to create the structural conditions for European business to grow in size,
mimic US corporate management styles and develop further US produc-
tion technologies (Buch-Hansen and Wigger, 2011).
The socio-economic content of European integration changed after
the great stagflation crisis of the 1970s, which became manifest in a
profit squeeze, mass unemployment, overcapacity in several manufac-
turing sectors and saturated markets. European business pushed for
the relaunch of the European integration process in the 1980s along
neoliberal lines as a way to restore corporate profits. The accelerated
pace of economic integration, manifest in the Single European Act in
1987 and the creation of the EU in the early 1990s, was constitutive
for European corporations to transnationalize and to mobilize financial
capital more easily and, henceforth, to invest in new spheres of produc-
tion on a global scale. The establishment of the EMU and eventually the
euro eliminated exchange-rate fluctuations, which significantly reduced
transaction costs for cross-border business deals of all sorts. A key pro-
tagonist representing the transnational capital fraction was the Euro-
pean Roundtable of Industrialists (ERT) (Van Apeldoorn, 2002; see
also Cowles, 1995). Composed of top executives from Europe’s largest
industrial companies, the ERT was formed in 1983 in order to push for
a European-level initiative for overcoming the enduring great stagflation
crisis of the 1970s and the completion of the single market. At the out-
set, a struggle between a Europeanist neo-mercantilist and a globalist
fraction took place within the ERT (Van Apeldoorn, 2002: 118–123).
Whereas the Europeanist fraction supported the creation of a European
home market shielded from outside competition, most notably from US
and Japanese competitors, the globalist fraction sought to supersede
regulatory market constraints on capital mobility and capital accumula-
tion beyond the European integration project and to impose the neo-
liberal free market idea on a worldwide scale through institutions that
limited the discretionary power of states within their national markets.
The ERT continued to be a prominent member setting the direction
for the course of European integration in the decades that followed
and actively sought to incorporate existing European business associa-
tions, such as UNICE, now BusinessEurope, and small and medium-
sized enterprises, into its political agenda of creating ‘an ever bigger level
playing field’. The unifying purpose was to accommodate the broader
interests of European business within the EU, as well as to draw on the
Business as usual – the EU is (still) driven by corporate interests 119
knowledge and organizational structure of specialized working groups.

In acting as the ‘vanguard of the Treaties’, the Commission and increas-
ingly also other EU institutions like the European Parliament and the
European Courts have underlined this market-making objective for the
integration project.
A focus on lobbying
It is against this background that the debate about lobbying in the EU
should be held. Conservative estimates suggest that there are about
30,000 lobbyists roaming the corridors of the Commission or the Euro-
pean Parliament in Brussels (Burson-Marsteller, one of the world’s largest
public affairs companies, estimates 50,000) (Corporate Europe Obser-
vatory, 2015). These figures include lobbyists for corporate interests,
as well as consumer groups, NGOs, think tanks and regional and local
public actors. Recent data based on voluntary declaration of lobbying
activities shows that corporate interests indeed dominate lobbying with
EU policy-makers, in particular with regard to access to high-level offi-
cials in the Commission. This is not to say that other institutions do not
also have relevant levels of lobbying; however, due to its privileged posi-
tion within the policy process, the Commission constitutes a key node
for lobbying in the EU. Around 75 per cent of lobby meetings declared
by the Commission between December 2014 and June 2015 were with
corporate lobbyists, prompting a researcher from Transparency Interna-
tional to argue that ‘there is a strong link between the amount of money
you spend and the number of meetings you get’ (EU Observer, 2015a).
On closer observation, these figures need to be differentiated according
to various Commission portfolios, with the key policy fields of climate
and energy, digital economy and financial market as the most clearly
targeted and dominated by corporate lobbyists.
The Commission has acknowledged the role of lobbyists, and the need
to flank the influence of organized capital, at the highest level, with its
President Jean-Claude Juncker calling upon his colleagues and staff to
‘ensure an appropriate balance and representativeness in the stakehold-
ers they meet’ (European Commission, 2014c: 9). The EU Transparency
Register, a voluntary registration platform since 2011, is set to become
mandatory from 2017 onwards. In the same vein, closer scrutiny of
expert groups working within the policy-making terrain in Brussels has
led to more focus on how business interests have influenced key EU
policy areas (Alter-EU, 2010). These attempts to increase transparency,
integrity and access in EU lobbying are commendable and noteworthy.
However, we question whether they can indeed lead to fundamental
changes in the relationship between business interests and core actors in
EU integration. Initiatives to curtail corporate lobbying are often pre-

sented in the context of preventing or rolling back the ‘corporate cap-
ture’ of the EU. However, as Pierre Defraigne, former Head of Cabinet
of Commissioners Etienne Davignon and Pascal Lamy at the Directorate
General for Trade stated ‘there is de facto a systemic collusion between
the Commission and business circles’ (Corporate Europe Observatory,
2015, our emphasis). The assumption that the Commission or other EU
institutions can be ‘captured’ is based on the premise that they constitute
the allegedly neutral social terrain for pluralist interest representation to
start with, as we outlined above. The intimate intertwining of business
interests and fundamental EU processes is much more structural. In the
following, we illustrate this with examples from EU crisis management
and ongoing economic governance.
Corporate interests at play in EU responses to the crisis

The EU’s responses to the ongoing multiple crises more often than not
reflect the demands of organized capital and its access to political deci-
sion-makers. For instance, banks and other financial institutions became
bigger and ultimately ‘too big to fail’ through several rounds of merg-
ers and acquisitions, which increased their influence on policy-making.
With the far-reaching bailouts of the financial sector across Europe, the
pre-crisis social power configuration with finance capital as the most
dominant capital fraction has been left intact. In response to the broad
societal support in favour of new financial market regulations, finance
capital representatives increased their lobbying expenditures in Brussels
significantly in the time from 2013 to 2014: JPMorgan Chase 30-fold,
Goldman Sachs 14-fold and UBS seven-fold (EU Observer, 2015b). To
date, no radical regulatory frameworks for the financial sector have
been adopted.
Corporate influence more generally is not limited to lobbying, as illus-
trated by the decisive impact of business interests on the competitiveness
agenda at the heart of the Commission’s response to the multiple crises
in Europe. At a meeting in Berlin in March 2013, bringing together the
German Chancellor Merkel, French President Hollande and Commis-
sion President Barroso, as well as 15 ERT members, it was agreed that
industrial competitiveness should be at the centre of EU policy-making
(ERT, 2013). More concretely, the captains of industry assembled in the
ERT demanded more business-friendly regulations, such as tax reduc-
tions, less labour protection, more labour market flexibilization, lower
severance payments to employees, as well as downward pressures on
wages, the facilitation of mergers and acquisitions or what the ERT
calls ‘market-driven consolidation’, and more privatizations. These
The diminishing power of big business 121
demands have booked actual success, and very much correspond to

earlier initiatives by the Commission. In addition to a broad set of aus-
terity packages, flanking policy programmes such as the Regulatory Fit-
ness and Performance Programme and Competitiveness Proofing have
been adopted to streamline and simplify, as well as repeal existing EU
and national legislation. This will affect the entire legislative acquis in
a broadly deregulatory fashion. The costs of adjustment towards ‘com-
petitiveness’ are almost exclusively put on labour and systems of social
protection, rendering the class character of the European project ever
more visible.
Conclusion
The influence of business is still ‘business as usual’, that is, the EU con-
tinues to be heavily driven by corporate interests. While we see encour-
aging developments to bring about more transparency and access to
the policy-making process, and an overall strengthening of the public
debate and scrutiny of the role of business interests in European inte-
gration, we contend that there remains a fundamental asymmetry at
the heart of the EU, privileging the interests of specific social groups
over others in the policy-making process, such as the finance capital and
transnational capital fractions. Alongside the vast incorporation of a
range of ‘authoritarian’ elements in the institutional outlook of EU elim-
inating or obviating opportunities for political and judicial contestation
(Sandbeck and Schneider, 2014), the rhetoric of European democracy
and an EU polity based on actual principles of equality and participa-
tion very much represents a pipedream. The growing political contesta-
tion of the socio-economic content of the European project demanding
to take democracy seriously reveals the fractures and fault lines arising
from the multiple European crises; yet this ordeal by fire might be the
basis of which new alternatives for Europe can be forged.
7.2 The diminishing power of big business

David Marshall
The claim that big business dominates EU policy-making and hence
has too much power is a familiar one. Here the argument tends to be
that because big business is wealthier than organizations representing
wider citizen interests, it is able to commit significantly more resources
to lobbying decision-makers. This narrative is seemingly borne out by
the permanent presence in Brussels of government affairs offices from
most large European firms, along with a host of legal and public affairs
consultancies, which in the main provide support to business. In addi-
tion, big business is said to benefit from close relationships with their
respective national governments, with this support leading to favour-
able EU decision-making via the Council.
In contrast, I argue that the power of big business within the EU has
become progressively more constrained. In recent years, big business
may even have become structurally disadvantaged compared to organi-
zations with an anti-business agenda claiming to represent the interests
of ordinary citizens. The reasons, which I will explain in more detail, are
both historic and political. The effect is to prejudice the policy debate,
and as a consequence decision-making has become skewed in favour of
anti-business citizen organizations – which naturally have a strong inter-
est in keeping the myth of business dominance alive. The selective use
of examples of when business achieves its policy goals is commonplace,
and feeds into a more general anti-corporate rhetoric. Yet, Brussels is
also home to many flourishing and influential anti-corporate NGOs,
centred on the Square de Meeûs.
The lobbying process

At a fundamental level, organized interests’ actions in influencing
policy-making, which is a tangible expression of power, is not simply a
case of how many more euros one side puts behind its argument – at least
not above the threshold of having sufficient resources to actively con-
tribute to the debate; and with more than 400 permanent NGO offices
in Brussels, civil society is hardly left unrepresented. In fact, increases in
spending are often associated with a lobbying setback, for example the
recent increase in spending by businesses in the financial sector was a
defensive act following only very limited success in reducing the cost of
post financial crisis regulation.
Moreover, the domination of policy-making by any one section of
society is typically associated with closed policy-making within a sin-
gle institution. In contrast, the EU’s political system has evolved so as
to place multiple constraints on the domination of policy-making by
any one institution, and by extension one section of society. Business
certainly plays an active role across many areas of policy-making, but
on controversial issues that it takes a position on, it encounters strong
and highly credible opposition. As a result, in comparison to organized
interests that purport to represent the interests of the citizen, for exam-
ple consumer groups, big business is frequently on the losing side.
Part of the explanation for why business power is the focus of popu-
lar concern, and on occasion the subject of conspiracy theories, lies in
the still essentially private or undisclosed nature of lobbying, along with

apprehension over the perceived effect of unconstrained power. This
naturally leads to a certain public and political unease, and so it should.
The health of democratic decision-making depends on such vigilance.
But at the same time, the incorporation of societal interests into the
process is vital for the quality and legitimation of public policy, a factor
which is largely absent from the public discourse on lobbying. This of
course makes it easier to stereotype and even demonize big business. But
the reality is that today’s EU policy space contains a staggering range of
organized interests, which in number and variety considerably exceed
that found within any member state capital. Their principal objective
is to influence legislative outcomes on issues that directly affect them.
This is typically done through the transfer of policy relevant informa-
tion to politicians or bureaucrats that otherwise would not be aware.
For their part, policymakers require this information in order to suc-
cessfully transform their political goals into effective legislative out-
puts (Austen-Smith, 1993; Ainsworth, 1993; Lohmann, 1993). This is
a particularly important function in the EU context as its institutional
capacity relative to the policy-making task is low. As such, the lobbying
process provides a direct non-partisan opportunity for societal interest
to be heard, and is vital for the legitimation of public policy-making.
It also provides a means to expose both abuses of the system by officials,
and the capture of a policy area by any one section of societal interests,
including big business. This essentially pluralist conception of interest
representation assumes that if an organized interest attempts to advance
its own private interest over the interests of a wider public interest, a
countervailing power will emerge (Truman, 1951).
The pendulum swings in favour of citizen groups

For much of the early development of the EU, big business was success-
ful in advancing its own private interests, and was therefore system-
atically more influential and hence more powerful than other societal
actors. During the late 1950s, business appeared to conform to the neo-
functionalist logic by successfully promoting regulatory spillover from
sectors of the economy where a European level competence existed to
areas where it had not (Haas, 1958). Again, following the economic
slowdown of the 1970s, multinational corporations aided by an expan-
sionist Commission successfully supported market integration as a
remedy for economic stagnation (Sandholtz and Zysman, 1989). This
activity appeared to conform to Olson’s (1965) logic of collective action
through which societal groups with concentrated interests, such as big
business, triumph over diffuse societal interests which are encumbered
by the many non-contributing free riders. However, Olson’s theory

failed to explain the extraordinary growth in mass movements, such
as environmental and women’s rights organizations. He misjudged the
power of ideological motivation, and did not foresee that diffuse inter-
ests would successfully self-define themselves as defenders of the public
interest (citizen groups), and that to maximize their leverage selectively
align with concentrated interests, for example with exporters in pursu-
ance of free trade (Trumbull, 2012). Moreover, Becker (1983) has shown
that when a concentrated interest receives a certain level of policy ben-
efit, a tipping point will be reached whereby diffuse opposing groups,
such as consumers, will organize. The result will be a restoration of
equilibrium between opposing interests.
The catalyst for such realignment by the many self-styled citizen
groups was the shift in competences across a range of policy areas
from the national level to Brussels during the 1990s, following the Sin-
gle European Act. The transformation did not take long, and as early
as 2001 there were more than 300 registered citizen groups in Brus-
sels, a number that now approaches 400 (Greenwood, 2011). Together
these groups present a formidable challenge to business interests across
the breadth of EU policy-making. The collective participation of these
groups was highly beneficial to the quality of European policy-making.
It also enabled the Commission as the agenda-setting agency to for-
mulate policy proposals that would survive the subsequent legislative
process. This is because high-quality policy information from across the
range of organized interests is required in order to increase the likeli-
hood of a proposal overcoming opposition from both the Council and
the European Parliament (Crombez, 2002).
This suggests that the system of interest representation at the critical
policy formulation stage had become more or less pluralist in nature, and
as such the first mover advantages that businesses enjoyed had been – as
Becker (1983) would have anticipated – cancelled out. However, this
assumption rests on the premise that the Commission acts as a neutral
arbiter, whereas it is commonly accepted that when policymakers seek
input to develop legislative proposals, they draw heavily from lobbyists
that share their political goals (Sabatier and Jenkins-Smith, 1993). But
in respect to the Commission, it is difficult to discern an enduring politi-
cal outlook, although it is straightforward to identify a long-term politi-
cal motivation. Analogous to Niskanen’s (1971) model of bureaucratic
budget-maximization, the Commission has consistently aligned itself
with interests that serve to maximize its bureaucratic power. With the
single market project largely completed during the 1990s, opportuni-
ties for the Commission’s future bureaucratic advancement would come
from regulating the newly created market, thereby putting it at odds
with the interests of big business, which illustrates the expedient rather
than enduring nature of their alliance. What was to follow would be an
explicit politicization of EU policy formulation which was and contin-
ues to be legitimized through the selective use of favourable expertise
(Boswell, 2008). This instrumental use of knowledge necessarily advan-
taged the interests of self-styled citizen groups that defined themselves
against the interests of big business.
Moreover, in addition to the Commission’s promotion of groups
which advance an explicitly anti-business agenda, the Commission
actively bankrolls many of these NGOs. For example, the European Con-
sumer Organisation (BEUC) receives an operating grant of €1,304,467
along with other EU funding of €262,158 which together represent 45
per cent of its annual budget (BEUC, 2013). These groups occupy a priv-
ileged position in EU decision-making, and the information they pro-
vide serves to strengthen the Commission’s informational advantages
over the Council and EP. I argue that this activity, combined with the
coincidence of the Commission’s bureaucratic ambition aligning with
anti-business interests, represented a tipping point which has broken
the equilibrium of societal interests in favour of anti-business citizen
groups. This situation has also made it much easier for more extreme
anti-business organizations to organize and be heard. Although, on the
one hand they are excluded from the programme of subsidies given that
they lack the credibility necessary to legitimize the Commission’s policy
agenda. The consequence of their increasing presence on the fringes of
the policy debate is that it has allowed the Commission to frame pol-
icy proposals as more centrist than would have been the case, in effect
altering the parameters of the policy debate and making it easier for
national governments to agree on positions that are further away from
business than would have been possible. In return these more extreme
groups benefit at the expense of business as the Commission’s policy
agenda is pushed in the direction they favoured. Moreover, these gains
are not one-offs. Mirroring the past process whereby business had ini-
tially gained success, once a citizen-friendly regulatory bridgehead was
formed in one sector, a process of incremental advancement occurred,
which for example is largely the story of the ongoing development of
environmental regulation.
What about the EU’s legislative institutions? The common perception
is that the Council is closely aligned to business interests, but we sim-
ply don’t know if this is true because no systematic research has taken
place. It seems equally plausible that elected member governments take
their responsibility to take into account a range of societal interests very
seriously, and with the majority of governments formed by coalition
there will also be a range of party interests to accommodate – as such,
the idea that the Council has been captured by business interest seems
unlikely, although, in comparison to the Commission, business inter-
ests may well be more welcome. In contrast, it is now well established
that the European Parliament provides strong support to citizen groups
(Kohler-Koch, 1998; Pollack, 1997). Indeed, its transformation from
consultative body to equal co-legislator (Tsebelis and Garrett, 2000)
was facilitated by parliament’s fervently argued case that it alone pro-
vides a direct link to the interests of the ordinary citizen.
The legislative effect of parliamentary support for anti- business citi-
zen causes is significant. To illustrate this, Dür et al. (2015) contrast the
success of business interests in achieving their policy goals on policy
areas where the parliament acts as co-legislator (codecision) with policy
areas where its legislative powers are reduced. The results are clear-cut;
compared to citizen groups, business is significantly less successful at
achieving its policy goals when parliament is at its most powerful. As
if to compound the disadvantage that business suffers, the entry into
force of the Lisbon Treaty significantly extended the policy areas where
parliament is legislatively equal to the Council, thereby providing a
further example of the increasingly structural nature of big business’s
comparative deficit in policy influence (power). This disadvantage is not
simply contingent on the level of EP involvement. The analysis by Dür
et al. also makes clear what the forgoing analysis has set out. Across
the breadth of policy-making, business is routinely less successful than
citizen groups at achieving its policy goals. Interestingly, recent research
carried out in the United States has also cast doubt over the alleged
domination of policy-making by big business (Hojnacki et al., 2015).
And, that’s without the considerably higher levels of funding that many
non-governmental organizations (NGOs) receive from the EU.
Conclusion
In conclusion, at the current phase of EU policy-making, the power of
big business is relatively weak. This differs markedly from the popular
narrative partly because of the legacy of early business dominance over
EU policy-making, along with a widespread concern over the conse-
quences of unchecked business power. But it is also as a result of con-
certed attempts by anti-business citizen groups to exploit the fear of
rampant business power and claim to be the underdog – an opposing
strategic claim by big business simply would not be plausible. That this
debate plays out across the familiar liberal statist economic fault line
tends to obfuscate the rational assessment of the role and relative power
of organized interest across EU policy-making. However, the forgoing
analysis has shown that power is not exercised in a vacuum, and if its
manifestation is achieving policy success, then in the EU case institu-

tions matter – or put another way, having a powerful ally makes you
more powerful. Business power is considerably constrained because its
deregulatory goals are not compatible with the Commission’s bureau-
cratic ambition; and the European Parliament’s overriding concern is
for democratic legitimacy, which explicitly means aligning with citizen
cause groups that are invariably opposed to the policy position taken
by big business.
Chapter 8
The Future of the Euro: Union or

Disintegration?
When the euro was introduced in 2002, many claimed that this was the
most momentous event in the history of the European Union since the
Rome treaties in 1957. And they were right: no other move towards
integration has had the same potential of tying together the fates of
the currently 19 member states in the eurozone. If any illustration were
necessary for this, the euro crisis that started in 2010 and reached its
apex with the Greek drama of 2015 has provided ample and unwelcome
evidence. The drama of a potential default of highly indebted Southern
member states has kept EU leaders and global financial markets on their
toes. The actual or looming contagion of the problem to the whole EU
makes this crisis the most serious in the history of the Union.
Many experts recommend a move towards a real economic union, or
else the eurozone would break up. In fact, some early proponents of a
common European currency had hoped that its introduction would be
a major step towards a truly federal state (Tsoukalis, 1977). No wonder,
then, with the stakes so high, that emotions and controversy linked with
the euro were always intense. Already the first plans for Economic and
Monetary Union, culminating in the doomed Werner Plan of 1969, were
marred by conflicts between those who advocated a fiscal union and
close economic coordination as essential parts of a common currency,
and others who thought that a fixed exchange rate among European
currencies and transfer mechanisms in the case of imbalances would
do. When, at the Maastricht summit in 1991, it was decided that the
euro would be in fact introduced, there was a tacit hope among the
deeply sceptical countries owning the most stable currencies, especially
Germany, that the convergence which was necessary to sustain a com-
mon currency would happen over time (Dyson and Featherstone, 1999).
A so-called Stability and Growth pact was put in place in 1997 to force
euro members to stick forever to the strict rules which had been required
for accession. The European Central Bank (ECB) was given unprece-
dented independence to pursue a monetary policy for the whole euro
area. Nonetheless, the fact that the euro was a currency not backed by a
128
Why the euro is a functional necessity 129
truly federal structure caused lingering doubts about its future (Dyson,
2008; Torres et al., 2006).
As the Greek crisis has shown, the hopes for convergence were mis-
guided, at least over the short run. Critics who had pointed to the flaws
in the construction of the single currency see themselves confirmed
(Feldstein, 2012). Increasingly, voices in Europe, especially from the far
Left and Right, are calling for a reintroduction of national currencies.
Most EU politicians, however, remain adamant in their support for the
currency and do not tire to point out the advantages of the euro.
Given the importance of the common currency for the fate of the EU,
this second edition features two debates on this topic. The first debate is
broadly concerned with the political dimension of the euro, whereas the
second deals with the economic rationality of this momentous project.
In this first debate, Henrik Enderlein argues that the common
currency is a functional necessity for a closely integrated economic area.
The now apparent flaws need to be remedied by closer integration.
A breakup would have incalculable consequences. Against this, Andreas
Nölke maintains that euro members are too diverse to form a monetary
union. This diversity should be acknowledged and consequently result
in a dismantling of the common currency.
8.1 Why the euro is a functional necessity

in the process of European integration
Henrik Enderlein
Since the start of the euro area crisis, it has become fashionable again
to argue against the single currency. Why bother with the difficulties of
combining 19 different fiscal policies with one monetary policy, when
each country, or blocs of countries, could easily be connected through
a fixed exchange rate? Thus, under certain circumstances, adjustments
would be easy, e.g. after a crisis or when a specific economic shock hits
a country. Proponents of this view tend to forget that the creation of
the euro is not just a ‘nice to have’ by-product of the European Union
but a crucial step in the functional dynamic of European integration.
Indeed, the creation of the single currency is based on several economic
and political rationales that need to be taken into account in a broader
‘cost-benefit’ analysis on whether it makes sense to preserve the sin-
gle currency. This chapter starts with an outline of the functional logic
underlying the single currency before discussing why and where the orig-
inal set-up was flawed and what a ‘completed’ euro area could look like.
130 The Future of the Euro: Union or Disintegration?
The functional logic of the single currency

At its origins, European integration was about ending the vicious cir-
cle of political conflicts that engulfed Europe in the first half of the
twentieth century through the exchange of goods, services and people.
Transforming a continent of nation states with relatively closed borders
into a large free trade area was the cornerstone of the project of political
integration. Open borders for goods do not only call for an end to cus-
toms duties, but even more importantly require quite far-reaching agree-
ments on regulatory standards and thus on certain political preferences.
The debate about the transatlantic trade agreement TTIP since 2013
and the possibility that all regulatory standards will converge between
the United States and the EU remind us how far Europe has come in the
past decades.
Today, inside the European Union, the internal market legislation
ensures that people, goods, services and capital can move freely inside
the continent. Moreover, the competition rules are strict: protectionism
from regulatory intervention is strictly forbidden. In decades of mainly
regulatory work, the European Commission together with the mem-
ber states has developed the ‘acquis communautaire’, a huge body of
laws and rules, ensuring there is a transparent set of rights and duties
deriving from the participation in the Union, and in particular in the
internal market.
Why does all this matter so much for the single currency? The f ormer
Chairman of the US Federal Reserve, Paul Volcker, is said to have argued
that trade is more affected by 10 minutes of movements in exchange
rates than by 10 years of trade negotiations. Even if this sentence was
not related to monetary union in Europe, there is no simpler way to
express the functional logic of the creation of the euro as a consequence
to the single market. The four freedoms are essentially incompatible with
different currencies (Padoa-Schioppa et al., 1987). The Delors Report of
1989, which can be seen as founding document of the euro, notes that
monetary union is the ‘natural consequence of the commitment to cre-
ate a market without frontiers’ (Delors, 1989: paragraph 14). While the
European level acquired a clear exclusive competence in the implemen-
tation of the single market, and mainly in competition policy, regulatory
policy and standard setting, it could not fight distorted competition as
a consequence of so-called competitive devaluations. Frequently, until
the early 1990s, member states devalued their currencies to obtain a
competitive edge for their products, disrupting the whole edifice of the
single market and thus a fundamental pillar of European integration. In
analytical terms, the functional process of European integration, which
was based on the overarching objective to prevent wars thanks to eco-
nomic exchanges in a single market, had thus reached its limits due to
the incompatibility of the single market with a multitude of national

currencies. But there were even more arguments in favour of adopting a
single currency: Europe’s political role in the world economy was weak-
ened by a multitude of national currencies that could not compete with
the US dollar as reserve currencies. While the German D-Mark came
closest to playing such a role, even the German economy was too small
to be considered a solid backing to a world reserve currency. Also, the
role of the D-Mark as an anchor currency inside Europe raised question
as to the legitimacy of political representation of Europe as a whole in
international economic institutions and fora. In sum: in the late 1980s,
all European nations had to answer the question whether they were
ready to permanently and credibly fix their exchange rates inside the
single market to allow free trade to fully develop, thereby also strength-
ening the political weight of Europe in the world.
To put these considerations into a wider economic context: all open
economies engaged in trade with other economies have to make an
important choice between fixing their exchange rates to other curren-
cies and having a monetary policy that takes into account the national
economic cycle. That choice, which derives from the ‘unholy trinity’ or
‘trilemma of open economies’ (Mundell, 1963; Fleming, 1962), is based
on the consideration that capital flows will adjust to differences in mon-
etary policy, thus requiring a flexible exchange rate or, and this is the
converse argument, a monetary policy which stabilizes the exchange
rate and therefore does not take into account the requirements of the
national business cycle. Only two economies whose business cycles
are sufficiently aligned, i.e. the characteristics of which are sufficiently
similar to make sure there are no idiosyncratic shocks, can avoid that
choice. They form a so-called optimum currency area (Mundell, 1961;
M
cKinnon, 1963).
Against this background, one of the key challenges in the process of
European integration in the past decades has been that Europe clearly
doesn’t show the characteristics of an optimum currency area. Regional
economic differentiation is high, growth models differ greatly, and many
structural or supply-side characteristics of European economies differ
greatly. Despite this fact, the decision was taken in the late 1980s and
early 1990s to engage in the process of monetary unification. In the
trade-off between (i) allowing the single market to function properly
without exchange rate realignments and (ii) making sure monetary poli-
cies in member states could react to domestic cyclical shocks but then
lead to exchange rate realignments, Europe chose the former, consider-
ing that the latter would have run the risk of leaving the internal mar-
ket project incomplete. A quasi-federal economic entity without borders
for people, goods, services and capital cannot properly function with
different currencies. On top of the economic arguments, there were also

political considerations. The start of serious discussions on a single cur-
rency coincided with the collapse of the iron curtain and the reunifi-
cation of the Germany. Several European nations, in particular France
and its then President François Mitterrand, saw a necessity to embed
Germany even more strongly in the common European project, thus
putting some limit on what was perceived as German economic and
monetary dominance in Europe in the late 1980s.
Germany’s chancellor Helmut Kohl was ready to accept the full
integration of Germany into that common economic European space –
not out of political weakness or concessions, but because he saw that
Germany would become the biggest benefactor of a solidly integrated
economic and monetary union. But the big question was how to solve
the puzzle of creating a single currency in a heterogeneous economic
space. There were two quite consistent approaches to this. Germany, in
the run-up to the negotiations on the Maastricht Treaty that c reated the
monetary union, favoured a sequencing that would start with increased
trade integration and harmonization of structural characteristic of Euro-
pean economies, bringing them closer to an optimum currency area.
The single currency would then come as the endpoint or ‘crowning’ in
that process. France, on the other hand, argued that the single currency
had to be there at the start to ensure that trade integration could work
effectively from the beginning, but the it would have to be accompa-
nied by a political process ensuring ‘economic union’ would develop
more quickly, notably from a much stronger management of economic
processes through a ‘gouvernement économique’ (including a politically
steered central bank, which Germany opposed). Let’s be clear: both
approaches were internally consistent and represented logical steps for-
wards for the European project. Unfortunately, they were incompatible.
What did the European Union do? It did what it often does: it struck
a compromise deal. The Maastricht Treaty stipulated that the single
currency should be implemented from the very beginning, but with-
out measures to transform the European economies into a much more
homogenous economic space. The Maastricht Treaty essentially created
a ‘minimalist monetary union’.
The crisis as the consequence of a minimalist monetary

union
The consequences of that ‘original sin’ of the minimalist monetary union
are simple. It is best described by the problem of ‘one size fits none’ (cf.
Enderlein, 2005) of the European Central Bank (ECB). The ECB focuses
its monetary policy on the weighted average economic conditions of all
members of the single currency. So if 50 per cent of the euro area are
at low growth, low employment and zero per cent inflation (bust coun-
tries), and 50 per cent are at high growth, high employment and four
per cent inflation (boom countries), the ECB will act as if the inflation
in the euro area was average, at two per cent inflation. Quite paradoxi-
cally, however, that monetary policy would be inappropriate for all euro
area countries. It would be too restrictive for the bust countries and
push them even deeper into the bust, whereas it would be too lax for
the boom countries, which would heat up even more. During the first
decade of EMU, this is pretty much what happened. Monetary policy
was too restrictive for Germany, which at that time was called the ‘sick
man of Europe’ and too accommodating for the boom economies in
Ireland, Spain or Portugal. The ECB ran the right monetary policy for a
country that did not exist.
The current crisis in the euro area has brutally exposed the failures of
the minimalist monetary union. There is now a widespread consensus
that the EMU architecture as set up in the Maastricht Treaty had three
in-built institutional deficiencies: (i) the lack of an institutional frame-
work to ensure fiscal discipline, (ii) the impossibility of EMU to prevent
and correct imbalances, and (iii) the absence of provisions in EMU to
ensure the stability of the financial system.
Thus, contrary to what is often argued, the crisis derives from a
multitude of causes that gave given rise to a large variety of symp-
toms. Explanations focusing solely on wage-setting processes or fiscal
irresponsibility, on problems in banking practices or banking regulation,
on the failures in policy coordination or the application of sanctions,
will all only partially be right. The root cause of the current crisis lies
in the contradiction between a single, supra-national currency and the
continuation of nation state based economic policies. This contradiction
has given rise to all the other ‘causes’ of this crisis.
In other words, the euro area crisis has shown that economic and
monetary union have to be seen as two mutually reinforcing elements,
leading to a virtuous circle of deeper economic integration and thus a
better functioning of monetary union. When the euro was created, many
macroeconomic studies considered that this virtuous circle would arise
automatically from price flexibility and price competition: if different
economies can freely trade, then the law of one price should theoreti-
cally lead to price convergence. With hindsight, however, the rigidities
in EMU proved much stronger than expected. Trade integration did not
develop as strongly as anticipated. Many euro area economies kept a
‘home-bias’ that eventually led to strong economic divergence in EMU.
This lesson should be given careful attention in the current process of
further reforms of EMU.
What’s next: disintegration, muddling through, or the

completion of EMU?
After a first decade of relative success, during which the euro acquired
the status of world reserve currency and during which the ECB got
accepted as a credible and independent central bank (European Com-
mission, 2008), the euro area crisis brutally exposed the weaknesses
of minimalist monetary union as outlined above. In 2010–2012, many
financial market participants believed the euro would be allowed to dis-
integrate. And while several rescue packages were created to stabilize
the euro, it took the famous sentence by ECB President Mario Draghi to
‘do whatever it takes’ to preserve the single currency, before the immedi-
ate pressure went away. However, the crisis is still not over and there are
legitimate questions as to whether the euro area can survive a possible
next crisis. As a consequence, there are now three broad options for the
future of the euro.
The first option is to allow disintegration, i.e. to tolerate the return
to national currencies or clusters of national currencies. As the first part
of my argument has hopefully shown, there is a clear functional link
between the process of European integration and the single currency.
Despite all the transition costs related to failures of banks, sovereign
defaults and massive financial market uncertainty in the context of a
return to national currencies, the abolition of the single currency would
clearly weaken the functioning of the single market in the medium- to
long-term and thus represent an important set back to the European inte-
gration process. German chancellor Angela Merkel therefore, in a very
explicitly and carefully worded sentence, often states: ‘If the euro fails,
Europe fails.’ Whether that sentence also applies to a smaller euro area
is not clear. In the summer of 2015, the German finance ministry for the
first time officially floated the idea of a ‘temporary exit’ of Greece from
the euro area, even if the EU Treaties state that euro area p articipation
is ‘irrevocable’. Greece finally stayed inside the single currency, but the
exit option was put on the table. From an economic perspective, allow-
ing an exit, even of a small country, would fundamentally alter the set-
up of the euro area: the main difference between a fixed exchange rate
regime and a monetary union is that the latter is, indeed, irrevocable.
The moment the first country leaves the single currency, the very prin-
ciple of monetary union would be put into question and Economic and
Monetary Union could be perceived as having been transformed into a
fixed exchange rate regime in all but name. It could be only a matter of
time until the next country would leave, or – in anticipation of financial
market participants of such exit to h appen – until it would be pushed
outside the euro area in the context of a speculative attack.
The second option is ‘muddling through’. Europe often shows a ten-

dency not to solve problems directly, but to wait for a crisis or some
external trigger before decisions are taken. I consider that option to be
probably the most likely one, but it is also the most dangerous one. It is
unlikely that the still incomplete monetary union could survive the next
storm. It is thus high time to complete the euro area, instead of discussing
break-up and instead of continuing with kicking the can down the road.
The third option is to do what it takes to make the euro work more
effectively. Since 2010, the governance of EMU has already been subjected
to a major overhaul. But those reforms are still not sufficient to make the
euro work (cf. Enderlein, Fritz-Vannahme and Haas, 2014). Europe still
needs to recognize that monetary union cannot function as a stand-alone
element. A more complete monetary union would thus require (i) some
further degree of political integration, (ii) a clear role of the EU level as
a steering mechanism on macroeconomic and budgetary matters, and
(iii) an emphasis in economic policy-making on convergence in EMU.
Completing the euro

This third option, the completion of the euro, is often confused with
some kind of blueprint for a European ‘superstate’. That is not the goal
at all. It would be far more constructive to ask, in pragmatic terms, what
supplementary measures on the path to integration need to be adopted
in order for the euro to function properly. What is needed is a defini-
tion of the next integration steps: we need to build as much additional
European integration as necessary, but as little as possible. Defining
what exactly this implies is one of the biggest challenges Europe needs
to take up right now. Different people have different answers to those
‘minimum requirements’ for the euro. I think it would be reasonable to
focus on the following four.
First, it is necessary to continue to pursue the completion of the inter-
nal market (cf. Monti, 2010). A totally integrated trade area is neces-
sary in order to implement a more effective common monetary policy
and unlock the full economic potential of the European continent as an
integrated and competitive market. Not only is the service industry still
rooted in national production patterns to around 80 per cent, but the
free movement of people across borders also encounters a number of
obstacles: pension rights, for example, are very difficult to transfer from
one country to another.
Second, it is necessary to deepen the fiscal union through better risk
sharing and sovereignty sharing. One approach could be a system of ‘fed-
eralism by exception’ (Delors and Enderlein, 2012). Under normal circum-
stances, each country would be independent in setting its budget policy in
accordance with the euro area’s established rules of fiscal policy-making.

