The Future of the European Union

38.1.6: The Future of the European Union

Although the future of the European Union is currently impossible to predict and its many challenges continue to fuel the crisis of confidence in both the eurozone and the larger integration project, enlargement plans are in place and the EU remains a leading economic and political power.

Learning Objective

Predict how the European Union will develop over the next few years

Key Points

  • The 2008 financial crisis followed by the European debt crisis caused a delay in the schedule for Euro adoption for most new EU members. As of 2017, there are 19 EU member states in the eurozone; three Baltic states, Estonia (2011), Latvia (2014), and Lithuania (2015), joined after the outbreak of the debt crisis. Seven states (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, and Sweden) are on the enlargement agenda and despite the crisis, the eurozone and its economies are currently relatively stable.
  • Although the eurozone is open to all EU member states once they meet the criteria, the treaty is silent on the matter of states leaving the eurozone, neither prohibiting nor permitting it. Likewise, there is no provision for a state to be expelled from the euro. Greece is the only country where the question of leaving the eurozone (Grexit) has gained serious political traction. The debate continues although as of 2017, it remains mostly political. No practical steps to arrange Greece’s exit from the eurozone have been taken either by Greece or by the EU.
  • The most dramatic and uncertain outcome of the growing lack of confidence in the project of European integration has been the British decision to exit the European Union (Brexit).From the beginning of the European integration, Britain represented a different approach than that proposed by France and Germany. While the latter pushed for gradual but increasingly stronger integration that would go beyond the common market, Britain maintained its stand of focusing largely on the economic union.
  • As late as December 2015, a clear majority was in favor of Britain remaining in the EU. Under pressure from many of his MPs and the rise of euroskeptic sentiments, in 2013, Cameron announced that the conservative government would hold an in0out referendum on EU membership. The referendum  took place in on June 23, 2016; 51.9% voted in favor of leaving the EU and 48.1% voted in favor of remaining a member of the EU. No member state has ever left the EU and it remains unclear how the process will unfold. One likely consequences may be the independence of Scotland, which voted overwhelmingly to stay in the EU.
  • Despite the ongoing crisis, currently, accession negotiations are under way with several states. The Western Balkans have been prioritized for membership since emerging from war during the breakup of Yugoslavia. Albania, Macedonia, Montenegro, Serbia, and Turkey are all recognized as official candidates and the latter three are undergoing membership talks. Bosnia and Herzegovina and Kosovo are recognized as potential candidates for membership. However, in 2014, President of the European Commission Jean-Claude Juncker announced that the EU has no plans to expand in the next five years.
  • Moldova, Ukraine, and Georgia signed Association Agreements with the EU in 2014, which deepened their trade and political links with the EU.In 2002, the European Parliament noted that Armenia and Georgia may enter the EU in the future. However, in 2015, to the east of the EU, the countries of Belarus, Kazakhstan, and Russia launched the creation of the Eurasian Union, which was subsequently joined by Armenia and Kyrgyzstan. Armenia stated in 2017 that it seeks to cooperate with both organizations. Currently, Georgia is the only country in the Caucasus actively seeking EU membership.

Examples

Key Terms

Eurasian Union
An economic union of states located primarily in northern Eurasia. A treaty aiming for the establishment of the union was signed in 2014 by the leaders of Belarus, Kazakhstan, and Russia, and came into force in 2015. Treaties aiming for Armenia’s and Kyrgyzstan’s accession were signed in 2014, with Armenia’s accession treaty coming into force in 2015.
European debt crisis
A multi-year debt crisis that has been taking place in the European Union since the end of 2009. Several eurozone member states (Greece, Portugal, Ireland, Spain, and Cyprus) were unable to repay or refinance their government debt or bail out over-indebted banks under their national supervision without the assistance of third parties like other eurozone countries, the European Central Bank (ECB), or the International Monetary Fund (IMF).
Brexit
The United Kingdom’s prospective withdrawal from the European Union.
Maastricht Treaty
A treaty undertaken to integrate Europe, signed in 1992 by the members of the European Community. Upon its entry into force in 1993, it created the European Union and led to the creation of the single European currency, the euro. The treaty has been amended by the treaties of Amsterdam, Nice, and Lisbon.
Grexit
The potential exit of Greece from the eurozone, primarily to deal with its government debt crisis.
eurozone
A monetary union of 19 of the 28 European Union (EU) member states that have adopted the euro (€) as their common currency and sole legal tender.

Since eurozone membership establishes a single monetary policy for the respective states, they can no longer use an isolated monetary policy, such as increasing their competitiveness at the cost of other eurozone members by printing money and subsequent devaluation, or printing money to finance excessive government deficits or pay interest on unsustainable high government debt levels. As a consequence, if member states do not show fiscal discipline (as they were obliged by the Maastricht Treaty), they will sooner or later risk a sovereign debt crisis in their country. This is what happened to Greece, Ireland, Portugal, Cyprus, and Spain, and the debt crisis spiraled into the crisis of confidence in not only the common currency but also the project of European integration.

The 2008 financial crisis followed by the European debt crisis caused a delay in the euro adoption schedule for adoption for most new EU members (those who joined in 2004 or later). As a general rule, the majority of economic experts recommend new EU member states with a forecasted era of catching up and a past record of “macroeconomic imbalance” or “financial instability” first address these issues before adopting the euro. As of 2017, there are 19 EU member states in the eurozone, with three Baltic states, Estonia (2011), Latvia (2014), and Lithuania (2015), joining after the outbreak of the debt crisis. Seven states (Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, and Sweden) are on the enlargement agenda and despite the crisis, the eurozone and its economies are currently relatively stable.

