Two-speed Europe will save the EU

(jesse1dog, CC BY)

The idea of a two-speed Europe should be viewed positively. In economic policy, permission for Member States not to join certain EU initiatives can – figuratively speaking – fill the national purse. Which is not to say that all ideas should be contested.

The slogan “two-speed Europe” is mainly viewed negatively in Poland. This is because the context in which it is used in Poland is rather narrow: when they hear this slogan, numerous commentators see only the spectre of discrimination against Poland, consisting of denying the country its EU funds.

“Two-speed Europe” permanently acquired negative connotations in Poland around 2012, when the slogan was frequently invoked in the context of criticizing the plan to create a separate budget for the euro area. Politicians raised fears that a separate budget for the euro area would limit the European funds for Poland, because the currency union would garner the money for its own projects. Therefore, a “two-speed Europe” would undermine European solidarity.

Two-speed Europe and the national purse

Both the coalition politicians and the opposition raised such fears. There was just one conclusion among the public: a two-speed Europe is something terribly bad.

However, the idea of a “two-speed Europe” should be viewed positively. Generally, in certain aspects of economic policy it is precisely a two-speed Europe, in other words recognition of the fact that Member States should have the right not to join certain EU initiatives and directives that can – figuratively speaking – fill, and not empty, the national purse. How? Countries will have greater possibilities to introduce free-market changes, which will make people richer.

Not all actions of Brussels are good for EU countries – one example is the changes planned by Brussels which in the name of fighting false self-employment could complicate real self-employment. However, this does not mean agreement with the argument that the EU is a project which leads to poverty. Some of the actions of the EU definitely support wealth creation. An example is the development of a single digital market.

Similarly, “two-speed Europe” should not mean a permanent, official division of states between those that are always pursuing strong integration and those that are loosely integrated (apart from the case of the euro area, whose existence already creates such a division). The term should simply illustrate the acceptance in the EU decision-making process of two approaches: on a specific issue regarding potential “supererogatory” directives and programmes, the state may either decide on integration (e.g. adopt the given directive or initiative) or it can opt out.

The history of integration shows that certain states are by their very nature euro-enthusiasts, even supporting the idea of a “United States of Europe” (e.g. until recently Belgium and France), while others are more sceptical (e.g. the Czech Republic and Poland). Most likely, after the introduction of a “two-speed Europe” this type of division will crystallize. However, it is possible that on one specific issue the state in question will support close cooperation, and on another it will be sceptical.

A remedy against the threat of “exits”

Today, the positive aspect of a “two-speed Europe” is gaining in importance. The slogan of a “two-speed Europe” should be supported by all nations for whom the maintenance of European integration in the face of the turmoil associated with Brexit and other potential “exits” is important. In the context of growing euroscepticism, a “two-speed Europe” is precisely something that can protect European integration against destruction and thus prevent the serious economic and political consequences of the collapse of the integration project.

In order to understand this, one must look beyond the polarisation that is clearly visible in the Polish media in which the “good” centralised European Union that cares about every aspect of socio-economic life is presented as a counterweight to the “bad” Brexit, which is to become the symbol of nationalist populism.

This polarisation is evident even in the case of prominent authorities. In an interview for a weekly “Tygodnik Powszechny”, Norman Davies, the famous British historian, perceives Brexit purely as the effect of British “nostalgia for the empire”, the “rebirth of nationalist moods in Europe”, and also national hostilities, hence, for example, comparison of British eurosceptism to the fight against the Germans during World War 2 and the accusation that the Poles are taking jobs away from the British.

Similarly, Leszek Balcerowicz, the author of Polish economic transition in 1990, earlier boldly critical of the EU due to its statism and anti-capitalism, assigns the eurosceptic result of the British referendum purely as a result of demagogy: “Voting for Brexit shows that aggressive demagogy wins even in a mature democracy … Populist demagogues … blame the EU, while offering even worse policies”; “Euro-MPs of Law and Justice blamed the EU for Brexit. Even MPs from the UK probably viewed this with surprise,” he wrote on Facebook.

However, even taking into account the serious and disturbing influence of demagogy and absurd stereotypes, as well as the phenomenon of unfairly blaming the EU for national problems, isn’t it really the case that the structure and initiatives of the EU are to some extent to blame for Brexit and the anti-EU moods in other Member States?

EU in the dock

Of course, one should not dismiss the analyses which point out that both the growing popularity of euroscepticism and the political weakening of the European Union (caused by the United Kingdom’s exit from the EU) are an opportunity for Russia to extend its influence in Europe and reduce the solidarity of European states in the face of a potential threat.