However, should a country’s debt get out of control, another mechanism
would have to be adopted. One could suggest that in a monetary union,
sovereignty ends when solvency ends (Enderlein et al., 2012). In practical
terms, this would mean that when a country no longer has access to a
financial market, it would gradually transfer its sovereignty in budgetary
policy-making to the European level. The quid pro quo could be simple: the
greater the financial dependence of a country on European financing, the
deeper the transfer of sovereignty and thus the European Union’s scope for
intervention. The implementation could be done through a democratically
controlled European Monetary Fund (based on, and developed out of, the
European Stability Mechanism), at the top of which a European Finance
Minister could speak for the general interest of the European Union or
euro area – as opposed to the particular interests of every single member
state (Enderlein and Haas, 2015). Setting up the right democratic control
mechanisms wouldn’t be an easy task, as the balance between European
and national legitimacies would have to be altered.
Third, banking union needs to be completed, with a clear risk shar-
ing logic that lends credible stability to the euro area financial system
(Merler and Pisani-Ferry, 2012). The main challenge is to prevent the
emergence of a financial system in which a euro in a, say, German bank
account would be considered safer than a euro in a Greek bank account.
For this, there needs to be a common system of deposit insurance or
reinsurance and also a clear fiscal backstop to the single resolution fund
on which the current banking union is based.
Fourth and finally, it is also necessary to compensate for a part of the
cyclical disparity existing within the euro zone. This has been achieved
in the United States, and even in Germany, thanks to a common taxa-
tion system or to a common form of unemployment insurance. Such
advances may appear desirable to convinced p ro-Europeans, but they
are not at all urgent. The proposal has been made to set up a stabiliza-
tion fund designed to counter excessive cyclical fluctuation. Countries
enjoying a boom would contribute to the fund, while those in a reces-
sion would benefit from it. In a system of this kind, over the longer term,
transfers do not occur in a one-way direction only. Such a system would
reduce cyclical divergence within the euro zone and it would thus ensure
that the ECB’s monetary policy would become more effective (Ender-
uttenberg and Spiess, 2013).
lein, G
Conclusion
Today, there are good reasons to believe that the ‘old’ EMU system can-
not survive. If that is the case, there are only two remaining options.
For a plurality of economic and social models! 137
Either Europe returns to different currencies, which would threaten the

future of the Single Market and, with it, the future of the common pro-
ject for political integration; or Europe succeeds in bringing the different
national economic systems in line so as to allow the euro to function
properly as a single currency.
As the costs and risks of a break-up are clearly very high, I take the
firm view that the second option should be pursued. I consider further
integration in a few selected areas to be a much smarter response to the
crisis than break-up. This doesn’t imply the creation of a full-fledged
federation or a superstate.
An appropriate governance framework for the European Union will
need to combine elements of the old nation state environment with
more innovative forms of supranational governance. Building such a
framework is paramount to overcoming the trade-off between preserv-
ing strong domestic political legitimacy and solving supranational chal-
lenges, in particular economic challenges arising from the Single Market
at the European level. What probably will need to emerge is a sui generis
construct that can respond to that trade-off. The fundamental question
is whether the old Westphalian concept of the nation state is still the
right reference point for governance in a world in which many chal-
lenges stretch beyond border. The philosopher Jürgen Habermas has
thus started to refer to the need of a ‘non-state supranational demo-
cratic order’ that would allow establishing governance mechanisms at a
level above the nation states, without replacing them, but complement-
ing them in a regional, here European, setting (Habermas, 2012). Such
innovative ideas will probably need to be developed further to allow
European integration and, in particular, the single currency to remain
effective, legitimate and stable.
8.2 For a plurality of economic and social

models! Against a monolithic euro state!
Andreas Nölke
European integration is a unique achievement. It helped to overcome the
massive tensions that plagued Europe for centuries and led to some of
the worst wars in human history. Historic rivalries between the United
Kingdom, France and Germany, and between these major powers and
smaller European countries, seem to be episodes of the past. Moreover,
the European integration process has led to many achievements that
doubtlessly benefit European citizens. Being able to cross borders with-
out passport controls, to effortlessly buy goods from producers in other
European countries or to participate in European programmes like the

Erasmus student exchange scheme are massive improvements for citi-
zens used to the traditional system of fairly closed nation states and
their restrictive borders.
At least since the 1990s, however, the European integration process
has taken a wrong turn. It has set its sights firmly on establishing a Euro-
pean quasi-state that is based on a common currency and uniform eco-
nomic institutions, and is supplemented by a political union in which the
most important social and economic decisions are taken in Brussels, not
in national capitals. This long-term goal, the commonly assumed ‘final-
ity’ of European integration, does not take into account that – at least
for the foreseeable future – the broad majority of European citizens do
not support the replacement of national democracy by European democ-
racy. It does not take into account that the legitimacy of the European
integration process still relies on its undisputed problem-solving ability,
on its ‘output legitimacy’, in the words of Fritz Scharpf (2011). Finally, it
also does not take into account that the economic and social institutions
in Europe are far too diverse to be governed by highly uniform rules.
Even after more than six decades of European economic integration,
national economic and social models in Europe still differ fundamen-
tally. Yet, economic heterogeneity should not be considered a bad thing,
because there is not ‘one best way’ to organize an economy. The differ-
ent models of the liberal United Kingdom, the coordinated economies
of Northern Europe, the French state-led economy, the Southern Euro-
pean consumption-led economies and the former transition economies
of Eastern Europe all have their specific economic advantages and dis-
advantages. During the last decades, however, the EU has increased the
pressure on its member states to harmonize these differences, guided by
the vision of a pan-European liberal model. This process has gone way
too far. We should change course to rescue the European integration
process and to decrease the tensions between the peoples of Europe that
have (re-)emerged during the last years.
European economic integration: heading towards forced

liberalization
Looking back at the history of the European economic integration, we
can distinguish among three main phases (Höpner and Schäfer, 2007):
• A phase of coexistence of different European economic and social
models (late 1950s until mid-1970s);
• A phase of increasing competition between European economic and
social models (mid 1970s until late 1990s);
• A phase of convergence of European economic and social models – or

of the attempt to enforce this convergence (since the late 1990s). The
euro is the apex of this attempt.
Unlike the customs union of the first phase of European economic
integration, the Common Market in goods that marked the second
phase already had considerable implications for the economies of the
member states. Based on the judgements of the European Court of
Justice, and the corresponding integration step of the Single European
Act, the sovereignty of member states in the regulation of product mar-
kets was limited by the principle of mutual recognition. This increased
the intensity of competition between European companies considerably.
It also indirectly fostered competition between the national social and
economic institutions supporting these companies, without, however,
challenging the existence of these institutions.
This changed in the third phase of European economic integration
when liberalization was extended from markets in goods to markets in
services, capital and persons (free movement of workers). The liberaliza-
tion of these markets under the common denominator of convergence
towards a liberal model of capitalism interferes far more deeply with the
institutions of differently organized economic and social models. This
has become obvious, e.g. in the case of the original proposal of the Take-
over Directive that has been put forward by the European Commission
with the target of establishing an open market for corporate control.
The latter is a central element within the corporate governance systems
of liberal economies such as the United Kingdom. There, the threat of
an unfriendly takeover serves to discipline management in favour of
shareholder primacy, as exercised by pension funds, activist hedge funds
and other institutional investors. In other economies, in contrast, cor-
porate control is exercised by interlocking directorates, house banks,
block-holders or the state. Unfriendly takeovers are an alien element
that does not work well with other institutions in these economies, such
as worker co-determination or state direction. Thus, the enforcement of
an open market for corporate control would have changed the power
relations within companies in many European countries considerably
in favour of the side of shareholders such as institutional investors, a
characteristic of the liberal model of economic and social organization
(Höpner and Schäfer, 2007: 15–18).
The main drivers of this liberalization process were the European
Commission and the European Court of Justice, two non-majoritarian
institutions. The original Commission proposal would have undermined
the regulation of services by the governments of the economies where
these activities are to be undertaken. This has been successfully opposed
in many European societies, due to concerns about safety or quality
standards, or the undercutting of locally paid wages. Correspondingly,

the principle was eliminated from the Directive. Later, however, substan-
tial liberalization steps still have been enforced via case decisions of the
European Court of Justice, as for example in case of the Laval decision
(2008) that has placed limits on the right of Swedish unions to strike in
order to protect Swedish remuneration standards against cheap labour
from Latvia.
The eurozone crisis and eurozone rescue policies: onward in

the wrong direction
Such a radical harmonization of European economic and social models
under the banner of the liberal model does not only endanger worker’s
rights, but – even before the eurozone crisis – has also led to a negative
politicization of European integration. This has become obvious, e.g.
during the Dutch, French and Irish popular votes on European Union
treaty changes, where the majority of the population rejected further
advances in integration. The introduction of a common currency – and
later steps to rescue the common currency – follows the same logic as
highlighted above. Again, we witness an enforced homogenization of
heterogeneous social and economic models under the leadership of a
non-majoritarian institution (European Central Bank), with even more
problematic consequences.
One of the main problems of the eurozone is the combination of a
unified monetary policy with the existence of very heterogeneous wage-
bargaining systems in the member economies. This combination has been
core to the emergence of the eurozone crisis (Scharpf, 2011; Hancké,
2013; Höpner and Lutter, 2014; Nölke, 2015). The Northern econo-
mies, based on their strongly institutionalized wage-bargaining systems,
are able to focus their wage settlements on the small corridor between
the safeguarding of real wages and worker participation in productivity
increases on the one hand, and preserving the profitability of companies
and avoiding inflation on the other hand. The Southern economies do
not have this kind of comprehensive wage-bargaining system.
Traditionally, the resulting differences in wages and prizes have been
corrected by monetary policies, including central bank interest rate
changes and currency devaluations of Southern countries. However, the
introduction of the eurozone has abolished these tools. This has led to a
heavy divergence in the internal competitiveness of the eurozone econo-
mies. At the same time, the common currency has also affected the exter-
nal competitiveness of the Southern eurozone economies, in particular in
context of the rise of the large emerging markets (De Ville and Vermeiren,
2015). The latter are strong competitors for the typical goods produced
by the Southern European economies, which are based on rather low

labour costs, but so far they are a lesser threat to advanced and less
price-sensitive German products, such as capital goods. The common
currency, however, leads to a higher exchange rate for the euro, as com-
pared to stand-alone currencies of Southern member states. Thus, the
euro negatively affects the price competitiveness of Southern producers.
While these divergences had been masked during the early phase
of the introduction of the common currency by increasing access to
public and private credit – and the corresponding consumption-led
boom in the Southern economies – the global financial crisis has put
an end to this period of financialized growth in the Southern Eurozone
(Gambarotto and Solari, 2014). After the global financial crisis, most
member zone economies drastically increased their debt in order to
save their banks. Rating agencies and other financial market actors
became increasingly sceptical about the debt servicing capacity of the
Southern Eurozone economies. In order to stop the divergence of inter-
est rates for the sovereign debt of Eurozone member economies, the
European Union introduced reform programmes that promised finan-
cial support, in exchange for fiscal contraction and the liberalization
of labour markets. Again, the response of the European Union was
dominated by the logic of ‘one best way’ in which the economies of the
South had to follow the blueprint of a liberal economic model, now
combined with German fiscal restraint. The adjustment programmes
for countries like Greece have demonstrated how deeply this approach
interferes with democracy in the member economies. Neither the results
of national elections nor those of a country-wide referendum were able
to change the economic course for Greece as demanded by the ‘Troika’
of Commission, ECB and IMF. Since the July 2015 agreement, their
representatives even have a right to veto national legislation.
Moreover, a common institutional blueprint cannot work throughout
the whole Eurozone and has already led to a deep economic and social
crisis in the Southern economies. In early 2015, the Southern economies
seem to have stabilized, except Greece. Closer scrutiny shows, however,
that this stabilization occurs on a low economic level. Extremely high
youth unemployment persists, and the underlying reduction of the bal-
ance of payment deficits is less the result of increasing competitiveness
but rather of a strong reduction of imports. The latter also leads to grow-
ing conflicts with other economies such as the United States, because of
the reduction of international demand. The ECB policy of quantitative
easing – the purchase of financial assets for the purpose of increasing the
money supply in order to stimulate the economy in a situation of very
low interest rates – intensifies this problem by causing a devaluation of
the euro, potentially leading to global currency wars.
It would be a grave mistake to continue on the chosen path. For the

South of Europe, one or two decades of social and economic stagnation
are very likely. From the perspective of the North, this policy does not
only weaken important export markets but still contains the threat of a
chaotic implosion of the euro system, at very high cost. Furthermore, a
continuation of current policies will lead to permanent tensions not only
with economies outside of the eurozone, but also between the govern-
ments and peoples of the eurozone itself. While one side focuses on the
need to implement additional adjustment programmes, the other side
highlights the need for compensating fiscal transfers; both are highly
unlikely to give in.
A great leap forwards? The dangers of further state-building

Many observers of the European integration process argue that the
obvious problems of the eurozone make a further leap forwards in
European integration necessary now. They advocate not only compre-
hensive fiscal transfers but also the further delegation of political power
to the European level, in order to legitimate the provision of additional
transfers and stronger supervision of member states by EU institutions
(Glienicker Gruppe, 2013; Groupe Eiffel Europe, 2014; Platzer, 2014).
These proposals, however, are neither helpful nor realistic. Moreover,
they endanger the future of peaceful cooperation and democratic self-
determination in Europe.
Additional fiscal transfers would not obviate the need for a forced
harmonization of fundamentally diverse models of social and economic
organization in the eurozone; they would not even change the danger-
ous prescriptions of the adjustment programmes. Transfers may soften
the social problems of the Southern economies but would not solve their
competitiveness problems – they would rather increase prices and, thus,
intensify their problems even more. Moreover, the degree of social cush-
ioning would be limited, given that the volume of fiscal transfers that
would be politically feasible certainly would not be sufficient to funda-
mentally change the social situation in the Southern economies. Finally,
even quite comprehensive fiscal transfers do not necessarily lead to a
dynamic economy, as witnessed in the Italian Mezzogiorno and Eastern
Germany.
The transfer of additional responsibilities to the European level that
necessarily would go hand in hand with substantial fiscal transfers
does not seem politically realistic at all. In Germany, currently the most
integration-friendly European member state, it would not muster sub-
stantial political support. Even without straightforward fiscal transfers,
large parts of the population have developed strong reservations about
further assistance programmes to Southern Europe. The refugee crisis

of 2015 has intensified these concerns. Support for further European
state-building would be even less pronounced in member states with a
tradition of strong reservations vis-à-vis the European Union, such as
France or the Netherlands.
Additional advances in European state-building could even lead to a
destruction of the European integration process, given the continuing
legitimacy crisis of the Union, as documented by recent Eurobarometer
surveys (Zalc, 2013), as well as a long series of election results that have
favoured Eurosceptic parties. Although the political elites in Europe
might agree on a further delegation of competences to the Union level,
the broad population would not agree. In contrast, the negative politici-
zation of the Union and the further dissolution of the ‘permissive consen-
sus’ would most likely increase. After all, the unsuccessful management
of the eurozone and of the refugee crises has further eroded the output
(problem-solving) legitimacy of the Union, without being able to com-
pensate for this by increased input (democratic participation) legitimacy.
Even if increases in the powers of the European Parliament were polit-
ically feasible, they might result in a net loss of democratic legitimacy.
Strengthening the European level necessarily decreases the amount of
democratic self-determination on the national level. In case of the Euro-
zone rescue policies, this is true for crucial issues such as taxation, social
policy and labour regulation, as far as the euro crisis is concerned. At the
same time, these losses in democratic legitimacy cannot be compensated
by a functioning democracy on the European level. Even if we leave fun-
damental issues such as the different weight of individual citizens’ votes
aside – otherwise large countries such as Germany would need to send
much more deputies into the parliament, to the disadvantage of smaller
countries – the EP cannot claim the same level of democratic legitimacy
as national parliaments, given the lack of public attention and low voter
turn-out in EP elections. Recent initiatives that have tried to remedy
these problems – e.g. by linking EP elections to the Commission presi-
dency – were not successful. Moreover, it is highly likely that a further
politicization of the EU via EP strengthening in the current situation will
not lead to a parliament that replicates the familiar cleavages between
left and right or liberal and conservative, but rather between creditor
and debtor states (Höpner and Schäfer, 2012).
Another jump in integration in order to stabilize the eurozone system
could thus have exactly the opposite consequences than desired by its
proponents – instead of leading to the evolution of a democratic Euro-
pean federation, it could lead to a fundamental delegitimization of the
European Union, with a crisis of democracy in the member states and
increased inter-state tensions in Europe as collateral damages.
A change of course: towards a more plurality-friendly Union

Instead of forcing through the botched experiment of a common cur-
rency and risking a fundamental crisis of European integration, we
should change course. A certain reduction of forced integration would
not only be popular with broad groups of the population. It would also
pay more attention to the heterogeneity of European capitalism and to
the functioning of democracy in Europe. The steep rise of movements
of the political right in many member countries is an indication of the
dangers of the continuation of the current integration process.
However, even more pressing is the social upheaval caused by the
eurozone crisis and the rescue policies. If we do not want to risk dec-
ades of economic, social and political crisis in the Southern economies,
we cannot avoid devaluations and the reintroduction of the ability of
national central banks to set interest rates in accordance with domestic
needs. Given that a split up of the eurozone or an exit of single countries
would lead to massive legal, economic and political problems, the intro-
duction of national parallel currencies might be one of the most attrac-
tive options currently available (Schuster, 2015). Since a huge amount
of debt still would remain denominated in the common currency, this
would need to go hand in hand with a massive act of economic support
for the Southern economies. However, this unique act of solidarity might
be politically more feasible than other options, given that this would
lead to a permanent improvement of the economic competitiveness of
the Southern economies and would alleviate the danger of permanent
fiscal transfers. Finally, the erection of the eurozone system has at least
led to one major advantage, given that the European Central Bank could
form the nucleus of a European Monetary Fund, analogous to the role
of the International Monetary Fund in the system of Bretton Woods. By
setting up a managed currency system that is able to pay attention to a
plurality of social and economic models, but still provides some stability
against and limits on speculative financial flows, the European Union
might even become a global role model – which certainly would not be
the case with a uniform euro state.
Chapter 9
The Euro: Economic Success

or Disaster?
While the euro, since its very origins, has always been a deeply politi-
cal project, its fate and success will hinge most likely on whether it
is able to enhance the economic well-being of the European peoples.
After all, the economies of scale inherent in a single currency for a
deeply integrated economic area were always cited as one of its most
obvious benefits. And while the euro as political project has been
contested from its very beginning (see the chapters by H. Enderlein
and A. Nölke in this volume), it appeared rather uncontroversial that
a monetary union sooner or later made economic sense for the EU.
Most foreign observers would have preferred a later introduction of
the common currency at a time when the eurozone was closer to a
so-called optimum currency area that combines capital and labour
mobility with risk sharing mechanisms, such as a common budget.
But its principal desirability was quite uncontested – until the euro
crisis erupted. After five years of crisis, economists across the globe
argue that instead of enhancing welfare, the euro has acted as an
instrument impoverishing many to the benefit of few. While there
is relative consensus on the immediate causes of the crisis, opinions
are strongly divided on whether the eurozone suffers from inherent
flaws resulting in a negative economic performance, or whether it is
an idea which has a valid economic rationale and just needs some
adjustments to work.
Tal Sadeh argues that the economic benefits of the euro are too
indeterminate to justify the political cost associated with a monetary
union. Waltraud Schelkle counters that arguments that the eurozone
members are too diverse are overblown. The eurozone should be seen
as a risk sharing community that needs just some additional instru-
ments to work.
145
146 The Euro: Economic Success or Disaster?
9.1 Exit or differentiated monetary

integration – saving the euro by making
it more flexible
Tal Sadeh
Between December 2009 and ECB President Mario Draghi’s famous July
2012 pledge to do ‘whatever it takes’ to save the euro, Irish, Italian, Por-
tuguese, Spanish and especially Greek sovereign debt faced huge pressure
in the markets, as default risk, once unthinkable, began rising. The 1992
Maastricht Treaty, which established Economic and Monetary Union
(EMU) in Europe, specifically ruled out mutual guarantees for member
governments’ debts (‘bail-outs’). However, most market participants
seemed to assume that economic interdependence among the member
states would compel governments to do just that in case of a crisis.
This assumption was put to the test, as European governments rushed
to offer increasing amounts of loan guarantees, with the help of the
International Monetary Fund (IMF). A Greek bail-out was followed by
Irish, Portuguese and yet another Greek bail-out. Spain came close to
an official bail-out at the end of 2012. Cyprus was bailed out in March
2013 and has imposed capital controls ever since. Increasingly, the pri-
vate sector had to shoulder the burden of these bail-outs. In the summer
of 2011, even major member states came under pressure, in response to
inconsistent Italian budget policy and concerns that the French govern-
ment would not be able to fulfil its commitments to rescue the other
member states. Italy and Spain received help when the ECB intervened
in their favour in the bond markets in the fall of 2011. Social protest
erupted in these countries at the austerity and reform measures imple-
mented by the governments as part of the loans’ conditions, or, in the
case of Italy and Spain, in anticipation thereof. Political unrest grew also
in Finland, Germany and the Netherlands at the prospect of seemingly
endless rounds of bail-outs.
These developments reminded everyone how difficult it is to sustain
EMU. With an uneven distribution of economic gains, and quite high
costs to some member states, and with little domestic political support
to pay its increasingly transparent price, the fate of EMU is argued here
to hang on its ability to transform itself into a more flexible regime. One
way forwards is for the euro area to allow less reform-committed mem-
ber states to leave the euro area as part of a stability package that limits
the damage of exit to the departing member state(s), to the remaining
member states and to the world economy. Another possibility is to do
away with the simple in–out distinction, and instead allow the euro area
to evolve into a club with differentiated integration.
Exit or differentiated monetary integration 147
From a viewpoint of economic efficiency, EMU involves a trade-off

between microeconomic gains and macroeconomic costs. The gains are
potentially derived from expanded trade in goods and services following
the elimination of the trade barrier inherent in exchange rate fluctua-
tions and currency conversion costs. Indeed, after initial difficulties in
accurately quantifying the trade benefits brought about by the euro,
recent research shows that the establishment of the euro area has more
than doubled trade in goods among its member states (Sadeh, 2014). In
fact, the trade benefits derived from the single currency have been dis-
proportionately larger in the periphery member states.
However, according to the World Bank, data manufacturing now
amounts to only about 16 per cent of the economy of the euro area
by value added (down from 19 per cent when the euro was launched)
and even less than that in the Mediterranean economies (as low as 8
per cent in the case of Greece). And the effect of the euro on trade in
services, which form an increasing share of output in the euro area, and
are responsible for a great majority of jobs, remains obscure. It is con-
ceivable that some of the growth in trade in goods increased cross-bor-
der trade in services because of intra-industry services and because of
bundling (the servicing of consumer and intermediate goods). However,
given the political difficulties in liberalizing trade in services in the EU,
little can be expected here. Neither can the euro be credited with price
convergence in Europe, which is an indicator of trade-driven competi-
tion, because most of it is the result of the Single Market.
Thus, given that the euro has not fulfilled its economic promise, it
is not surprising that annual GDP growth rates in the euro area have
not impressed – about 2 per cent on average between 1999 and 2007;
the recent negative annual rates (–0.25 per cent on average between
2008 and 2013) make it even harder to suggest that growth would
have been even slower without the euro. In fact, membership in the
euro area has been associated with some negative economic effects,
by exacerbating first the asset price inflation in the periphery during
the 2000s, and more recently the economic stagnation. All of this, of
course, does not mean that the euro area was destined to such dismal
economic performance; national economic policies could have better
responded to the launch of the euro, and the crisis could have been
better managed. And yet, 15 years after its launch, it is hard to argue
that the euro brought large economic net benefits to Europe that could
not have been realized without it.
The macroeconomic costs associated with a currency union derive
from the loss of monetary policy autonomy and the resulting inability to
adjust the exchange rate. Outside EMU, these policy tools are conveni-
ent when growth rates diverge significantly among the member states.
For example, a euro area member state undergoing a recession may

want to lower the interest rate or see the euro depreciated, but these
measures may not be simultaneously appropriate for another member
state undergoing an economic boom. Thus, the costs of EMU are lower
if growth rates are synchronized among the member states.
Unfortunately, the record of EMU on convergence is again not
encouraging (Enderlein and Verdun, 2009: 491). The annual standard
deviation of growth rates among the euro area member states was on
average only slightly lower between 1999 and 2008 (1.7 per cent points)
than it was between 1992 and 1998 (1.9). Even this small decline may
not necessarily be identified as a direct consequence of the single cur-
rency, rather than the result of other shocks that would have occurred
regardless of EMU. In fact, there are good reasons to suspect that the
euro had adverse effects on the synchronization of growth rates. First,
the terms of the launch of the euro caused Germany to enter it with an
overvalued exchange rate; Germany has since regained its competitive-
ness (and thus exports and growth) through labour market reforms. By
contrast, Italy (and France) entered with an undervaluation and lost
competitiveness with time.
Second, the uniform nominal interest rate that the ECB sets translates
into different national real interest rates given continued differences in
the rate of price inflation. In this way, the single currency pro-cyclically
stimulates economic activity in high-inflation countries, and restrains
activity in low-inflation countries (Enderlein and Verdun, 2009: 494).
While the euro is credited with harmonizing inflation rates over time
(see below), they remain by no means identical. Standard deviation in
national inflation rates is still about 1 per cent point, which is quite
a lot in terms of monetary policy rate setting. Third, the euro did not
stimulate trade – the main factor expected to drive growth rate synchro-
nization – until the mid-2000s (Sadeh, 2014). The crisis made things
worse. The standard deviation of growth rates among the member states
greatly increased between 2009 and 2013 (2.5 per cent points). While in
2009 this divergence was the result of the global crisis and the different
exposure of member states to global trade, what followed was mostly
a euro story.
If national growth rates are not synchronized and fiscal and monetary
policies are constrained in EMU, it is imperative to remove rigidities and
allow market forces a greater influence on prices and wages. However,
prices in the euro area are known to change very slowly, because of
product and labour market regulations limiting competition. Reforms
in the goods and labour markets in Europe have either slowed after the
adoption of the euro, or were unaffected by it. Reforms in the goods
market are largely attributable to the drive to complete the EU’s Single
Exit or differentiated monetary integration 149
Market. Substantial wage moderation and erosion of real wages were

observed in countries preparing to enter the euro area in the 1990s, but
much less so after the adoption of the euro, with few notable exceptions
such as Germany (Alesina et al., 2010). Following the launch of the euro,
all EU member states (with the exception of Austria and Spain) slowed
their labour market reforms in areas that enhance national economies’
capacity to adjust to recessions. Within the euro area, the differences are
huge: Greece has the least liberalized labour market, while Ireland is the
most liberalized.
Economic openness can also compensate for the lack of monetary
autonomy inherent in euro area membership. International flows of
capital and labour can stimulate a depressed economy. In addition, capi-
tal flows restrict a country’s ability to set its own interest rate and thus
reduce the opportunity cost of adopting the euro, especially in highly
open (mostly small) economies (Jones, 2008). Indeed, openness as meas-
ured by the ratio of total exports and imports of goods and services to
output has increased continuously in most member states, as have capi-
tal flows. However, on average, such openness is consistently lower in
euro area member states than in non-euro EU member states; within the
euro area, it is relatively high in Germany but especially low in Greece,
Portugal and Spain. And labour flows, which Optimum Currency Area
theory prescribes as a remedy for asymmetric shocks among member
states, are known to be relatively small among EU member states and
cannot compensate for the above divergence. Recent social and politi-
cal tensions over immigration might hinder efforts to increase labour
mobility any further.
Persistent differences in the rates of price inflation among the member
states add to the costs of maintaining the euro area, because industries
in high-inflation countries lose competitiveness. During the euro’s first
decade, Greece, Ireland, Portugal and Spain experienced significantly
higher inflation than the euro area average. Germany, by contrast, has
had the lowest inflation. While on average inflation has been consist-
ently falling and converging in the euro area (Greece being an outlier)
these differences have nevertheless accumulated over the years since the
euro was launched (Enderlein and Verdun, 2009: 495).
It is by now clear that the economic gains of a single European cur-
rency are on aggregate small, and that euro area membership requires
more reform than some member states’ politics can allow (see also the
chapter by A. Nölke in this volume). Before the recent global crisis, they
did not commit consistently to the imperatives of EMU, and now too
much needs to be achieved in a very short time. Since 2010 the euro
crisis has exposed these tensions as never before. In response to the
crisis, many governments reiterated their commitments to reform and
austerity. However, now that the price for staying in the euro is more
transparent, it is harder to maintain a strong supportive coalition within
each and every member state. Social groups that are asked to make great
sacrifices for the sake of fiscal stability (either in their home country or
by helping other member states achieve stability) may wonder whether
leaving the euro is worse for them than staying in – all the more so if
they perceive that other groups gain more from membership in the euro
area but are asked to sacrifice less.
The single currency may have important political benefits for the
member states individually, and for Europe as a whole, whether in terms
of national interests or in terms of norm-setting. There is no scope here
to analyse such benefits, but it is clear that the member states have so far
revealed strong preference to maintain the membership of the euro area.
While the resolve to prevent a breakup is remarkable, the economic dif-
ficulties of the euro can no longer be ignored. Insisting that all members
abide by the rules is essential for preserving the credibility of the single
currency. However, insisting that no member can ever leave is not realis-
tic in the long term, unless some degree of variation is permitted in terms
of what membership entails.
Assuming that deeper fiscal integration among the member states,
not to mention full political union, cannot be collectively achieved in
the foreseeable future, exit or differentiation in monetary integration
are the practical options to prevent the single currency from implod-
ing. The former means that some of the member states whose member-
ship is more expensive to maintain should be allowed to leave the euro
area as part of a stabilization package. In other words, member states
should receive aid (perhaps from the IMF) and debt relief to restart their
economies outside the euro area. Devised properly, such a package can
minimize the cost of the exit. Departing from the club might still be very
costly (Eichengreen, 2010), but staying in may be costlier still, at least
for those who suffer from ever harsher austerity packages. And a depar-
ture by one member state may not set off a domino effect that inevitably
forces other member states out of the euro area, if those who stay are
committed to adjust their economies to the exigencies of a shared cur-
rency, and if the ECB is willing to supply all the liquidity it would take
to defeat speculative attacks. Admitting that one marriage has failed
does not mean all marriages are destined to fail. Insisting that no mar-
riage can fail is not a credible notion. For example, repeated failure or
inadequacy of reforms and domestic political turmoil over five years in
Greece suggest it cannot prosper in the euro area. However, Ireland and
Portugal have successfully graduated their bailout programmes.
Of course, for exit to be orderly, the departing member states must
cooperate. If they have political reasons to insist on staying in the euro
Unity in diversity: the unfulfilled promise of the euro 151
area, then differentiated integration, which is increasingly typical of the

EU in general (Schimmelfennig et al., 2015), is the remaining option.
Differentiation could mean allowing a member state to exit the euro
area economically (i.e. allowing it to diverge de facto from the com-
mon monetary policy) without exiting it politically (adopting a national
currency and exiting the euro area’s decision-making bodies). Moder-
ate levels of economic detachment could be achieved by measures such
as capital controls (as has already been done in Cyprus and Greece).
Greater differentiation could be achieved by allowing the circulation of
IOUs (script money) aside the euro in the issuing member state without
being accepted outside it. Under such conditions, the script would drive
the euro out of domestic circulation, reserving it for cross-border trans-
actions, and/or be devalued against the euro. Such a de facto increase in
liquidity and/or devaluation would ease some of the economic pressure,
especially for some of the more deprived sectors of society.
However, differentiated monetary integration could also mean allow-
ing a member state to integrate more closely (rather than more loosely)
with the euro area. This would involve greater political integration than
is currently demanded of the member states, such as by ceding different
aspects of domestic control over the national budget and administration
to the euro area’s institutions. In the past few years, member states under
a bail-out programme have all been obliged to accept at least close foreign
monitoring of their administration, and in the case of Greece such moni-
toring increasingly spilled over into control. This is often seen as a national
humiliation, but perhaps it can be institutionalized as an elevated form of
integration rather than a degrading condition tied to financial aid.
Of course, the details of any plan for differentiated monetary integration
in the euro area must be worked out carefully and cannot succeed without
consent of the euro area’s institutions and the member states. No solution
to the euro crisis would be perfect or cheap, but insisting that all member
states remain under the same conditions as the Maastricht Treaty envi-
sioned more than 20 years ago may ultimately be the most expensive path.
9.2 Unity in diversity: the unfulfilled

promise of the euro
Waltraud Schelkle
Creating a monetary union between an ever-expanding number of diverse
and unequal nation states is arguably one of the biggest social experi-
ments in history. It is still not well understood. How can we explain the
attempt, the success of which is so far not assured? And can it work?
Many regard the euro as failed. Harvard economist Robert Barro,

writing for the Wall Street Journal in January 2012, expressed the ver-
dict of many US observers: ‘Despite some scale benefits from having
larger countries, the cost of forcing heterogeneous populations … into
a single nation could be prohibitively high. … The euro was a noble
experiment, but it has failed’ (Barro, 2012). The quote contains a couple
of tacit assumptions. First, a monetary union must be part of a country,
read: a political union. And, second, a nation is defined by its homo-
geneous population. But: neither of these assumptions applies to the
United States. The greenback was created precisely to force a divided
country into one (Frieden, 2015: 49103). In 1863, after the South had
declared its secession from the union, the American Congress introduced
the first national currency with no representatives of the secessionist
states present. The currency of the victorious North was imposed on the
South. The gold-based currency remained contested for several decades
because the agrarian states wanted a monetary regime in which it was
easier and cheaper to get credit. In the Barro sense, the US experiment
failed as well. The dollar area remains a union of heterogeneous popu-
lations and diverse political-economic geographies. Or would anybody
claim that Texas and California are homogeneous?
Many political economists, however, dispute even that the euro was a
‘noble experiment’ (see the contributions in Matthijs and Blyth, 2015).
They see the common currency as the expression of a neo-liberal policy
consensus which ignores differences in institutional arrangements, par-
ticularly for wage bargaining, across the euro member states (see the
chapter by A. Nölke in this volume). They argue that in a European
Monetary Union (EMU), labour market institutions have to become
alike so that they can achieve wage moderation in line with Germany.
Otherwise, the loss of competitiveness will continue to push these coun-
tries into current account crises (Hancké, 2013; Johnston and Regan,
2014). These points deserve more debate than is possible in this short
article. But my disagreement is threefold: first, EMU does not impose
and has not led to homogeneity of policy choices. Second, wage bar-
gaining systems can only play a supporting but not the decisive role in
stabilizing economies; no wage bargaining system can rein in, say, a rise
in housing costs of 10 per cent and more per year. And third, the notion
of ‘models’ revolving around wage-setting institutions ignores that they
are in constant flux; the proliferation of models in the comparative cap-
italism literature suggests that economic institutions are not so fixed
after all. The euro is not destined to fail.
The historical evidence shows that European governments and their
advisors have tried to coordinate, harmonize and eventually unify their
monetary policies ever since the late 1960s (Dyson and Featherstone,
1999: chapter 3). They did so conscious, not ignorant, of the differences
between their political economies. These differences concerned mem-
ber states’ vulnerability to social conflicts feeding inflation and budget
deficits as well as their ability to contain current account imbalances
and currency crises, which were subjects of constant debate. The tim-
ing of EMU coincides with the increasing strains in the fixed exchange
rate system of Bretton Woods that were fuelled by permanent current
account imbalances, notably German and Japanese surpluses and cor-
responding deficits of the United States, but also of France, Italy and the
United Kingdom. The dollar-parity system collapsed in August 1971.
The efforts to replace it included the so-called Werner Plan to introduce
a common currency among the six original European Community mem-
bers by 1980. Financial instability in the aftermath of the liberalization
of banking and capital markets renewed these earlier efforts after the
mid-1980s and it succeeded this time, with a larger membership than
initially projected. These efforts at European monetary integration were
about sharing risks from monetary and financial instability between
states that have a political bond and complementary economic interests
(Schelkle, forthcoming).
Risk sharing between states can be achieved through various channels
(Asdrubali et. al., 1996; Sørensen and Yosha, 1998). It can take place
through closer financial market integration that leads to cross-border
shareholding, lending and borrowing. So if the domestic economy expe-
riences a downturn, household consumption can draw to some extent
on these international sources of income and credit, and vice versa if
in an upswing. For most households except the wealthy, this happens
indirectly through the revenues of their pension funds, insurers and
international banks. They all invest household savings in an interna-
tional portfolio and thus smooth the return on these savings, at least in
theory. Other risk-sharing channels include common policies towards
migrants which allow citizens and their families to move, find work and
integrate into the welfare system of another member state. While this is
important insurance for individuals falling on hard times, it is not clear
that regions can be insured in that way: they lose their young mobile
workforce in a downturn and are thus additionally disadvantaged. Risk
sharing can also come from interstate emergency funds, such as aid or
the recently created European Stability Mechanism which gives bilater-
ally guaranteed credit on non-commercial terms. This last channel is
the small equivalent of a common budget in a fiscal federation like the
United States.
The potential for mutually beneficial risk sharing rises with the diver-
sity of the risk pool (Imbs and Mauro, 2007). But the paradox is that the
more diverse countries are, the less likely it is that they share the political
bonds needed to overcome the mistrust, justified or not, which is neces-

sary to activate and exploit the opportunities for risk sharing. Diversity
makes it more likely that members are not hit by the same shocks or not
in the same way. The member economies that are less hard hit or even
benefit from an economic shock can then smooth income and consump-
tion of those hit hard, through cross-border share holdings, credit, job
opportunities and fiscal transfers. But whenever the veil of ignorance is
lifted and the risks have materialized, the lucky members of an insur-
ance scheme tend to see the unlucky as at least partly responsible for
their mishap (‘moral hazard’). This can then easily serve as a pretext
for reneging on commitments. The political capacity to overcome such
opportunism sets practical limits to inter-state risk sharing.
This literature is a good starting point, but we know now from hind-
sight that it had too much trust in financial markets as shock absorbers.
The risk-sharing channel of financial markets can also act as a transmis-
sion mechanism for shocks. The initial trigger of defaulting mortgage
loans, taken out by low income households in the United States, was
amplified by fire sales of assets and capital flight (into the US dollar!) by
European banks invested in these toxic products. From then on, the cri-
sis took its fatal course: governments guaranteed national banks’ obli-
gations and relieved them from their worst assets, not only to rescue the
banks but also the savings of households. By 2010, however, financial
investors turned the tables and attacked sovereign borrowers in bond
markets. Greece was a fiscal disaster waiting to happen, but this cannot
be said of Ireland and Spain. Markets panicked them relentlessly into
pro-cyclical fiscal retrenchment (‘austerity’), and the measures they took
were then codified in adjustment programmes prescribed by the troika
of the IMF, the European Commission and the European Central Bank.
In order to break this diabolic loop of insolvent banks and over-
indebted governments, the risk pool of a currency union needs a com-
mon debt instrument. Joint liability for debt incurred to avert a systemic
banking crisis would protect each member-state government from being
picked up by speculators in the expectation that it would not be able
to shoulder the cost of a bank resolution (which typically requires com-
pensating savers or bond holders like pension funds on social grounds).
This would not so much have helped banks: in fact, a common debt
instrument like a Eurobond would have allowed to close down insol-
vent banks more vigorously than anxious governments dared to do. It
would have spread the risk of a bond market attack on all member
states and not exposed those that bond investors thought, for good or
bad reason, were not creditworthy any more. Neither wage flexibility
nor wage moderation could have prevented or remedied the situation.
And fiscal discipline was simply not an option for any government when
national banking systems were about to collapse: Germany had one of

the biggest bank rescue packages of all OECD countries.
There was some risk sharing. The dog that did not bark in this epic
saga was a payments crisis which is typically a stage in any financial
crisis. This is the problem of not being able to make a payment even
though the two contracting parties have agreed on the underlying trans-
action. In international economic relations, it is known as a sudden stop
of trade finance. The conspicuous absence of a payments crisis is note-
worthy, given the credit crunch in Ireland and Southern Europe as well
as the capital flight from these countries.
The euro area’s cross-border payments system, TARGET2, played
a pivotal role. Mistrust between banks could have led to a complete
breakdown of commerce; this was prevented. Banks could offload their
claims against each other to their respective central banks. Since finan-
cial institutions in different countries (or in the United States: in different
Federal Reserve districts) do not maintain direct financial links between
each other; the central banks create this link. The bank of a client (in
Germany or California) who needs to pay somebody in another state
instructs the central bank to draw on its deposits and credit the account
of the bank at the central bank there so that this bank (in France or
Texas) can pay the client who is supposed to receive the payment. This
mechanism became visible during the euro crisis in large TARGET2
imbalances; in particular, the German Bundesbank accumulated large
claims against the TARGET system. These imbalances indicated that
the insurance mechanism against a sudden stop of trade finance worked
and not that something is wrong, as some critics suggested (for example
Sinn, 2012). Even banks outside the euro area, in particular UK banks,
benefited and could hedge against a break-up of the euro area. This was
another insurance service of TARGET, although probably not one it was
designed for.
TARGET is an excellent example for how risk sharing in a union of
diverse members can work, economically and politically. Economically,
it is analogous to universal social insurance: it is the same insurance
against the vagaries of disrupted payments for all participants, whether
traders or speculators; and the insurance is provided as a public good,
the usage of which is non-excludable. This non-discrimination makes
it financially robust and technically efficient. Politically, it is important
that the insurance has no visible ex ante distributive effect: net import-
ing as well as net exporting nations benefit from it. In fact, the balances
do not even correspond closely to current account balances. In previous
years, the Bundesbank had a negative balance. Only if a member leaves
the euro area can there be a loss to the insurance pool. To take the
obvious example: if Greece exits, the claims against the Bank of Greece
would be distributed according to a member state’s share in the paid-up

capital of the ECB, not according to the current stated balances of each
national central bank in TARGET. So the loss allocation spreads the risk
of a euro exit fairly in the sense that it takes the different economic size
of member states into account. But it also gives everybody a stake in the
payments union and an interest in keeping all members in the insurance
pool.
TARGET thus illustrates how an insurance mechanism can make
the diversity of countries compatible and mutually beneficial. Unfor-
tunately, there is little political gain in preventing disasters: nobody
notices because it did not happen. The cross-border payments mecha-
nism removed the foreign exchange constraint on trade between mem-
ber states, a constraint that had triggered financial panics in the pegged
exchange rate system of the past. Trade, uninterrupted by the difficulty
to process a payment beyond the contracting parties’ control, is benefi-
cial to diverse countries. It removes an important obstacle for emerging
markets’ catch-up growth (Portugal, Spain) and it keeps open a source
of growth for countries with too little domestic growth dynamic (Bel-
gium, Germany).
Did this insurance prevent adjustment and/or enable too much risk-
taking? Possibly, yet this is not all bad. Insurance is meant to give time
for adjustment if the disturbance is not temporary. More risk-taking
is usually gainful, which is why economic actors do it: economic spe-
cialization and innovation are risk-taking activities. They promise
accelerated catch-up growth in countries that previously were stuck in
a low-growth equilibrium or in a cycle of boom and bust, the bust typi-
cally ending in an exchange rate crisis. Hungary got in trouble much
earlier than Greece despite better macroeconomic indicators; only the
adjustment programme allowed it an orderly devaluation (Mabbett and
Schelkle, 2014). Undoubtedly, asset inflation and household debt should
have been reined in, preferably through property taxes and prudential
regulation. But not all, and not only Southern European, economies
showed symptoms of a bloated financial sector.
A payments mechanism cannot prevent permanent trade imbalances.
Imbalances make those that accumulate debt vulnerable: a slight rise in
interest rates can render the servicing of debt too burdensome. The com-
mon currency made those that accumulate the corresponding claims
take too much risk: the absence of exchange rate fluctuations seems to
have created the false impression that country risks have gone for good.
But bond markets can suddenly create country risks by attacking the
sovereign’s debt issue. Still, this does not invalidate the insurance poten-
tial of a heterogeneous monetary union for its membership: it just says
that insurance of risks to orderly payments is not enough.
Risk sharing in the euro area is limited to monetary policy and com-
mon minimum standards of regulation. Contrary to the claims of con-
spiracy theories that depict EMU as a ‘neoliberal project’, political elites
are not cohesive: they mistrust each other and therefore have problems
realizing the benefits of collective action. In the euro area, this mistrust
resulted in a taboo on fiscal integration. Fiscal risk sharing has only now
been introduced with the European Stability Mechanism, but again,
this is limited to bilateral guarantees for bond issues. Fiscal difficulties
have to be solved nationally, even if they are due to bank rescues that
are in the collective interest. In the financial crisis, this shifted the risk
of market instability onto those with the weakest capacity to bear it,
namely the emerging markets inside EMU (Greece, Ireland, Portugal
and Spain). And so they broke first, even though each had rather differ-
ent weaknesses.
To sum up, the longstanding attempts at forming a European mone-
tary union can be understood as the search for ways to reduce the risk of
exchange rate instability and spread the risk from payments imbalances.
The euro area crisis is first and foremost the result of a massive financial
crisis. No OECD country has so far succeeded in reining in destabilizing
capital flows; it is not a specifically European problem. But the euro area
suffered more than others because of the fiscal taboo, refusing all joint
liability. This shifts the risks disproportionately on economies with high
growth potential, most likely to experience pro-cyclical capital flows. To
make the euro work does not require a full-fledged budget but targeted
fiscal insurance, such as a jointly underwritten resolution fund for insol-
vent banks, to allocate risks from financial instability more evenly. The
US dollar area is also still a heterogeneous union, and the arguments lev-
elled against the euro area apply there as well (from low labour mobility,
different inflation dynamics to limited fiscal risk sharing). Uniformity is
nowhere the promise of monetary integration. The euro started an evo-
lution that will never reach completeness, or finalité, as some Eurofed-
eralists hope and many Eurosceptics fear. But monetary integration as a
form of deliberate inter-state risk sharing can support political unity in
socio-economic diversity. As Peter Hall (2014: 1239) put it succinctly,
‘the future of European integration will depend on Europe’s capacity to
give substance to that slogan’.
Chapter 10
Can the EU Tame Big Finance?
Is the EU able to quickly react to political emergencies? Can member

states achieve the required degree of cooperation when they are faced
with surprising developments which demand a coordinated response?
The global financial turmoil after the collapse of Lehman Brothers in
September 2008 was a major test case for the capacity of the EU to
meet new challenges. Faced with chaotic markets, a potential meltdown
of financial systems in many member states, and the ensuing global
momentum towards the re-regulation of ‘Big Finance’, the EU was
called upon to provide a quick and coherent answer to the crisis.
Financial governance seems to be a prime example for a policy field
in which experts and bureaucrats decide complicated matters which are
not suited for public debate. This technocratic policy-making is one of
the criticisms which are most frequently levelled against the EU. In that
sense, financial regulation is also a test case for the legitimacy of Euro-
pean policy-making. This topic therefore encompasses many of the most
salient questions in this volume: the efficiency of EU policy-making, the
debate about the balance between national and supranational compe-
tencies, the reconciliation of widely diverging national positions, or the
problem of the democratic quality of EU decisions.
Finance was not one of the issues which was high on the agenda of
the European Communities during their first decades. The financial sys-
tems of the member states displayed very diverse national characteris-
tics. Limited financial integration across borders meant that there was
little pressure to coordinate policies in this area. Functional necessities
to integrate emerged only slowly when markets in financial services were
progressively liberalized during the 1970s and 1980s. The decisive event,
putting the problem of financial market regulation firmly on the EU
agenda, was without doubt the decision to establish a common currency,
which was taken at the Maastricht conference in 1992. It was inconceiv-
able to have a monetary union and at the same time widely diverging
national rules on the governance of financial markets. The Commission
took the lead in formulating a response to this problem. In 1999, with
the so-called Financial Services Action Plan, it published comprehensive
recommendations for an integrated financial market (Dür, 2011). After
it became clear that the coordination of the numerous different policy
158
The merits of adaptive governance 159
bodies in this area made decision-making helplessly slow when faced

with the breakneck speed of developments in financial markets, a Com-
mittee of Wise Men, chaired by the Belgian economist Alexandre Lam-
falussy, established a new framework for expedited decision-making
by expert committees (Quaglia, 2010). The financial crisis provided
the impetus to put a comprehensive governance framework into place.
Again based on an expert report (the so-called de Larosière report), the
new European System of Financial Supervision (ESFS) was formed, con-
sisting of the European Banking Authority, the European Insurance and
Occupational Pensions Authority, and the European Securities Author-
ity. Established on 1 January 2011, this new architecture was supple-
mented by the European Systemic Risk Council, chaired by the ECB.
Since the escalation of the euro crisis in 2010, moreover, several steps
were taken towards the creation of a European banking union, in par-
ticular the establishment of common banking supervision and a com-
mon resolution mechanism for failed banks. The EU now has a shining
new set of institutions administering a policy field which not long ago
was firmly in the remit of national jurisdiction. Will it work?
Daniel Mügge and Jörn-Carsten Gottwald use the case of financial
market regulation as a lens to address various dimensions of EU policy-
making. Gottwald claims that the EU has so far successfully responded
to the need for a new regulatory framework. Given the complicated
subject matter, it is utopian to expect broad public participation as well
as sweeping reforms within a short time. He argues that the EU now
understands that building a system of financial regulation needs to be
an ongoing process of adaptive governance. Daniel Mügge disputes
this positive assessment and identifies a democratic deficit in this area.
According to him, the process also has been cumbersome and ineffec-
tive, due to the habitual EU way of muddling through crises. This con-
troversy forms part of the debate in Chapters 8 and 9, and illustrates the
points made by the authors of Chapter 2 on the efficiency of the EU.
10.1 The merits of adaptive governance:

the regulation of financial services in the
European Union
Jörn-Carsten Gottwald
In the late 1990s, the European Union embarked on an ambitious pro-
ject to create an integrated market in financial services. A ‘Committee
of Wise Men’ was set up and tasked with developing a blueprint for
a European regulatory regime. The seven men under the leadership of
160 Can the EU Tame Big Finance?
Alexandre de Lamfalussy delivered. In the first decade of the twenty-

first century, the EU established three new regulatory and three new
advisory bodies and issued a stream of significant new directives in a
first comprehensive overhaul of the EU system of financial regulation.
Supranational and national bodies as well as market participants were
still in the process of adapting to the new environment when the global
financial crisis erupted in 2007 and 2008. The outfall from the crisis
created a completely new challenge to a regulatory regime which still
was – and remains until today – a work in progress. With the survival
of the eurozone and the sustainability of its financial markets at stake,
the EU initiated another tremendous round of regulatory institution-
building within an impressively short period of time. The incredible
dynamic of globalized financial markets triggered an equally dynamic
political response.
It would be premature to assess the quality of the new institutions with
regard to their capacity to stem and manage another series of financial
crises. The ongoing reform efforts, however, reveal one significant char-
acteristic of financial services regulation in Europe: the EU’s willingness
and capacity to adapt its structures, procedures and underlying princi-
ples in reaction to market developments, particularly crises. Responding
to the nature of globalized financial markets, taming financial markets
in Europe can only be achieved by experimental policy-making and by
enhancing the adaptive capacity of the regulatory regime. The pre-global
financial crisis reforms were strongly stimulated by innovations in finan-
cial markets; the second and third rounds of reforms were as much a
crisis-reaction as an attempt to improve the adaptive capacity and prepare
for future changes. The Commission explicitly acknowledges the fluid
nature of its regulation, referring to the need to continue its reforms due
to developments in markets and external challenges (European Commis-
sion, 2014d). As former President of the European Commission Manuel
Barroso pointed out, the nature of EU reforms needs to be gradual (Bar-
roso in European Commission, 2014e: 3). Thus, while the protection of
European societies and states against fall-out from financial crises has
been piecemeal at best, the EU has now understood that its regulatory
regime has to be more flexible and more efficient in adapting to market
changes. In both regards, the EU institutions delivered in remarkably
short time and triggered an important step towards deeper integration.
Aiming at a high-speed target: regulating financial services

Regulation is more than just establishing the rules of the game for
market participants and supervisors. Regulation, in the context of new
approaches to the study of political economy, also includes the poli-

tics of market creation and the impact on the distribution of relative
gains and losses for all actors involved. While normative theories of
regulation have been instrumental in defining core objectives for regu-
lation like transparency or fairness, positive theories have turned their
attention to how the real interactions between government, regulators,
business and society lead to different regulatory regimes. One common
assumption of both sets of theories is the underlying idea that regulatory
regimes actually can prevent crises from happening, thereby providing
something like a ‘stable market environment’. Recent research, however,
has stressed the experimentalist character of EU regulatory governance
(Eckert and Börzel, 2012; Campbell-Verduyn and Porter, 2014). These
considerations have a significant effect not only on the academic analy-
sis of the regulatory framework but also on the political design of its
principles and institutions.
The experimentalist nature of financial regulation in the EU is the
result of both the specifics of the EU as a political system and the par-
ticularities of markets in financial services. Markets in financial services
create tremendous challenges for any political system: market develop-
ments are truly global, 24/7, based on real-time provision of information
and moving vast amounts of capital within seconds around the globe.
A lot of transactions are conducted by pre-programmed software with-
out direct involvement of any human actor. Large investment banks,
hedge funds or insurance companies have access to capital exceeding
most public budgets. Even the presumably most powerful nation in the
globalized world, the United States, acts under constraints set by private
authorities and companies in global finance – at least as long as it wishes
to avail of access to credit markets. The breakdown of the highly regu-
lated system of Bretton Woods in the early 1970s saw a paradigm shift
from finances as a catalyst for trade in ‘real’ goods and services, to finan-
cial services becoming a highly lucrative market in itself often decou-
pled from their underlying products (so-called derivatives). Financial
markets offer tremendous rewards for innovative products. Therefore,
human creativity, ambition and increasingly sophisticated technologies
have triggered an indefinite race between regulators and market partici-
pants: new products leading to new regulation leading to new products.
Developing and developed countries alike depend on financial markets:
the former need the infusion of capital to allow processes of catching-
up and modernization, the latter for the provision of venture capital to
stimulate technological innovation. In essence, global finance has turned
into a global betting game with highly leveraged stakes.
In financial markets, huge potential benefits indicate huge risks.
At least three different approaches can be identified to deal with these
challenges: a radical option aims to fully monopolize financial services

in the hand of the state; this offers ultimate control but raises issues of
efficiency, fairness and governance. A second option rests on strict polit-
ical control through hard limits defined by laws within strict national
boundaries; this option does not dovetail with the interests of most
nations in times of globalization. Finally, from the 1990s onwards, the
idea of market-oriented specific regulation has gained ground. In this
concept, the oversight over financial markets moves from government
bureaucracies to specifically designed organizations, so-called regula-
tory agencies, staffed with experts close to the markets. Their guiding
principles usually include the development of modern and efficient mar-
kets as well as the preservation of stability. Transparency and account-
ability replace direct legitimization through parliamentary procedures.
The integration of stakeholders leads to a complex web of organizations
and institutions built around these experto-cratic regulatory agencies.
The move from traditional government of financial markets to gov-
ernance has significant implications for, and challenges and limits to,
regulation. New products require new regulation, triggering the regula-
tory spiral mentioned above and inviting international arbitrage between
highly regulated and less-regulated jurisdictions. As we have learned
from the most recent global financial crisis, repackaging of debt and
speculation in default can obscure markets to a degree where assessing
products and their systemic risk becomes impossible. With these lessons
in mind, regulation of financial markets needs to be understood more
as an experimentalist process than a quest for the perfect institutional
design. If markets in financial services are allowed to exist, crises cannot
be completely prevented. Therefore, the capacity of regulatory arrange-
ments to deal with crises and to be adapted to changes in the markets
becomes one essential criterion for the design and for the assessment of
regulatory regimes: how capable is it in dealing with changes? How fast
can it react to crises? How swiftly can it be redesigned? How open is it
to integrate new – national, transnational or global – stakeholders?
Learning and adaptation in EU financial services regulation:

from market creation to crisis management and beyond
Financial services regulation in Europe requires the integration of a
plethora of different national systems. Dealing with divergent interests
and traditions induced a strong dose of creativity and flexibility into the
politics of regulatory reform. The Treaty of Rome had already called
for the establishment of a single market in services, yet left national
governments with considerable discretion to protect their national sys-
tems of finance. This schizophrenic attitude was only overcome after
the introduction of the euro. Suddenly, the EU had a single currency,

but no European market for financial services. In a concerted effort by
leading representatives from the European Commission, business and
governments, a programme was developed to create a new EU regula-
tory regime. A handful of experts managed to get the Financial Services
Action Plan drafted, approved and set up for implementation between
1998 and 2004. The well-established combination of theoretically inde-
pendent expert groups, a so-called Committee of Wise Men, in conjunc-
tion with a concerted lobbying effort on the national and EU levels, and
grand bargaining at the Council of Europe, created an EU roof for the
national systems of financial service oversight including well-disguised
mechanisms pushing for a convergence of the different structures and
principles.
The Committee of Wise Men delivered a groundbreaking report in
2001 (Lamfalussy, 2001). Judging financial services regulation as ‘too
slow, too rigid, complex and ill-adapted’ (Lamfalussy, 2001: 7), it called
for the definition of an EU regulatory philosophy to produce coherent
objectives and attitudes for the development and regulation of finan-
cial services, the introduction of a new decision-making procedure to
improve the quality and the speed of regulation, and a new set of regula-
tory bodies to assemble the necessary expertise and to allow for smooth
cooperation between market experts and decision-makers.
Following the Lamfalussy report, a new decision-making process
was introduced and new committees were set up for banking, securi-
ties and insurance/occupational pensions (the European Securities Com-
mittee, the European Banking Committee and the European Insurance
and Occupational Pensions Committee). Each regulatory committee
consisted of representatives from the member states’ ministries. They
worked closely with advisory committees consisting of representatives
from the member states regulatory bodies (the Committee of European
Securities Regulators, the Committee of European Banking Regulators,
and the Committee of European Insurance and Occupational Pension
Regulators). They wielded substantial informal influence as they brought
together national regulators who at home advised national ministries
and were in charge of implementing regulation at home. Market partici-
pants and observers criticized this structure as opaque and ineffective.
In spite of its shortcomings, these regulatory and advisory bodies pro-
vided significant progress to the pre-Lamfalussy period: they brought
together representatives from the national regulators and ministries on
a regular basis, improved communication and understanding between
national regulators and thus allowed for the Europeanization of regula-
tory issues and debates. However, they could not solve one crucial short-
coming of the new regime: the member states agreed on a supervisory
structure and a new regulatory procedure, yet they abstained from

defining a set of clear guiding principles for the regulation of EU finan-
cial markets, a ‘regulatory philosophy’ which had been called for by
the experts of the Lamfalussy committee. The new framework linked
national supervisors with the EU level and offered them representation
and participation. Alternative ideas to completely substitute national
bodies by a new EU centralized authority were thwarted. The implemen-
tation of the Lamfalussy report changed the regulatory landscape pro-
foundly, yet public interest in these groundbreaking reforms remained
surprisingly low.
The current regulatory regime

This new regulatory regime based on the Lamfalussy report was still
very much a work in process when the global financial crisis hit Europe,
triggered bank runs and pushed several member states close to bank-
ruptcy. After a short period of political denial, the EU reaction was swift
and multifaceted. First, it included a supranationalization and centrali-
zation of banking supervision both at the level of the EU and at the level
of the eurozone. Second, it contained the broadening of the scope of EU
regulation by, for example, bringing rating agencies or hedge funds and
other actors of the shadow financial system under regulation (or at least,
trying to). Finally, the EU stepped up its activities in global regulation by
actively participating in the G20, the Financial Stability Board and the
deepening of bilateral regulatory cooperation with partners such as the
United States and the People’s Republic of China.
The European Commission has summarized its policies since the
outbreak of the financial crisis as follows: ‘the stabilisation of financial
markets became a priority and financial sector reform a crucial instru-
ment to achieve it. Filling in the gaps in financial sector regulation and
strengthening the supervision of the financial sector in Europe have been
the two main strands of work. To this end, the European Union has
established European supervisory authorities with real teeth’ (European
Commission, 2014d). In a dramatic change of the playing field for finan-
cial regulation, issues, which had been comfortably ignored by the elec-
torate as well as their representatives, suddenly became hotly debated.
The sovereign debt crises of members of the eurozone further intensified
political and academic interest in the organization and functioning of
financial markets and their effect on member states.
The reaction of the EU followed the established pattern of experi-
mental and adaptive governance. Between 2008 and 2014, the EU ‘pre-
sented over 40 laws to curb bankers’ bonuses, boost the amount of cash
banks hold in reserve, cast more light on hedge funds, ratings agencies,
central counterparties and complex trading and improve consumer pro-

tection’ (Barroso in European Commission, 2014e: 2). Another expert
group, this time chaired by Jacques de Larosière, produced a reform
outline, followed by intensive and public discussion. In 2009 the EU
decided to establish the ‘European System of Financial Supervisors’. It
consists of the European Banking Authority (EBA), the European Secu-
rities and Markets Authority, the European Insurance and Occupational
Pensions Authority plus a European Systemic Risk Board and the Joint
Committee of European Supervisory Authorities. The new authorities
are complemented by stakeholder groups – Securities Markets Stake-
holder Group, EBA Banking Stakeholder Group, and the Insurance and
Re-insurance Stakeholder Group as well as the Occupational Pensions
Stakeholders Group for the European Insurance and Occupational Pen-
sions Authority – to integrate the interests and ideas of market partici-
pants, consumers, trade employee representatives and academics in the
process of setting standards and defining procedures.
In June 2014, the Heads of States and Government of the eurozone
members went one step further: they decided to establish the so-called
Banking Union led by the European Central Bank. The Banking Union
consists of the Single Supervisory Mechanism, the Single Resolution
Mechanism and the so-called Single Rulebook to establish unified stand-
ards. So-called competent national authorities like Germany’s Bafin or
the Prudential Regulation Authority and the Financial Conduct Author-
ity, both of the United Kingdom, constitute a legal part of this system.
The Single Supervisory Mechanism transfers the responsibility of the
supervision of large banks of the eurozone and of all members who wish
to follow to the ECB. In 2016, the ECB directly supervised 129 large
banks by setting up Joint-Supervisory Teams with national supervisors
(ECB, 2016).
The ongoing process to establish a comprehensive Banking Union
adds another layer to the multilevel EU financial regulatory regime: a
eurozone level. As a result, the European system of financial regula-
tion has added even more complexity to its operations. The coopera-
tion between the two supervisory structures will be subject to regular
reviews. The EU acknowledges that the establishment of the Banking
Union ‘will impact the functioning of the ESFS, but does not call into
question its existence and necessity’ (European Commission, 2014f: 4).
The European Supervisory Agencies are designed to keep the respon-
sibility ‘for the establishment of common regulatory and supervisory
standards and practices and the consistent application of EU measures
across the Single Market’ (European Commission, 2014f: 4).
These new structures reflect the dynamic nature of financial markets
and the adaptive capacity of the EU regulatory regime. They do raise,
however, the issue of coordination. The cooperation of the various reg-

ulatory agencies is organized around the European Financial Stability
Board, Joint Committee of European Supervisory Agencies and particu-
larly around the ECB. The latter has clearly gained importance within
this new system of EU-level, eurozone-level and member state–level
regulation. The most recent round of reforms has thus contributed to
a centralization of banking regulation in Europe and represents a step
which had been discussed earlier but could only be implemented after
a process of learning had taken place during the global financial crisis.
Whether one supports this move or not, it highlights the experimental
nature and adaptive capacity of European efforts to deal with dynamic
changes in the markets for financial services.
Conclusion: taming financial markets through experimental

policy-making and adaptive governance
If stability and crisis prevention are the gold standard of assessing a
regulatory regime for financial services, then the EU has failed. Europe
is experiencing one of the worst financial crises in its history, with pro-
found consequences for public budgets and the long-term economic
prospects of member states. However, it is simply asking too much of
EU financial regulatory policy to be able to prevent any crisis. Financial
markets, driven by human creativity and greed, are too dynamic to suc-
cumb to political control. As long as societies and economies wish to
benefit from the positive contributions of financial markets to economic
development, and as long as financial services are considered an area
for individual economic entrepreneurship, regulatory regimes need to
prepare for new and unknown challenges. The alternative would be the
direct provision of financial services by state agencies.
The EU continues to support the existence of private markets in finan-
cial services. While it has agreed on another series of reforms, member
states still lack consensus on the precise objectives and accurate insti-
tutional implementation of regulatory policies in Europe. Huge differ-
ences between financial sectors in the United Kingdom or Ireland and
continental Europe remain in place. An increasing number of European
politicians call for a stronger respect of national interests while the crisis
management requires new and deeper forms of integration. There are
legal and ideological concerns regarding the role and newly enhanced
responsibilities of the ECB – let alone its policies. The EU has responded
to the crisis with a series of reforms seeking to establish a proper Euro-
pean regulatory regime. As the Commission readily accepts, the pro-
cess of regulatory reform is due to continue over the foreseeable future.
The crisis has intensified public interest in financial regulation. Issues of
The pitfalls of EU governance in financial markets 167
financial regulation, of transparency and responsibility are fiercely con-

tested – at least during times of acute crisis. Without a convincing blue-
print for a perfect regulatory regime, the EU continues with its policy of
experimental and adaptive governance.
In this crucial regard, the EU regime for the regulation of financial
services is remarkably successful. Without it, most member states would
not have been able to meet the challenges of the current crisis. While
the regulatory regime has not been able to prevent the current crisis,
decision-makers have established numerous venues for input and rep-
resentation of societal interests in the process of reform. Transparency
and access have improved enormously, as has coordination and coop-
eration within Europe. Before the global financial crisis, the main defi-
cit of the regulatory regime had been the lack of public interest in its
evolution, workings and outcomes. The eurozone crisis and the political
responses to it have turned the politics of regulation of financial services
into an area of heated public contestation. Regulatory reforms are set
to continue.
10.2 The pitfalls of EU governance in

financial markets
Daniel Mügge
The times when financial regulation was only of interest to nerds and
bankers in dark suits is long gone. The rules that govern banks, stock
markets, insurances and the like have taken much of the blame for the
financial and economic crisis that has engulfed the EU economy since
2007. Bank losses skyrocketed in the early crisis years. In late 2009, the
International Monetary Fund estimated that UK banks alone were to
lose an astounding US$604 billion until 2010 – more than 25 per cent
of British gross domestic product (GDP) for 2009. Eurozone banks were
to be good for another US$814 billion losses, amounting to 7 per cent
of eurozone GDP. European citizens have had to foot the bill as gov-
ernments bailed out financial institutions and imposed austerity to pay
back the resulting debt (Blyth, 2013: 51ff). Budget cuts have hit every-
thing from welfare provisions and education to infrastructure invest-
ment across the continent.
Unsurprisingly, the financial and economic crisis that will soon have
lasted for a decade has challenged EU citizens and policy-makers alike
to take a hard look at the way financial market rules had been drawn
up before the crisis. Has the integration of financial rulemaking in the
EU been a boon or a bane for European citizens? Taking stock of almost
30 years of uploading powers to Brussels, the overall assessment cannot

be anything but sobering. In a nutshell, while EU financial integration
failed to live up to its promises, the complex web of multilevel financial
institutions that were set up since the late 1990s has shown real flaws:
it has spawned more lenient regulation than would have been desirable,
it has further removed financial governance from the citizens it should
have served and it has repeatedly been rendered ineffective – both before
the crisis and in the response to it – by complexity and fragmentation.
Grave as they are, these defects come as no real surprise once we disen-
tangle the origins of pre-crisis financial governance in Europe.
Perilous incrementalism and private interests in EU

integration
In spite of all their differences, theorists of European integration by and
large agree that past integration steps can beget additional reform down
the line. In the benign account of this spillover mechanism, any given
level of economic integration, for example a customs union, makes fur-
ther integration more appealing. Stripped to its essentials, regional inte-
gration becomes self-reinforcing. The somewhat less benign version of
this mechanism adds an extra twist: integration is not moved forwards
by the ever greater benefits that each consecutive step towards closer
union bestows, but by the shortcomings that become apparent at each
level of economic integration. Faced with policy failure, policy-makers
have to choose between yet further integration, or disintegration –
which was long considered unpalatable and has only recently entered
the debate with a potential Greek exit from the euro or British exit from
the EU altogether. EU integration is a patchwork of incremental policy
fixes without any overall master plan that puts everything in its place.
Commonly, this stumbling forwards of European integration is not
considered a major problem in itself. In the run-up to the crisis, however,
it was fatal. The eternal construction site of EU economic governance
turned out to be ill-prepared for the policy challenges the crisis of the
late 2000s thrust its way. Worse still, the substantive policy generated
by fragmented institutions aggravated the financial meltdown and its
economic aftermath.
This incrementalism has been compounded by the key role that
private interests have played in shaping EU policy and institutions
in the financial sector (Mügge, 2010). Banks, investment banks and
stock exchanges have been core players in the policy community that
has reformed financial governance in Europe. Industry influence over
regulation is nothing new, and it is certainly not limited to the EU. Pri-
vate interests as a driver of, or obstacle to, regulatory and institutional
reform have meant, however, that eventual policy has frequently been
a compromise between multiple imperatives pulling in different direc-
tions (e.g. Singer, 2004; Gadinis, 2008; Thiemann, 2014), of which the
wider public interest in financial stability has been only one. In short,
the heavy industry role in financial regulation reinforces its patch-
work-character – the dangers of which the credit crisis has starkly
illustrated. It is difficult to specify how intense the financial sector
regulatory influence has been since the onset of the crisis. Available
evidence suggests, however, that it has remained substantial, even as
other voices, for example from an NGO such as FinanceWatch, have
become more audible (Mügge and Stellinga, 2010; Woll, 2013; Young,
2014).
The elusive benefits of financial integration

To be fair, drawbacks of financial integration and supranational govern-
ance in Europe could be balanced by their economic benefits to citizens.
The multilevel governance of financial markets in Europe – including
their regulation and supervision – is tightly linked with the project of
building an integrated market for financial services and capital, and
the desire to do the latter has normally been the key justification for
a partial uploading of competencies to the supranational level. Also,
empirically, integration of governance has been a corollary of market
integration, meaning that in any assessment of their merits, the two can-
not be completely disentangled.
The official justification for building a single financial market –
removing capital controls, allowing financial services to cross borders
freely and partially centralizing governance in Brussels – was that it
would boost efficiency in capital allocation and lower the cost of funds
to governments and enterprises. With these reforms, the EU hoped to
emulate the US model of finance, with a central role for stock and trad-
able debt markets. In the mid-1990s, the US economy appeared to have
found the key to combining economic vigour and growth with low infla-
tion. The bursting of the dot-com bubble already undermined the myth
of the new IT-led economy. The real challenge to the ostensible strength
of the US growth model came with the sub-prime crisis, however, which
exposed just how much of the US economic miracle since the early
1990s was built on financial quicksand.
The European financial regulatory project had been bent on imitating
US success in the mid-1990s – and hence exposed the European econ-
omy to similar dangers when the sub-prime house of cards finally came
tumbling down. A corollary to increased cross-border integration was
increased competition – advocated forcefully by the Champions League

of European financial firms in the erroneous belief that it would suit their
long-term interests. To be sure, this competition was an artefact of the
rules prevailing in Europe more than of the fact that they were generated
through multilevel institutions. That said, one key argument in favour of
integrated European governance – argued to outweigh potential disad-
vantages – was that it was necessary to allow intra-European financial
integration and to boost the competitiveness of European firms in the
global market place. In this way, multilevel governance and the emer-
gence of super-charged investment banking in Europe were tightly linked.
The credit crisis exposed the limits and, indeed, inherent fallacies
of finance as a turbo-booster for economic growth. More importantly
for this chapter, however, it revealed the detrimental effects of using
reformed European governance as a tool in a transatlantic competition
that in the end generated only losers. Countries such as Canada and, to
some degree, Australia refused to be lured into this competitive game –
and the limited fall-out of financial crisis there has proven them right.
In conjunction with Economic and Monetary Union – the institutional
vehicle for the single currency – financial market integration through
harmonized regulation also had a clear intra-European dimension: it
was supposed to inject economic dynamism into the peripheral regions
of the EU, where financial markets had remained underdeveloped by
Northern European standards.
In the years before the crisis, the Commission set out to gather empir-
ical evidence to see whether financial integration had lived up to its
promises in this respect (European Commission, 2007). The findings
were mixed. Many indicators were seen as pointing in the right direc-
tion, including the convergence of interest rates paid by EU governments
for their debt. Others underlined that much financial activity contin-
ued to be concentrated in Europe’s traditional financial centres, while
a catch-up of the Mediterranean countries in particular proved elusive.
The record looked positive, if less impressive than had been hoped.
The crisis that erupted in the late 2000s shattered this optimistic view.
Greece emerged as the obvious example of how what looked like ben-
eficial effects of EU financial integration turned out to be a treacherous
mirage. The extension of ‘sophisticated’ finance to ill-prepared coun-
tries meant that the latter would be swamped in credit, generating tem-
porary economic calm that could masquerade as economic progress.
With financial markets lulled into complacency by EMU, which eradi-
cated exchange rate risk, the abundance of funds fuelled not sustainable
investment, but excessive consumption relative to productive capacity
and bubbles in unproductive sectors such as real estate. To complete
the picture, ‘modern’ financial techniques could be used to hide the true
state of financial affairs from outside observers, including other Euro-

pean governments. The Goldman Sachs–arranged swap agreement of
the Greek government, which turned sovereign debt into a financial ser-
vice and thereby allowed Athens to fool its EMU partners, was a stark
example (Hope et al., 2010).
Multilevel governance and financial stability

The crisis has demonstrated that a good financial system distinguishes
itself not only by offering economic benefits in good times but also by
providing a modicum of financial stability during bad times. It would
be unfair to claim that European financial market integration caused
the crisis by itself – other important factors played a role, too. But it
would also be wrong to portray the crisis as an exogenous shock, like
a meteor that hit integrated European finance out of clear blue skies.
European integration has traditionally been built on the hope that it
can square the circle: offer Europe’s citizens the benefits of economic
integration without the perceived political costs of a superstate. But, if
any proof was needed, the crisis has revealed the limits of such hopes.
When finance permeates societies and economies as much as it does
in contemporary Europe – what has been called ‘financialization’ – a
strong public authority is necessary to hold everything together when
a crisis hits. In spite of common grid-lock in US politics, US authorities
were much quicker than EU ones both with large-scale fiscal stimulus
and aggressive monetary easing. Fragmented European economic and
financial governance, in contrast, meant that the reaction was slow and
that the crisis was left to fester. Through bail-outs of domestic banks,
national authorities were left to clean up the mess that European finan-
cial integration without fiscal and political integration had created.
As argued above, in the run-up to the crisis, EU financial integration
did not serve its citizens well in this respect: it encouraged risky cross-bor-
der investments without providing an adequate safety net in case of crisis.
Financial integration detached from mechanisms for burden-sharing –
whether in the form of euro bonds or some kind of fiscal federalism –
turned out to be pernicious. A number of fixes were eventually installed,
such as the European Financial Stability Facility and later the European
Stability Mechanism, but ongoing doubts about their durability contin-
ued to aggravate the crisis. Famously, some form of calm returned to
European financial markets only when Mario Draghi, head of the Euro-
pean Central Bank (ECB), declared in the summer of 2012 that he would
do ‘all that it takes’ to save the euro, and thus ensure the stability of
the European financial system. With its back against the wall, the ECB
accomplished what European political institutions were unable to do.
Has the EU fared better in responding to the financial crisis through

reforming its regulatory regime? Overall, the evidence is mixed. The EU
has become more interventionist than it was before the crisis (Quaglia,
2012), but – as is true around the world – it has not drastically changed
course in financial regulation. Its overall approach mirrors the US crisis
response remarkably well as European post-crisis regulatory reforms
have been closely coordinated across the Atlantic (Mügge, 2014; Qua-
glia, 2014; critically, Bieling, 2014). There is little evidence that without
European integration, post-crisis re-regulation would have been much
stricter and that integrated decision-making itself is to fault for the
limited scope of regulatory overhaul. Indeed, European integration of
wholesale financial markets has advanced sufficiently (Grossman and
Leblond, 2011) to limit the utility of such a thought experiment. What-
ever its merits or historical genesis, contemporary European finance
needs European governance. By now the key question is less whether it
is desirable and more how well it works.
The main European innovation to enhance financial stability in the
EU is the set of policies grouped together in the so-called Banking
Union. It combines two elements: the Single Supervisory Mechanism
(SSM) and the Single Resolution Mechanism (SRM). Under the SSM,
the ECB directly supervises the eurozone’s largest banks and coordi-
nates the supervision of the smaller ones. The SRM, which became
fully operational at the beginning of 2016, holds a pool of funds that
can be used to wind down banks in trouble. This pooling of risk and
supervision is meant to break the link between feeble banks and their
home governments, who end up footing the bill when financial trouble
arises.
The Banking Union clearly is a step in the right direction. But it stops
far short of creating a true European safety net. The resources of the
SRM will be built up to €55 billion over eight years. Considering the
hundreds of billions of losses that the credit crisis caused in its early
years, such a facility is unlikely to convince investors that it is more than
a first line of defence. Once the SRM would be exhausted, bickering
over who would carry the rest of the financial burden would resume.
As Jones and Underhill recently put it,
Eurozone countries have yet to accept the outcome as collectively

generated through their own deliberate policy of financial market and
monetary integration. Collectively generated costs need to be shared
if financial stability is to result. Many of the reforms initiated dur-
ing the crisis [reinforce] a per-country architecture that only raises
the costs for the vulnerable and diminishes the available benefits of
financial integration for all involved. (Jones and Underhill, 2014: 38f)
European financial integration remains a half-built house, even in finan-

cial regulation (McPhilemy, 2014), and it is unlikely that it will prove
particularly stable in the face of renewed financial turmoil.
The democratic deficit in financial regulation

Of course, able financial governance produces not only collective goods,
such as economic growth and financial stability. It also has a plethora
of socio-economic effects whose costs and benefits are distributed une-
venly throughout society. Financial-system design structures the way in
which citizens accumulate their pensions, it influences the availability
of mortgages and credit in general, and it affects employment opportu-
nities and conditions through the terms on which it supplies credit to
corporations.
If citizen preferences about these characteristics of financial govern-
ance diverge, and if there is no obvious optimum solution, it becomes
imperative that financial governance is in some form democratic, mean-
ing that it allows citizens to formulate and articulate policy preferences
and to make them count in the policy process.
The complexity of financial governance and regulation makes citi-
zen input into rule-making inherently difficult – whether in the EU or
elsewhere. That said, multilevel governance has further damaged demo-
cratic citizen participation – ‘input legitimacy’ in Scharpf’s (1999) terms.
Lest the EU regulatory machine become atrophied to the point of com-
plete immobility, key decisions have been outsourced to a web of expert
committees. In the early 2000s, much of the rule-design was handed to
the so-called Lamfalussy committees, EU-level clubs of national regula-
tors (Quaglia, 2008; Posner, 2009; Mügge, 2010). Post-crisis reforms
adopted in 2010 have further strengthened these committees and, now
re-branded as fully-fledged ‘regulatory authorities’, equipped them with
their own staff. The net effect of such reforms have been that national
parliaments have been reduced to all but rubber-stamping policy negoti-
ated between the supranational committees, EU finance ministries, the
European Commission and the European Parliament.
The latter would seem the most likely substitute for citizen represen-
tation in regulation. But European citizens themselves largely refuse to
be won over by the European Parliament’s claim to citizen representa-
tion. More gravely, the crisis has starkly illustrated the deficiencies of a
one-size-fits-all approach to regulation (Mügge et al., 2010). The regula-
tory preferences of stakeholders will differ with the specific ‘variety of
capitalism’ within which they find themselves, given the way financial
systems interact with pension arrangements, labour markets, corporate
governance, etc. The European Parliament is unable to accommodate
these differences, let alone heed them in its own policy output. Cet-
eris paribus, the multilevel governance arrangement in EU finance has
further removed financial rule-making from European citizens without
any unambiguous improvement in the quality of regulation it produces
compared to member states themselves.
Conclusion
Has the multilevel set-up in EU financial governance been a boon or
a bane for European citizens? The complex division of tasks between
supranational bodies and member states has clear downsides, while the
concrete benefits remain elusive. To be sure, a number of these short-
comings could be remedied by more daring concentration of competen-
cies in supranational hands – think, for example, of a stronger and more
effective role for the European Parliament.
The history of European integration is a cause for scepticism, however.
The plethora of interests within the EU and the institutional complexity
that union has developed to deal with them mean that grand designs
have rarely been implemented – and even those that have been, such
as EMU, have a mixed record at best. As new challenges to financial
governance emerge, the EU will therefore probably not respond with
massive regulatory overhaul but with its customary mode of reform and
adaptation: muddling through.
Chapter 11
The Big Waste? The Common

Agricultural Policy
If there were a prize for the most reviled European Union policy, the
Common Agricultural Policy (CAP) would most likely be the winner.
This is remarkable because for decades the CAP has been at the heart
of European integration and it was the policy area where most of the
money of the European Community went. Initially consuming almost
the whole budget, the share of agriculture in total EU spending has
declined only slowly and now stands at about 40 per cent (European
Commission, 2015b). The heydays of the CAP were the decades in
which European integration was still an unquestioned good. Nonethe-
less, the policy was unpopular already then, although it achieved its most
obvious purpose spectacularly – European self-sufficiency with regard
to food. This was no mean feat after the deprivations of the immedi-
ate World War II period. Another objective was to placate and satisfy
a group of voters, namely farmers, which in many countries used to
be core constituencies of conservative parties and were often prone to
follow right-wing demagogues. Producers in other areas of the world
produce food at much lower cost – therefore European farmers had
to be protected from the impact of world markets. They needed a fair
standard of living, especially compared to the rising post-war wages of
industrial workers (Rieger, 2005).
The European Union tried to achieve these objectives through a com-
plicated system of tariffs and quotas, as well as an extremely cumbersome
system of price guarantees for agricultural products. The CAP became
an entrenched policy subfield with extreme resistance to change. This
sparked endless conflicts with major agricultural exporters, particularly
the United States, and resulted in giant over-production in the 1970s.
Images of wine lakes, butter mountains and tomato hills – p roduce
that had to be destroyed or distributed cheaply on world markets –
dominated media attention on the CAP. Numerous reform efforts fol-
lowed and they continue until this day (Cunha and Swinbank, 2011).
Recent enlargement rounds which admitted economies with compara-
tively large agricultural sectors intensified the need for substantive and
sustained change (see Chapter 13). External pressure during successive
175
176 The Big Waste? The Common Agricultural Policy
rounds of global trade talks, most recently the so-called Doha round,
also played an important part in the many reform attempts by the Euro-
pean Union. Policy instruments shifted to direct income support for
farmers. This support was linked to objectives other than production,
such as rural development and the preservation of landscapes. In the
past two decades, issues of food safety and environmental policy have
increasingly become key issues in the politics of European agriculture.
For both these problems, the CAP has been seen as the problem as well
as the cure. The CAP is one of the EU policies which allows well-organ-
ized groups to exploit their privileged access to decision-makers and
information and, thus, to make reforms in the interest of the common
good almost impossible (see also Chapter 7). Despite many changes in
the past decades, the CAP remains among the most controversial poli-
cies of the European Union.
Eugénia da Conceição-Heldt argues in her chapter that the CAP still is
an economically wasteful and environmentally disastrous policy which
urgently needs further reform. Ann-Christina L. Knudsen counters that
the CAP has to be understood as a public policy with broader objectives
than those specifically linked to agricultural production. To her, the CAP
is an essential part of the European way of life.
11.1 Europe’s common values and

agricultural policy: a defence of the CAP
Ann-Christina L. Knudsen
In a recent Eurobarometer Special on Europeans and the CAP, 92 per
cent of respondents answered that agriculture and rural areas are impor-
tant to Europe’s future. An overwhelming majority was also in favour
of continuing support for farmers’ incomes through the EU’s budget in
return for the delivery of safe, healthy, high quality and organic food
products (Eurobarometer, 2014). The survey also showed that a large
majority of respondents thought that the sector would be a strong force
in the future of Europe through the use of new biotechnologies and the
production of renewable energies. These high approval ratings reveal
that there is solid public support towards one of the EU’s primary areas
of activity and spending, its Common Agricultural Policy (CAP), even
in an atmosphere of severe financial and economic constraint. This is
not necessarily because citizens have suddenly become EU-enthusiasts
in the area of agriculture, but rather because they realize that the CAP
plays a key role in catering for the lifestyle and type of society that
European citizens enjoy and expect. The CAP builds upon common
Europe’s common values and agricultural policy 177
European values and deep-rooted political priorities, as this contribu-

tion will demonstrate, and it embodies an impressive combination of
the modern and progressive with the preservation of unique landscapes
and diverse local traditions across the vast territory. No other EU policy
contains such riches, yet the chapter shows that the CAP needs not be
analysed as an insular or sui generis phenomenon.
Critics of the CAP, however, look elsewhere. They routinely point out
that it is a paradox that around 40 per cent of the entire EU budget
goes to a sector that merely employs 4–5 per cent of the work force
in most member states, ranging from 29 per cent in Romania to just
over 1 per cent in Britain (World Bank, 2015). Such figures nevertheless
give an inadequate picture. The small size of the EU budget compared
to national budgets means that the CAP claims no more than around
0.5 per cent of the EU’s total gross domestic product (GDP). It is distrib-
uted widely across the 90 per cent of the EU’s territory that is classified
as ‘rural’, and that is home to more than half of the entire population.
A more substantial criticism of the CAP, however, has revealed that the
major recipients are large businesses operating in the food and farm
sector, and they obtain millions of euros in CAP subsidies (European
Commission, 2015e). The beneficiaries include royal families, multi-
national food and investment companies such as Nestlé, Unilever and
Kraft Foods, and even current and former EU ministers for agriculture
who, incidentally, are often farmers themselves. The (mis)allocation of
public funds of this scale should be monitored and questioned in a well-
functioning democracy. It is not the intention of this text to justify or
hide such flaws in the policy’s architectural details. The contribution
instead aims to move the focus to the bigger picture of identifying and
exemplifying what the socio-cultural mechanisms behind the political
priorities embedded in the CAP are, as this will help us evaluate what
role to expect for the CAP in the future EU.
Three vital political priorities