However, this link between euroscepticism and populism does not mean that anti-EU moods are solely the result of cheap demagogy. It is necessary to analyse what mistakes have been made by the EU itself, since over half of British voters went so far as to make such a radical and exaggerated choice: support for Brexit.

The arguments in favour of Brexit were, in fact, a mixture of views, some of which were populist in essence, and others which were a symptom of a rational socio-economic analysis. The British voted “no” because they simply did not feel connected with the EU, which is not “populism”, but a phenomenon that is well-documented in sociological and political studies.

The authors of the collective study published by the University of Nantes, “Europe: Crise et critique” (2015), note that the lack of democratic legitimacy of the EU is connected, among others, with the lack of sufficiently clear expressions of EU citizenship and with the technocratic character of EU politics.

Two conclusions flow from such a rationalist, non-populist criticism of the EU. Firstly, the centralist institutional structure of the EU, devoid of democratic legitimacy, does not satisfy all states and citizens, and secondly, the EU has departed from measures which could actually improve the welfare of its citizens, and which are by no means thanks to centrally planned strategies, but through greater economic freedom.

An example is the adaptation of the EU single market to the requirements of the digital economy. This is quite and old idea – it originates in 2010, when the European Commission was headed by José Manuel Barroso. The single digital market was to facilitate the online sale of goods and services, including the liquidation of the so-called geo-blockade, preventing the use of online films and music in certain countries.

At the moment everything is at the planning stage and is progressing very lazily: the European Commission promised to present a detailed strategy on 16 planned changes by the end of 2016, but in spring it turned out that it will present only six strategies. This lack of urgency is surprising, because according to the Commission itself, which speaks so much about growth and jobs, the implementation of a single digital market could create 3 million jobs.

However, the Commission was able to efficiently adopt bureaucratic and vague strategies such as Europe 2020 or “Guarantee for youth”, which in the opinion of the European Court of Auditors did not lead to the creation of any new jobs.

Desperate protest

In other words, the reason for the desire of the British to leave the EU was not only populist views and views that are offensive to other nations (such as hostility towards Polish immigrants, accusing them of dishonesty and theft), but also – in the case of those voting for Brexit – a feeling that the EU’s meticulousness can no longer be stopped, or the phenomenon of a lack of sufficient civic legitimacy of the EU, which is expressed, among others, by the exclusive right of the European Commission to submit legislative proposals. All in all, this is connected with the previously mentioned political phenomenon of detachment of the Brussels headquarters from the daily life of the citizens.

Therefore, to some extent the votes in favour of Brexit were a desperate protest against the EU’s restrictions on market freedom. Voters felt that it was not possible to make the EU return to the idea of economic freedom as its foundation stone. But such attempts were made – for example, by David Cameron, Prime Minister of the UK, who in his famous letter to Donald Tusk, President of the European Council, put forward not only the demand to limit benefits for immigrants from other EU states, but also appealed for an urgent return of the EU to its free market roots: “[The] burden from existing regulation is still too high. So the United Kingdom would like to see a target to cut the total burden on business. The EU should also do more to fulfil its commitment to the free flow of capital, goods and services.” He drew attention to the mess in the EU’s ideas which means that the free-market ideas of Brussels are not realised: “[We] should bring together all the different proposals, promises and agreements on the Single Market, on trade, and on cutting regulation into a clear long-term commitment to boost the competitiveness and productivity of the European Union and to drive growth and jobs for all.”

However, in February 2016 the European Commission unjustly ignored this appeal. Having completely disregarded the reasonable proposal to “bring everything together”, the leaders of the EU states, the President of the European Council and the head of the Commission announced that they would create… a special programme to eliminate excessive bureaucracy. However, this programme will join the already existing programmes, whose aim is to… liquidate excessive burdens.

The very content of Brussels’ declaration is proof that EU reality is disturbingly reminiscent of Franz Kafka’s “The Trial”.

Forgotten mechanism of strengthened cooperation

The granting of more freedom in economic and social policy to EU Member States, while maintaining the basics of community policy, such as the single market, could keep the UK in the EU as well as keep the desire for “exit” in other countries under control.

Such a comprehensive change of course requires amendments to treaties. However, even without these, it is possible to introduce certain improvements in the functioning of the EU. In order that regulations which generate the resistance of certain states (such as climate policy) can become an element of European integration, it is worth the EU recalling the so-called mechanism of strengthened cooperation. So far, it has only been used twice, but it really is worth starting to use this instrument instead of forcing countries to sign up to unwanted solutions, which gives rise to euroscepticism.

In accordance with the treaties, this mechanism allows nine or more Member States to adopt regulations – in the framework of the EU – which will apply only to this coalition of countries. The fact that up to now this solution has rarely been applied is proof of how great the pressure of EU institutions and certain Member States is for individual directives to apply to all EU countries. This even applies to the most sceptical countries to a given idea and those that have at their disposal relevant economic analyses that forecast its failure.

Model Europe

What would a two-speed Europe look like? Generally speaking, not all the solutions would apply equally to all the Member States.

Let us take the labour market regulations as an example. It should be considered whether states should have the possibility to waive certain provisions of EU labour law. This concerns such provisions that they feel are incompatible with the principle of subsidiarity, according to which the EU takes action only when it will give more effective solutions than action at the Member State level.

The directive on fixed-term employment guarantees that people employed on this basis will not be discriminated against in terms of access to training. According to the law, companies may be forced to irrationally invest in employees employed for only a few months to the same degree as those that have been working for a long time and do not intend to leave the company soon.

Moreover, the EU’s Working Time Directive, which applies to all 28 Member States, guarantees every employee the right to 4 weeks paid holiday per year. Although the daily and weekly limits to working time that are established in the directive are necessary, at the same time, by including in the directive the right to a month’s paid holiday, in the name of political correctness the debate has been cut off as to whether really in every case payment should be due for the period in which one does not work, but simply rests.

Yes, this is a radical idea, but isn’t it worth, at least as part of an experiment, returning to the principle according to which workers should earn a holiday through saving from their wages enough money to allow them to get by during their rest periods?

However, as regards provisions applying to all Member States, the EU should above all focus on adjusting the single market to the epoch of the Internet (e.g. by lifting the prohibition on applying lower VAT on e-books when it can be applied to traditional books).

It is crucial to improve the existing principles of how the EU market functions, e.g. by successfully completing the negotiations on the free trade agreement with the USA and strengthening the prohibition on state aid (which has been diluted at the Treaty level).

Today, an indecent number of exceptions are permitted, which allow governments to finance non-public enterprises (e.g. “aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest” – Article 107 paragraph 3c of the Treaty on the Functioning of the European Union).

A reheated pork chop can be tasty

On 25 June, two days after the British referendum, Jean-Marc Ayrault, the head of French diplomacy, and Frank-Walter Steinmeier, Germany’s minister of foreign affairs, presented a draft reform of the EU entitled “A strong Europe in a world of uncertainty”, which permits a two-speed Europe.

Arguing that it is necessary to maintain the “European social model” and at the same time create an EU core based on a common security policy and strong integration of the euro area states, Ayrault and Steinmeier write: “France and Germany recognise their responsibility to reinforce solidarity and cohesion within the European Union. To that end, we need to recognise that member states differ in their levels of ambition member state when it comes to the project of European integration. While not stepping back from what we have achieved, we have to find better ways of dealing with different levels of ambition so as to ensure that Europe delivers better on the expectations of all European citizens.”

This reference to citizens confirms that by reducing the Commission’s omnipotence, people – the inhabitants of the EU states – will be able to express whether they want faster or slower integration.

The most important EU politicians are beginning to realise that it is necessary to allow a choice on the speed of integration in the face of growing Eurosceptic sentiment. The idea for the reform of the EU through the introduction of a positively conceived two-speed Europe has already appeared several times in recent years; however, for the last three years there has been growing interest in the idea among the European political elites.

In 2014, German Christian Democrats Karl Lamers and Wolfgang Schäuble wrote in the Financial Times on the need to recognize the “diverse appetite for integration”. In 2015, Jean-Claude Juncker, head of the European Commission, also seemed to allow for the possibility to derogate from some EU projects: “One day we should rethink the European architecture with a group of countries that will do things, all things, together and others who will position themselves in an orbit different from the core.”

Each of the three options of a “two-speed Europe” is lacking something. Ayrault and Steinmeier’s draft concerns the possibility of countries not joining future initiatives of deepening integration, but does not include the possibility of individual countries opting out of the already existing EU directives.

Unfortunately, the idea of Lamers and Schäuble leaves, for example, the issue of climate in the EU “core”, which is compulsory for all states, so the introduction of this draft reform would not mean an end to the battles over climate regulations for states that believe these regulations to be economically harmful.

In turn, Juncker’s declaration is unfortunately not reflected in reality. A debate has not yet started in which every Member State would be asked what it thinks of the current state of compliance with the principle of subsidiarity by the EU and whether it wants more space for its own action.

However, it is worth pursuing the idea of a two-speed Europe and it is good that it appears in the declarations of key politicians. The idea could save the European Union, both politically and economically.

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