Created during the 1960s, the CAP is one of the EU’s foundational
policies. Unlike other original activities such as competition and indus-
trial policies that primarily aim at regulating markets through legisla-
tive measures, the CAP is essentially a public policy (Knudsen, 2009).
Importantly, public policies are not neutral mechanisms, but give testi-
mony of what type of values and ideals we can find in a given society
(Lascoumbes and Le Galés, 2007).
At the heart of the CAP is a redistributional mechanism that can allo-
cate funds to both private and public actors through a wide range of
subsidies and support programmes. The CAP is therefore one of the
EU’s few spending policies, and its primary political priorities can be
summarized as maintaining a constant and safe food supply, provid-
ing an income safety net for farmers, and preserving certain common
European values. To appreciate why the CAP is designed in this way, the
following sections will identify and critically assess central structural
determinants that have shaped these political priorities.
Food
At a most basic level, the emphasis placed on agriculture in post-war
European politics stems from a belief that agriculture holds a strate-
gic position in society. Everyone must eat regularly, and an adequate
food supply is necessary to keep a society socially and politically stable.
Yet food production is an unpredictable enterprise, subject to condi-
tions that the farmer cannot control individually, such as weather or
diseases. Europeans today are accustomed to an unwavering supply of
safe and varied foods, so much so that it might be easy to forget that
the food chain is complex and fragile and does not function automati-
cally. The upkeep of a modern food infrastructure across a large terri-
tory like the EU demands intensive regulation, and the CAP is one of
the world’s most reliable at this job. More particularly, when the CAP
was first created, it was against the historical context of two devastating
world wars that turned fertile farming areas into battlefields and made
most Europeans at the time experience shortages, under-nourishment or
even starvation. After the war, policy-makers were acutely aware of the
destabilizing effects of a faulty food chain and their construction efforts
sought to restore as well as modernize farming. By the time the Rome
Treaty was signed in 1957, the food supply had long been restored, but
the memories of shortages were not far away, and the particular idea of
agricultural exceptionalism – namely that this sector needs special polit-
ical attention for a society to function – gained particular prominence.
An efficient food chain depends on a long range of private actors, but it
is above all CAP regulation that assures that certain rules and standards
are upheld at the common market for food products in the EU.
Consumers become particularly alert to the functioning of the basic
food infrastructure when something goes wrong. In the summer 2011,
an E. coli contamination of cucumbers was discovered in the EU and
was directly tied to several deaths and hundreds of cases of food poi-
soning. Even more fatal was the so-called mad cow disease that caused
a major scandal and food crisis during the 1990s. These two exam-
ples show how the EU’s food security responses have developed and
improved over time. When the mad cow crisis broke out, the toxic com-
bination of unsafe feeding practices for bovines with the lax oversight
from public authorities led to a public outcry across the EU, but the
CAP had no instruments to deal with these problems. In fact, more than
2 million infected cattle and sheep had entered the food chain before
the problem was disclosed publicly. Scientists have connected this to
more than a hundred human deaths (Budka, 2011). In the name of
precaution, several million cattle were slaughtered. Consumer trust in
the authorities’ abilities to provide safe foods plummeted. As national
authorities were unable to cooperate and exchange information in an
efficient way, the EU stepped in and began to play a key role in the
restoration of consumer confidence in foods (Ansell and Vogel, 2006).
One strategy was the Commission’s integrated strategy – called From
Farm to Fork – that sought to establish a clearer link between food
producers and consumers. Another strategy was to improve coordina-
tion of specialized scientific information, alerts and advice in relation to
communicable diseases, as well as setting up an independent scientific
risk assessment and advisory agency called the European Food Safety
Agency. Food risks can never be completely eradicated, but these net-
works and agencies all responded immediately to the cucumber inci-
dent in 2011 to ensure that the risks were identified and communicated
quickly and that the spread of contamination was contained.
Regarding external trade relations, the EU similarly plays a crucial
role in managing food standards in imports. Based on the precautionary
principle, it has for instance taken part in some rather tough confronta-
tions with the United States over issues such as hormone injected beef
and the so-called Frankenstein foods, that is, food produced with geneti-
cally modified organisms.
Welfare
A top priority for the European Commission as well as many member
states is the provision of a ‘basic income safety net’ for farmers. Income
redistribution is usually the remit of national welfare state policies.
The CAP is practically the only EU policy area that is concerned with
income transfers to individuals. This priority has been a constant feature
throughout the CAP’s life. The EU’s Court of Auditors has called this
‘the real leitmotif running through the whole CAP’ (Court of Auditors,
2004: item I). Already the Rome Treaty stipulated that the policy’s aim
should be ‘to ensure a fair standard of living for the agricultural com-
munity, in particular by increasing the individual earnings of persons
engaged in agriculture’ (Treaty, 1957: article 39b). It was a reaction to a
situation in which income levels and standards of living were generally
rising in post-war Western Europe, but much less so for those employed
in agriculture. At a time when technological innovations were behind
continuous growth in the industrial sector, many farmers found it dif-
ficult to follow suit. The introduction of, say, a tractor on a farm is not
likely to bring similar growth and wealth increases as a conveyor belt in

an automobile factory. Moreover, the labour-intensive nature of farming,
the immobility of land, complex ownership structures, and low levels of
education among farmers were basic conditions that hindered a fast rise
of incomes in farming. Some farmers certainly earned well, especially
those who took advantage of new and increasingly cheap technologies
such as combine harvesters and milking machines. But others lacked the
means to participate in the modernization process and either continued
to live on low incomes or left the profession entirely. The farm problem,
as it was called in the 1950s, developed into what is now known as the
agro-industrial complex. Income problems in the sector continue despite
CAP support. One reason is that modern farming is extremely invest-
ment-intensive and many of those who have invested are now caught
up in massive debt. Another reason is that strong regional differences
provide unequal conditions for fortunes in farming, a situation that is
also highlighted in every enlargement scenario.
Public interventions into agriculture were, however, not invented in
the European Community. The idea of agricultural exceptionalism in
national policies became particularly pronounced after the outbreak of
the agricultural crisis in the early 1920s. Although the extent of the
national agricultural welfare state policies differed, by the end of the
1950s they all broadly consisted of a mix of policies that included
income redistribution, extensive domestic market support and external
trade barriers. The political goal of income parity in farming was not
easy to fulfil, and when the Rome Treaty entered into force, national
agricultural welfare states were struggling to live up to their welfare
aims. To try and rectify this, the income-gap problem became the abso-
lute priority in the negotiations shaping the CAP in the 1960s and
this objective has remained stable ever since. The original market and
price support had, however, problematic features and led to a bias in
financial benefits for bigger farms, which we can still observe today.
It also led to massive overproduction that has been depicted by media
in images of butter mountains and wine lakes. In an attempt to rec-
tify these problems, the key policy instruments were altered from the
early 1990s onwards in a series of reforms that moved away from price
support – and thereby indirect income support – to direct income trans-
fers. This gave the CAP a more clearly defined redistributory profile and
also made it more efficient.
The CAP is supplemented by national and local policies that range
widely from tax benefits to planning permissions for farmers. While
public intervention has reached an unprecedented degree of refinement
in the EU, most other industrial states have similar measures, though
not necessarily with the same type of priorities as in the EU. The average
level of public support to producers (called Producer Support Estimate)

in the OECD countries was 18.2 per cent of aggregate gross farm receipts
in 2013 (OECD, 2015). The Producer Support Estimate in the EU was
close to this average, namely 19.8 per cent. This is well above the United
States (7.4 per cent), but below the one of countries like Norway (53 per
cent), Switzerland (49.4 per cent), South Korea (52 per cent) and Japan
(55.6 per cent) (OECD, 2015).
Values
A key set of priorities in the CAP has been to preserve and promote
values that relate to farming and food. First, while the CAP does not
set direct limits to the size of farming units, it is clear that it builds up
a particular ideal of what the good properties of a farm are. Europeans
tend to be alienated by images of helicopter-flying cowboys that manage
herds of millions of cattle in the United States and Australia, portraying
industrial farming on an immensely large scale. Instead, CAP legislation
has for the first four decades systematically referred to a conception of
the ‘family farm’. The family farm was not just any farm, as the presence
of the word ‘family’ implied that there was a moral economy involved
with running the business. The farmer, their family and their relation-
ship to soil and locality have been important symbols in the narration
of belonging and nationhood cross much of Europe (e.g. Weber, 1976).
The adoption of this terminology for both national and CAP legislation
implied the political acceptance of the obligation to preserve this feature
of the European socio-cultural landscape.
Since the turn of the millennium, the terminology related to the farm
unit has begun to change but it still builds on an ideal. Europe’s new
farmer is ‘multi-functional’. The principle of multifunctionality rewards
the farmer for undertaking certain tasks beyond traditional agricul-
tural production. These tasks include, for instance: nature conservation,
upholding biological diversity, securing animal welfare, environmen-
tally friendly production techniques and facilitating agro-tourism. This
moves away from the original priorities of attaching values directly
to the (family) farm unit, to a broader range of priorities and values
that are related to rural areas and the life that it also enables. In policy
terms, the consequence of this reform is that farm support and incomes
are increasingly decoupled from agricultural production per se. Instead
there has been a political definition of other ‘services’ that farmers are
best placed to provide and that are in demand with the general public.
The farm is the backbone of rural communities, and when farms
disappear, it becomes a struggle to uphold adequate facilities for
everyday lives to function in such areas. Yet rural communities con-
tain something of fundamental value to Europe, as captured well
by former Commissioner for Agriculture and Rural Development,

Mariann Fischer-Boel: ‘Rural regions are indeed the soul of Europe. …
They represent the environmental, socio-economic and cultural richness
of our continent even more than European urban areas. Farmers and
farm households will be important providers of public goods’ (Fischer-
Boel, 2007). Concerted efforts to preserve this socio-cultural heritage
began in the framework of the CAP in the early 1970s when it was real-
ized that along with the depopulation of the countryside, many local
communities were dying, and with them also dialects and traditions.
Efforts to counter such tendencies were integrated into the structural
and cohesion policies that were subsequently developed. In debates
over CAP reform, there is now a strengthened emphasis on what role
the ideal European countryside should play in a future EU. It is clear
that during vacations, Europeans do not want to be faced with a string
of industrial-scale farms that exists, for example, in the US Midwest.
Increasing emphasis is placed on maintaining village life, a varied and
distinct countryside and well-kept farms. This ideal is in fact also a key
feature of the emerging EU-tourism strategy, which is an expanding sec-
tor that generates directly or indirectly already more than 10 per cent
of the EU’s GDP and keeps many small and medium sized businesses
running in rural areas.
Another clear value emphasis in the CAP relates to the choice of
promoting food products that rely on proud craftsmanship and strong
traditions bound to certain localities. In the wake of the single mar-
ket project, an EU-wide labelling system was introduced in 1992, and
since then more than a thousand products have received that label, for
instance the prized Italian parmigiano cheese. It has the most restric-
tive label, the Protected Designation of Origin, which the EU Court of
Justice has found to be an integrated part of EU food law that trumps
the principle of free enterprise in the common market (Official Journal,
2008). Hence, only producers in a designated area in Italy that live up
to certain production standards have the right to name their products
as ‘parmigiano’.
The practice of such EU-labelling has come as a reaction against
mass-produced food products. Some have criticized this as a Proustian
search for lost time and authenticity that privileges middle-class con-
sumers to whom such products are primarily a marker of distinction.
Yet studies have demonstrated that ‘gastronationalism’, as these label-
ling practices have also been called, not only reflects a resistance against
trends of global homogeneity in food as created by companies such
as Kraft Foods and Unilever in collaboration with large retailers, but
also that it can shape production and marketing positively (DeSoucey,
2010). This also informs the strategy behind delegations headed by
The European agricultural fortress under attack 183
EU commissioners for agriculture that travel to emerging markets to

promote ‘quality products’ with the geographical indications labels.
Interestingly, when Commissioner Dacian Cioloş in March 2011 went
to China, the programme for the visit included among others the area
where the Longjin tea is grown. A few months later this product became
one of the first produced outside the EU to receive a ‘Protected Designa-
tion of Origin’ label. Food values, it appears, can also be translated into
reciprocal strategies in trade and heritage.
Conclusion
The looking glass through which the CAP makes sense is not the typical
economistic or rationalist one that is often used to analyse the EU. The
CAP is a public policy, and scholars of public policy have pointed to
the need to identify and analyse the types of priorities, values and ideals
that have been chosen for policy. This article has shown that the CAP
rests on the need to secure a safe food supply, farmers’ incomes and the
values stemming from Europe’s rural areas and food traditions. In the
past two decades, the CAP has shown a remarkable ability to accom-
modate new demands in its priorities. It embodies a unique link between
economic entrepreneurship and the common values that make Europe
distinctive to both Europeans and others. Europeans are expressing a
continued support towards this, as the Eurobarometer surveys showed,
and the CAP will have an important role in shaping the EU’s future.
Perhaps the main task ahead is of a different nature, namely for critics –
wherever they reside – to admit that when they go home from work at
night, uncork a bottle of good wine and treat themselves to a nice bowl
of pasta sprinkled with parmigiano, the CAP has ultimately been a cen-
tral gateway to their comfortable lifestyles.
11.2 The European agricultural fortress

under attack
Eugénia da Conceição-Heldt
The EU’s Common Agricultural Policy remains an economic and envi-
ronmental disaster. It has become a safe haven for uncompetitive farmers,
and it is a typical case of how the influence of powerful interest groups
leads to economically inefficient policies. The huge amount of subsidies
lavished on European farmers, the resulting trade distortions created
inside the EU and in world markets, and its negative impact on the
environment make the CAP a particularly striking case of misallocation.
The CAP protects EU farmers from international competition through

import tariffs, direct payments and export subsidies. This increases
prices for European consumers and creates problems for farmers in for-
eign countries. Moreover, by coupling subsidies with production until
the beginning of the 1990s, the CAP regime had a distributional effect
that benefited big producers to the detriment of small farmers. Finally,
the CAP also encouraged intensive methods of production that caused
huge environmental damage.
Since its inception in the 1960s, the European agricultural ‘fortress’
(Roederer-Rynning, 2015) has been under both internal and external
pressure. This pressure increased in the 1990s. The challenge of East-
ern enlargement brought a number of countries with large, relatively
unproductive agricultural sectors into the EU, making a reform of the
CAP necessary to avoid a huge increase in the EU budget. Although
the member states did agree on several CAP reforms, they missed the
opportunity to achieve a fundamental reform that would have shifted
agricultural subsidies towards more productive purposes and would
have improved the EU’s competitiveness in the long term. Instead, the
CAP system was simply transferred as it was to the new member states
to ensure that it remained a safe haven for all European farmers.
Though, in the past two decades, the CAP has gradually adapted to
new demands, I will show in this chapter that its transformation is far
from complete and that it still has to be considered a failed policy.
Under attack from the outside: the impact of the

CAP on world trade
One of the major effects of the CAP is that it inhibits agricultural trade
liberalization, thus hurting foreign agricultural producers and domes-
tic exporters in other sectors. International pressure during global
trade negotiations caused a shift of domestic support from subsidies
to income support and rural development policy in order to make the
CAP compatible with WTO rules. Despite these changes, however, the
EU still abundantly subsidizes its agricultural sector and continues to
promote a very defensive position on agricultural issues in trade nego-
tiations. The dumping of highly subsidized European agricultural prod-
ucts on the world market makes it difficult for developing countries to
compete. CAP reforms resulting from pressure in international trade
talks have not resolved these problems. One of the main difficulties in
changing the CAP arises from the fact that member states are unable
to agree on a reform of the CAP’s general objectives and principles as
they were defined in the Treaty of Rome in 1957. The CAP still aims
to increase agricultural productivity, ensuring a fair standard of living
for farmers, stabilizing markets, providing sufficient supplies of food

and ensuring that these reach consumers at reasonable prices (TEU Art.
39). The resilience of CAP’s objectives and subsidies constitutes a classic
case of the joint decision-making trap identified by the German political
scientist Fritz Scharpf (1988): decision-making by unanimity combined
with conflicting preferences among member states limits significantly
the problem-solving capability of the EU, leading to suboptimal policy
outcomes and inefficient lowest common denominator compromises
(Scharpf, 2006).
In the late 1950s and 1960s, the then six EC member states estab-
lished the three main CAP principles: the unity principle, the Commu-
nity preference principle and the principle of financial solidarity. The
unity principle implied that the agricultural markets of all member
states were to merge into one single market with a common price level
and unrestricted trade between member states. The Community pref-
erence principle refers to the CAP regime of import tariffs and export
subsidies, designed to give preference to EU products over imported
ones. This principle de facto protects domestic producers from foreign
competition through a system of variable customs duties. Moreover,
EC member states set a target and an intervention price, and created a
common market organization for each agricultural commodity. Com-
mon market organizations seek to encourage higher market prices
(intervention prices) by reducing supplies of an agricultural product.
Essentially, each year the Agricultural Council sets a target price at a
level that is expected to provide a satisfactory return to farmers. The
common market organizations then purchase as much of the pro-
duced agricultural commodities as necessary to keep the price above
the target level. The third CAP principle – the principle of financial
solidarity – means that the cost of doing so would be covered by the
Community budget.
In order to protect European farmers from international competition,
products could generally only enter the European market if their price
was equal to or above the price on the EC market. This price is com-
monly referred to as the ‘entry price’. For cases where the international
price of a commodity was lower than the EC’s target price for that com-
modity, the EC introduced a system of export subsidies which reim-
bursed producers the difference between world prices and the EC price
level. This enabled European farmers to export agricultural products
to the international market which had not been sold within the EC’s
market. Compared to tariffs for industrial products, export subsidies
and import tariffs for agricultural products are generally very high. The
EU maintains particularly high tariff levels for dairy, sugar and animal
products (World Trade Organization, 2013).
CAP export subsidies, in particular, have been widely criticized,

especially by agricultural trade exporters such as the United States or
Australia, but also by emerging countries such as Brazil and by least
developing countries (LDCs). These criticisms primarily address the
excess production created by internal support prices and the resulting
surplus, which was dumped on world markets at a lower price than the
products of non-subsidized exporters, many of them LDCs.
The EU responded to rising opposition from LDCs and NGOs with
the so-called Everything but Arms initiative in 2001. This initiative gives
LDCs preferential treatment by granting them 97 per cent duty-free
access without any quantitative restrictions on imports of all products
except arms and ammunitions. Furthermore, at the WTO ministerial
conference in December 2005, the EU agreed to abolish all export sub-
sidies by 2013. However, since the Doha round is deadlocked and since
WTO members agreed on the ‘single undertaking principle’, meaning
nothing is agreed until everything is agreed, this concession will not take
effect if there is no progress on the other issues that are on the negotiat-
ing agenda, including domestic support and market access.
Domestic support subsidies have been the other major bone of conten-
tion in international trade rounds. In the current Doha round of trade
liberalization, negotiations on agricultural issues deal with reduction of
tariff rates and domestic subsidies and the elimination of export sub-
sidies (da Conceição-Heldt, 2011: 44). On all these issues, the EU has
a very defensive position. First of all, EU member states only accepted
to negotiate on the reduction of tariff rates on the condition that geo-
graphical indications for EU products would be excluded. Moreover, the
EU made the elimination of export subsidies dependent on the inclu-
sion of other forms of export support used in particular by the United
States and Australia, such as export credits, state trading enterprises and
food aid. Finally, the EU wanted to keep its system of domestic support
and to include the controversial principle of multifunctionality in trade
negotiations. Thus, it would be able to subsidize the agricultural sector
by linking subsidies to the protection of the environment, rural develop-
ment and food security (da Conceição-Heldt, 2011: 126).
With the 2003 CAP reform (the so-called Fischler reform), mem-
ber states shifted market price support to direct aid payments on the
basis of the area farmed and the livestock kept. The main objective of
the Fischler reform was not really to reduce support to farmers but,
rather, to shift payments from the first pillar (market production) to
the second (rural development policy). Altogether, however, this reform
neither came anywhere close to meeting the demands of other WTO
members for a rapid elimination of export subsidies, nor did it signifi-
cantly reduce import barriers. This is why the CAP remains one of the
most contentious issues between the EU and its international trading

partners. Nonetheless, agricultural interest groups, especially the peak
agricultural confederations at the European level, the Committee of Pro-
fessional Agricultural Organizations (COPA), which consists of over 60
agricultural organizations from the 28 member states and represents
large agricultural producers, and the General Confederation of Agricul-
tural Cooperatives (COGECA), continue to oppose agricultural trade
liberalization and CAP reforms. In the Doha round, the COPA has criti-
cized the European Commission sharply for using the CAP as a bargain-
ing chip. The main argument put forward by agricultural interest groups
is that reduction in domestic support would undermine the European
multifunctional model of agriculture and force farmers to abandon agri-
cultural activity. French farmers, the main beneficiaries of CAP subsidies,
would be the main losers from agricultural trade liberalization. Accord-
ingly, they continue to successfully lobby French governments against
further CAP reforms and global trade liberalization. A tight coalition
of member states and producers makes the CAP extremely resistant to
reform demands from the outside.
Under attack from the inside: budgetary, environmental and

consumer costs
CAP reforms in the last two decades were not only driven by external
pressures from multilateral trade negotiations. They also reflected sharp
attacks from within the EU due to the policy’s high cost for taxpayers
and consumers and the general agreement among member states that
the CAP could only ‘survive’ enlargement to the east after undergoing a
fundamental reform.
On the budgetary side, the CAP is a subsidy-devouring monster that
absorbs a large part of the EU’s budget. In 1985, the share of the CAP
in the EC budget represented 73 per cent. Today, after several reforms
and attempts to decrease subsidies, agriculture still comprises 40 per
cent of the EU’s budget (European Commission, 2015b). At the end of
the 1990s, increased budgetary pressures occurred largely in connection
with the enlargement to include the Central and East European coun-
tries (CEEC). First, because agriculture’s share of total GDP was larger
in these countries than in other EU member states, a direct transfer of the
CAP subsidies to the CEEC would have required an enormous increase
in CAP costs and thus the EU’s budget. A second major concern was that
injecting large sums of subsidies the in form of direct payments into the
new entrant countries would undermine restructuring efforts of their
comparatively unproductive farm sectors. In the end, EU member states
decided that the ten candidate countries would receive the same direct
payments as the EU-15 countries, gradually phased-in over a period of

ten years from 2004 to 2013. Thus, the enlargement of the EU was not
used to achieve a fundamental reform of the CAP, but simply to transfer
the system to the new member states. The EU missed a unique oppor-
tunity to shift agricultural subsidies towards more productive purposes
and to improve the EU’s competitiveness in world markets.
In addition to budgetary concerns, a second internal criticism addresses
the negative environmental effects (e.g. water pollution, soil and air
quality) of increased production stemming from the CAP. Since the CAP
subsidies were from the very beginning coupled to production, this sent
a signal to big farmers to intensify production, with serious ecological
consequences. High levels of production and the use of chemical fertiliz-
ers cause contamination of ground and surface waters, especially where
intensive livestock and grain production takes place. Agriculture contrib-
utes to around 8 per cent of total greenhouse emissions and is the princi-
pal source of methane (from cattle production) and nitrogen oxide (from
grazing livestock). CAP subsidies boosted the farmers’ prices above mar-
ket prices and encouraged farmers to produce too much, using excessive
amounts of fertilizer and pesticides to keep unprofitable tracts of land in
production. Decoupling subsidies from production is a way of lowering
returns and decreasing the incentives to boost production levels through
the use of agrochemicals (Oersted Nielsen et al., 2009: 375). Of course,
this problem may not be solved via increased agricultural imports, as it
is not clear that production in the United States, Australia or Brazil and
transport from these countries would cause less environmental damage.
Instead, to decrease greenhouse emissions in the agricultural sector, the
EU would have to support small, local farmers.
As a reaction to the fact that major beneficiaries of CAP are large
business firms, such as royal families or multinational food companies,
the CAP now makes eligibility to receive subsidies dependent on being
an ‘active farmer’. At the same time, the Commission was mandated
by member states to prepare a list of firms not eligible to receive farm
subsidies. Another central reform aspect is related to strengthening the
sustainable environmental dimension of the CAP by making 30 per cent
of each country’s direct payments ceiling (‘green payment’) dependent
on compliance with environmental rules, such as keeping permanent
grassland and establishing ‘ecological focus areas’. The 2013 reform
also introduced new subsidies to support small and young farmers
(European Commission, 2013). These are first small steps towards using
public money in a more efficient way for the public goods linked to
agricultural production.
While these reforms addressed some of the CAP’s problems, they did
not substantially reduce EU spending on agriculture nor did they turn
the CAP towards a more competitive approach. CAP subsidies were

simply shifted from mass production to a more sustainable, environ-
mental dimension production. The opposition by the powerful farm
lobbies COPA/COGECA at the national and European levels explains
why member states only reluctantly agreed on minimal CAP reforms.
COPA/COGECA, uniting the main profiteers of the highly regulated,
protectionist agricultural sector, effectively lobbies member states’ rep-
resentatives and the Directorate General Agriculture of the European
Commission. Although some scholars (Davis, 2003) have emphasized
COPA’s monopoly position in representing European farmers, its influ-
ence has declined since the beginning of the 1990s (Grant, 1997), when
the European Farmers’ Coordination entered the scene. Because COPA/
COGECA basically represents big farmers, small family farmers con-
sidered their interests were not adequately addressed within this peak
organization. Thus, they joined with consumers’ groups and environ-
mental organizations in the 1990s to form the European Farmers’
Coordination, a European network for environmentally sustainable
agriculture (Hennis, 2005). Since then, there has been a competition
between these two models of agriculture with the COPA/COGECA
pleading for the continuation of the old CAP based on intensive agricul-
tural production and the European Farmers’ Coordination promoting a
new agricultural model based on small family farm ecological products
and, thus, the inclusion of an environmentally sustainable dimension.
The latter favour a CAP oriented towards preserving the countryside,
producing higher quality, ecological products for which European con-
sumers are ready to pay higher prices and subsidizing a sector that is
considered by some as part of Europe’s common values. Ultimately, the
competition between these two models has resulted in fragmentation
within the agricultural sector.
Conclusion
In the past two decades, due to internal and external pressures and a
stronger competition among farmer groups, the CAP gradually shifted
from a mass production model to a more environmentally oriented pol-
icy. Nevertheless, the CAP is still a safe haven for farmers, with a com-
plex system of regulations and subsidies that shields European farmers
from world markets. Furthermore, its negative economic and environ-
mental effects make it highly contested. Farmers protesting in front of
the Berlaymont building in Brussels against further CAP reforms have
been joined by consumer and environmental group protestors who ques-
tion the necessity of maintaining an environmentally damaging policy
simply to support an economically inefficient sector.
In order to ‘survive’, the CAP will have to adapt to new demands.

First, if the CAP fails to adapt adequately and take into consideration
the broader societal concerns, a backlash in the integration process with
a renationalization of agriculture could be one consequence given the
low levels of popular support for this highly subsidized policy. Second,
the European Parliament, the institution that represents the interests
of EU citizens, has by now increased its decision-making power over
agricultural policy. This could provide an opportunity for the CAP to
adapt and, in the long term, to move the CAP beyond national agricul-
tural interests and budgetary disputes among member states. Finally,
in the framework of the ongoing Transatlantic Trade and Investment
Partnership between the EU and the United States, agricultural trade lib-
eralization and food regulation standards remain two of the most con-
troversial issues on the agenda. Time will tell whether the EU is ready
to sacrifice the CAP in exchange for gains in other issue areas, such as
services, which are more important for the European economy.
Chapter 12
Does the EU Act as Normative

Power?
For centuries, states were the main actors on the global stage. Interna-
tional organizations and supranational institutions such as the EU were
seen as little else but instruments in the hands of powerful governments
and their constituents. Thus, it is not surprising that few commentators
cared to think about the EU as global actor during the early decades of
European integration. Events in the early 1990s changed all this. The end
of the Cold War removed the umbrella of bipolar great-power rivalry
under which the Europeans were able to hide. The Maastricht Treaty
institutionalized a common foreign and security policy as part of the
EU, and the bloody break-up of Yugoslavia brought home the need for
common approaches to many pressing international issues which were
beyond the problem-solving capacity of single member states. In more
and more areas, ranging from foreign trade to development aid, envi-
ronmental diplomacy, human rights policy, financial regulation, energy
issues and so on, the European Union became an international actor on
its own right (Bretherton and Vogler, 2006). Debates in the 1970s and
1980s on whether the EU should be seen as an independent actor on the
world stage petered out. Now the focus is on the issue of what kind of
an actor the EU is. Does it act increasingly like a traditional state with
similar means and ends or does it constitute something entirely new?
Already after the first attempts of the Europeans to coordinate their
foreign policies in the quite inefficient EPC (European Political Coopera-
tion) framework, some authors speculated that the then European Com-
munities would not only become a new type of actor but that it would
behave in a different way, namely as a so-called civilian power (Duchêne,
1972; Bull, 1982). Civilian powers were expected to put an emphasis
on non-military means in their international behaviour, to prefer mul-
tilateral diplomacy to traditional power politics, and to try to promote
democratic values. The reaction of the United States to 9/11, in particu-
lar the Iraq War which was opposed by many EU members, seemed to
emphasize this distinction. While the United States and other great pow-
ers ultimately relied on hard power, the EU seemed to be equipped with
a different kind of power: soft power (Nye, 2002). A comparison of the
191
192 Does the EU Act as Normative Power?
National Security Strategy 2002, issued by the Bush administration, and

the European Security Strategy of 2003 (ESS, 2003), underlined this. In
2002, Ian J. Manners, a British scholar now working in Denmark, pub-
lished an article in the Journal of Common Market Studies in which he
claimed that the EU acted indeed differently in its international policies.
He called the EU a ‘normative power’: not only its means, but, above
all, its ends were shaped by normative concerns. Manners argued that
given that the very existence of the Union was based on multilateral
understandings, an emphasis on shared values and the rejection of tradi-
tional great-power diplomacy, it based its external actions on the same
principles. The article has become one of the most widely quoted pieces
in research on European integration, not least because the Iraq War
seemed to confirm its arguments. Ever since, the debate has continued on
whether the EU really behaves differently in the international arena. The
controversy about ‘Normative Power Europe’ feeds into wider debates
on the ‘nature’ of the EU as an international actor and on the relevance
of norms, perceptions and ‘roles’ in international relations.
Daniela Sicurelli from the University of Trento (Italy) backs the view
that the EU should be seen as a normative power, and that such an inter-
pretation can lead to a better understanding of how the EU acts in the
global arena. Mark A. Pollack challenges this notion and thinks that the
EU is not different from traditional state actors, as it employs material
and ideational power resources to further its goals and often acts rather
hypocritically. The debate illustrates not only different ways of seeing the
EU as global power, but also different methods of analysing this question:
while Pollack’s analysis is an example of a rationalist account, Sicurelli
shows how a reflexive approach, which sees the interests of actors not as
reflections of their capabilities and constraints but as derived from their
idea-based interpretations of reality, can enrich our understanding of the
EU. These two chapters are also of huge relevance to the external dimen-
sion of various EU policies, such as agriculture (Chapter 11), enlarge-
ment (Chapter 13), and security (Chapter 14). The issue of normative
power is also a core part of the identity debate (Chapter 6).
12.1 The EU is a normative power

in world politics
Daniela Sicurelli
Even though it lacks many traditional foreign policy instruments, the
EU is an influential actor in multiple fields of international politics, such
as trade and environmental negotiations, peacebuilding and democracy
The EU is a normative power in world politics 193
promotion. More specifically, it stands out for its ability to promote

principles, practices and regulatory standards – in other words, norms –
beyond its borders. By introducing the concept of normative power
Europe, Manners (2002) has captured this role played by the EU in
international relations. According to this argument, the EU differs from
states guided by traditional power politics because its foreign policy
decisions are primarily shaped by ideational motivations. In its exter-
nal relations, the EU ultimately aims at promoting its constitutive val-
ues and principles internationally. In order to socialize other players to
the norms on which it is constructed, it uses soft power tools, such as
providing a successful example as cooperative economic and security
region, promoting the attractiveness of its market, and being a major
provider of development and humanitarian aid. By exporting its body
of laws and norms beyond its borders, the EU ultimately contributes to
shaping what is normal in international relations.
This suggestive representation of the EU has sparked a lively debate
among international relations scholars, and inspired numerous theo-
retical and empirical works (see e.g. Whitman, 2011, Björkdahl et al.,
2015). In this chapter, I claim that its commitment and ability to pro-
mote its constitutive norms internationally is indeed a distinctive feature
of the EU as an international actor. In the first part, I provide evidence
in support of the argument that European foreign policy can be under-
stood as the result of normative pressures and exhibits a preference for
soft power instruments; in the second part, I test the normative impact
of European foreign policy and discuss the conditions that contribute to
the international diffusion of EU-sponsored norms.
The constitutive norms of the EU and its sources of power

According to the content of the official documents of European insti-
tutions, the EU’s intention is to emerge as a normative leader at the
global level, in contrast to other powers, notably the United States (Diez,
2005). Many analyses of the practices of the EU have shown that iden-
tity and normative concerns are in fact important components of Euro-
pean foreign policy. To this end, it engages in the promotion of those
principles that represent the very foundations of the EU polity, namely
economic liberalism, multilateralism (understood as strong support
for international law), universality of human rights, liberal democracy,
solidarity and sustainable development (Lucarelli and Manners 2006;
Rosamond, 2013). This importance of ideational motivations in shaping
the EU’s foreign policy does not imply that it acts against the interests of
its members and institutions. On the contrary, the separation of norms
and interests in European external relations is impossible. By exporting
its fundamental norms, for instance, the EU aims at legitimizing itself in

the eyes of its international partners as more than the sum of its parts
(Manners, 2002).
The EU’s attempt to export norms through its external relations is
evident across different policy areas, including trade, neighbourhood
and foreign and security policies. Always a major sponsor of multilat-
eral trade agreements, the EU has also emerged since the 1990s as a
norm promoter in negotiations on preferential trade agreements with
single states and regional organizations such as MERCOSUR and the
Association of South East Asian Nations (ASEAN). Each of the prefer-
ential trade agreements that the EU has promoted and concluded since
the mid-1990s includes human rights clauses and a sustainable devel-
opment chapter which calls on its trade partners to ratify and enforce
international environmental and labour law. Owing to its principled
foreign policy, the EU has emerged as a normative power in contrast
to other trade negotiators, which mainly act according to traditional
realist considerations. The Lisbon Treaty has further reinforced the nor-
mative voice of the EU in its international relations by empowering the
European Parliament in trade policy-making (Feliu and Serra, 2015).
Due to the presence of many parties which strongly promote human
rights and environmental concerns, the EP has always criticized EU
trade policies as too narrowly focused on commercial aspects. In the
framework of the ongoing trade negotiations with India, for instance,
a resolution by the EP demanded to make an eventual trade agreement
dependent on an ongoing dialogue on human rights, with particular
reference to the Indian occupied Kashmir (European Parliament, 2011).
Such a call clashed with the way the Indian government conceptualizes
international relations and with its reluctance to conclude free trade
agreements that contain non-commercial provisions with consequences
for domestic politics (Khorana and Garcia, 2013). At the time of this
writing, trade negotiations between the two parties are still ongoing
and, despite the high commercial relevance of an eventual agreement,
the EU’s insistence on human rights conditions remains a major hurdle.
Neighbourhood policy is another field in which the EU exercises its
efforts of democracy and human rights promotion. The Union is well
equipped to contribute to democratization processes beyond its borders
because its members are liberal democracies and its institutions are built
upon principles of democratic governance such as transparency, partici-
pation and accountability (Lavenex and Schimmelfennig, 2011). Many
analyses of the discourse of the EU leaders confirm that through its
programmes of democracy promotion, the EU seeks to export the norms
that constitute its very foundations. As the former High Representative
for EU foreign policy, Catherine Ashton, commented in reaction to the
Arab Spring in 2011, the EU has a moral imperative to intervene in sup-

port of democratic social movements. She explained that since the EU
is ‘a union of democracies’, ‘we have a democratic calling’ in that con-
text (Ashton, 2011). For this purpose, the EU mobilized over €4 b illion
financial resources for 2011–2013 under the European Neighbour-
hood and Partnership Instrument and established the so-called SPRING
programme (Support to Partnership, Reform and Inclusive Growth) to
provide additional financial support to countries showing commitment
to, and progress in, democratic reforms.
Foreign and security policy provides another context for the EU
to export its founding norms. In 2001, the President of the European
Commission, Romano Prodi, claimed that the EU should export its
model of regional peace-building. He observed that in Europe ‘the rule
of law has replaced the crude interplay or power’ and concluded that
‘by making a success of integration we are demonstrating to the world
that it is possible to create a method of peace’ (Prodi, 2001). Build-
ing upon these convictions, the EU pursues international peacekeeping
based primarily on civilian tools. At the time of writing (1/2016), the
EU was involved in 12 civilian security operations, mostly in Africa and
Southeast Europe. These aimed at establishing the rule of law, policing
unstable areas, monitoring borders, reforming the security sector of the
countries concerned and building up their capacity for democratic gov-
ernance. Although it prioritizes civilian tools of conflict management,
the EU has also developed military capabilities and is currently involved
in six military security operations in the same regions. The possibility
to implement military operations does not per se harm the potential of
the EU to act as a norm promoter internationally (Björkdahl, 2011).
Privileging civilian and normative forms of power, in fact, helps ensure
that any parallel use of material incentives and coercive instruments of
power is ‘utilized in a more justifiable way’ (Manners, 2012: 194). For
this reason, all the military operations of the EU are supported either by
parallel civilian security mission or by financial instruments dedicated to
development cooperation and democracy promotion.
The normative impact of the EU

Empirical data concerning the process and results of EU norm diffusion
show that, under favourable conditions, the EU has been able to per-
suade other actors to endorse its rules and standards. First, the EU has
achieved tangible results in its attempt to export its model of regional
economic and security integration at global level. Its experience of inte-
gration has influenced parallel processes in other regions including the
African Union, the Southern African Development Community, ASEAN
and MERCOSUR by activating socialization and emulation dynamics

(Lenz, 2013). As they travel to other regions, EU norms of regional inte-
gration have been filtered and adjusted to the local contexts (Björkdahl
et al., 2015). In fact, the local political culture and history of their mem-
bers affect how those organizations endorse and reframe EU norms. An
example of this process of norm localization is provided by the building
of ASEAN as a regional security organization. The South East Asian
region has modelled its security institutions on the norm of ‘common
security’ developed in the EU in the early 1990s and reframed it as
‘cooperative security’. This concept emphasizes the need to foster con-
sensual decision-making processes among ASEAN member states while
preserving national sovereignty in the field of security (Acharya, 2004).
This example shows that the effectiveness of EU norm diffusion is con-
ditional upon the extent to which those norms fit locally established
norms (Björkdahl et al., 2015).
Second, the EU is distinguished by its ability to export regulatory
standards through trade agreements such as, for instance, food safety
requirements and environmental and labour standards. The effective-
ness of the EU as a normative leader through trade depends not only
upon material factors, such as the size of its market, but also upon
its ability to establish transgovernmental networks of bureaucratic
actors and experts involved in capacity-building programmes. These
networks, involving sectoral bureaucracies in the European Commis-
sion, member states’ administrations, regulatory agencies, international
organizations and non-state actors, help socialize its trade partners to
EU norms and add legitimacy to EU-sponsored rules and standards
(Lavenex, 2014).
Third, as shown by the case of the reform process in Tunisia after
the Arab Spring, when the EU finds a permeable local context, it
can prove successful as a promoter of democratic institutions. As
opposed to other international players, including the United States,
the EU has devoted considerable resources to supporting Tunisia’s
transition to democracy. It implemented an observatory mission to
monitor the first post-revolution elections held by the country on 23
October 2011 and increased its financial support to civil society under
the SPRING programme. In contrast to other countries of the region,
pro-democratic forces coexisted in Tunisia with a moderate Islam-
ist government which was able to respond to the EU’s conditionality
and financial assistance. As a result, the EU played an auxiliary role
to domestic forces aiming to democratize the country (Börzel et al.,
2015). This case study demonstrates that where the EU finds receptive
political elites, it can make a meaningful contribution to supporting
democratization processes.
The ability of the EU to act effectively as a normative power is largely

dependent on its reputation, and especially on the perception of EU-
sponsored norms as legitimate. The EU has been able to create an image
as a legitimate and effective norm promoter in multiple international
venues, such as environmental negotiations, human rights and democ-
racy promotion. More generally, it is widely perceived as a promoter of
the principle and practice of multilateralism in global affairs. For exam-
ple, the perception of the EU as leader of multilateral environmental
negotiations is widely shared by participants in the UN climate-change
negotiations (Karlsson et al., 2011). The Union is also seen as major
driver of international development and democracy promotion policies
in the representations of a majority of World Bank officials (Baroncelli,
2010).
However, although the norms promoted by the EU are widely con-
sidered legitimate, the EU is often criticized for the patronizing under-
tones of its discourse, for the use of coercive foreign policy tools such
as conditionalities, and for the lack of coherence in its foreign policy
decisions (Lucarelli, 2014). Yet, ironically, resistance to EU norms may
end up enhancing its norm-setting power. Opposition against the EU’s
assertive methods of norm promotion is a confirmation of its visibility
as an actor. The latter, in turn, is a precondition for the EU to exert its
influence internationally. As Gordon and Pardo argue: ‘Without resist-
ance the EU’s normative agenda may withdraw into the shadows and
lose its potency’ (2015: 417). In 2013, for instance, the Israeli govern-
ment openly rejected ‘Guidelines’ published by the European Commis-
sion (2013) on the allocation of grants, prices and financial instruments
funded by the EU to Israeli government and private entities. The Guide-
lines state that EU institutions cannot fund Israeli companies, public
bodies and institutions that operate within Israeli settlements and reas-
sert the existence of the Green Line (referring to pre-1967 borders).
Israel’s rejection of the Guidelines de facto contributed to making the
issue of the Green Line newsworthy both among Israeli and interna-
tional media, thereby empowering the European normative stance in the
domestic debate in Israel as well as internationally.
Conclusion
The broad spectrum of foreign policy decisions and instruments used by
the EU to export its constitutive values and principles and the wide geo-
graphical scope of the target countries make its commitment to norm
promotion a distinctive feature of the EU as an international actor.
The preconditions for the EU to play the role of a normative power
worldwide include the visibility of its foreign policy actions and the
representation of EU-sponsored norms as legitimate among its interna-

tional partners. Furthermore, the normative fit of European foreign pol-
icy decisions with local norms, the permeability of recipient countries to
new norms, and the presence of transnational networks of experts and
bureaucrats supporting its normative positions are facilitating condi-
tions for the emergence of the EU as a normative leader. By increasing
the powers of the European Parliament in foreign policy-making and by
strengthening the image of the EU as a unitary actor and its presence on
the ground throughout the European External Action Service, the Lis-
bon Treaty has further increased the opportunities for the EU to project
its normative power at global level.
12.2 Living in a material world: a critique of

‘normative power Europe’
Mark A. Pollack
There is, in contemporary literature on European Union foreign pol-
icy, a widely expressed view that the EU today constitutes a ‘normative
power’. As first articulated by Ian Manners (2002) in an extraordinarily
influential article, the idea of ‘normative power Europe’ (NPE) combines
two fundamental claims.
The first of these claims is about the EU’s ‘normative difference’, the
notion that the EU, by virtue of its history, its nature as a hybrid pol-
ity, and its political and legal framework, is constituted by a commit-
ment to certain constitutional norms that determine its international
identity (Manners, 2002: 241). Reading through a series of historic
declarations, policies and treaties, Manners identifies five core norms
(peace, liberty, democracy, the rule of law and human rights) and four
minor norms (social solidarity, anti-discrimination, sustainable devel-
opment and good governance) which together constitute the EU’s nor-
mative identity (Manners, 2002: 242). These are not simply universal
or Western norms; rather, ‘the EU is normatively different to other
polities with its commitment to universal rights and principles’ (Man-
ners, 2002: 241). Indeed, ‘in my formulation the central component
of normative power Europe is that it exists as being different to pre-
existing political forms, and that this particular difference pre-disposes
it to act in a normative way’ (Manners, 2002: 242). Since then, a huge
number of studies has picked up this theme, repeatedly pointing to
the EU’s purported normative uniqueness, almost invariably in com-
parison to a self-interested or realist United States with no discernible
values or scruples.
Living in a material world 199
Manners’s second claim is about the nature of the EU’s ‘normative

power’. After reviewing traditional views of Europe as a ‘civilian power’
wielding material economic resources, and contemporary views of
European Security and Defence Policy (ESDP) wielding military power,
Manners suggests that these views need to be augmented by a considera-
tion of Europe’s normative power – a ‘power of opinion’, ‘idée force’,
or the ability to shape conceptions of ‘normal’ in world affairs (Man-
ners, 2002: 239). While not rejecting entirely the significance of material
economic and political power, Manners argues that ‘the ability to define
what passes for “normal” in world politics is, ultimately, the greatest
power of all’ (Manners, 2002: 253).
In the language of rational-choice theories such as intergovernmental-
ism, institutionalism and realism, NPE proposes a new and novel expla-
nation of both the preferences and the power of the European Union
in world affairs – the former generated by constitutive norms and the
latter driven primarily by symbolic and ideational processes rather than
by material resources.
There is something very powerful in this formulation. There can be lit-
tle doubt that, with respect to human rights, the death penalty, multilat-
eralism and the rule of law, European leaders see and present themselves
as driven by sincere normative convictions in their interactions with the
rest of the world. As Manners rightly pointed out, it would be difficult, if
not impossible, to explain EU policies on an issue like the death penalty
through any appeal to the material interests of the member states. The
notion of the EU as a normative power has precipitated a series of books,
articles and edited volumes in recent years (see e.g. Lucarelli and Man-
ners, 2006; Aggestam, 2008; Laïdi, 2008; Tocci, 2008; Whitman, 2011;
Rosamond, 2013; Zielonka, 2013). Beyond the academy, NPE has pen-
etrated the thinking of EU practitioners, who increasingly present them-
selves as uniquely normative actors on the world stage. Whether this
influence is due to the accuracy of its claims, or the heroic light in which
it paints the EU and its leaders, however, remains an open question.
In fact, recent events in world politics, and contemporary scholar-
ship by students of EU foreign policy, have begun to question the rather
heroic depiction of the Union as an inherently normative power, pure
in motivation and non-coercive in its behaviour. Across a range of issue
areas frequently considered to be ‘normative’ in character, much scholar-
ship suggests that material interests, and material power resources, are
at least as significant in European foreign policy as normative ones. The
image of the EU as a purely normative actor, I argue, is an ideal type –
one that illuminates certain, perhaps more admirable, features of the EU
as a global actor, but one that should not be confused with a realistic
portrayal of what the EU is and does in world affairs.
Preferences
With respect to preferences, a growing body of scholarship challenges,
or at least lends nuance to, Manners’s portrayal of the EU as an actor
uniquely driven by normative considerations. Manners, in his original
statement, simply accepts at face value the various declarations, policies
and treaties that spell out the EU’s core normative principles. And his
illustrative case study of the EU’s global campaign against the death
penalty emerges as an ‘easy’ case – one in which no EU member state
appeared to have a discernible material interest that might cut against or
undermine the Union’s collective normative commitment.
By contrast, other scholarship suggests either that material interests
may underlie the EU’s normative declarations (thus masking the EU’s
hidden motives), or that EU normative and material concerns may inter-
mingle in determining EU preferences (the notion of ‘mixed motives’) or,
alternatively, that material interests may cut across and undermine the
EU’s public normative stance (hence generating charges of hypocrisy;
see e.g. Aggestam, 2008: 7).
Claims that the EU’s normative preferences are in fact a mask for
its hidden material interests are commonplace among the Union’s con-
servative critics, who question the source and the sincerity of the EU’s
commitment to multilateralism and the rule of international law. Robert
Kagan, for example, has famously suggested that the EU’s embrace of
such principles actually reflects an effort to compensate for Europe’s
military weakness and tie down a hegemonic United States (Kagan,
2002). Others, like Jack Goldsmith and Eric Posner, suggest that the
EU’s commitment to the rule of law and multilateralism is insincere, as
witnessed by the Union’s willingness to violate international law where
doing so will serve its material interests (Goldsmith and Posner, 2009).
Such accounts serve a useful purpose in questioning the purity of the
EU’s motives, but they almost certainly go too far in reducing the EU’s
normative beliefs to hidden material preferences.
More convincing, in this context, are other studies that demonstrate
mixed motives and even hypocrisy in the EU’s ‘normative’ foreign poli-
cies. In their study of the EU’s environmental diplomacy, for example,
R. Daniel Kelemen and David Vogel (2009) suggest that while the EU’s
global environmental leadership is consistent with EU norms such as
multilateralism and sustainable development, a pure NPE approach
pays inadequate attention to the role of economic interests. In their
alternative, ‘regulatory politics’ approach, the EU has sought to export
or upload its high environmental standards, not simply out of norma-
tive concern for the global environment, but at least in part in an effort
to level the economic playing field vis-à-vis states with more-lax eco-
nomic standards. Indeed, the EU’s environmental diplomacy is just one
part of a broader Commission initiative to ‘promot[e] European stand-

ards internationally through international organization and bilateral
agreements’, which, the Commission argues, ‘works to the advantage of
those already geared up to meet those standards’ (European Commis-
sion quoted in Pollack and Shaffer, 2009: 129). Hence, the EU’s vaunted
success in exporting its domestic regulations may represent the Union’s
material as well as its normative interests.
We can also find mixed motives in other cases, where the EU’s nor-
mative declarations can and sometimes do come into conflict with the
material interests of EU member governments and their constituents.
In the area of arms trading, for example, the EU’s members expressed
a genuine normative concern for preventing armed conflicts, which
helped lead to the establishment of an EU code of conduct for arms
trading with third countries. Yet, the large material interests of arms
exporters in the various EU member states have resulted in provisions
that are often politically rather than legally binding, and sufficiently
vague as to impose few significant restrictions on such sales (Webber,
2010). Similarly, in the human rights realm, the EU has been inconsist-
ent in its insistence on observance of human rights, treading more softly
in its criticisms of economically or strategically important states like
Russia and China (Smith, 2001). Perhaps the most obvious case of EU
hypocrisy, in which economic interests trump normative declarations, is
the area of trade policy. Here, notwithstanding admirable, normatively
motivated efforts like the ‘Everything but Arms’ initiative, the Union’s
defence of the protectionist Common Agricultural Policy stands as a
significant global impediment to economic development in the world’s
poorest nations, and perhaps the greatest single obstacle to further trade
liberalization (Oxfam, 2003).
Power
Even if one concedes that the EU’s foreign policy is motivated exclu-
sively by normative ends, there remains the question whether the means
or sources of EU power are normative, material, or – as seems likely –
some combination of the two. To his credit, Manners did not argue that
EU power arose solely through ideational processes – and indeed the
experience of EU foreign policy in a range of areas has revealed the lim-
its of normative power and the importance of material economic and,
in rare cases, military power to promote the EU’s values and interests
in the world.
Take, for example, the case of EU enlargement, which is often seen as
a triumph of the EU’s normative power spreading democracy and free
markets to the post-Soviet republics of Central and Eastern Europe. In
fact, however, careful studies of the EU enlargement have demonstrated
that while some of the effects of the EU might be partially attributable

to learning from the EU’s normative example, on balance ‘the external
incentives provided by the EU can largely account for the impact of
the EU on candidate countries’ (Schimmelfennig and Sedelmeier, 2005:
210–211; see also Vachudova, 2005; Zürn and Checkel, 2005). By con-
trast, in other post-Soviet states like Russia, Ukraine and Belarus, and
to some extent also in Turkey, the EU’s normative example, without
the material promise of membership, has not been enough to prevent a
backward slide into authoritarianism. Indeed, the gradual slide of Vic-
tor Orbán’s Hungary into ‘illiberal democracy’ demonstrates the limits
of the EU’s normative power to propel and sustain political change even
within its own borders (Kelemen, 2015b).
A second case, namely the EU and global human rights, similarly
points to the importance of material pressure and economic condition-
ality in securing implementation of human rights norms in third coun-
tries. In the United Nations system, for example, the EU has been a
consistent and impassioned advocate of human rights worldwide, but
has few material incentives to offer other states, relying primarily on its
normative example – and here we find the EU’s consistently pro-human
rights position losing ground to authoritarian defenders of national sov-
ereignty like Russia and China who regularly defeat EU proposals on
issue after issue in the UN Human Rights Council (Gowan and Brandt-
ner, 2008). By contrast, the EU has been found to have much greater
influence on human rights practices when it explicitly links human
rights performance to the material benefit of trade access to EU markets
(Hafner-Burton, 2009).
Indeed, surveying the EU’s human rights and environmental foreign
policies in recent years, it is hard not to conclude that the EU foreign-
policy practitioners have drunk the NPE Kool-Aid, believing that the
force of the EU’s normative example really could change the world,
uncoupled from the EU’s material sources of bargaining leverage. That
view has served the EU poorly in the UN human rights realm, and
condemned the Union to near-irrelevance at the Copenhagen climate-
change negotiations in December 2009, where the final agreement on
the ‘Copenhagen Accords’ was negotiated by the United States, China,
India, Brazil and South Africa without EU participation (Groen and
Niemann, 2013).
The limits of the EU’s normative power, and the significance of its
material power, are arguably most evident in European countries’ con-
troversial but ultimately successful military intervention in Libya, which
succeeded in removing Col. Muammar Quaddafi from power after four
decades of authoritarian rule. Indeed, the Libyan case illustrates both
the kernel of truth in, and the limits of, the NPE thesis. One could, with
Manners, make a strong case that normative concerns about human

rights and democracy were foremost in the minds of European leaders,
yet those leaders were sharply divided about the use of military force,
with Britain and France taking the lead in a NATO military operation
while Germany opposed the use of force and abstained from the UN
Security Council resolution authorizing the operation. In this case, the
EU’s normative preferences and power were not inherent in its nature
but were rather deeply contested, and the means by which the Union
effected change in Libya was not primarily normative but military. The
Libyan case does not, of course, suggest that the EU should seek to
become a global military actor – indeed, the mixed outcome of the Lib-
yan intervention counsels caution on that score – but it does suggest that
normative power alone has its limits.
The Libyan intervention, and the debate over it within Europe, also
serves to underline another point, namely that the Union’s supposedly
inherent values are in fact deeply contested in practice among its mem-
ber states. Two other examples of a divided and tentative EU shall suffice
to illustrate the point. First, when Russia intervened militarily in eastern
Ukraine, and later annexed Crimea by force in 2014, the Union’s collec-
tive response was debated internally, and some members’ demands for
a vigorous, principled response were watered down by states concerned
about their material dependence on Russia for energy (Forbrig, 2015).
Second, and even more starkly, the EU was sharply divided over the
response to the wave of Syrian and other asylum seekers in Europe in
2015, with some member states (most notably Germany) demonstrating
an outpouring of generosity and welcome, while others (with Hungary,
once again, at the forefront) responded with anti-immigrant rhetoric
and policies (Kelemen, 2015b).
Conclusion
‘Normative power Europe’ is a Platonic ideal. Taken as a statement of
fact, it whitewashes EU foreign policy, and presents the United States as
a grotesquely realist Other. A careful and systematic reading of the EU’s
role in world affairs, however, suggests a far more mixed and nuanced
story than the heroic image of ‘normative power Europe’. For those who
believe in human rights, democracy and the rule of law, there is little
question that the contemporary EU and its member states have been, on
balance, a force for good in the world. However, if we want to under-
stand and use that force for good in the future, we would be better
served to jettison the idealistic and heroic image of the EU as a purely
normative actor, and instead understand the complex mix of material
and normative preferences and power that make the EU an admirable,
but also a flawed, inconsistent and sometimes failed advocate of its val-
ues on the global stage.
Fortunately, after an initial period of uncritical celebration of the
EU’s ‘normative difference’, the scholarly study of EU foreign policy
has entered a second stage, in which scholars seek to understand the
conditions under which the EU asserts normative leadership, and the
conditions under which other members of the international community
do, or do not, accept that leadership. Understood not as an ideal type but
as a falsifiable research programme, ‘normative power Europe’ holds the
promise, not of uncritically lionizing the EU and its positive influence in
the world, but of holding the Union to account for its foreign policy, and
of understanding the conditions under which and the ways in which the
EU does, nor does not, project its values into a troubled world.
Chapter 13
Is EU Enlargement a Success
Story or Has It Gone Too Far?
Enlargement has often been seen as the EU’s greatest success story. From
the first enlargement in 1973 to the most recent one in 2013, no fewer
than 22 states have acceded to the EU. Many of the acceding countries
were politically and economically weak when starting accession negoti-
ations. Greece, for example, had been ruled by a military junta between
1967 and 1974, and still had to be considered a weak democracy when
it joined the EU in 1981. Similarly, Portugal and Spain, the two coun-
tries that acceded in 1986, had been dictatorships until 1976 and 1975,
respectively. All of these countries not only became stable democracies
after entry to the EU, but also – at least until the recent sovereign debt
crisis – witnessed economic development. No wonder that soon after the
fall of the Iron Curtain and the transition to democracy in Central and
Eastern Europe many of the formerly Communist countries deposited
their wish to become members of the EU. As a consequence, the EU
now has 28 member countries, with five more countries enjoying the
status of official candidate states and another two countries being con-
sidered potential candidates.
With many of the EU’s new member countries having seen rising
standards of living, more regard for human rights, and more stable
democratic institutions, enlargement indeed seems to be one of the
most successful EU policy instruments. Critics of the EU’s enlarge-
ment policy, however, warn that this conclusion may be flawed.
They point to the difficulties that enlargement has posed to the EU’s
decision-making system, with an increasing number of states making
the finding of consensus increasingly difficult (Preston, 1995). They
also point out that the impact of enlargement on the accession coun-
tries may not have been as benign as emphasized by the enlargement
optimists (Bohle, 2006). For some accession countries, it may have
been better if they had themselves decided (based on broad societal
support) to pursue certain economic and social reforms rather than
having these reforms forced upon them from the outside. Without
EU membership, they may also have had greater flexibility to pursue
autonomous economic policies more in line with their domestic needs.
205
206 Is EU Enlargement a Success Story or Has It Gone Too Far?
The controversy is of utmost importance for the future of the EU, not
least as a result of Turkey’s membership application.
In this volume, Rachel Epstein and Christopher J. Bickerton engage
in this debate. Epstein stresses the beneficial effects of enlargement on
the accession countries – according to her, it enhanced the security of
these countries, reinforced democracy, and created wealth. Bickerton
disagrees. In his view, the EU’s expansion to the east depoliticized these
countries’ transition to democracy and by doing so degraded political
life. Their debate is complemented by Chapter 2, which looks at the
impact of enlargement on decision-making in the EU.
13.1 The benefits of EU enlargement:

defending security, democracy and
prosperity
Rachel Epstein
By 2015, the EU faced crises on multiple fronts. First was the ongoing
conflict between Greece and its creditors over the terms of its bailout.
Related to that was the EU’s ongoing economic crisis and stagnation – by
2015 in its sixth year. Third and finally was the war in eastern Ukraine,
which had followed Russia’s annexation of Crimea in 2014. Although
Ukraine is not an EU member, Russian involvement there has clearly
meant to test the EU’s (and the North Atlantic Treaty Organization’s)
resolve and create divisions – both within Europe and between the
Europeans and the United States. Though Europe’s economic crisis has
been hard on everyone, including the East Central European (ECE)
states, the dual economic and security problems tend to highlight the
necessity of EU enlargement and the benefits of EU membership for the
post-communist states rather than undermine the enlargement policy.
This is because Russian intervention in Ukraine demonstrates the con-
tinuing vulnerability of ECE countries. In addition, from an economic
perspective, some aspects of the EU’s single market insulated ECE coun-
tries from the worst economic effects of both the US financial crisis and
the eurozone’s debt and currency crisis. Finally, democracy, while not
unscathed by these dual challenges, has remained the standard to which
ECE regimes accept they will be held.
Enhancing security
East Central Europe has always been geopolitically unstable and vul-
nerable. The Allies emerging from World War II divided Europe into
The benefits of EU enlargement 207
two separate spheres. The Soviet Union was allowed to claim a sig-
nificant buffer zone of ‘satellite states’, including the entire region that
we now refer to as ECE. These ‘satellites’ would not only have regimes
friendly to the USSR, but they would also be forced to undergo whole-
sale social transformation to ensure ideological consistency between the
newly founded, so-called ‘People’s Democracies’ of ECE and the Soviet
Union. Included in the transformation were communist party takeo-
vers of entire political systems between 1945 and 1948, authoritarian
rule thereafter, collectivization in agriculture, and the nationalization of
most property and industry (Rothschild and Wingfield, 2000).
The Western Allies allowed the Soviet Union to consolidate a sphere
of influence under state socialist authoritarianism in part because of the
massive – some would say heroic – efforts of the Soviet Union during
World War II. Indeed, without the enormous commitment required of
Germany’s army on the Eastern Front, it is not clear the Allies could
have defeated the Axis in the West and in the Pacific. But there is another
reason for the Iron Curtain’s particular configuration. And that is the
division of Europe that is much deeper and older – in developmental,
political and even psychological terms (Brenner, 1989; Wolff, 1994).
Whether it was Stalin and Churchill negotiating the ‘Percentages Agree-
ment’ in 1944 or the Allies constructing the post-war order at Potsdam
in 1945, it was as if these victors were looking at a much older map
of Europe in which a centuries-old developmental divergence marked
a ‘logical’ division of Europe – the eastern half of which the West was
not willing to defend (Bunce, 2000: 212–213). Western perceptions of
eastern ‘backwardness’, however misguided, help explain why the Allies
ultimately relinquished Poland, Czechoslovakia and Hungary despite
the former two countries’ longstanding formal ties to the Western Allies
and the latter’s uncertain status after the war. The Soviet Union, it turns
out, was not committed to asserting hegemony over Hungary after the
war, but ultimately did so when its political interventions there went
unchallenged by the United States.
To the extent, then, that the Cold War division of Europe reflected
much older and prejudiced understandings of what belonged to the
West and what belonged to the East, the post-communist enlargement
of the EU promised to undermine that earlier, flawed vision and to make
ECE a much safer place to live. By giving ECE states voice in the world’s
most powerful regional institution and through ECE’s own embrace of
the political and economic integration that EU membership requires,
enlargement shifted expectations of what constitutes ‘Europe’. Expand-
ing the Western definition of ‘Europe’ to include the experiences of post-
communist states puts ECE out of reach of eastern aggression in a way
the region has never been before. If the EU’s power to shift expectations
about such grand themes as ‘what belongs to Europe’ seems far-fetched,

it is worth remembering that the original impetus behind post-war
European integration was precisely about shifting expectations. In that
case, however, the organizing principle of the European Coal and Steel
Community (ECSC) in 1952 was to make war between Germany and
France not only impossible, but also ‘unthinkable’.
The war in Ukraine can be read in at least two ways. One interpreta-
tion is that both EU and NATO enlargements were inimical to Russian
interests; that Russia has legitimate interests; and that the West should
take a more conciliatory and accommodating approach to Russian
actions in Ukraine as recognition of Russian needs to secure a sphere
of influence. A contrasting view, however, and one shared by majorities
in some ECE states, particularly the Baltic States and Poland, is that
EU (and NATO) membership decisions should be left to the national
political processes of those who will live with the consequences and not
to external influence – and particularly not by externally generated vio-
lence. According to this second view, with which I agree, EU enlargement
was justified by the logic and rightness of self-determination. It was evi-
dent that the West was no longer privileging its relationship with Russia
at the expense of the myriad smaller, weaker states in Zwischeneuropa –
meaning, in this context, those countries sandwiched between Russia
and Europe. And though difficult to prove definitively, EU enlargement
would seem to make similar Russian intervention in a Poland or in an
Estonia less likely for the graver ramifications such actions would likely
entail for Russia.
Reinforcing democracy
If European integration has from the outset been about changing the
European political context from one in which war had been com-
monplace to one in which war was unthinkable, European integra-
tion, and subsequently, enlargement, has also aspired to be about
consolidating democracy. The common market for coal and steel
had the practical effect of rechanneling German power through a
supranational authority. By controlling the major inputs of war, the
ECSC prevented German politicians from mobilizing political sup-
port around economic nationalism – in stark contrast to the interwar
period (Tooze, 2006). Greece had been a military dictatorship before
joining in 1981. Similarly, both Spain and Portugal had been authori-
tarian before they became members in 1986. All three experienced
early versions of European ‘conditionality’ in the sense that in order
to join, they had to fulfil more than just the basic requirements of
democratic governance.
The post-communist enlargements have put democratic aspirations

at the centre of the EU’s agenda. Starting with the Copenhagen criteria
in 1993, democracy, the rule of law and the protection of human rights,
in addition to the economic criteria, were put forth as clear conditions
that post-communist countries would have to meet in order to join. As
in earlier enlargements, however, it is not easy to state definitively that
it was the EU that secured democracy, or that, by contrast, without
the EU, the result would have necessarily been authoritarianism. That
caveat notwithstanding, some evidence from the post-communist period
and the democratizing effects of the EU can be brought to bear.
The existence of the EU, its policy of enlargement and its monitoring
practices in all likelihood did help consolidate democracy in Romania
and Bulgaria. Romania had no opposition movement to speak of under
communism, so in the transition it was operatives from within the for-
mer dictatorial regime that orchestrated the ousting of President Nico-
lae Ceauşescu. When the same personnel took power through elections,
they took the country in a decidedly ‘illiberal’ direction, limiting media
freedoms, undermining the opposition (sometimes through violent
means) and resorting to ethno-nationalist mobilization to build political
support. Bulgaria did have an array of opposition groups that united
in the transition and they did have some early electoral success. But in
that country, too, it was the former communists, renamed the Bulgarian
Socialist Party, who dominated politics in the first seven years. And they,
like their Romanian counterparts, were less than fully committed to
the range of democratic practices that the EU ultimately insisted on. In
both cases, the EU provided a clear alternative to both the political and
economic programmes of the dominant communist successor parties,
and in so doing, also helped mobilize opposition parties in both coun-
tries with EU-reform based platforms. Slovakia is a third case in which
such dynamics were in play (Vachudova, 2005). Democratic reforms
concerning minority rights were also strengthened by EU conditionality
in the Baltic States (Kelley, 2004).
Poland, Hungary and the Czech Republic were widely believed to be
countries that would have been strongly democratic regardless of EU
enlargement. That theory, as well as theories about the impact of the
EU itself on democratic consolidation, has been tested by the rise of
anti-system parties in ECE, corporate capture of some political parties
in these countries, as well as curbs on the checks and balances that are
critical to democratic practice (Innes, 2014; Trencsényi, 2014). The most
extreme case is the rise of FIDESZ in Hungary. FIDESZ won a super-
majority in 2010 and managed to keep it in 2014, with an even more
extreme-right party (Jobbik, not the Socialists) posing the main threat to
FIDESZ dominance. EU concerns about Hungary have revolved around
perceived curbs on the independence of the media, judiciary and central

bank, as well as redistricting in the party’s favour (Sedelmeier, 2014).
While the EU has been reluctant to impose its harshest censure on the
regime (Art. 7 TEU, which potentially allows for a range of sanctions,
from monitoring to suspension of voting rights in the Council), there is
also evidence that the EU has nevertheless moderated FIDESZ’s conduct
while in government. In its own defence, FIDESZ has argued that none
of its laws is outside the bounds of EU norms – that is, one can find
similar versions of each of its laws – be it concerning the central bank,
the media or anything else – in at least one other EU member state. This
observation is not intended to cast doubt on the claims of FIDESZ’s
critics. Rather it is to point out the extent to which the regime is at least
partly, and self-consciously, constrained by EU standards.
A serious objection to the argument that the EU has consolidated
democracy in post-communist countries is that much about the EU’s
enlargement process is in fact undemocratic – a process that had become
even more demanding by the time Croatia joined in 2013. It is certainly
true that the acquis communautaire is an enormous and non-negotiable
body of law that candidate countries must take on in order to join. In
everything from fisheries to central bank law, much policy that would
normally be the domain of domestic debate is already decided. It may
even be argued that the EU’s top-down method of legal harmonization
leaves little to the democratic process that in theory the EU, at least as
stated in the Copenhagen criteria, champions.
Two arguments in the EU’s defence come to mind. First, the EU’s demo-
cratic credentials are at least in part supported by the fact that candidate
countries have all wanted to join and so have voluntarily signed up for
the rigorous accession process. The Copenhagen criteria, the acquis, and
even the monitoring process that began with Agenda 2000 in 1997 and
the Regular Reports on each country’s progress towards accession there-
after have been transparent pieces of enlargement that post-communist
countries could have rejected – but at the cost of EU membership. It is
therefore difficult to argue that the EU imposed anything on ECE.
Second, with regard to the claim that the EU’s accession process takes
issues off the table that should otherwise be the subject of domestic
debate, this is true. But it is not true to an extent that seriously under-
mines democracy in ECE states because there are still myriad issues on
which the EU does not have established law and does not even have a
firm opinion. So for example, the use of partially privatized pension
schemes in ECE did not originate with the EU and has been an impor-
tant distributional debate for some years (Orenstein, 2008), as has the
flat tax (Appel, 2011). The EU also does not impinge on how education
or health systems are organized. The welfare state, its scope and mission,
have been left to member states to negotiate – this is as true in ECE as

in the older 15 members. Moreover, although it was not the EU’s pref-
erence, several of the post-communist candidates, later members, have
even debated issues that were ostensibly dictated by the EU – including,
for example, central bank independence. There has also been consider-
able room for domestic debate on monetary policy more generally. For
although ECE states agreed to join the eurozone eventually, there is no
fixed timeline in which they must do so. This has left ECE states outside
the euro considerable latitude concerning policies that affect inflation,
debts, deficits, interest rates, exchange rates and employment (Epstein
and Johnson, 2010).
It is unlikely that symbolic politics in the form of ethno-nationalist
mobilization or lustration have taken on a bigger role in ECE than they
would have in the absence of enlargement. Symbolic politics are every-
where part of the democratic mix. But if anything, the EU (with NATO’s
help) probably dampened the salience of symbolic politics by requiring
that all aspiring members have good relations with their neighbours
(Epstein, 2008). In addition, the absence of a membership perspective
in the Balkans in the 1990s did little to subdue symbolic politics there.
Creating wealth
By joining the EU, ECE states gained access to a large and wealthy mar-
ket, EU structural and cohesion funds for economic development, and
the Common Agricultural Policy (CAP) to protect their farmers. For
those that have not yet done so, ECE states also have the option ulti-
mately of joining the eurozone as a means of eliminating exchange rate
risk, reducing transaction costs and thereby encouraging still more inter-
national economic exchange (by 2015, only Poland, Hungary, Czech
Republic, Bulgaria, Romania and Croatia among post-communist coun-
tries remained outside the euro). Though the eurozone crisis has made
euro adoption less attractive in some states, it is also the case that all of
the Baltic States have joined during that same crisis.
Some notable successes of the EU’s wealth-creation capacities are
manifest in the fact that every post-communist country that joined
the EU since 2004 has, in absolute terms, become substantially more
wealthy relative to the ‘old 15’ (Epstein, 2014a). The gains have been
particularly strong in Poland, Slovakia, Romania and Bulgaria – three
of which had the most difficulty preparing for EU accession. Romania
and Bulgaria in particular, while still far below the ‘old 15’ average,
more than doubled their per capita GDP between 2000 and 2013 (and
in Romania the multiple is closer to 3). In addition, one can point to
the huge success of ECE in attracting foreign direct investment (FDI),
which has led to higher wages for segments of populations and a mas-
sive upgrading in the complexity of exports, especially in the so-called
Visegrád 4 (Poland, Czech Republic, Slovakia, Hungary) and Slovenia
(Bohle and Greskovits 2012).
At the same time, apart from the ongoing economic problems of the
eurozone, the sustainability of the ECE growth model is in question.
While it is true, given the context of foreign domination in finance, that
Western banks have been supportive of Eastern markets through the
crisis (Epstein, 2014b), the structure of FDI, as well as finance, appears
to constrain ECE prospects for themselves becoming centres of innova-
tion. Moreover, even if mostly foreign-owned financial sectors proved
relatively resilient through the crisis, the dramatic downturn in 2009 did
reveal the extent to which ECE is heavily dependent on foreign markets.
The only possible exception to this is Poland, which, with nearly 40 mil-
lion domestic consumers, was the only country in the EU to not suffer
a recession in 2009.
Economic challenges within the EU notwithstanding, there is evidence
that economic opportunities are enhanced through membership, rather
than diminished by it (Epstein and Jacoby, 2014). In addition to the aid
and CAP funds coming from the EU, post-communist members, even
those still outside the euro, have likely enjoyed lower borrowing costs
than they would have in the absence of membership. Inflation has also
been brought under control. Membership has boosted investor confi-
dence. International travel and working and studying abroad have been
greatly eased by enlargement. The EU and ECE might have achieved
most of these economic outcomes just by extending the market, forgo-
ing the rigours of enlargement. That this more ‘minimalist’ vision of
post–Cold War integration did not prevail is a credit to European lead-
ers, who seem finally on the verge of alleviating an East–West divide that
had defined the continent for far too long. Enlargement has conferred
not just market access to ECE states, but more importantly, institutional
power through EU structures. Such power and inclusion represent an
enormous improvement upon any prior geostrategic arrangement the
peoples of ECE have faced.
13.2 EU enlargement: a critique

Christopher J. Bickerton
Expansion has always been a part of European integration: from the
inclusion of the British, Irish and Danes in 1973 through the Iberian
expansion in 1986 (Portugal and Spain; Greece joined in 1982) to the
EU enlargement: a critique 213
Scandinavian expansion in 1995 (Sweden and Finland). This ongoing

expansion has long been contested. Twice over in the 1960s, General
de Gaulle vetoed British membership of the EC because he felt it would
entrench US influence and power over Western Europe. In 2007, the
President of the European Commission, José Manuel Barroso, attracted
attention when he compared the ever-expanding EU to an empire, a
comparison already made and debated by scholars (Zielonka, 2006;
Colomer, 2007; Leca, 2009).
This chapter will focus on enlargement to Central and Eastern Europe:
the ‘big bang’ of 2004, the ‘little bang’ of 2007 when Romania and Bul-
garia joined the EU and Croatia’s membership of the EU in 2013. The
entry of ten new member states into the EU in 2004, eight of whom were
former members of the Eastern bloc, was the largest single expansion
and it transformed the EU institutionally and ideologically. Celebrated
as the realization of the dream of a united Europe and canonized a dec-
ade later as one of the EU’s proudest moments, the EU’s 2004 expan-
sion was used to rejuvenate a flagging political project. Faced with an
unprecedented political mobilization against the EU, most evident in the
negative referendums on the EU Constitution in 2005 in France and the
Netherlands, the EU and its member states hoped enlargement would
serve as a source of political renewal. As one of its proponents put it,
‘we may haggle and barter in Brussels, but it may be that it is in Istan-
bul that we shall write the next chapter in the European story’ (Patten,
2005: 149).
Since those heady days, the EU’s expansion has hit hard times. From
a ‘big bang’, we now have a slow and uncertain trickle. After Croatia,
it is not easy to know which country might be next. Negotiations with
the rest of the Balkans are slow and Turkey is losing interest in joining
a club that keeps raising the bar to membership. Some welcome this
‘enlargement fatigue’, arguing that institutionally the EU cannot man-
age any new members. In particular, they point to Turkey, arguing that
such a large country will only generate budgetary and labour mobility
problems. Behind this endorsement of ‘enlargement fatigue’ is an ugly
chauvinism: the difficulties of institutional adaptation serve as a façade
behind which lurk cultural prejudices and fears.
This chapter will not criticize enlargement because of what the new
members have done to the EU. In fact, the new members probably
injected a bit of life into a stagnant Union. Rather, this chapter will criti-
cize enlargement for what the EU has done to its new member states.
Enlargement consolidated two negative trends in Eastern European
political life: the rise of illiberal populist-style politics and technocracy.
Additionally, the enlargement process can be criticized for the EU’s nar-
cissism: as a policy, it has been driven more by the EU’s concerns about
itself, its identity and its future than by any concern with improving
conditions of life in candidate countries. For this reason, those countries
large enough or rich enough to live without the EU, like Turkey, would
do better to go their own way.
Expansion into Eastern Europe

The expansion of the EU into Eastern Europe began in the early 1990s
when European leaders were corralled into offering Eastern European
governments the prospect of membership. Reticence and ad hocery were
key features of the early years of the enlargement process (Zielonka,
1998). By the end of the 1990s, the question was no longer if but when
and how many: would all candidate states join at the same time, or
would they join one-by-one, or in groups? In the end, the enlargement
process took just over ten years: from the elaboration of the member-
ship criteria in 1993 to the entry of ten candidate states into the Union
in 2004.
The problem of enlargement lies in this decade-long process of
externally-directed political, social and economic transformation. Of
course, the trajectory of Eastern European states since 1989 cannot all
be attributed to the accession process to the EU. Indigenous develop-
ments are probably most important and they determined the manner
in which Eastern European societies would interact with the EU (Bick-
erton, 2009). However, the accession process consolidated two nega-
tive features of the transition process: the technocratic manner in which
transition was conducted and the undermining of the main institutions
of democratic representation in Eastern Europe. This latter feature lies
behind a rise in populism in Eastern Europe and the instability of its
political life after 2004. Described as a problem of ‘backsliding’, there
has been in recent years growing recognition that in terms of the qual-
ity of democracy and governance in Eastern Europe, EU membership
was no panacea (Dimitrova, 2010; Mungiu-Pippidi, 2014; World Bank,
2006; Epstein and Jacoby, 2014).
Depoliticizing transition
While there was strong support for some of the more radical economic
measures introduced after the collapse of Soviet rule in Eastern Europe,
there was also a good deal of discontent. After all, an entire way of life
was being dismantled, to be replaced with an alternative that embraced
wealth creation but ushered in great inequality and insecurity. East-
ern European elites, cognizant of the demands they were making on
their own populations, were careful to yoke these changes to the EU
enlargement process. Transition was lifted from the realm of choice into
the realm of necessity by virtue of its place in the reforms demanded by
the European Commission. There was no point therefore in debating
the ins and outs of the transition to capitalism: it had to be this way if
countries were to join the EU club.
Transition, and all its attendant effects, was thus experienced as a
technical necessity. It took the form of implementing rules and regu-
lations emanating from Brussels rather than that of political choices
made by elected representatives and – ultimately – made by the peo-
ple themselves. While this made life easier for political elites in can-
didate states and for the negotiators in the European Commission
(why p resent your demands in the form of political choices when you
can present them as inevitable, beyond the pale of debate?), it slowly
severed domestic societies from their own political representatives.
Accession became an executive-dominated affair, justified in the lan-
guage of experts, far removed from the daily lives of people in E astern
Europe. Support for enlargement in candidate states was therefore
essentially a matter of faith rather than a conscious political choice.
This helps explain the mixture of hope and fatalism surrounding
enlargement. Most recently in Croatia, the 2012 referendum on EU
membership saw 61 per cent vote in favour but on a turnout of only
44 per cent. All political parties in the parliament supported mem-
bership (Whitman, 2013). Why bother to vote when there is so little
debate about the issue?
Degrading national political life

The consequences of this for the political institutions of candidate
states were significant. In the early days of the post-1989 period, par-
liaments were held up as the main institution embodying the new
democratic era. Hungarian political scientist Attila Agh called them
‘governing parliaments’ (1999: 89). This did not last: as the enlarge-
ment process picked up pace, power shifted from parliaments to execu-
tives. Slowly, within candidate states ‘islands of excellence’ emerged,
tasked with managing the implementation of EU laws (Grabbe, 2001:
1017). The result was that on the side of candidate states, negotiations
were conducted by a small team, backed up by extensive administra-
tive support but shorn of any real relationship to either the legislature
or society at large. In what way could these negotiation teams properly
articulate and defend the national interest when their claims to being
representative were so weak?
The role of national legislatures was essentially to rubber-stamp
EU laws. Scholars studying enlargement at the time remarked that the
deliberative culture associated with well-functioning parliaments was

being lost. Political parties also followed suit (Malova and Haughton,
2002). For all the political debates that were being conducted at the
time, one issue that was firmly off the agenda was that of enlargement
itself. It was, as Grzymala-Busse and Innes put it, a ‘valence issue’, mean-
ing that it was something all parties agreed on and chose not to dis-
cuss (2003: 64). Since enlargement included within its remit most of the
major policy issues of the time, the political sphere itself was stripped of
much of its content. As Ivan Krastev has put it, the result was a growing
sense of powerless vis-à-vis politics: people were able to change govern-
ments but not to change policies (2007: 59).
Over time, this process transformed the nature of political contes-
tation in candidate states. Political scientists in the region have noted
a collapse in the liberal consensus of the 1990s and the rise of illib-
eral politics (Ost, 2005; Krastev, 2007). As anger and frustration about
the changes being made were unable to express themselves in an open
debate about the merits of transition, they were channelled back into
society itself. From witch hunts driven by virulent anti-communists in
Poland to attacks on Roma communities in Hungary, attention focused
on the identity of groups rather than the right or wrongs of govern-
ment policies. Enlargement thus consolidated a sense of political pow-
erlessness and disenchantment that was strong already at the end of the
1980s. As one author recounts, in Estonia people began to see the EU in
the same way as they had seen the Soviet Union: a powerful but distant
body, imposing laws upon them that they would outwardly accept but
would resist in practice (Raik, 2004). Raik describes this as the strategy
of ‘double-think’: doing one thing but thinking something quite differ-
ent. A similar point was made in a study of local and regional elites in
Hungary, Estonia and Slovenia: ‘local elites are highly adept at window-
dressing and paying lip service while doing the opposite or at least the
minimum’. ‘Non-fulfillment’, these authors concluded, ‘or poor fulfill-
ment, is, after all, a classic “weapon of the weak” strategy of resistance
as well as a sign of alienation from a decision-making process elsewhere’
(Hughes et al., 2002: 356).
This sense of alienation helps us understand the trajectory taken
by enlargement since 2004. A reason given for ‘enlargement fatigue’
is that some new member states have proven themselves unable to
properly implement European laws. This has been particularly acute
in the two members who joined in 2006: Romania and Bulgaria. Reg-
ularly castigated for being unwilling to crack down on corruption,
some within the EU are saying that these countries should not have
joined when they did. Future enlargements will be conditional upon
evidence of actual implementation of laws, not just the promise of
implementation. Of course, one of the reasons why laws can be so

difficult to implement is that local actors do not believe in them. In
the language of rational-choice political science, this is the difference
between formal rule adoption and ‘behavioural adoption’ (Dimitrova,
2010: 139). Unless laws are considered legitimate, it is unlikely they
will be properly implemented. Legitimacy demands more than just
an acceptance by political elites; it also rests upon a broader, social
consensus.
Narcissus EU
A second problem with enlargement has been its internal orientation.
Fêted as a major peace-building initiative for the EU, enlargement was
adopted by governments and civil society groups as a model for how to
democratize weak states and how to rebuild post-conflict societies. The
European Stability Initiative, a pro-enlargement think tank focusing on
the Balkans, called this ‘member state building’: building states through
the accession process (Knaus and Cox, 2005). For all the hubris, in prac-
tice the enlargement process has often been more about the EU than
about exporting democracy to others. Justifications of enlargement have
corresponded to the EU’s own anxieties and doubts about the vital-
ity of its political project. In the debate about Turkish membership, for
instance, supporters and critics differ principally in terms of their atti-
tudes towards European identity: some think Turkey will corrupt its
Christian heritage; others think it will inject new life into its multicul-
tural model. In a 2010 plaidoyer for further enlargement made by the
foreign ministers of the UK, Sweden, Italy and Finland, the main reason
given for Turkish membership was Europe’s economy. ‘Emerging from
the crisis’, they write, ‘we cannot afford to overlook the opportunity
of expanding the free flow of capital, goods, services and labor’ (Bildt
et al., 2010).
For candidate states, this suggests they are the terrain upon which the
travails of European identity-building and integration are played out.
That leaves them hostage to fortune: tidal changes in political senti-
ment within the EU can keep them firmly in the cold, as is presently the
case with Turkey and countries in the Balkans. From this vantage point,
enlargement is not an objective, meritocratic process. It is capricious
and subjective, and for a country attached to its own independence and
autonomy, a rather humiliating affair. It perhaps comes as no surprise
that the excitement around enlargement that existed in Eastern Europe
throughout the 1990s and early 2000s has to a large extent dissipated.
In 2013, when Croatia joined, Richard Whitman tellingly dubbed it
‘accession without fanfare’ (Whitman, 2013).
Conclusion
Far from being the success story much vaunted by its supporters,
the EU’s expansion has negatively impacted upon the political life of
new member states. Justified as a way of stabilizing new democracies,
enlargement eviscerated much of the political debate in candidate states
and it has juridified political choices in ways that pushed critics to the
margins of public life. Unable to directly contest the policy choices being
made, anger and frustration in Eastern Europe has been channelled into
illiberal directions. Technocracy and populism are the true legacies of
enlargement. Yet, lest new member states feel too hard done by, they can
comfort themselves with the thought that now at least they look just
like their Western counterparts. Technocracy and populism dominate
the politics of Western European states too, and thus enlargement has
brought about a kind of united Europe, but not the one imagined by its
ideologues.
Chapter 14
Towards a Common European

Army?
In April 2011, Libya, one of the many countries in the Arab world that
witnessed protests against decades of oppression during the so-called
‘Arab spring’, descended into bloody chaos as ageing dictator Muam-
mar al-Gaddafi clung to power with the help of his well-equipped army.
Immediately, intense debates erupted in EU member states on whether
they could stand by idly as many people were massacred in their imme-
diate neighbourhood while exerting their democratic rights. In the end,
France and Britain were at the forefront of the countries that actively
intervened with their militaries, whereas countries such as Germany
and Poland refused to participate. Once more, a common security and
defence policy of the Europeans seemed to be more of a fata morgana
than a real prospect. Libya has now turned into a failed state, plagued
by warring factions, infiltrated by ISIS and unable to govern its borders
which are crossed by huge numbers of refugees who try to leave Africa
towards the shores of the EU.
While few would argue against the idea that more European coop-
eration in the area of security and defence policies is a desirable end,
doubts have accompanied the idea since its first manifestations, such
as the doomed European Defence Community of the early 1950s, the
rather ineffectual European Political Cooperation (EPC) of the 1970s
or the botched response of the EU to the breakdown of Yugoslavia in
the 1990s. This disaster, however, and the end of the Cold War have
led to the formal integration of a Common Foreign and Security Policy
(CFSP) into the European treaties as pillar two of the Maastricht Treaty.
Following an important Franco-British understanding at Saint-Malo in
1998, a formalized European Security and Defence Policy (ESDP) sup-
plemented CFSP and was added to the treaties in 2001, if only after long
and intense debates.
Ambitious goals regarding forces and capabilities were formulated.
As of this writing (June 2015), the EU has pursued more than 30 mili-
tary and civilian missions abroad. In December 2003, the EU formu-
lated its first European Security Strategy, modelled after the regular US
practice of summing up in a comprehensive document the challenges
219
220 Towards a Common European Army?
to and responses of US defence policy to a changing security environ-

ment. However, huge questions about the EU’s will and capacity to
become a fully fledged military actor remained. These concerned, for
instance, the lack of credible capabilities given shrinking defence spend-
ing in Europe, technological limitations, divergent strategic outlooks
and cultures among EU member states, as well as fears of decoupling
from and duplication of NATO. In a famous book, US political analyst
Robert Kagan drew a sharp dichotomy between America which is com-
fortable with the use of force, and Europe which is essentially mired
in a culture which prevents the development of real military capabili-
ties (Kagan, 2003). The EU’s efforts at creating credible structures in
this area, renamed Common Security and Defence Policy (CSDP) in the
Lisbon Treaty, continue to face challenges from many sceptics, not least
from member state governments which are hesitant to transfer decision-
making power in defence matters to the EU.
Hanna Ojanen and Anand Menon represent this debate on the pro
and cons of CSDP. Hanna Ojanen, a Finnish national who has worked
in Swedish and Finnish think tanks on EU defence policies, maintains
that these policies should not be judged only for their specific contribu-
tion to Europe’s security but also for various other functions they serve.
Anand Menon from King’s College, London (UK), says that the CSDP
failed in its ambitions. EU member states rather decline together than
muster the effort to pull together. The arguments in these chapters also
bear on other important themes in this volume, for example the ques-
tion of the efficiency of EU policies (Chapter 2) and the controversy
over whether the EU acts as normative power (Chapter 12). And finally,
a British exit represents a huge blow for any effective European defence
(Chapter 16).
14.1 Still flattering to deceive: the Common

Security and Defence Policy
Anand Menon
On 3–4 December 1998, at the picturesque French seaside resort of
Saint-Malo, Tony Blair and Jacques Chirac concluded that the ‘Euro-
pean Union needs to be in a position to play its full role on the inter-
national stage’. To that end, they declared, ‘the Union must have the
capacity for autonomous action, backed up by credible military forces,
the means to decide to use them and a readiness to do so, in order
to respond to international crises’. Thus were laid the foundations for
what was to become first the European Security and Defence Policy
Still flattering to deceive 221
(ESDP) and latterly, following the Lisbon Treaty, the Common Security
and Defence Policy (CSDP).
The rationale for CSDP lay in a perceived need to improve the
Union’s ability to respond to security crises. Dismay at its failure to
halt armed conflict in the Balkans during the 1990s carried over to the
Saint-Malo meeting. And it was reinforced thereafter by frustration that
a sex scandal in the United States (Bill Clinton’s dalliance with Monica
Lewinsky) could stymie Western responses to the unfolding drama in
Kosovo. Consequently, British and French political leaders saw CSDP
as a means to enable Europeans to act more decisively. In London, such
concerns were exacerbated by fears that European weakness might lead
to American disillusionment with, and conceivably even disengagement
from, NATO.
CSDP spawned intense debate. On the one hand, official statements of
intent were bullish. The Headline Goal 2010, approved by the E uropean
Council in June 2004, declared boldly that the ‘European Union is a
global actor, ready to share in the responsibility for global security’
(Council of the EU, 2004). On the other, critics expressed concern at
attempts to equip the Union with the instruments of ‘hard power’.
They issued dire warnings lest an increasing emphasis on military
power undermine the Union’s ability to wield other, ‘softer’, influence
(Sangiovanni, 2003: 200–201).
Both camps, however, made a fundamental mistake in basing their
analyses on an erroneous assumption: that the EU’s stated ambitions
represented an accurate guide to future action. The fundamental weak-
ness of CSDP has not been to skew the nature of EU external policies
towards an emphasis on military force. Rather, it has been a failure to
live up to ambitious claims that the Union was about to become an
effective international security actor – and this in a world which renders
an effective European security capability increasingly necessary.
The key here is not that Europeans need to fully integrate their defence
policies, as they have done in other areas of state activity. For one thing,
this is simply not politically possible given resistance to the idea in many
member states. More importantly, it is not necessary. European defence
capabilities could be significantly improved via enhanced cooperation
that would allow the maintenance of national armed forces. Even such
limited steps, however, currently seem unlikely.
Assessment
It would, of course, be unfair to describe CSDP as a failure tout court.
After all, it does provide the EU with a policy instrument previously
lacking from its repertoire. The Union had previously been criticized
for ‘a disproportionately heavy focus on economics, human rights and

democratization to the neglect of diplomatic conflict prevention meas-
ures that seek to significantly alter the political dynamics of an emerging
conflict’ (International Crisis Group, 2001: ii). And the 20-plus CSDP
operations carried out to date have undoubtedly exerted a positive
impact on the ground. EU (and NATO) interventions in Macedonia, for
instance, quite possibly helped avert civil conflict, while a report by the
highly respected charity Oxfam acknowledged that a CSDP mission in
Chad ‘has made many civilians feel safer through its activities, which
include patrolling known dangerous routes, destroying unexploded ord-
nance, making contact with local leaders, and positioning itself defen-
sively around civilians during rebel and government fighting’ (Oxfam,
2008: 13). Meanwhile, the EU naval mission deployed off the coast of
Somalia played an important role in bringing about the dramatic reduc-
tion in the piracy – dramatized so effectively in the film Captain Philips
(2013) – in those waters.
These achievements, however, mask a reality of significant shortcom-
ings. While enthusiasts have compared the EU’s activism favourably
with the single mission launched by NATO this century, such analyses
overlook profound differences in scale. EU military interventions have
been highly limited in scope (particularly in comparison to the mas-
sive NATO deployment in Afghanistan). One particularly trenchant cri-
tique describes CSDP missions to date as ‘small, lacking in ambition and
strategically irrelevant’ (Korski and Gowan, 2009: 11). Moreover, the
Union has been quite prepared to let others do the heavy lifting for it.
A significant proportion of its military operations have either followed,
or accompanied, action on the ground by other institutions (NATO
troops preceded those of the EU in both Macedonia and Bosnia, while
the Union operated alongside UN forces in Congo).
Certainly, the Union has declared success following each of its CSDP
missions. Yet this is largely explicable in terms of the limited man-
dates adopted in the first place. Getting EU personnel in and out of an
unstable theatre is one thing. Bringing about stability is quite another.
Numerous CSDP interventions have signally failed to resolve the real
problems on the ground. Thus, EU intervention addressed ‘only the
consequence and not the issues underlying the conflict in Chad’ (Sec-
retary General of the United Nations, 2008: §52). Operation Arte-
mis, deployed to the Democratic Republic of Congo in 2003, was the
object of much hostile comment from humanitarian groups, for being
‘totally insufficient’ to meet the challenges on ground, because of its
limited scope in terms of both space and time (International Crisis
Group, 2006).
Indeed, this track record of rapid, small interventions declared suc-

cessful while leaving conditions on the ground largely unaltered raises
the suspicion that CSDP missions can be designed with an eye as
much on their implications for the Union itself as for the host state.
Such suspicions are merely heightened by the apparent belief on the
part of some that CSDP is as much about ‘completing’ European inte-
gration as it is about promoting security. As former French Foreign
Minister Dominique de Villepin put it in his BBC Dimbleby Lecture in
October 2003: ‘There will be no Europe without a European Defence’
(De Villepin, 2003).
A desire to strengthen integration is not, however, an adequate r ationale
for military intervention. Whether conceived of to test European capa-
bilities, or to illustrate that the EU does indeed have the capacity to act,
operations can appear tokenistic. Observers voiced their suspicion that
the first CSDP mission to be deployed to Africa was conceived for purely
political or cosmetic reasons – in order to show the EU could act rather
than to solve problems on the ground (Haine and Giegerich, 2006).
Equally, the story of EU non-interventions is revealing. As striking as
those missions actually carried out are those instances where security
challenges – even in Europe’s own neighbourhood – failed to engender
an EU response. Britain and France chose to act through NATO when
launching their intervention in Libya. In 2013, France, similarly, pre-
ferred to act unilaterally in Mali. Military responses to Russian aggres-
sion in Ukraine have been coordinated through NATO.
If the history of EU missions is one of limited achievements, the pic-
ture in terms of capability developments is, if anything, bleaker still.
CSDP was, from the first, a tool for enhancing member states’ military
capabilities. And, admittedly, it has spawned a bewildering variety of
initiatives ranging from the so-called Helsinki Headline Goal of Decem-
ber 1999, to the November 2001 Capabilities Improvement Conference,
to the Headline Goal 2010. Soon afterwards, in 2004, the member states
created the European Defence Agency (EDA) to assist them in meet-
ing their objective of capabilities improvements. A parallel process was
launched on the civilian side.
It is certainly possible that EU requirements may have helped drive
forwards some national defence reform processes and the development
of new capabilities. Certainly, most member states are taking steps to
enhance their force-projection capabilities (International Institute for
Strategic Studies, 2008).
Yet, significant substantive improvements have been slow to materi-
alize. In comparison to the roughly 6000 EU troops deployed in 2008,
the African Union fielded more than 30,000, and the UN 75,000, while
the NATO force in Afghanistan then numbered around 130,000 (Toje,

2008: 12). In a coruscating critique, the former head of the European
Defence Agency baldly characterized attempts to enhance European
capabilities as a ‘failure’ (Witney, 2008: 30). As one authoritative report
put it, ‘institutional initiatives have generated flurries of bureaucratic
activity, but achieved limited results’ (International Institute for Stra-
tegic Studies, 2008: 29). And this while targets are shifted at will. As
the former EDA chief has put it, from Helsinki to the Headline Goal
2010 ‘the goalposts were not so much moved as dismantled altogether’
(Witney, 2008: 30). In sum, it is hard not to agree with the conclusion
reached by a report for the European Council on Foreign Relations that
member states ‘have proved no slouches when it comes to delivering
on paper’ (Korski and Gowan, 2009: 43). Real progress, meanwhile,
remains distinctly limited.
Partly, the capabilities problem is one of spending. In 2005, Europe
was the only region in the world where military spending decreased – by
some 1.7 per cent. Defence spending by European NATO members fell
by 35 per cent between 1985 and 1995 (International Institute for Stra-
tegic Studies, 2008: 94). More recently, large-scale defence cuts (amount-
ing, in the case of Germany, to some €8 billion by 2014) have led US
and NATO officials to express concern that Europeans will no longer be
able to contribute effectively to Western defence efforts. Only Estonia
will meet the NATO target of spending 2 per cent of GDP on defence in
2015. The three largest member states are among six which, although
falling short of this target, have decided to cut defence spending.
Yet underspending is not the main problem. Combined European
defence spending is still an impressive €190 billion. The fact is that
defence budgets are frequently badly spent. Certainly, Europeans have,
over the last decade, maintained roughly the equivalent of a corps
(60,000–70,000 troops) on operations. Yet this is about the most they
could sustain, despite having over one and a half million troops on their
books.
Moreover, inefficiencies result from the fragmentation of the Euro-
pean defence market. Several small national defence industries produc-
ing similar hardware for several small national militaries is a recipe for
duplication and waste. Little wonder, then, that Europe continues to
lack the ‘key enablers’ – air-to-air refuelling capacity, intelligence, sur-
veillance and reconnaissance and satellite communications – serially
identified in numerous EU reports over the years. Many such capabili-
ties are simply beyond the resources of any individual member state.
While some have engaged in limited pooling and sharing of military
equipment – the Dutch and Belgians have agreed to joint naval training
and maintenance – they remain in general stubbornly reluctant to buy
military equipment abroad. Nor have these same member states pro-
vided the EU with real competence to ensure greater liberalization of the
European arms market.
Declining capabilities, dangerous world

All this is at a time when Europeans confront, in the words of the EU’s
former High Representative for Foreign and Security Policy, Catherine
Ashton, ‘increased volatility, complexity and uncertainty’ (Ashton,
2013). Analysts now speak of an arc of instability in the European
neighbourhood, running from the Sahel, to the Horn of Africa, through
the Middle East and the Caucasus. Russia has not only invaded Ukraine
but also has troops on the ground in Georgia and Moldova. To the
south, the optimism provoked by the Arab Spring has given way to
grave concerns related to radicalization in Europe and extremism on its
borders. Military intervention in Libya has helped produce an anarchic
land governed by warlords, awash with both militias and weapons and
increasingly used by affiliates of Al-Qaeda in the Islamic Maghreb as a
base of operations. Syria reels under a brutal civil war. The rapid spread
of Daesh (the so-called Islamic state) represents a threat both in terms
of the stability of the region and the potential to cause trouble in the
West itself.
Moreover, Europeans will not necessarily be able to look to the US to
provide security for them as it did in the past. Shifting US priorities, in
the form of the oft rebranded pivot/rebalance/tilt towards Asia, coupled
with shrinking resources conspire to render Washington less willing to
act as a global policeman. Rather, US policy-makers are keen to encour-
age key regional allies to do more.
Conclusion
There are very good reasons, then, for Europe to develop more effec-
tive security capabilities of its own. Given the size and fiscal constraints
acting upon member states, this can only be achieved multilaterally.
However – and let me be clear on this point – I am not suggesting here,
as Commission President Jean-Claude Juncker recently did, that the
answer to this lies in the creation of a ‘European Army’. Quite aside
from the under specification that pervades discussion of this subject,
there are two distinct problems with this idea.
First, political resistance in the member states means it is not some-
thing that is achievable even in the medium term. Second, the roots of
the European defence problems lie at the national level. Effective col-
laboration between European states that are increasingly incapable,
individually, of procuring the military capabilities necessary to con-

front security threats represents the only viable response. Such inter-
governmental collaboration would go a significant way towards
starting to address the capability problems that increasingly bedevil
European militaries, undermining their abilities to fulfil their tasks
effectively.
CSDP was meant to help foster such collaboration and not to replace
national defence policies. Its ambitions were, broadly, twofold: improv-
ing the Union’s ability to intervene in international security affairs, and
enhancing European capabilities for such interventions. It has, to a
greater or lesser extent, failed on both counts. In terms of the capacity
to intervene, it is undeniable that a certain measure of success has been
achieved. The European Union is now capable of acting in a way that is
was not prior to the creation of CSDP. And while, in the words of senior
EU official Robert Cooper, it has not saved the world, it has, undeniably
saved lives.
This being said, however, the most striking feature of the first decade
and a half of EU defence policy is how limited interventions have been.
Granted, something might be better than nothing, but that something
represents little to show for a decade of work and of hugely ambitious
rhetoric.
When it comes to capabilities, the picture is clearer still. A central
rationale for the creation of an EU defence competence was that this
might serve to spur member states into action to address fundamental
capability shortfalls. This has not occurred. Indeed, in what is perhaps
the most damning critique of CSDP imaginable, one observer has noted
that ‘the problem of insufficient European military capacity is arguably
more acute than at the time when President Jacques Chirac and Prime
Minister Tony Blair met [at Saint-Malo]’ (Toje, 2008: 19).
Recent crises underline the declining faith in CSDP. When the French
intervened in Mali, they did so unilaterally, only subsequently seeking
the support of their partners. And while the European Union has, by
most measures, managed quite impressively to maintain its sanctions
against Russia following the latter’s intervention in Ukraine, it has been
noticeable that those East European states that feel most threatened by
Moscow’s belligerence have focused their attempts to garner multilat-
eral support on NATO.
Crucially, it is increasingly clear that the most militarily powerful
member states – Britain and France – are losing faith in CSDP. France, as
noted above, has resorted to unilateral interventions rather than seeking
to mobilize EU partners. As for Britain, the increasing prominence of
the EU in domestic political debates has curbed activism from L ondon.
The negative outcome of the June 2016 referendum, with its likely
Defence integration in the EU 227
consequence of Great Britain leaving the EU, has the potential to fatally
undermine CSDP.
British and French scepticism about CSDP is based partly on frus-
tration with the apparent inability of their partners to invest more in
capabilities. Partly, too, it stemmed from an unwillingness on the part
of both governments to allow defence integration within EU institu-
tional structures to impinge too closely on a crucial area of national
sovereignty. Herein lies a fundamental problem confronting the Union’s
defence policy ambitions. While collective action might represent the
only means by which Europe can contribute effectively to international
security affairs, member states may yet prefer autonomous decline.
Note: The author wishes to gratefully acknowledge the invaluable sup-

port provided by ESRC standard grant RES-062-23-2717. For a longer
and more detailed presentation of the arguments of this chapter, see
Menon (2012).
14.2 Defence integration in the EU: from

vision to business as usual
Hanna Ojanen
A good part of the literature on the Common Security and Defence
Policy (CSDP) is pessimistic about the potential of it to become a reality
one day. The doubts originate from the idea that security and defence
are the policy fields closest to the core of national sovereignty, fields in
which states would never totally relinquish their decision-making rights.
The continued dissonance of views and the vitality of various national
discourses on security and defence policy seem to confirm the sceptics’
view that any agreement on common policies or steps ahead in defence
integration will be frail and merely exist on paper. Member states will
always continue to defend the priority of their national interests in this
area.
It is true that there remains a considerable degree of ambiguity over
CSDP. The Lisbon Treaty refers to the specificities of certain member
countries’ policies and to the important role played by other organiza-
tions in the field, notably NATO. The specific CSDP structures and poli-
cies are of a relatively recent origin. They all have emerged in the past
12 years: the European Defence Agency (EDA), the European Security
Strategy (ESS), the European External Action Service (EEAS), the soli-
darity and mutual defence clauses in the Lisbon Treaty, and the around
30 crisis-management operations that the EU has carried out. Critics
note many shortcomings. The operations have been rather small; it has
been difficult to gather enough capabilities from the member states for
instance for civilian crisis management; and the so-called Battle Groups
have not been used at all. The creation of the institutions has spurred
tensions and controversies. Efforts at updating the ESS have not yet
yielded results. Many would conclude that CSDP has not meant much
in practice at all (e.g., Menon, 2009).
These critics, however, suffer from two fallacies. First, there is the
lure of numbers. Big numbers are not always the right solution, whether
one tries to solve a crisis by augmenting the number of troops in action
or spends more money on defence. Second, there is the lure of narra-
tives. Scholars often try to compress political developments into a story
with a logical end. More often than not, this logical end is closely mod-
elled on similar developments in the past. Thus, the CSDP is compared
with NATO and found short of efficient military structures, or the EU
is compared with powerful nation states and its efforts at creating an
effective military is seen as a potential reality of lofty political speeches
only. CSDP, however, is not about achieving what others have achieved
previously. As I will show, CSDP has many goals, it is needed for various
different reasons, and not all of them are related to military issues per se.
Drivers and interests behind CSDP

A typical way of analysing the CSDP is by looking at the interests of
the EU member states. Sometimes these interests converge, but differ-
ent member states also have their specific reasons for signing on to and
benefiting from it. CSDP serves their interests – not of all at all times,
but rather of most and for most of the time.
Traditional defence cooperation, for instance defence alliances, are
usually explained by the existence of a common enemy, or the need
to respond to a shared threat. However, there is no external threat
that would compel the member states to cooperate, nor is there a lack
of existing arrangements for cooperation in the field, as most of the
CSDP countries are also in NATO. Still, defence integration has started
to grow. Why? The drivers of CSDP are not necessarily those that one
would first think about, and not the same as for security and defence
cooperation traditionally (see also e.g. Smith, 2003 and Howorth, 2007:
52–57). It is the context that matters, and the context of CSDP develop-
ment is that of European integration. The internal logic of integration,
the links between different policy fields, and the creation of new norms,
notably those concerning state sovereignty, are factors that pave the way
for CSDP. These processes, while lacking a direct link to defence, lead to
increasing convergence of security and defence thinking.
If we look closer at the role of member states, we find that different

countries benefit from CSDP in different ways. For Germany, the added
legitimacy provided by the common European framework has been the
major historic reason to further cooperation. The United Kingdom, par-
ticularly in late 1990s, saw in CSDP a way of strengthening its position
in the EU, while France has viewed it as a European alternative to trans-
atlantic defence cooperation. For a country like Finland, CSDP is seen
as means to strengthen national security in a rather tangible way given
its close proximity to Russia.
In recent years, smaller groups of member states have been instru-
mental in taking integration forwards, first by new steps among them-
selves, then by drawing in a growing number of followers. A clear
example is the Saint-Malo summit between France and Great Britain
in December 1998 that soon led to a Union-wide push to define the
steps to reach an autonomous military capacity for the Union. The Lis-
bon Treaty opens new possibilities for this kind of development within
security and defence: new core groups can emerge through the scheme
of permanent structured cooperation which allows groups of countries
to move ahead in defence cooperation. In practice, deepened defence
cooperation in, for example, pooling of capacities or joint monitoring
of airspace, already takes place in regional groupings such as Visegrád
Group of the Czech Republic, Hungary, Poland and Slovakia, or NOR-
DEFCO, a defence cooperation between the Nordic countries (see Behr
and Ojanen, 2014).
Even states outside of the Union have the possibility to play a driving
role. The United States is an interesting case in that it has moved from
opposing the creation of CSDP to formally welcoming it because of the
opportunities this offers for increasing the EU’s self-reliance and thus
a more even burden-sharing in defence matters (Howorth, 2007: 137).
It is also important to look at the role of different EU institutions
that see their own position within the Union enhanced by getting a
voice in this field. Of particular interest is the EDA. Seemingly a rather
weak actor and controlled by the member states, it is emerging as a
network-builder that sets rules as to the standards of efficient regulation
or desirable outcomes (Merlingen, 2011) and shapes the political order
of European defence (Bátora, 2009).
The EEAS also has a stake in the development of the policy as its own
legitimacy as a new EU organ depends on the success of its initiatives. A
concrete test case is the new security strategy or global strategy that the
European Council mandated the EEAS and the High Representative to
prepare for summer 2016. Such a strategy strengthens the credibility of
the EEAS. At the same time, it channels and strengthens common poli-
cies, giving them new impetus.
In a longer term, the EEAS opens a door for still-new actors that can
see their interests served by CSDP and turn into its proponents, includ-
ing EU citizens and national diplomats. Thus far, CSDP has been of
low practical consequence for citizens. It has not had budgetary conse-
quences that a European taxpayer would directly feel. It has not been
an issue of heated political debate, neither at the national nor European
(parliamentary) level. However, the EU delegations around the world,
particularly if they are to get more consular tasks, can become a con-
crete manifestation of the added value of EU policies for a citizen in an
emergency situation. National diplomats, in turn, get the possibility to
join the proponents of integrative efforts if they feel they benefit from
the new career possibilities offered in the European diplomatic service –
in a similar way to how their counterparts in national armed forces and
defence administrations benefit from European military structures.
Not only EU institutions, but also the European defence industry has a
considerable stake in CSDP, particularly so as the goals of enhancing the
competitiveness of European defence industry and a European defence
market figured prominently on the agenda of the special EU Defence
Summit in December 2013. This very summit was also fundamental in
underlining the high-level leadership in these questions of the President
of the European Council, and the active involvement of the Commission
(Coelmont, 2015). External expectations constitute another fundamen-
tal motivation for the development of CSDP. The EU is expected to act
in crises because of its resources and its explicitly stated goals to do so.
Operations such as the EU Advisory Mission for Civilian Security Sector
Reform in Ukraine (EUAM Ukraine) or the Border Assistance Mission
for the Rafah Crossing Point (EUBAM Rafah) between Gaza and Egypt
are such examples.
NATO and the UN are examples of organizations with a shared
interest in getting the EU to play a more active role. Because of its
supranational features, the EU can make its members comply and
deliver better than any other organization, and this benefits other
organizations when their goals coincide. Since its Strategic Concept
from 2010, NATO has also underlined the importance of the EU that
it characterizes as ‘a unique and essential partner for NATO’. NATO
recognizes the importance of a stronger and more capable European
defence and an emerging ‘strategic partnership’ between them that
NATO would like to strengthen. For the UN, an EU with increasing
capacities is a fundamental ally in UN peace support activities, but also
in sustaining multilateralism and international order. The operations
against piracy in the Gulf of Aden (EU NAVFOR Somalia) have been
serving the UN and its specialized agencies, notably the World Food
Programme (WFP).
The existence of a multitude of different drivers makes the process

probably not quicker, but maybe more stable. This panorama of pro-
ponents also shows that CSDP cannot be explained only by traditional
security interests. It develops for many other reasons, too, internal and
external, material and ideational, and in interaction with other actors.
Impact and significance of CSDP

The long list of drivers of CSDP also means that there is a long list of
actors interested in trying to influence its development. They are inter-
ested because of the impact that the development of a common security
and defence policy already has had on them, or is expected to have.
Among these actors are, first, other international organizations. Some
authors argue that CSDP challenges NATO, unduly duplicates its func-
tions, causes unnecessary spending and inefficiency, and constitutes a
liability to the security of the member states as an unreliable alternative
to existing structures (see e.g. in Howorth and Keeler, 2003). However, a
closer look at the relations between the EU and NATO (or between the
EU and the UN) shows the importance of the EU these organizations (see
more in Ojanen, 2011a). A strong CSDP is positive for them as it makes
the EU a more efficient and important partner. In addition, it challenges
prevailing practices, and thus can spur change in its partners. CSDP has
clearly inspired NATO when it comes to needs to enhance civilian crisis
management, and the new consultative way in which the 2010 Strategic
Concept was prepared. It has also challenged the UN system in claiming
for a special enhanced observer status in the General Assembly to better
suit its unique character somewhere between an organization and a state.
CSDP also has important effects on states outside the Union. For EU
accession candidates, CSDP has direct relevance, as conformity with the
EU’s policies is required from them. For Turkey, CSDP has been high-
lighted as a field in which cooperation could be strengthened before
actual accession. Among the big outsiders, CSDP is of growing impor-
tance particularly for the United States as a way to decrease the need
for US presence in Europe. At the same time, outsiders may actively try
to downplay CSDP, portray it in a certain way, or purposefully ignore
it and keep turning to the member states instead. This has lately been
the case of Russia. Such efforts do but reveal that the EU and CSDP are
becoming increasingly consequential.
Like any EU policy, the impact of CSDP is visible first and foremost
within the member states. The EU Battle Groups, rotating military units
that deal with crises, are an example of activity that has hitherto had
most impact on the level of member states and the development of their
defence capabilities, while its impact on the EU’s crisis-management
capacity is still to be seen. EU member states have also developed more

similar views on crisis management, armaments procurement and
defence spending (Howorth, 2012). Increasing convergence is visible
even in the traditionally divisive question of use of force (Coelmont,
2015). On a deeper level still, the EU and CSDP are transforming the
state, altering in a fundamental way how the essential elements of a
state, territory, citizens and security functions are seen. The EU frames
both the internal and the external security of its Member States (Ojanen,
2011b). Increasing awareness of shared external borders and border
management, preparedness to assist in natural catastrophes, and even
to defend the territory of other member states under attack are signs of
how national security is being europeanized.
Finally, what is particularly striking is that CSDP brings with it ele-
ments of supranationalism and democratic decision-making rarely
associated with defence issues. Decision-making still remains for the
most part strictly intergovernmental; qualified majority voting is pos-
sible only in matters of implementation. Yet, the Commission and the
European Parliament are becoming more central in this realm – as in
any other policy realms of the Union. The EEAS adds to this tendency
through its right to put forward policy proposals and its potential to
become an agenda-setter (Vanhoonacker and Pomorska, 2013). CSDP
can strengthen public debate because of the nature of the substance
itself: security and defence is more likely to raise public awareness and
consequently political pressure than matters of ordinary foreign policy
(Wagner, 2003).
During the negotiations on the EEAS, the European Parliament pushed
through considerable changes using its budgetary powers. Control over
the EEAS budget also implies control over its activities even when it
comes to defence, a field where the EP is formally not competent. Regu-
lar question times and consultations prior to approval of strategies and
mandates also strengthen the position of the EP. Interestingly, the EP is
on the way to accumulating powers that do not exist at the national level
– security and defence are hardly a usual topic of parliamentary scrutiny
or public debate in many countries. The CSDP, thus, has the potential of
making security and defence policy more democratic (see also Kietz and
von Ondarza, 2010). In the long run, CSDP could change the locus and
mode of decision-making on security and defence, including an increase
in parliamentary accountability and overall democratic legitimacy.
Conclusion
When assessing CSDP, it is important to look at what is there, not at what
is missing. This impedes one from seeing that it actually is consequential,
both internally and externally. Internally, it is a feature of the EU’s inter-

nal governance system and crucial part of the broader integration pro-
ject (Smith, 2003; Faleg, 2013). Externally, it is part of a broader system
of European or global governance, whereby the EU is a contributor to
a safer world order as well as a provider of European regional govern-
ance – in uncertain times increasingly also a regional security provider.
CSDP is working on a practical day-to-day level of security and
defence integration. No more just a vision, it is becoming business as
usual. It is an indispensable part of EU’s external relations and a cru-
cial component of the credibility and comprehensiveness of its policies
towards the neighbours and the world.
Over the years, it has mattered in different ways for EU member
countries: as a provider of legitimacy, leadership and security through
capacity improvement. It has made its way into the formulation of
national policies to the extent that its collapse would weaken the secu-
rity of the member states (Faleg, 2013). But it also changes national
debates on security and defence as it creates peer-pressure and intro-
duces elements of a joint scrutiny on what today’s security and defence
needs are and how they can be met in new ways. National policies no
longer exist in a vacuum. In changing the nature of the debate, CSDP
also enhances citizens’ stakes by offering new ways to take part in
policy-shaping.
Chapter 15
A New German Hegemony:

Does It Exist? Would It be
Dangerous?
Until the fall of the Berlin Wall in 1989, the so-called German Ques-
tion denoted the probably most serious and explosive quandary of
global politics in the twentieth century. At issue was the problem of
how to deal with the largest country in the centre of Europe. Germany
was a latecomer state that consisted of numerous small independ-
ent territories for centuries, until Prussia’s Iron Chancellor Otto von
Bismarck achieved unification in 1871, in the aftermath of a victori-
ous war against France. The new German empire aggressively sought
to secure and enhance its position among the established countries.
This policy resulted in World War I, and, ultimately, in the even greater
catastrophe of World War II. The victorious powers tried to deal with
the German question once and for all by partly dismembering the coun-
try and placing numerous restrictions on its sovereignty. In addition,
the Cold War produced the division of what remained of Germany in
an Eastern part, which was to become the Communist-ruled German
Democratic Republic, and a Western part, consisting of the occupation
zones of the United States, Britain and France. Another consequence
of the Cold War was the long-term presence of large military forces of
Germany’s former enemies, now allies, which not only sought to deter
attacks from the ideological adversary but also the rebirth of German
militarism (Hanrieder, 1989). Militarily, the German problem seemed
contained.
The Western occupation zones in divided Germany soon developed
into the capitalist Federal Republic of Germany which recovered from
the war quite quickly. Within two decades it became one of the economi-
cally most successful states of the world. This economic rise revived
the issue of German preponderance in new terms. European Integration
since the early 1950s was the core instrument to harness Germany’s
renascent economic clout. German leaders fully endorsed the resulting
constraints. The support of European integration became a core ele-
ment of their foreign policy. When the reunification of East and West
234
Editors’ introduction 235
Germany in 1990, accompanied by full sovereignty, reignited concerns

about German domination, German chancellor Helmut Kohl con-
sciously used the deepening of the EU to allay these fears. The readiness
to give up the German currency, the Deutsche Mark (DM), then one of
the strongest currencies in the world, in favour of a common European
currency was of utmost importance in this context. Other EU member
states had been forced to closely align their economic policies to those
of Germany if they wanted to avoid repeated disruptive devaluations.
The euro promised to regain some economic influence for them. This
worked, until recently.
In the security sphere, Germany’s culture of restraint and its refuta-
tion of power politics served to silence those few voices that expected
a reunited Germany to return to its traditional great-power habits (e.g.
Waltz, 1993). However, the crisis of the euro which erupted in 2009
and clearly showed that Germany was still the pivotal economic power
in Europe brought the German question back once again. Across
Europe, strident denunciations of the German-imposed austerity
regime emerged. In addition, the developments in Ukraine also thrust
Germany on the centre stage of diplomatic efforts to deal with an asser-
tive Russia. Chancellor Angela Merkel’s policy of welcoming over a
million refugees in the country has placed a kind of moral leadership
on Germany which is deeply resented by many German citizens as well
as EU governments.
How should the country react to these new responsibilities? By taking
on a role as ‘Central Power’ (Münkler, 2015), trying to exert leadership
and proactively steer Europe through the crisis? Or by continuing its
traditional policy of restraint, mindful of history? The two chapters in
this section reflect the intense debate among politicians, academics and
public commentators about Germany’s future role in Europe.
Matthias Matthijs from Johns Hopkins University asserts that
Germany has provided the wrong kind of leadership in Europe,

by abusing its dominant position as the eurozone’s most powerful
creditor state to push the burden of economic adjustment onto the
European periphery, while being largely ineffective in foreign policy
due to its inability to reconcile its realist interests with its liberal val-
ues. Miguel Otero Iglesias, who is researcher at the Spanish think
tank Elcano Royal Institute, and Hubert Zimmermann from the
University of Marburg, Germany, think that the German government,
all in all, has behaved responsibly and should continue to provide
responsible l eadership for Europe. The question of German l eadership
has relevance for most aspects of EU p olitics, particularly common
European defence policy (Chapter 14) and the politics of the euro
(Chapters 8 and 9).
236 A New German Hegemony
15.1 The failure of German leadership

Matthias Matthijs
Since the early 1990s, Germany’s relative power and influence – both in
Europe and the wider world – have grown substantially. With the dawn
of German reunification, a series of unrelated events have conspired
to drape Europe’s leadership mantle over the shoulders of Germany’s
chancellor. The EU decision to go forwards with the single currency
at Maastricht in 1992 without the United Kingdom, the slow but ulti-
mately successful reintegration of the Eastern Länder into the German
economy, the fortunate timing of the Hartz reforms in the early 2000s,
and the relatively weak economic performance of France and Italy have
all combined to make Germany the de facto leader of Europe. Henry
Kissinger’s question – ‘who do I call when I want to call Europe?’ –
finally has an answer: Angela Merkel in Berlin.
Since 1990, Germany has gently morphed from a ‘civilian power’
into a ‘geo-economic power.’ In the 1990s, Germany used to define its
interests broadly in civilian or normative terms, within a liberal interna-
tionalist framework of multilateral cooperation. Human rights, peace,
democracy promotion and a willingness to take on an uneven share of
the burden in order to develop supranational institutions used to be the
hallmarks of German policy (Maull, 1990). But since the early 2000s,
Berlin has increasingly acted in a geo-economic fashion, by elevating its
narrow economic interests over other interests. It has been less shy to
impose its national preferences onto others, and has shifted to a more
selective multilateralism with a much more realist approach to interna-
tional affairs (Kundnani, 2015; Szabo, 2015). Since the end of the Cold
War, Germany has gradually transformed itself from a ‘semi-sovereign
state’ (Katzenstein, 1987) to a more normal ‘middle range’ power, and
leveraged its considerable economic strength to increase its diplomatic
clout and international prestige.
European integration is at a crossroads, and Germany is now
Europe’s ‘indispensable nation’. The governance of the euro, the chal-
lenge of dealing with a revanchist Russia and emerging powers in Asia
and Latin America, and the humanitarian and political consequences
of the Arab Spring, all require more rather than less EU cooperation.
Collective action is often hard to achieve, and since the traditional
Franco-German engine has been sputtering, there is a very strong case
for Germany to lead the way, both in its own enlightened interest as
well as in Europe’s, just like a benign United States led the liberal
world in the wake of World War II. While still uncomfortable with
the label of being Europe’s ‘hegemon’ or ‘leader’ for obvious historical
The failure of German leadership 237
reasons – the German word for leader is Führer – Berlin’s policy elite
has progressively embraced its newfound power, both in the economic
realm (through its de facto position as biggest economy and main
creditor state in Europe’s E conomic and Monetary Union) and in for-
eign affairs (by being NATO’s main broker and interlocutor between
the United States and a resurgent R ussia). Starting in the late sum-
mer of 2015, G ermany has also played a leading role in dealing with
an almost biblical exodus of refugees from war-torn Syria, Iraq and
Afghanistan. There is no doubt that over the past five years, German
policy has been able to decisively shape events and has had a profound
impact in Europe’s economic, foreign and domestic affairs. However,
though German leadership is desirable, and very much needed in times
of crisis, Berlin’s actions have been largely misguided. German leader-
ship has singularly failed to deliver either a more s table and prosper-
ous eurozone, a safer and more democratic European neighbourhood
or more harmonious relations between the EU’s member states.
Conviction without strategy: ordoliberalism, rules and the

euro crisis
‘Never did a ship founder with a captain and a crew more ignorant of
the reasons for its misfortune or more impotent to do anything about it’,
was Marxist historian Eric Hobsbawm’s stinging verdict of America’s
role during the Great Depression (Hobsbawm, 1999: 190). Any analyst
of the slowly unfolding train crash that was the euro crisis starting in
the autumn of 2009 could be forgiven for saying the exact same thing
about Germany’s role in it. While Greece had clearly broken the fiscal
rules of the Stability and Growth Pact in the most egregious way, and
was teetering on the brink of bankruptcy, the dogmatic insistence early
on of Germany’s lawyer-politicians to stick to the rules, i.e. no bail-
outs for Greece, rather than take a more pragmatic and discretionary
approach, would lead to outright panic in the bond markets and result
in financial contagion to the rest of Europe’s periphery (Jones, 2010;
Matthijs, 2014a).
From the beginning, there were two fundamentally different euro
crisis narratives. ‘Systemic’ accounts pointed to the euro’s flawed
institutional design and the many forgotten unions that were never
created (economic, fiscal, political, financial, debt and banking). If one
subscribed to this view, the solution to the crisis was to build those
forgotten institutions and introduce some kind of safe asset or com-
mon debt instrument, an economic government and a democratically
more legitimate political union (Matthijs and Blyth, 2015; McNamara,
2015). ‘National’ accounts, preferred by the overwhelming majority of
Germany’s policy elite, focused on the flaws within individual member

states, and painted the crisis as a morality tale of ‘Northern saints’ and
‘Southern sinners’ (Fourcade, 2013). Hard work, high savings, wage
restraint and fiscal prudence were seen as Northern virtues; a lack of
competitiveness, low savings, inflated wages, excess consumption and
fiscal profligacy were seen as Southern vices. The adequate solution for
flouting the EU’s rules therefore was one of necessary pain and redemp-
tion in the South, i.e. austerity and structural reform (Matthijs and
McNamara, 2015). This solution to the crisis implied long recessions
and painful adjustments, likely to make the crisis worse in the short
term in the vain hope of bringing about long-term stability.
Europe’s insistence on applying a heavy dose of both ‘ordoliberal’ and
‘neoliberal’ medicine as remedies to the crisis – a combination of fiscal
rules stipulating austerity measures and structural reforms to enhance
competition – meant that Europe’s Greek problem would go from a
manageable fiscal crisis to a full-blown ‘sovereign debt crisis’ in a mat-
ter of months (Blyth, 2013). Germany, with both Chancellor Merkel
and her powerful Finance Minister Wolfgang Schäuble leading the euro
pack, played a key role in this. As Merkel herself put it rather bluntly
in 2010: ‘The rules must not be oriented toward the weak, but toward
the strong. That is a hard message. But it is an economic necessity’ (as
quoted in James, 2011: 530). In other words, Germany’s solution to the
euro crisis was to run away from its partial responsibility as careless
lender to the periphery during the boom period, and push most of the
burden of adjustment onto Europe’s periphery (Matthijs, 2015).
Of course, there was no malign intent on the part of the German gov-
ernment in any of this. Berlin’s policy elites genuinely believed that what
they were doing was in Europe’s best interest. And therein lies the trag-
edy of Germany’s leadership during the euro crisis, which can be illus-
trated by Schäuble’s own views on what responsible leadership entails.
In a speech in Paris in November 2010, Schäuble invoked the relevance
of the teachings of economist Charles Kindleberger for Europe’s pre-
dicament. For Kindleberger, the main cause of the Great Depression had
been the fact that a much-weakened United Kingdom could no longer
play the role of leader or ‘hegemon’ in the world economy, and that an
isolationist United States was unwilling to do so (Kindleberger, 1973).
Kindleberger’s view of leadership during crises was that of one state
acting alone as the ultimate provider of ‘global public goods’, includ-
ing serving as a market for ‘distress goods’ (goods that cannot find a
buyer), practising countercyclical lending, serving as a lender of last
resort, managing a system of stable exchange rates and coordinating
macroeconomic policy. Schäuble, a lawyer by training, had read Kindle-
berger very differently. For him, responsible leadership meant France
and Germany respecting and following the rules they had set for them-
selves at Maastricht in 1992, practising fiscal restraint and avoiding any
moral hazard: exactly the opposite of what Kindleberger had in mind
(Matthijs, 2015).
If you assess Germany’s performance as the provider of ‘regional
public goods’ in a European context, before and during the euro crisis,
one can only conclude that it has failed miserably (Matthijs and Blyth,
2011). First, rather than being a market for distress goods, Germany
has continued to export much more than it imports during the crisis,
and refused to stimulate its own domestic consumption and investment.
Second, instead of countercyclical lending, Germany’s banking sector
practised the opposite, i.e. excessive lending to Europe’s periphery dur-
ing the boom combined with a sudden stop of capital during the bust.
Third, far from allowing the ECB to reinterpret its mandate as being
a ‘real’ lender of last resort, Germany has consistently sought to limit
the ECB’s powers and emphasized its institutional constraints. Fourth,
Berlin has dictated a policy of ‘austerity for all’ to the rest of Europe in
place of coordinating macroeconomic policy where the North would
inflate by increasing spending while the South would deflate through
budgetary austerity.
The main underlying assumption to Germany’s behaviour has been
that it would be good for Europe’s periphery to become more like Ger-
many. But herein lies the rub. Germany can only be Germany because
the other countries are not. Not everyone can be a net exporter (you
need net importers), and you cannot all simultaneously cut your way to
growth (Blyth, 2013). This fallacy of composition – what makes sense
for countries individually can be disastrous for all countries taken as a
whole – has been at the heart of the euro problem (Matthijs and Blyth,
2011). The contrast between Germany’s role in the euro crisis and the
United States’ role during the global financial crisis of 2008 could not
be starker: the United States had learned the lessons from the 1930s
and led the world economy by providing all global public goods. This
is one of the main reasons why the euro crisis has lasted for over five
years, while the worst of the global financial crisis was over after just
six months (Matthijs, 2015). There is a historical rationale for Germa-
ny’s obsession with rules, to be sure, given the legacy of the Rechtsstaat
rather than democratic government during the Wilhelminian period,
and the experience of the Third Reich with its complete disregard for
the rule of law. And while rules should be at the heart of any multi-state
currency union, they cannot replace leadership during periods of cri-
sis, when enlightened leadership should be confident enough to ignore
the rules temporarily for the common good (Jones, 2009; Matthijs and
Blyth, 2011).
By 2016, European integration was in deep trouble. Rather than eco-

nomic convergence, the euro had brought about significant divergence
within the eurozone. The gap in living standards between Northern and
Southern Europe was back to where it was in the early 1990s. From a
political perspective, the popular perception of an all-powerful Germany
imposing draconian terms on Southern Europe, especially in Greece, has
been very bad for the European project (Matthijs, 2014b). The whole
point of the European Union was to ban the ‘German Problem’ to the
dustbin of history. After a long night of negotiations in July 2015, dur-
ing which Greece’s left-wing Syriza government was forced to choose
between ‘Grexit’ (exit from the eurozone) or a humiliating acceptance of
much harsher bailout terms than Greek voters had rejected in a referen-
dum one week earlier, former German foreign minister Joschka Fischer
observed ‘the return of the Ugly German’. By compelling a member of the
eurozone to leave ‘voluntarily’, Fischer believed Germany ‘announced
its desire to transform the eurozone from a European project into a kind
of sphere of influence’ (Fischer, 2015).
Strategy without conviction: foreign policy between

interests and values
In the realm of foreign and security policy, Germany in the twenty-first
century has been torn between its normative values as a ‘civilian power’
and its realist interests as a ‘geo-economic’ power, even though it has
been slowly moving towards the latter (Kundnani, 2015; Szabo, 2015).
On the one hand, in its capacity as civilian power, the country is fully
embedded in the transatlantic alliance through NATO and the European
Union, which are both built on liberal and Western values and promote
democracy, human rights and the rule of law. On the other hand, as a
geo-economic power, Germany is driven more by its economic interests,
which often clash with those Western values, not least when it comes
to doing business with a fast growing but authoritarian China, and its
energy dependence and commercial ties with a renascent Russia. Both
states have poor human rights records, have their own idiosyncratic
interpretation of the rule of law and can hardly be called democratic.
Yet Berlin has recently taken a more realist line by pushing aside some
of its values in order to secure lucrative business deals.
Nowhere has this clash between interests and values been more obvi-
ous than in Berlin’s dealings with Moscow over the crisis in Ukraine in
2014. While Germany supported the European Union’s offer of a far-
reaching trade deal with Ukraine in November 2013, consistent with
its liberal values and soft power projection, it was caught off guard
when then Ukrainian president Viktor Yanukovych cancelled the EU
deal in favour of closer cooperation and commercial ties with Vladimir

Putin’s Russia. While Germany is a key member of the European Union,
it has a long history of engagement with Russia, and since Chancellor
Willy Brandt’s Ostpolitik, a time-honoured tradition of engaging with
the East, known as Wandel durch Handel, or ‘change through trade’
(Szabo, 2015: 25).
When pro-EU protests in Kiev’s Maidan Square turned violent and
Yanukovych was forced to resign in February 2014, Moscow i nterpreted
the overthrow of Ukraine’s democratically elected and pro- Russian
president as a coup d’état. The turmoil in Kiev was the pretext for
Russia’s military invasion of the Crimea, and subsequent annexation in
March 2014 (Mearsheimer, 2014). Putin justified the offensive as Russia
protecting its vital strategic interests, including its fleet at Sevastopol,
given the risk of Ukraine joining NATO and a rival naval base in the
Black Sea. In April 2014, protestors – with the help of pro-Russian par-
amilitary troops – seized and held government buildings of the East
Ukrainian cities Luhansk and Donetsk, de facto splitting Ukraine in a
pro-Western and pro-Russian part. Russia’s seizure of Crimea consti-
tuted a clear violation of the post-war international system’s rules of the
game: it was the first time since World War II that Europe’s borders were
being redrawn by military force.
Germany has played a skilful diplomatic – but ultimately u nsatisfying –
balancing role during the Ukraine conflict, acting as mediator between
Russia and the West. While on the one hand, Germany agreed with the
United States and its EU partners to impose a series of sanctions on R ussia,
and Ukraine signed a landmark Association Agreement with the EU in
June 2014, Berlin has been careful to keep open the lines of communica-
tion with Moscow. Germany helped broker the Minsk truce between the
Ukrainian government and pro-Russia rebels in September 2014, and a
gas supply deal between Moscow and Kiev in October 2014. According
to Stephen Szabo, ‘President Obama relied on Chancellor Merkel to take
the lead in mediation attempts with Russian President Vladimir Putin
and it was clear that whatever sanctions regime emerge[d] would only
go as far as Berlin [permitted]’ (Szabo, 2015: 129).
The results of Germany’s leadership of Western diplomatic efforts to
deal with Putin’s Russia are dismal. Europe has ended up with a divided
Ukraine, and a Russia that has hardly been punished for unilaterally
seizing a big chunk of territory of a sovereign country by brute military
force. The Baltic States as well as Poland for the first time since the
Cold War feel seriously threatened again in their own security. German
foreign policy, sympathetic to its Eastern neighbours’ fears but wary
to alienate its Russian business partners, lack a credible deterrent that
would come with a much more powerful military. In the end, Berlin has
done very little to allay their Eastern neighbours’ fears, and the EU’s
agreement with Ukraine is a clear example of biting off more than one
can chew. If the negotiation of a third bailout for Greece, a member
of the eurozone, proved to be a gargantuan task, there is little hope
for a financial package for Ukraine, a country with a much more cor-
rupt government that is (and may remain) still a long way off from EU
membership.
While Germany’s interests are to continue to do business with Russia,
its values point in another direction. Unlike Lord Palmerston’s Victorian
Britain in the nineteenth century, which only had permanent interests
and no permanent friends, Germany does have permanent friends in
NATO and in the European Union. For better or worse, Germany’s stra-
tegic future is tied up with the West and its liberal values. As opposed
to economics, leadership in foreign policy does actually entail enforcing
the rules of a liberal world order rather than ignoring them when they
conflict with commercial interests. A tighter Western bloc may have got
Putin to rethink his own aggressive tactics. In foreign policy, it has been
German weakness – both in terms of its principles as well as in terms of
its military power – rather than German strength that has undermined
its leadership potential.
In the most recent crisis facing the European Union, caused by the
sudden upsurge in refugees and migrants from the Middle East and
North Africa, Germany has unambiguously taken the lead by taking in
a hugely disproportionate share of all asylum seekers. Germany received
over 1 million refugees in 2015 alone, and was expected to take in about
twice that amount in 2016 at the time of writing. Unlike in the euro
crisis, Germany decided to lead the rest of Europe on the refugee crisis
by taking on the main humanitarian burden and by breaking the EU
rules set out in the Dublin Convention. Merkel’s Willkommenskultur
(welcoming culture) and open border policy gained her plaudits all over
the world and earned her Time Magazine’s ‘Person of the Year’.’
However, the other EU member states – led by Hungary, Poland,
the Czech Republic and Slovakia – were less thrilled by Germany’s
approach. They felt that Germany’s unilateral decisions had forced their
hand. Despite its economic size and moral leadership on refugees, Berlin
was not able to get the rest of Europe to follow up with a collective
response. Leadership in the end requires others willing to follow, and the
rest of Europe seemed all too happy for Berlin to take on the brunt of
asylum seekers. While Berlin could force the Greeks to radically reform
its economy during the euro crisis, it was not able to get the Slovaks or
the Czechs to accept even a handful of refugees. This last crisis thus only
underlines the fact that the European Union, and German leadership
within Europe, still have a long way to go.
A benign hegemon: Germany’s European vocation 243
Conclusion: The discontents of a German Europe

In a speech in Hamburg in 1953, German novelist Thomas Mann told
an audience of German students: ‘We do not want a German Europe,
but a European Germany’ (as quoted by Garton Ash, 2012). In the
early 1990s, after German reunification and the signing of the Treaty
of Maastricht, it certainly looked like Mann had gotten his wish. Just
over 20 years later, however, the tables seemed to have turned. While
Germany has been forced into a difficult balancing act between rules
and discretion in the eurozone, and between interests and values in its
foreign policy, we have ended up with a much more German Europe,
but not necessarily for the better.
15.2 A benign hegemon: Germany’s

European vocation
Miguel Otero-Iglesias and Hubert Zimmermann
‘Benign Hegemony’ is a concept many scholars have used to describe US
global politics after 1945, at least with respect to its behaviour towards
allies. A benign hegemon is characterized by a policy of restraint in the
exercise of its power, by respect for mutual commitments, by the provi-
sion of military and economic security for allies, and the acceptance of a
role as honest broker (Ikenberry, 2001). While many might contest that
the United States ever lived up to this standard, proponents of the so-
called hegemonic stability theory argue that the existence of a hegemon
is a major stabilizing factor for international relations. Among the first
to make this argument was Charles Kindleberger who in his work on
the Great Depression of the 1930s (1973) argued that the absence of a
stabilizing power in the system was the main cause of the catastrophic
breakdown. While the term ‘hegemon’ usually carries a negative con-
notation, it is well known that conflict in social systems is less likely if
somebody takes responsibility for the whole without abusing his or her
position. We argue that this is the role Germany has to fulfil in Europe,
particularly now, with Britain on its way out of the Union. As Polish
foreign minister Radek Sikorski said in 2011 in widely quoted remarks: ‘I
will probably be the first Polish foreign minister in history to say so, but
here it is: I fear German power less than I am beginning to fear German
inactivity.’ According to him, Germany is Europe’s ‘indispensable nation’,
a nation that should not dominate but lead in reform (Sikorski, 2011).
In recent years, particularly after the controversies about Greece’s
euro membership, Germany has been accused across Europe of
abusing its power as economically dominant country (Beck, 2013).

We argue, however, that it has fulfilled this role exerting a benign
hegemony within the European Union (EU) particularly in the eco-
nomic area, but also increasingly in the political sphere. By doing
so, we build on K indleberger’s conception of ‘stabilizing’ leadership.
In his view the hegemon needs to provide five public goods: be the
buyer of last resort, offer countercyclical long-term lending, secure
stable exchange rates, coordinate macroeconomic policies and be the
lender of last resort during financial crises. Some authors (Matthijs
and Blyth, 2011) claim that Germany fails to deliver on each of these
goods. However, reality is more complex. Germany might not be the
market of distressed goods, but it has made the euro a stable currency,
and it has lent considerable money to the periphery in good and bad
times. Usually, fulfilling all of these tasks implies an active role by
the hegemon. We argue, however, that in the EU benign hegemony
might be better performed, especially by Germany, under a passive
mode. This is particularly true if we consider hegemony beyond the
monetary field. Germany has acted as a firm anchor for Europe by
having a stable democratic political system and by being a consensus-
builder rather than a leader in trying to converge the foreign policies
of 28 member states into one EU foreign policy vis-à-vis heavy-
weights such as the United States, Russia and China. In late 2015,
opening its borders generously to more than a million refugees from
Syria and other conflict areas, Germany also acted as a moral leader,
despite strong misgivings among its European partners and a surge of
xenophobic sentiment in Germany.
Throughout the existence of European integration, Germany as the
largest European economy has not only been an anchor of stability, but
it also provided economic resources which made most common poli-
cies possible in the first place. While it usually deferred to France with
regard to political leadership, it has recently also taken on a more pro-
active role in the political sphere. This is a complicated balancing act.
History matters a lot in understanding Germany’s role in Europe. The
territories that today form the Federal Republic of Germany have been
pivotal for the stability of the Continent for centuries (Simms, 2013).
From the fifteenth century until the nineteenth century, when modern
Germany was created, European powers (Spain, France, England and
Russia) tried to control those lands in order to establish a balance of
power among themselves or to consolidate their supremacy over their
rivals. England in particular was keen not to let the geographic core
of Europe fall under Spanish, French or Russian rule. During this
period, the German peoples formed administratively the Holy Roman
Empire, but politically they were divided and weak. In the nineteenth
century, however, they united and a new powerful nation state emerged.
In the twentieth century, Germany tried to expand its Lebensraum
by starting two devastating world wars, and failed. The lesson for
Germany’s political elite has been clear. Germany should never try to be
the hegemon again (Schäuble and Lamers, 1994).
This historical perspective is fundamental to understand Germany’s
contemporary benign hegemony. It is a strategy which is not actively
pursued. As several authors have explained (Chang, 2003; Paterson,
2011), Germany is a reluctant hegemon. But it is precisely this passive,
cautious approach that is beneficial for the EU as a whole. If Germany
would act as a self-confident leader which imposes actively (and some-
times aggressively) its will, as the United States has done over the past
50 years, the European continent would become mired in economic and
political tensions. Hence, Germany’s biggest positive contribution to
the EU is that it has remained a bastion of stability in the heart of the
Continent. Despite facing enormous challenges over the past decades,
Germany was able to cope with the tensions of the Cold War, the fall of
the Berlin Wall, the reunification of the country, the economic downturn
of the early 2000s (when it was described as the ‘Sick Man of Europe’),
the Global Financial Crisis and the European banking and sovereign
debt crisis, with a remarkable degree of stability and resilience. With
steady growth, low unemployment and consensus-based political sys-
tem, Germany is the strong, stable and central pillar that holds the
European house together. The country has become somewhat of a role
model. Recent polls have identified Germany repeatedly as the world’s
most positively viewed nation (BBC, 2013). In all rankings of good gov-
ernance and freedom, Germany is among the top-placed countries in the
world (Freedom House, 2015).
Overall Germany has devoted extraordinary amounts of political
and financial capital to improve the living standards of its n eighbouring
countries. This behaviour was certainly not altruistic. The German politi-
cal and industrial elites were seeking political stability and new markets.
But which hegemon acts only on altruistic grounds? N onetheless, the
level of solidarity that Germany has offered to the rest of the members
of the EU is unprecedented in history. For a long time, negotiations in
Brussels would run smoothly because Germany was willing to pay more
than the other European powers (especially the UK and France) in order
to reach agreements that would keep everyone happy (e.g. Soros, 2013).
Germany’s financial concessions started already when the Common
Agriculture Policy (CAP) was agreed. Industrial Germany was willing
to subside French farmers in order for them to buy German machines
(Knudsen, 2009). This is a textbook example of a benign hegemon,
even for Kindleberger. Without this first step, the European Economic
Community would not have lasted, and thus the single market and the
European Union (arguably the most idealistic project in human his-
tory) would never have come into existence. If Germany had not put the
money on the table, Gaullist France would never have accepted pooling
its sovereignty.
This is no different for most of the member states that joined the
rich club of the EU at a later stage. Countries such as Greece, Ireland,
Portugal and Spain (GIPS) had a per capita income much lower than
the six founding countries, and Germany was the chief contributor to
the structural and cohesion funds that were poured into these coun-
tries to achieve closer convergence. One just needs to travel around the
GIPS to see how many projects were and are still funded by the EU.
Unfortunately, some of this money was wasted due to corruption and
mismanagement (this is why the German policymakers and taxpay-
ers are reluctant to follow the same strategy in the aftermath of the
European debt crisis), but certain countries like Spain have effectively
used it to upgrade its infrastructures and transport networks, and con-
sequently its productivity and per capita income. If one analyses how
much a country like Spain has benefited from EU funds, the amount is
very similar (in real terms) to the amount received by Europe as whole
under the Marshall Plan (Criado, 2010).
Germany has also been fundamental in completing the EU enlarge-
ment successfully, another extremely positive milestone in European
integration. Many think that the enlargement was too hasty because a
lot of these countries (especially Bulgaria and Romania) were too poor
to achieve political and economic convergence with the rest of the EU
(see the chapters by Epstein and Bickerton in this volume). They point
out that German industry’s eagerness to enter new markets trumped
political and geopolitical considerations (Russia did certainly not
welcome such a swift move of EU borders to the East). However, if one
asks the public opinions of these countries, the overwhelming major-
ity sees membership in the EU as a positive development. In general,
despite the collective action problems that come with a higher number
of members in the club, the big bang enlargement of 2004 and 2007 was
completed rather smoothly. Who would have imagined 20 years ago
that Donald Tusk, a Polish national, would become the President of the
EU? This successful integration was in great part thanks to Germany,
which has historical, economic, political and cultural links with many
of these countries, and thus was quintessential in including them in the
European family.
While enlargement is generally conceived as a success story, the other
big European project of the past 25 years, European Monetary Union, is
now seen by many as a failure (Matthijs and Blyth, 2015). The eurozone
debt crisis and Germany’s clumsy response to it have reinforced this

view. Here again we think that the critique to Germany is overstated.
First, it has to be noted that the acceptance of the common currency
has been an enormous concession. Germany’s mark used to be one
of the most respected currencies in the world, so much so that other
European currencies increasingly tried to stabilize their currencies by
pegging their value to the mark. However, this forced them to mirror
German e conomic policies, undergo periodic bouts of adjustment and
generally lose their autonomy in monetary policies. For this reason, it
became a core goal of France and other European countries to reduce
their dependence on German monetary policies. Germany was not in
principle opposed to a common currency; however, it was afraid that
differences in economic policies would lead to costly fiscal transfers in
a monetary union. Therefore, it was adamant in creating a currency
based on German stability principles and on the prohibition of auto-
matic mutual bailouts (which it was afraid would mostly be financed by
the German taxpayer).
If we analyse Germany’s response through the ‘stability first’ lens,
we can see that Angela Merkel’s crisis management was more benign
than commonly thought. In first instance, it was positive that G ermany
sailed through the crisis with stable governments and a strong leader
who was able to gain the trust of the German people (always sceptical
about the eurozone becoming a permanent transfer union). Merkel
defended German interests as fiercely as she could by saying innu-
merable times ‘nein’ to big rescue funds for the GIPS countries and
attempts of debt mutualization led by France, but by doing so she
was able to clip the wings of monetary hawks in Germany. When it
was necessary she had sufficient room for manoeuvre to cross cer-
tain German red lines without losing the support of her voters. Crit-
ics of abusive or ineffective German leadership often forget that
even the governments of the most powerful countries have to build a
domestic consensus for their policies. This is particularly true in the
case of G ermany, the political system of which is characterized by the
existence of numerous checks and balances, such as the division of
responsibilities between the federal level and states (Länder), the exist-
ence of a powerful constitutional court and the fact that all its gov-
ernments are coalitions between different parties. Accommodating the
requirements of E uropean c ooperation often means overcoming strong
domestic opposition.
Despite its reluctance throughout the crisis, when the break-up of the
euro was at stake, Germany has always stepped in to hold the union
together. Merkel and the Bundestag agreed to rescue first Greece, then
Ireland and Portugal, and later the Spanish banking system and Cyprus
with the creation of the permanent European Stability Mechanism

(ESM), which has now a firepower of €500 billion, and is a de facto
European Monetary Fund. Finally, the German political establishment
accepted the creation of the banking union and, perhaps most impor-
tantly, restrained from openly criticizing the president of the ECB, Mario
Draghi, when he stated that the ECB would do whatever it takes (within
its mandate) to save the euro, including buying sovereign bonds from
the member states. Given the figures involved, these rescues were only
accepted by German public opinion because Merkel followed a very
cautious and conservative approach. Had she thrown huge amounts of
money into the ailing periphery to avoid contagion in May 2010, as
many demanded, it is unclear whether the German public would have
accepted this and re-elected her.
Of course, Merkel’s primary objective was not to rescue the popula-
tions of the periphery but rather the German economy and the project
of European integration which had served Germany so well. But yet
again we should not confuse a benign hegemon with an altruistic one.
In the midst of the crisis, every state looked to preserve its own national
interests. Germany’s strategy, by contrast, followed the pattern described
above of ‘stability comes first’. Merkel needed first to save the German
banks and, by default, the German depositors. Her second concern was
to get the country out of the 2008–2009 recession (turning the German
export machine towards China) to keep unemployment levels low. Once
these two objectives were secured, she was willing to make concessions
to the indebted periphery.
But yet again, the strategy was to obtain long-term stability. The view
from Berlin was that sovereign debt spreads were a helpful mechanism
to enforce structural reforms in the southern countries of the eurozone.
Germany could have come with a Marshall Plan for the South, but
without proper control of how the money was to be used, much of it
could have been wasted, as happened with the structural and cohesion
funds. To avoid this, Germany could have taken matters in its hand and
managed the whole endeavour on its own as the active leader of the EU,
but this would be seen in the South as German colonialism. So given the
circumstances, letting the markets apply their pressure was perhaps the
least damaging option for Germany. Ultimately, countries like Ireland,
Portugal and Spain did undertake some of the needed reforms.
Some critics read Germany’s good economic performance very dif-
ferently. They argue that it represents Germany’s predatory, and not
benign, hegemony. They claim Germany has constructed a eurozone that
is clearly in its favour. Some even go as far as denouncing that Germany
has embarked in a neo-mercantilist strategy of low wages and domestic
demand repression which is highly detrimental for its own people and
utterly destructive for the EU as a whole (Posen, 2013). We disagree. It
is certainly true that the euro has benefited Germany immensely. Had
Germany kept the Deutsche Mark, its exchange rate value would have
been much stronger and the large surpluses accumulated over the past
years would have been smaller. But can we really blame Germany for the
problems in the European periphery? Is it Germany’s fault that in these
countries the education systems are dysfunctional, the e xpenditure in
R&D is below the EU average, the productivity levels are low, the high-
tech industry is limited and clientelism and corruption are systemic?
These are domestic problems and Germany had no responsibility in
their creation.
The truth is that the German political and economic establishment
knows that there are only two options for the future. If Germany wants
to preserve the stability of Modell Deutschland based on its exporting
capacity and its huge current account surpluses, it either needs to subsi-
dize the less competitive regions within the monetary union or go back
to the Deutsche Mark and go it alone. The German elite still believes that
the former is the right path and this is the reason why it wants, through
the principle of self-help, make the strongest parts of the periphery fit
to compete in an ever globalized and multipolar world (so as to reduce
the costs of the subsidies) and offer the necessary solidarity, with strict
conditionality, to the weakest so that they remain in the eurozone.
Germany has acted as a diligent leader of Europe’s foreign policy,
too, after the invasion of Crimea by Russia. Instead of following the
more aggressive stand of the Baltic member states or Poland, first Mer-
kel tried to establish a dialogue with Putin and reach a negotiated solu-
tion, as advocated by the less belligerent countries of the EU such as
Italy or Spain. However, once Merkel realized that Putin’s attitude was
unacceptable, she instructed the German diplomatic machinery to seek
a consensus (domestically and among the EU member states) to apply
sanctions against Russia. This consensus is still holding at the time of
writing, showing that the German approach of reluctant but at the same
time stabilizing hegemon works.
German leadership was criticized in Europe, not only during the euro
crisis but soon after that also on the issue of how Europe should deal
with economic migrants and refugees. Responding to a humanitarian
emergency situation at the Southern borders of the EU, the German
government decided in August 2015 that it would have been immoral
to leave the hundreds of thousands of refugees seeking shelter in the
EU languish in no man’s land. The risks of this courageous decision
became soon obvious when some of those who crossed the border were
implicated in terrorist acts, such as the Paris attacks of November 2015,

or criminal behaviour. Many EU member states adamantly refuse to
share the burden, in particular newly elected right-wing populist gov-
ernments in Poland and Hungary. It is quite likely that this situation
and the unknown longterm consequences of Britain’s vote to leave the
EU will pose an even greater challenge to German leadership in the next
years than the euro crisis.
Overall, thus, Germany has started to face up to the challenge pro-
nounced by the Polish foreign minister and exerted a benign hegemony.
In doing this, it behaved responsible, given the many contradicting forces
which it had to mediate, like any leader. Claims of Germany abusing its
power are wide off the mark.
Chapter 16
Should It Stay or Should It Go?

Britain, EU Membership and the
Merits of Selective Integration
Britain’s place in Europe has been controversial for centuries. When, in

the 1950s, the six original member countries established the European
Community, the United Kingdom first participated in the conference of
Messina in 1956 which drew up the founding documents. Soon, however,
it withdrew its delegates and decided to establish a rival free trade area
(the European Free Trade Association, EFTA) with an awkward mix of
members. Six years later, the British government realized it had made a
mistake and applied for admission to the EU only to be vetoed by French
President de Gaulle. Only after another veto in 1967 and after de Gaulle’s
death, did Britain finally gain admission in 1973. However, it remained an
awkward member, as illustrated by the British rebate on contributions to
the EU’s budget that was negotiated by B ritish Prime Minister Margaret
Thatcher in 1984 and its decision to stay out of the euro in 1992.
Already before the June 2016 referendum, in which British voters opted
to leave the EU with a 52 to 48 percent majority, the rise of the Euro-
sceptic United Kingdom Independence Party (UKIP) put the future of
British EU membership into question. In addition, a rising number of
opt-outs requested by the United Kingdom, such as on banking union and
migration policy, suggested that the country was drifting towards exit.
Exasperation in the rest of the EU has been growing. The pros and cons
of British membership are among the most hotly debated issues in the EU,
and thus this controversy offers a principled debate on the benefits and
drawbacks of EU membership.
In the following, Martin Rhodes argues that “Brexit” is a disaster for
both Britain and the EU. For him, EU membership means both eco-
nomic benefits for Great Britain and greater influence on world affairs.
Alan Sked takes the opposite position. He argues that the economic
costs of EU membership clearly outweigh the economic benefits: trading
with the EU from outside rather than membership in the EU thus is the
best policy for the United Kingdom to pursue. This debate connects well
with those introduced in Chapters 1 and 2.
251
252 Should It Stay or Should It Go?
16.1 Brexit – a disaster for Britain and for

the European Union
Martin Rhodes
British exit (or ‘Brexit’) from the European Union is now more or less
certain. In an attempt to settle the ‘European question’ in British poli-
tics once and for all, Conservative Prime Minister David Cameron
announced in January 2013 that his party would hold an in–out referen-
dum on Britain’s EU membership by the end of 2017. Cameron renewed
that commitment after his election victory in May 2015, and the sub-
sequent passage of the UK Referendum Bill, supported by 84 per cent
of MPs (from all parties, except for the Liberals and Scottish National-
ists), paved the way for a referendum in June 2016. In this referendum,
British voters supported Brexit with a 52 per cent majority.
In the following, I set out the reasons why Brexit is a disaster both for
Britain and for the EU. The material consequences (financial, economic
and security related) are clearly in favour of membership, as are the heavy
costs of attempting to disentangle the country legally and in terms of pol-
icy obligations and opportunities from the EU. The advantages of Brexit
have been massively exaggerated by Britain’s anti-Europeans. These are
found right across the political spectrum, but especially in the vocal and
increasingly successful United Kingdom Independence Party (UKIP).
How did it come to this?

Britain’s relationship with Europe has never been settled. The term
‘awkward partner’, coined by Stephen George (1990), is more apposite.
As George explains, the calculus behind joining the European Economic
Community (EEC) in 1973 was based on how well membership could
be reconciled with Britain’s pursuit of multilateral free trade and its ‘spe-
cial relationship’ with the United States. Little has changed. Nostalgia
for that earlier era is still apparent among Brexit’s backers, even if the
United States sees the ‘special relationship’ as best served by Britain at
the heart of Europe. Echoing a long line of US Presidents and Secretaries
of State, Barack Obama told the BBC on 24 July 2015 that ‘Having the
UK in the European Union gives us much greater confidence about the
strength of the transatlantic union’ (BBC, 2015).
Margaret Thatcher (prime minister 1979–1990) made Euroscepticism
respectable, and wrapped it in a powerful rhetorical bundle with appeals
to national sovereignty and a market unfettered by EU regulations.
But she was simply tapping a rich vein that had already produced a
national referendum on EEC membership under Labour in June 1975
Brexit – a disaster for Britain and for the European Union 253
(64 per cent of voters elected to stay in), and a long-term strategy by
British governments to create a UK zone of exception inside the EU. The
paradox is that opposition to Europe has grown regardless.
The list of concessions made by Britain’s EU partners is impressive –
and gives the lie to those who argue that Britain is weak in Europe or
lacks the freedom to act independently. Britain has avoided (along with
Denmark and Sweden) eurozone membership; opted out of the S chengen
passport-free zone; convinced other member states to reduce its EU
budget payments; obtained a special protocol that prevents the CJEU
(Court of Justice of the European Union) from ruling on British compli-
ance with the EU’s Charter of Fundamental Human Rights; and, under
Protocol 36 of the Lisbon Treaty, it secured a block opt-out from all 130
pieces of EU Justice and Home Affairs legislation that preceded Lisbon
(it subsequently chose to opt back in to 35). In December 2012, Cam-
eron secured a requirement that regulatory decisions by the European
Banking Authority are backed by a majority of countries both inside and
outside the eurozone to protect the City of London. Britain also opted
out of the Maastricht Treaty’s social chapter (EU law on worker’s pay
and health and safety): the Blair Labour government’s 1997 decision to
opt back in created a powerful rallying cause for British Eurosceptics.
Thus, Britain has the best of both worlds: it is in the EU, but has
been allowed to take an à la carte approach to membership, pushing
the notion of EU ‘variable geometry’ to an extreme. And yet several
developments have been propelling it towards the exit.
First is the persistence of Thatcherite Euroscepticism in the Conserva-
tive Party, whose base is now comprised mainly of older, white, middle-
class and non-cosmopolitan supporters – making a pro-European stance a
liability for many of its MPs. ‘Conservatives for Britain’, a Brexit advocacy
group founded in June 2015, had 50 MPs, though one of its leaders, Bill
Cash, estimated that some 200 Conservative MPs oppose continued EU
membership. Ultimately around 140 supported the Leave campaign.
Second, UKIP – a nationalist anti-European party – has found support
in a similar part of the electorate to that of other far-right populist par-
ties: cultural conservatives, nationalists, those mistrustful of mainstream
politicians, and ‘the losers from globalization’ who equate the EU with
immigration and socio-economic dislocation (Twyman, 2014; Ford and
Goodwin, 2014). This groundswell of support made UKIP the most suc-
cessful British party (with 27.5 per cent of the vote) in the 2014 European
Parliament elections, delivered it 12.7 per cent of the vote in the May
2015 general election and won it two defections from the Conservatives
in 2014. One result has been a sharp shift by the C onservative Party
leadership towards UKIP’s strident anti-Europeanism – but one that has
not noticeably weakened it.
Third, as Daddow (2015: 83) argues, no British leader since 1973

has ever seriously challenged ‘the strong notion of outsiderliness under
pinning Britain’s status as a reluctant partner in the organization’,
allowing anti-European forces, including a largely Eurosceptic tabloid
and broadsheet press, to outnumber their pro-European counterparts
and d ominate the debate. Pro-European appeals to the hearts and minds
of the British people have been few and typically feeble.
The case for British EU membership

Somewhat ironically, the most coherent recent case for British EU mem-
bership by a leading politician came from David Cameron in his 2013
referendum speech (Cameron, 2013). Alongside appeals for an EU shift of
course (he called for greater competitiveness, institutional flexibility, the
repatriation of powers, greater democratic accountability, and a respect
for non-members in key eurozone decisions), Cameron also made it quite
clear why Britain should stay in: Britain will wield less foreign policy
clout outside the EU; there is no escaping the web of rules that bind even
non-single market members (Norway and Switzerland) who trade freely
with it; and British jobs and security are at risk if Britain leaves.
But Cameron also called for ‘a new settlement’ – a new treaty or treaty
changes that would have exempted the UK from certain European direc-
tives and end the ‘sclerotic, ineffective decision-making that is holding
us back’. By early 2014, pushed by UKIP’s growth and his own back-
benchers, that list extended to ‘unnecessary interference’ by European
institutions, including the European Court of Human Rights (ECHR),
in the British judicial system; and free movement, but with restrictions
on benefits and mechanisms to prevent large-scale intra-EU migration
(Cameron, 2014).
One could do worse, however, than take the following cues from
Cameron’s 2013 speech as the basis for a detailed pro-European argument –
regarding Britain’s national strength in Europe, the strength it derives, in
turn, from EU membership and single market access, and the costs of carv-
ing out a fully independent existence in an interdependent world.
1) ‘… if you join an organization like the European Union, there

are rules. You will not always get what you want. But that does
not mean we should leave.’
This statement from Cameron (2013) was as sensible as any about the
benefits, opportunities and obligations of EU membership. As already
mentioned, Britain has been politically highly astute in obtaining the
best membership terms possible, while retaining access to the EU’s single
market and other collective benefits, such as agricultural and regional
subsidies, and the strength in numbers the EU brings to its trade nego-
tiations. Britain may not always get what it wants, but more often than
not it does.
In recent reports by an independent panel on its impact in Europe,
the ‘British Influence Scorecard’ revealed more successes than failures –
in 90 per cent of initiatives – in Britain’s pursuit of its policy agenda
(British Influence, 2014, 2015). That conclusion was echoed by a report
on ‘Cutting EU Red Tape’ from the UK Government’s Business Taskforce
(2014). Its main finding was that Britain had been highly successful in
convincing the European Parliament, think tanks and the Commission,
as well as the EU Competitiveness Council of Ministers in December
2014, to support a range of regulation-reducing measures. These include
‘The Better Regulation’ plans unveiled by the European Commission in
May 2015 which extends its 2012 ‘Regulatory Fitness and Performance
Programme’ to streamline, reduce and prevent overburdensome rules on
enterprise (European Commission, 2015d).
Britain has also had key allies on such initiatives – notably the cur-
rent German and Dutch governments – and they (and others) will now
miss its liberal influence. As Carl Bildt, the former liberal-conservative
Swedish prime minister, remarked recently, the current strategic agenda
of the European Commission ‘reads like it was written in London’. He
continued thus: ‘[The] mainstream issues on the EU agenda this year –
the EU-US trade deal and the creation of a Single Market in the energy
and digital sectors – are … in the UK’s interests as well as Europe’s. That
is why many countries look to Britain to set out a vision and provide
leadership’ (Briggs, 2015).
Moreover, the UK government’s ‘Review of the Balance of Compe-
tences’ between Britain and the EU (Foreign and Commonwealth Office,
2014) revealed that where Britain did not already have opt-outs and
policy independence, EU membership was critical for key UK interests
(as in completing the single market); that the United Kingdom was a
‘policy driver’ (on external trade, services, energy, climate, environment,
food safety, digital information rights); that the benefits were higher
than the costs (in research, education, public health); or that EU policies
acted as ‘multipliers’ of UK interests (in foreign policy and development
aid) (Emerson, 2015). This is not a picture of a country enslaved. It is
rather one of the great benefits to be derived from collective action in
the global economy.
2) ‘We have more power and influence … if we can act together’

As Cameron (2013) commented, ‘There is no doubt that we are more
powerful in Washington, in Beijing, in Delhi because we are a powerful
player in the European Union. That matters for British jobs and B
ritish
security.’ Advocates of Brexit (e.g. Business for Britain, 2015) argue

on the contrary that EU membership weakens rather than strengthens
Britain in the world: the greater the EU’s role in conducting foreign
policy, the more British interests are subordinated. Liberated from the
EU, Britain could resume its erstwhile position among the great powers.
In reality, Britain after Brexit is more likely to be ‘a cross between a
greater Norway and a greater Guernsey’ (Marquand, 2013). Rather than
delivering greater national autonomy and strength, Brexit will make
Britain a dwarf on the international stage. That diminishment will be com-
pounded by the fact that after Britain’s vote to leave the EU, Scotland –
where support for membership is much higher than in England and
Wales – will almost certainly vote to leave the United K ingdom. Even
the UK government’s own review of international affairs and Europe
has noted that ‘The majority of the evidence we received argued that it
was generally strongly in the UK’s interests to work through the EU in
foreign policy’ (HM Government, 2013: 88).
A recent Financial Times (2015) editorial noted that Britain is currently
‘lurching from halfhearted engagement towards strategic irrelevance’ on
the world stage. It is largely lacking in influence over the key issues
of the day, including the war against Islamic State and the associated
ongoing instability in the Middle East, Russian belligerence in Ukraine
and the European ramifications of the Greek crisis. Add to that a shrink-
ing defence budget, and the notion that Britain still is, or could become
again, an autonomous world power is illusory: UK defence spending has
fallen from around 8 per cent in the early 1980s to 2 per cent today, and
programmed government cuts will reduce it further.
Britain has tended to see the EU’s Common Foreign and Security
Policy (CFSP), and especially its Common Security and Defence Policy
(CSDP), as detracting from its relationship with the United States via
NATO. Europhobes imagine (US protestations to the contrary) that the
United Kingdom would be stronger in NATO without the complication
of the EU. On the contrary, with the shift in focus of the United States
away from Europe to the Asia-Pacific, the United Kingdom is more
dependent on its European allies than before. It plays a critical role in
EU defence in an age of new security threats, and is well placed, with
the highest level of military spending in Europe (around 23 per cent of
the EU total), and its seat on the UN Security Council, to strengthen EU
security and make the CSDP function as the European pillar of NATO.
After the Brexit vote, that role is thrown into question.
3) ‘Continued access to the single market is vital for British

businesses and British jobs’
As for jobs – heavily dependent on trade with Europe and on the trade
deals struck by the EU on behalf of its member states – Europhobes
fantasize about Britain being at the core of new open commercial orders,
ranging in ambition (and feasibility) from an expanded E uropean Free
Trade Area (EFTA), or a new Anglophone and British Commonwealth
trade zone, to a Global Free Trade Agreement driven by a Britain revital-
ized by the swashbuckling spirit of Sir Francis Drake and the Elizabethan
era (Bruges Group, 2014; Buckle et al., 2015). Those who set their sights
lower imagine an independent Britain in the company of Norway or
Switzerland – countries who have negotiated special access to the single
market while remaining outside the EU.
But as Cameron (2013) himself pointed out, neither the Norwe-
gian nor the Swiss options are viable ones, and would simply mean
Britain’s exit into a cul-de-sac of disempowerment. A report by the
mildly Eurosceptic group Open Europe notes that the ‘Norway option’
would leave Britain with 94 per cent of its current costs (£31 billion a
year) and subject to, but with no influence over EU rules (Booth and
Howarth, 2012). Another option – to conduct trade with the EU under
WTO rules with no privileged access to the single market – would lead
to tariffs being placed on many British products, would hurt inward
foreign direct investment (many multinationals, such as car makers,
will move across the English channel), disrupt the extensive supply
chains linking British manufacturers with their EU counterparts and
damage the role played in European finance by the City of London. It
would be the worst outcome for British business – including the small
firms whose interests are so strongly pushed by UKIP and Conservative
Eurosceptics.
Among the very few rigorous independent attempts to evaluate the
costs of Brexit, Ottaviano et al. (2014) focused on the effects of trade on
British living standards net of smaller transfers to the EU. The analysis
uses a standard quantitative static general equilibrium trade model and
measures static losses at between 1.13 per cent and 3.09 per cent of
GDP, though such losses could double if dynamic effects are included.
And these do not include the very large transaction costs involved in
disconnecting Britain from the vast corpus of EU law, or its reconnec-
tion to treaties with third countries that Brexit will sunder (Nicolaides,
2013) – not to mention the costs to British business created by the
loss of access to the EU market for employment skills. It is not sur-
prising that although reluctant to get involved in political debates, the
Confederation of British Industry and large City of London banks – as
well as international ratings agencies – have warned against the costs of
Britain leaving the EU (CBI, 2013). The EU would also suffer from the
loss of around 15 per cent of its collective GDP.
Surveys consistently reveal the high level of support in the British
business community for EU membership. Of the respondents to a City
of London survey in 2013, 84 per cent wanted the UK to stay in the EU,
while 90 per cent agreed that membership benefited the economy as a

whole (TheCityUK, 2013). A British Chambers of Commerce (2015)
survey revealed that 74 per cent of businesses employing more than
500 people believed that withdrawal from the EU would have a negative
effect on the economy, and even 63 per cent of small firms employing
between 1 and 19 people concurred.
Conclusion
The great bulk of evidence reveals that Britain enters a future of eco-
nomic losses, business uncertainty and foreign policy marginalization
as it leaves the EU. And yet much of the debate on m embership took
place in a fact-free zone, one in which English, rather than B ritish
nationalism, set the tone and pace of d iscussion, and a fiercely Euro-
phobic press was driving a good part of public opinion. In June 2015,
a cross party group of MPs was formed to campaign for Brexit; mobi-
lization by those opposed to exit remained weak; and the so-called
‘outers’ were the most passionate voters. The voters in play – those
less interested in politics – were hard for the ‘yes’ campaign to reach
(Shakespeare, 2015). As David Cameron’s EU referendum gamble
failed to pay off, Brexit will occur – a disaster both for Britain and the
European Union.
16.2 The case for Brexit: why Britain should

leave the EU
Alan Sked
The debate over Britain’s membership of the EU has often been
marred by mythology on the one hand and prejudice on the other;
simple logic dictates, nonetheless, that Britain should abandon the
EU. The case is clear and overwhelming. Indeed, having chosen to
remain outside the eurozone and harbouring no desire to enter it to
embark on fiscal and political union, Britain is already semi-detached
from the EU.
Two states have already left the European Union – Algeria in 1962
and Greenland in 1985. However, since both were overseas territories,
they hardly provide a guide for the withdrawal of a full member state.
Greece, of course, may soon do so. Meanwhile, the hypothetical case
of withdrawal by the Netherlands (‘Nexit’) was examined by Capital
Economics of London in February 2014, with the study concluding that
the Netherlands would be a net gainer by leaving (Capital Economics,
The case for Brexit: why Britain should leave the EU 259
2014). It would save contributions to the EU budget; it could rescind

EU regulations; it would save on its share of EU bailouts to poorer,
Southern European members; it could run its own monetary and fiscal
policies; and it could develop trade links with economically dynamic
countries around the world. But back to Britain…
This text is based on the assumption that it is normal for countries
to want to be independent and to run their own affairs and that demo-
cratic nation states are best placed to thrive economically, achieve politi-
cal and social harmony and remain at peace. The EU is seen, therefore,
to be historically misconceived and already appears to be in decline from
over-regulation, lack of democracy and accountability and bureaucratic
centralization. Its share of world GDP has been falling for some time
and continues to do so, and it has very little influence in international
affairs. It relies on myths (keeping the peace in Europe; furthering liv-
ing standards; and consolidating democracy) to legitimize its continued
progress towards ever closer union while its institutions become more
sclerotic and ever less popular. All these factors provide the background
to the present debate over Britain’s membership of the EU. However,
since other chapters in this book deal with these themes, the main focus
of this one will be the economic advantages for Britain of leaving the EU.
The economic case for Brexit

Journalists and others often appear to take it for granted that the only
factor that counts in the debate over British membership of the EU is the
economic one. Today, immigration is also highlighted by those who find
other issues too complicated or intellectual. This contribution will have
little to say about immigration, although the UK economy has benefited
from it in many ways and will still require immigrants whatever the
outcome of a referendum. Clearly, however, withdrawal from the EU
will mean that immigration as a policy will revert to the control of the
British government. But how that control is exercised can be debated
once Britain has withdrawn. It is not necessary to debate future immi-
gration policy here. The economics of EU membership and withdrawal
do, of course, need to be addressed.
Britain was told by Harold Macmillan in the 1960s that discus-
sions over EEC membership amounted merely to ‘commercial negotia-
tions’. Edward Heath asserted equally mendaciously that there would
be no loss of sovereignty involved. By 1970, Heath was so desperate
for B
ritain to join the EEC that the civil servant leading the negotia-
tions followed the motto: ‘Swallow the lot. Swallow it now.’ So Britain
accepted all the EEC’s demands, including a new Common Fishing Pol-
icy which surrendered all her fishing rights. All this was done partly to
secure her ‘the political leadership of Europe’ (which never materialized)

and partly to help Tory governments use Europe to end Britain’s rela-
tive economic decline. Yet if European states were experiencing faster
growth, this was on account of conditions there – rebuilding European
cities after the war, the reduction of trade barriers within the European
customs union established by the EEC, and the continuing structural
switch from a griculture to industry – a process which ended in Britain
a century before. Britain’s own economic problems at the time were
entirely of her own making – militant trades unions, high taxes and high
overseas defence expenditure – and would be solved by British govern-
ment action in the 1970s and 1980s. The EEC brought economic prob-
lems not solutions – like membership of the European Exchange Rate
Mechanism (ERM) which cost the country billions; masses of red tape
on industry and finance; not to mention the higher food prices caused
by the Common Agricultural Policy and the disappearance of Britain’s
fishing fleet, fishing communities and fish stocks thanks to the Common
Fisheries Policy. These policies also caused Britain to contribute ever-
increasing sums annually to the EU budget (£21 billion gross today),
while the overall cost of EU membership has been estimated by some
experts to be the equivalent of 4 per cent of GDP (rising to 10 per cent
if opportunity costs are factored in). That is a huge sum of money (£40–
100 billion annually).
Once again, after the world crash of 2008, it was Britain’s own
actions – nationalizing banks and undertaking quantitative easing –
that saved the British economy. Had she followed the Europhiles’ advice
of a dopting the euro as her currency, she would have been in a similar
position to Greece and other European debtor countries in the eurozone,
faced with a policy of austerity and forced to deflate internally amidst
social penury and massive unemployment. It was in the eurozone, too,
that Berlin and Brussels forced out elected leaders in Italy and Greece
and had them replaced by technocrats. P rofessor Ulrich Beck then
wrote his best-selling German Europe, w arning Southern European
countries about the permanent prospect of G erman neo-colonialism
albeit under the ‘best’ generation of Germans ever (Beck, 2013). Out-
side the eurozone, mercifully, in 2015 Britain’s unemployment rate is
half that inside it, while her growth rate is twice as much. Moreover,
the prospects for EU growth are not good due to lack of structural
reforms and demographic decline. Yet, while Britain’s success causes
hundreds of thousands of Europeans from France, Spain, Italy, Greece,
Romania and Bulgaria to come to the United K ingdom in search of
work, her European partners try hard to undermine her by, for exam-
ple, a ttempting to ban the City of London dealing in euro-denominated
securities. The CJEU has just prevented this from happening, although
the European Central Bank may still appeal. (Christopher Noyer, Gov-
ernor of the Bank of France said in December 2012: ‘We’re not against
some business being done in London but the bulk of the [euro] business
should be under our control. That’s the consequence of the choice by
the UK to remain outside the euro area.’ Quoted in the Financial Times,
2 December 2012.) The EU is also attempting to impose a tax on all
financial transactions, another attempt to undermine the success of the
City of London. Indeed, if this is what happens to the City when the
United Kingdom is a member of the EU, what is the point of her stay-
ing inside it?
Coming out of the EU would probably not harm the City. In the words
of the Vice-Governor of the Chinese Development Bank, Gao Jian, in
April 2013 when discussing this possibility: ‘The City’s position as a
global financial centre with close connections with Hong Kong would
not change. Because of its infrastructure, because of its legal environ-
ment, because of its participation in the world, China will definitely use
London as a financial hub for many international transactions’ (quoted
in Bootle, 2014: 170). In January 2013, Moorad Choudhry said: ‘The
thing to remember is what attracted firms to London in the first place.
Freedom from excessive bureaucracy and high taxation is what led to
the Eurobond and FX trading markets siting themselves in London in an
earlier era and this same freedom will ensure that banks and other finan-
cial firms stay in the City even after a “Brexit” (a British exit)’ (quoted
in Bootle, 2014: 169).
Finally, Britain suffers economically from the fact that member states
of the EU – Belgium, Luxemburg, and Ireland for example – provide
tax havens for multinational corporations who therefore avoid p aying
tax in the United Kingdom. Indeed, the present President of the EU
Commission, Jean-Claude Juncker, when prime minister of L uxembourg
for 18 years, has recently been revealed as having abetted these c orporate
giants to achieve their aims. Clearly, therefore, Britain would be better
off economically outside the EU.
Brexit would entail no job losses

Would this mean losing jobs? Europhiles claim 3 million would be
lost, but this is a deliberate distortion on their part of a February 2000
report by the National Institute of Economic and Social Research which
merely stated that up to 3.2 million jobs were ‘directly associated with’
the export of goods and services to the EU (cited in Stewart et al., 2015:
5). The then director of the institute, Martin Weale, denounced the
Europhile spin as ‘pure Goebbels’. Indeed, the same paragraph of the
report stated: ‘In conjunction with the potential gains from withdrawing
from the Common Agricultural Policy and no longer paying net fiscal
contributions to the EU, there is a case that withdrawal from the EU
might actually offer net economic benefits’ (quoted in Stewart et al.,
2015: 5).
The Europhiles claim that withdrawal would lead to a major tariff war
between the United Kingdom and the EU, a pure fantasy on their part.
Why? Because 6.5 million jobs in Europe are directly associated with the
export of goods and services to the United Kingdom. The EU sells far
more to us than we do to it. Indeed, the United Kingdom is the eurozone’s
largest export market. So why would political leaders risk 10 million
jobs in a tariff war? What would be the point? Take the case of cars, for
example. The distinguished British economist, Roger Bootle, has written:
‘after a UK departure from the EU, umpteen European firms, including
German car manufacturers BMW and M ercedes, would be d esperate to
maintain free and open trading links with the UK’ and would lobby for
a free trade treaty (Bootle, 2014: 156). He points out that although the
British car industry employs 700,000 people and accounts for 10 per cent
of British exports, and, although under EU rules the current tariff on
cars is 10 per cent and 5 per cent on imported components, Britain, on
the other hand, is only 13th in the world league of car manufacturers,
so that if there were a trade war and the United K ingdom reciprocated
with the same tariffs on imported cars, there would be a huge net loss
to EU exporters. Free trade, therefore, would be the most rational out-
come. Japanese and US car manufacturers would no doubt be politically
pressured to issue dire warnings that they would pull out of the United
Kingdom if Britain left the EU, but there would be no point in listening
to them. They already threatened to do this if Britain refused to join the
euro. Today, however, the United Kingdom is still outside the eurozone,
and they are still manufacturing cars in Britain and are benefiting enor-
mously as a result.
Today, the global average tariff for all goods and services is
3 per cent. In Europe and the United States, the respective figures
are 1.09 per cent and 1.58 per cent. Switzerland charges zero and
Norway 0.58 per cent. The rules of the World Trade Organization
(WTO), moreover, follow the principle of ‘the most favoured nation’,
which means that member states cannot impose arbitrarily high tar-
iffs on one another. Hence a trade war would be illegal. Even if one
occurred against WTO rules, who would possibly benefit? The United
Kingdom, as already seen, would be in a more advantageous position
than the EU. But why bother? In reality, a free trade treaty would be
signed, probably one that abolished tariffs altogether. F oreign investors
– Americans, Chinese, Arabs, Japanese – would therefore also benefit.
There is no need to examine Swiss or Norwegian arrangements. The
British economy is so much bigger and trade with the EU so much

greater, that any deal with the United Kingdom would be unique.
Even so, the amount of trade done by Britain with the EU has to be
put into perspective. Only about 14 per cent of British GDP is involved.
Indeed, if the ‘Rotterdam/Antwerp effect’ is factored in – about 5 per cent
of exports to the Far East and elsewhere are routed through these ports –
maybe only 10 per cent of British GDP is involved in trade with the EU.
So why should it determine the future of the British economy? It does
not make sense. Europhiles talk as if the whole economy was somehow
dependent on the EU. It clearly is not.
Then there is their fetish about the Single Market. Membership means
that British products enter it on an equal footing with all other goods
produced inside the EU. Yet the United States, Japan, China, India and
many other countries all export successfully to the EU without being
members of the Single Market. Most of them are currently negotiat-
ing free trade treaties with the EU which if successful would still keep
them outside the Single Market. So why is it essential for the United
Kingdom to be part of it? As pointed out in the previous paragraph,
most (90 per cent) British economic activity takes place outside the EU–
trade with the rest of the world and the 75–80 per cent of economic
activity that takes place within the UK domestic market – retail trade,
utilities, entertainment, bars, restaurants, services, home repairs, dry
cleaning, maintenance etc.
Single Market regulations, moreover, have often brought severe
disadvantages. For example, the European Working Time Directive has
undermined the National Health Service since 2009 by limiting the expe-
rience of junior doctors, thus leading to a shortage of consultants. The
Single Market also ensures the free movement of people, which has seen
a huge influx of economic migrants to the EU from the poorer parts of
the EU and which has put a severe strain on local social services. More
than anything else perhaps, this has created a political backlash against
the EU. Clearly most immigrants are ambitious and hard-working, but
their presence undoubtedly creates strains on schools and hospitals,
leading to resentment from poorer citizens in particular who also have
to compete with them for jobs or who see their level of wages depressed
by this competition. Outside the Single Market, of course, immigration
will be controlled by the British government.
The benefits of withdrawal

Once free from EU membership, a number of benefits will accrue to
the United Kingdom. As a normal, self-governing democracy again,
it could negotiate its own free trade treaties with other countries and
trading blocs; it could represent itself on international trade organiza-

tions (presently, being only one of 28 EU member states, its own inter-
ests are submerged and overlooked); it would not have to impose EU
health and safety regulations on the 75 per cent of its economy that is
not involved in trade with the EU; it could concentrate on boosting its
already growing exports to the wider world where it has a trade surplus;
it could re-claim its fishing grounds; and its government would not have
to spend 40 per cent of its time on EU business. Certainly, exporters to
the EU would continue to have to abide by EU regulations, but they
already have to do this with regard to the regulations of any external
single market, whether it is that of the United States, China or Japan.
All independent states do this. It is utterly normal. To trade with the EU,
you most certainly do NOT have to be part of it!
The vested interests that support EU membership are large inter-
national law and consultancy firms, including City ones, who make a
fortune arguing over every comma of regulations and contracts; large
multinational companies, who use EU regulation to keep small com-
panies out of markets and decrease competition; and international
corporations who use various parts of the EU to avoid paying taxes
elsewhere. There are also the political dreamers who fail to see the eco-
nomic misery the EU has already caused millions of its citizens, not to
mention its lack of both democracy and international influence.
Conclusion
Now that the UK has voted 52% to 48% to leave the EU, the benefits
outlined above should begin to be reaped once a new British govern-
ment has concluded a final exit deal with Brussels. Britain will then
reclaim her position as a normal self-governing democracy.
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Index
Acquis communitaire 4, 121, 130, and its future in the EU see Brexit
210 British Chambers of Commerce 258
Afghanistan 1, 222–224, 237 Bulgaria 89, 209–211, 216, 246,
African Union 18, 195, 223 260
Agenda 2000 210 Bundesbank 155
Al-Qaeda in the Islamic BUSINESSEUROPE 115–118
Maghreb 225 Buzek, Jerzy 42
Algeria 83, 258
American Administrative Procedure Cameron, David 2, 49, 252–258
Act 85 Canada 170
Amsterdam, Treaty of (1997) 4, 49, CARICOM 18
53, 59 Chad 222
Arab spring 44, 195–196, 219, 225, Charter of Fundamental Rights 67,
236 87, 101–102, 253
Association of Southeast Asian China 19, 164, 183, 201–202,
Nations (ASEAN) 18, 194–196 240–248, 261–264
Australia 170, 181, 186, 188 Chirac, Jacques 220, 226
Austria 67, 149 Christiansen, Thomas 100
Churchill, Winston 207
Banking Union 32, 47–52, 136, Cioloş, Dacian 183
159, 165, 172, 248, 251 citizenship, of the European
Barro, Robert 152 Union 94–106
Barroso, José Manuel 11, 23, 120, civil society 72, 74–77, 105–106,
160, 213 122, 196, 217
Beck, Ulrich 260 Clegg, Nick 39
Becker, G. S. 124 Climate Change 59, 197, 202
Belarus 202 Co-decision procedure 32–33, 66,
Belgium 3, 66, 68, 261 71, 78
Bildt, Carl 255 Cohesion policy 182
Blair, Tony 220, 226, 253 Cohesion Fund 211, 246, 248
Bohman, James 78–79 Cold War 2–3, 15–18, 99, 106, 191,
Bootle, Roger 262 207, 212, 219, 234–236, 241,
Border Assistance Mission for the 245
Rafah Crossing Point 230 Comitology 39
Bosnia 222 commercial policy see trade policy
Brandt, Willy 241 Committee of European Banking
Brazil 186, 188, 202 Regulators 163
Bretton Woods conference/ Committee of European Insurance
system 15, 144, 153, 161 and Occupational Pension
Brexit 251–253, 256–261 Regulators 163
Britain 2, 9, 15–19, 95, 177, 203, Committee of European Securities
219, 223–229, 234, 242 Regulators (CESR) 163
294
Index 295
Committee of Professional Defraigne, Pierre 120

Agricultural Organizations Delors, Jacques 130
(COPA) 187, 189 democracy promotion 194–195,
Committee of Wise Men 159, 163 197, 236
Common Agricultural Policy democratic deficit 4, 7, 17, 64–66,
(CAP) 3, 8, 42, 50, 175–190, 70–77, 97–98, 116, 159, 173
201, 211–212, 245, 260, 262 Denmark 4, 45, 64, 192, 253
Common Fisheries Policy (CFP) 42, development cooperation 195
260 Doha round 176, 186–187
Common Foreign and Security Policy Draghi, Mario 134, 146, 171, 248
(CFSP) 191, 219, 256 Dür, Andreas 126
Common Security and Defence Policy
(CSDP) 9, 219–223, 226–233, eastern Europe 9, 207
256 Economic and Monetary Union
competition policy, in the EU 34, (EMU) 45–62, 99–101, 106,
40, 130 118, 128, 133–136, 146–153,
confederation 18, 187 157, 170–174, 237
Congo, Democratic Republic of 222 Economic Community of West
Conservative Party (UK) 2, African States (ECOWAS) 18
252–253 education policy 17, 59, 69, 167,
Copenhagen Accords 202 210
Copenhagen Criteria 209–210 Empty Chair Crisis 3, 24
Corporate Europe Observatory 120 enlargement, of the European
Council of Europe 83, 163 Union 2, 8, 21, 29–33, 89,
Council of Ministers 17, 39, 46, 100–105, 175, 180, 184–218,
52–54, 64–66, 70–76, 81–87, 246
255 environmental policy 17, 22, 49,
Council of the Federation of 59, 176, 184–189, 194, 197,
European Industries 117 200–202
Court of Auditors 179 Estonia 208, 216, 224
Court of Justice of the European EU Advisory Mission for Civilian
Union (CJEU) 4–7, 39–41, 47, Security Sector Reform in
49, 53–54, 65, 71, 80–96, 253, Ukraine 230
260 EU Battle Groups 228, 231
see also European Court of Justice Eurobarometer 13, 66, 97, 111,
Crawford, Charles 44 143, 176, 183
Crimea 203–206, 241, 249 Eurobond 154, 261
Croatia 210–217 Eurogroup 22–24, 55–56, 59–61
Cuba 44 European Arrest Warrant 41
customs union 139, 168, 260 European Atomic Energy Community
Cyprus 1, 4, 104, 146, 151, 247 (Euratom) 3
Czechoslovakia 207 European Banking Authority
Czech Republic 209–212, 229, 242 (EBA) 159, 165, 253
European Central Bank (ECB) 6,
Davignon, Etienne 120 13, 47–58, 87, 128–136,
defence policy 4, 9, 45, 56, 58, 101, 140–159, 165–166, 171–172,
219–220, 226–227, 231–235 239, 248, 261
296 Index
European Coal and Steel Community European Food Safety Agency 179
(ECSC) 3, 5, 10, 13, 83, 117, European Insurance and
208 Occupational Pensions Authority
European Commission 3–11, (EIOPA) 159, 163, 165
22–61, 64–68, 75–97, 105–130, European Medical Association 115
139–154, 160–189, 195, 201, European Parliament (EP) 18,
213–215, 225–232, 255, 261 40–47, 79, 119, 124–127, 173,
European Community (EC) 19, 31, 255
82–88, 95, 99–103, 118, 153, elections 35–36, 55, 67, 77–78,
175, 180–187, 251 253
European Convention of Human powers of 4, 36–37, 51–54,
Rights 67 64–68, 80, 143, 174, 190–198,
European Council 17, 24, 28–33, 232
43–57, 60–63, 75, 221, 224, and co-decision 6, 32–34, 39, 46,
229–230 53, 70, 78
European Council on Foreign European Political Community 83
Relations (think tank) 224 European Political Cooperation
European Court of Human (EPC) 191, 219
Rights 83–86, 91, 94, 254 European Posted Workers
European Court of Justice (ECJ) 4, Directive 86
49, 80–86, 139–140, 182 European Roundtable of
Costa v. ENEL ruling of 1964 80, Industrialists (ERT) 118, 120
84 European Security and Defence
Gauweiler et al. v. Deutscher Bun- Policy (ESDP) 199, 219–221
destag 87, 90 European Securities and Markets
Van Gend en Loos ruling of Authority (ESMA) 165
1962 84 European Security Strategy of
Kadi v. European Council ruling of 2003 192, 219, 227–228, 277
2008 87, 94 European Stability Initiative (think
Laval Ruling of 2007 86, 140 tank) 217
SIMAP ruling of 2000 41 European Stability Mechanism (ESM)
see also Court of Justice of the 51–55, 61, 136, 153–157, 171,
European Union 248
European Defence Agency 223, European System of Financial
224, 227, 229 Supervisors (ESFS) 159, 165
European Defence Community 83, European Systemic Risk Board
219 (ESRB) 165
European Economic Community European Systemic Risk
(EEC) 3, 10, 93–95, 252, Council 159
259–260 European Trade Union
European elections see European Confederation 115
Parliament, elections European Union 4, 10
European External Action Service budget 32, 141, 176–188, 251,
(EEAS) 16, 61, 198, 227–229, 259–260
230–232 ‘constitution’ of 1
European Financial Stability Facility critique of 3, 13, 19–29, 37, 50,
(EFSF) 32, 171 65–79, 81–83, 143
Index 297
decision making in 4, 18, 33, Georgia 225

47–62, 64–66, 84 Germany 9, 18–25, 43, 82, 87, 100,
efficiency of 30–44 104, 128–156, 165, 203–207,
identity / role of 15, 98–114, 219, 224–235
191–204, 221 hegemony of 234–250
interest groups in 116–128 Constitutional Court of 23,
policies of see the subject headings 95
euroscepticism 11, 35, 63, 103, and France 3, 10, 14–19, 31, 50,
252–253 132, 137, 208, 244–247
Eurozone 1, 23, 29–32, 54, 72, Goldsmith, Jack 200
100, 128, 160–172, 211, 235, Greece 1, 4, 13, 18–24, 32, 43, 55,
240–254, 258–262 67, 104, 134, 141, 147–157,
crisis in the 8–13, 43, 50–52, 87, 170, 205–208, 212, 237,
103–106, 140–145, 167, 206, 240–247, 258–260
211–212 Greenland 258
eurosclerosis 3, 5, 45
‘Everything but Arms’ 186, 201 Haas, Ernst 5
Habermas, Jürgen 137
Fabbrini, Sergio 62 Habsburg Empire 22
FIDESZ 209–210 Hall, Peter 157
FinanceWatch 169 Hallstein, Walter 117
financial crisis of 2008/09 245 High Representative of the Union
financial regulation, in the EU 30, for Foreign Affairs and Security
40, 120–122, 133, 158–174, 191 Policy 194, 225, 229
Financial Services Action Plan Hitler, Adolf 82
(FSAP) 158, 163 Hobsbawm, Eric 237
Financial Stability Board 164, 166 Hoffmann, Stanley 5
Finland 25, 146, 213, 217, 229 Hungary 89, 104, 156, 202–203,
Fischer, Joschka 240 207–209, 211–212, 216, 229,
Fischer-Boel, Mariann 182 242, 250
Fischler, Franz 186
France 25, 50–53, 83, 148, 153, Identity 7–8, 14–15, 67, 80,
203, 219, 223–229, 234–238, 97–114, 192, 198, 214–217
260 Immigration 14, 26–27, 48, 53, 86,
and Germany 3, 10, 14–19, 31, 149, 253, 259, 263
132, 137, 208, 244–247 illegal 16
referendum of 2005 45, 102, India 19, 194, 202, 263,
143, 213 India FDI Watch
Functionalism 5 interest groups 34, 115–116, 183,
187
G 20 164 intergovernmental conferences
Gaulle, Charles de 24, 29, 34, 83, (IGCs) 51
213, 251 intergovernmentalism 5–7, 30,
General Confederation of 45–46, 51–63
Agricultural Cooperatives deliberative
(COGECA) 187–189 intergovernmentalism 57–60
George, Stephen 252 internal market see single market
298 Index
International Court of Justice Maastricht treaty 23, 45, 243, 253

(ICJ) 91–92 content/effects of 53, 58–64,
International Monetary Fund 100–103, 128–133, 146, 151,
(IMF) 50, 141, 146, 150, 158, 191, 219, 236, 239
154 signature of 4
Internet 27 Macedonia 222
Iraq 1, 16, 191–192, 237 Macmillan, Harold 259
Ireland 1, 4, 35, 50, 133, 149–157, Majone, Giandomenico 39–40,
166, 246–248, 261 69–70
Islamic State 256 Mali 223, 226
Israel 15, 197 Malta 4
Italy 3, 16–18, 25, 146–148, 153, Mann, Thomas 243
182, 192, 217, 236, 249, 260 Marshall Plan 246–248
Members of the European Parliament
Japan 118, 153, 181, 262–264 (MEPs) 36–37, 42, 67
Jefferson, Thomas 38 Merkel, Angela 23, 31–32, 57, 120,
Joint Decision Trap 29 134–235, 236–249
Juncker, Jean-Claude 3, 35, 55–56, Milward, Alan 26
119, 225, 261 monetary union see economic and
monetary union (EMU)
Kagan, Robert 200, 220 Monnet, Jean 12, 43
Kant, Immanuel 14 Moravcsik, Andrew 5–6, 69–70
Kelemen, R. Daniel 7, 81, 88, Mussolini, Benito 82
200
Kindleberger, Charles 238–239, National Institute of Economic and
243–245 Social Research 261
Kissinger, Henry 236 neofunctionalism 5, 45, 49
Kohl, Helmut 132, 235 neoliberalism 10, 118, 157, 238
Kosovo 44, 221 Netherlands 3–4, 43, 143, 146,
258
Labour Party (UK) 252–253 referendum of 2005 45, 102, 213
Lamfalussy, Alexandre 160–164, NGOs (non-governmental
173 organizations) 25–26,
Lamy, Pascale 120 115–119, 122–126, 169, 186
de Larosière report 159, 165 Nice, Treaty of (2000) 4, 59
least developing countries Niskanen, W. A. 124
(LDCs) 186 no bail-out clause 237
Lehman Brothers 158 Nordic Defence Cooperation
Libya 44, 202–203, 219–225 (NORDEFCO) 229
Lincoln, Abraham 65 normative power 8, 161, 191–204,
Lisbon, Treaty of (2009) 1, 2, 6, 29, 220
35, 43–49, 52–59, 63, 67, 77, North American Free Trade
80, 87, 92–105, 116, 126, 194, Agreement (NAFTA) 18
220–221, 227, 253 North Atlantic Treaty Organization
Lisbon agenda 56, 101 (NATO) 203–211, 220–231,
Luxembourg 3, 25, 34–36, 80–82, 237–242, 256
91–95, 102, 261 Norway 181, 254–257, 262
Index 299
Obama, Barack 241, 252 Rome, Treaty of (1957) 3, 83–84,

Olson, Mancur 123–124 95, 100, 106, 128, 162,
open method of coordination 60 178–180, 184
Optimum Currency Area 131–132, Russia 2, 16, 19, 44, 56, 201–208,
145, 149 223–226, 229–231, 235–242,
Orbán, Victor 89, 202 244–249, 256
ordinary legislative procedure 32,
53 Sarkozy, Nicolas 23
Organisation for Economic Scharpf, Fritz 29, 69–70, 138, 173,
Co-operation and Development 185
(OECD) 155–157, 181 Schäuble, Wolfgang 238
output legitimacy 138 Schengen Agreement 253
Oxfam 222 Schimmelfennig, Frank 100
Sedelmeier, Ulrich 100
people, movement of 14, 48–49, 94, Sikorski, Radek 243
135, 139, 263 single currency 43, 60, 102–103,
permissive consensus 4, 25, 103, 117, 129–137, 145–150, 163,
143 170, 236
pillars of the EU 4, 52–53, 130, Single European Act (SEA) 4, 34,
186, 219 118, 139
political parties 5, 54–55, 68, 71, single market 14–17, 21, 28, 34,
76–78, 98, 143, 175, 194, 215– 40, 44–50, 59, 105–106, 118,
216, 252 124, 130–137, 147, 162,
Portugal 4, 18, 67, 133, 149–150, 165, 185, 206, 246, 254–257,
156–157, 205–208, 212, 263–264
246–248 Single Resolution Mechanism
Posner, Eric 200 (SRM) 165, 172
Putin, Vladimir 241–242, 249 Single Supervisory Mechanism
(SSM) 165, 172
qualified majority voting Slovakia 207, 209, 211–212, 229,
(QMV) 33–34, 66, 72, 232 242
al-Quaddafi, Muammar 202 Slovenia 212, 216
‘Social Europe’ 21, 102
Reagan, Ronald 50 South Korea 181
realism 199 sovereignty 7–9, 30, 38, 53, 57,
referendum 45, 64, 83, 102–103, 84–86, 135–139, 196, 227–228,
141, 213, 215 234–235, 246, 252, 259
on British membership in the Soviet Union 15, 22, 207, 216
EU 2, 9, 49, 226, 251–264 Spain 4, 16–18, 25, 42, 50, 102,
regional integration 5, 18–19, 168, 133, 146, 149, 154–157, 205,
195–196 208, 212, 244, 246–249, 260
in Africa 18, 195 spillover 17, 123, 168
in Asia 18, 194–196 Stability and Growth Pact (SGP) 50,
Risse, Thomas 106 52, 128, 237
Roma 216 Stalin, Josef 207
Romania 89, 177, 209–216, 246, St. Malo summit of 1998 219–221,
260 226, 229
300 Index
structural funds 211, 246–248 136, 152–155, 161, 164, 181–

subsidiarity 49, 69, 88 188, 191–198, 200–207, 221,
Suez crisis 15 229–231, 234–239, 245
supranationalism 6, 30 46, 232 and Bretton Woods 153
Sweden 86–87, 104, 213, 217, 253 and confederalism 62
Switzerland 62, 68, 181, 254–257, and trade with EU 130, 141, 175,
262 179, 190, 252, 262, 264
Syria 1, 203, 225, 237, 244 Supreme Court of 92–93
Szabo, Stephen 241 see also North American Free
Trade Agreement
TARGET 155–156
TARGET2 155 Vanackere, Steven 44
terrorism 16, 41, 87, 96 Van Rompuy, Herman 32, 56
Thatcher, Margaret 9, 251–253 Verdun, Amy 100
trade policy 16, 26, 53, 191–194, Verheugen, Günther 39
201 de Villepin, Dominique 223
Transatlantic Trade and Investment Vogel, David 200
Partnership (TTIP) 130, 190 Volcker, Paul 130
Transparency Register 115, 119
Tsipras, Alexis 24 Werner Plan 128, 153
Turkey 22, 202, 206, 213–214, 217, Whitman, Richard 217
231 worker mobility see people,
movement of
UK Independence Party Working Time Directive (WTD) 41,
(UKIP) 251–257 263
Ukraine 2, 23, 56, 100, 202–208, World Food Programme (WFP)
223–226, 230, 235, 240–242, 230
256 World Trade Organization
Unilever 177, 182 (WTO) 91–94, 184–186, 257,
United Kingdom (UK) see Britain 262
United Nations (UN) 86–87, 91, World Wide Fund for Nature
94, 197, 202–203, 222–223, 115
230–231, 256
United States of America 3, 9–16, Yanukovych, Viktor 240–241
19, 29, 50–51, 70, 87, 94, 126, Yugoslavia 60, 191, 219

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THE EUROPEAN UNION SERIES

General Editors: Neill Nugent, William E. Paterson

Published Sieglinde Gstöhl and Dirk de Bievre The Trade

List of Figures viii

Introduction: Key Controversies in European Integration 1

1 The European Union: Success or Failure? 10

2 The Political Efficiency of the EU 29

3 More Powers for Brussels or Renationalization? 45

4 How Democratic is the EU? 64

5 Too Much Power for the Judges 80

5.2 A strange institution 91

6 Can There Be a Common European Identity? 97

8 The Future of the Euro: Union or Disintegration? 128

9 The Euro: Economic Success or Disaster? 145

10 Can the EU Tame Big Finance? 158

11 The Big Waste? The Common Agricultural Policy 175

11.2 The European agricultural fortress under attack 183

12 Does the EU Act as Normative Power? 191

13 Is EU Enlargement a Success Story or Has It Gone Too Far? 205

14 Towards a Common European Army? 219

15 A New German Hegemony: Does It Exist? Would It be

16 Should It Stay or Should It Go? Britain, EU Membership

2.1 The growth of EU legislation: cumulative count of acts in

ASEAN Association of Southeast Asian Nations

IGCs Intergovernmental Conferences

Marburg and Salzburg, February 2016.

Karen J. Alter is Professor of Political Science and Law, Northwestern

Henrik Enderlein is Director of the Jacques Delors Institut and Profes-

T. Evas and C. Lord) and European Economic and Social Constitution-

Miguel Otero-Iglesias is Senior Analyst in International Political Econ-

Alexander von Humboldt research fellow. He gained his doctorate at

In mid-2005, French and Dutch voters rejected a proposal for a Euro-

Can the EU survive? A community between crisis and revival

The scholarly debate

The Commission, according to Moravcsik, was of little help in produc-

Structure and scope of this book

is taken up in Chapter 6, with contributions by Ulrike Liebert and Jona-

points to the advantages that accrue to acceding states. ­Christopher

The European Union: Success

Is the European Union a success or a failure? Responses to this question

international affairs, and has provided an institutional template that is

1.1 Why Europe works

has had – at best – a mixed record on dealing with security threats.

founded in order to encourage peace between Germany and France as

Europe as a global power

Europe as an institutional model

1.2 The rise and fall of the EU

However, EU-enthusiasts also make three cardinal errors. First, they

Historical record: good and bad

ones. Germany was one of many EU member states involved in collec-

A fatal crisis for the EU

The end of EU-led integration

Staunch supporters of the EU tend to blame member states rather

mounting pressures using their outdated and dysfunctional institutional

The Political Efficiency of the EU

In 1988, German political scientist Fritz Scharpf published a seminal arti-

capacity for adaptation and its institutions continue to function com-

2.1 The EU as efficient polity

The European Council

This was not always the case. In response to complaints about

Regardless of the modality, voting is the key to speedy Council

Caricatures of EU inefficiency: the Commission

2.2 The EU: quick to regulate, slow to adapt

points to the advantages that accrue to acceding states. Christopher