Although the eurozone is open to all EU member states once they meet the criteria, the treaty is silent on the matter of states leaving the eurozone, neither prohibiting nor permitting it. Likewise, there is no provision for a state to be expelled from the euro. Some, however, including the Dutch government, favor the creation of such a provision in the event that a heavily indebted state in the eurozone refuses to comply with an EU economic reform policy. The outcome of leaving the euro would vary depending on the situation. If the country’s own replacement currency was expected to devalue against the euro, the state might experience a large-scale exodus of money, whereas if the currency were expected to appreciate, more money would flow into the economy. Rapidly appreciating currency, however, would be detrimental to the country’s exports.

Greece remains the only country where a debate over the question of leaving the eurozone has gained serious political traction; its potential exit is referred to as Grexit. Proponents of the proposal argue that leaving the euro and reintroducing the drachma would dramatically boost exports and tourism while discouraging expensive imports and thereby give the Greek economy the possibility to recover and stand on its own feet. Opponents argue that the proposal would impose excessive hardship on the Greek people, as the short-term effects would be a significant consumption and wealth reduction for the Greek population. This may cause civil unrest in Greece and harm the reputation of the eurozone. Additionally, it could cause Greece to align more with non-EU states. The debate continues although as of 2017, it remains mostly political. So far, no practical steps to arrange Greece’s exit from the eurozone have been taken either by Greece or by the EU.

 

Crisis of Integration: Brexit

The most dramatic and uncertain outcome of the growing lack of confidence in the project of European integration has been the British decision to exit the European Union, commonly known as Brexit. The UK was not a signatory to the Treaty of Rome, which created the European Communities – the predecessor of the EU – in 1957. The country subsequently applied to join the organization in 1963 and in 1967, but both applications were vetoed by the President of France, Charles de Gaulle. Once de Gaulle relinquished the French presidency in 1969, the UK made a third and successful application for membership.

From the beginning of the European integration project, however, Britain represented a different approach than that proposed by France and Germany. While the latter pushed for the gradual but increasingly stronger integration that would go beyond the common market (economic integration), Britain maintained its stand of focusing largely on the economic union. Opinion polls taken after the accession in 1973 until the end of 2015 generally revealed popular British support for EU membership. As late as December 2015, there was a clear majority in favor of remaining in the EU, albeit with a warning that voter intentions would be considerably influenced by the outcome of Prime Minister David Cameron’s ongoing EU reform negotiations, especially with regards to the issues of safeguards for non-eurozone member states and immigration.

Under pressure from many of his MPs and the rise of the euroskeptic United Kingdom Independence Party (UKIP), in 2013 Cameron announced that the conservative government would hold an in-out referendum on EU membership before the end of 2017, on a renegotiated package, if he was elected in 2015. The Conservative Party unexpectedly won the 2015 general election with a majority. Soon after, the European Union Referendum Act 2015 was introduced into Parliament to enable the referendum. Cameron favored remaining in a reformed EU and sought to renegotiate on four key points: protection of the single market for non-eurozone countries, reduction of red tape, exempting Britain from certain policies that would strengthen integration, and restricting EU migration.

The referendum  took place in the United Kingdom and Gibraltar on June 23, 2016; 51.9% voted in favor of leaving the EU and 48.1% voted in favor of remaining a member of the EU. The process of withdrawal from the EU has been governed by Article 50 of the Treaty on European Union. No member state has ever left the EU and it remains unclear how the process will unfold. Article 50 provides an invocation procedure whereby a member can notify the European Council, followed by a negotiation period of up to two years after which the treaties cease to apply; however, a leaving agreement may be reached by qualified majority voting. Unless the Council of the European Union unanimously agrees to extensions, the timing for the UK leaving under the article is two years from when the country gives official notice to the EU.

Before the referendum, leading figures with a range of opinions regarding Scottish independence suggested that in the event the UK as a whole voted to leave the EU but Scotland as a whole voted to remain (as happened), a second Scottish independence referendum might be precipitated (the first took place in 2014). On March 13, 2017, Scottish First Minister Nicola Sturgeon announced she would seek Scottish Parliament approval to negotiate with the UK Government for a Section 30 order enabling a second independence referendum, which would take place between the fall of 2018 and the spring of 2019.

 

Enlargement of EU

Currently, accession negotiations are underway with several states. The process of enlargement is sometimes referred to as European integration. This term is also used to refer to intensified cooperation between EU member states as national governments allow for the gradual harmonization of national laws. The Western Balkans have been prioritized for membership since emerging from war during the breakup of Yugoslavia. Albania, Macedonia, Montenegro, Serbia, and Turkey (a candidate since 1987, which makes it the longest-waiting candidate) are all recognized as official candidates, and the latter three are undergoing membership talks. Bosnia and Herzegovina and Kosovo are recognized as potential candidates for membership by the EU. In 2014, President of the European Commission Jean-Claude Juncker announced that the EU has no plans to expand in the next five years. Montenegro and Serbia have set a goal to finish accession talks by 2019.

The three major western European countries that are not EU members, Iceland, Norway, and Switzerland, have all submitted membership applications in the past. Iceland’s application is currently withdrawn by government and Switzerland’s is frozen. Norway rejected membership in two referendums. They all,  however, along with Liechtenstein, participate in the EU Single Market as well as the Schengen Area, which closely aligns them with the EU. In 2017, Iceland’s newly elected government announced that it may seek to begin talks with the EU on possible future membership once again.

Moldova, Ukraine, and Georgia signed Association Agreements with the EU in 2014, which deepened their trade and political links with the EU. The European Parliament also passed a resolution recognizing the “European perspective” of all the three post-Soviet countries. Ukrainian president Petro Poroshenko announced 2020 as a target for an EU membership application, but in 2016 Juncker stated that it would take at least 20–25 years for Ukraine to join the EU and NATO. The potential EU membership of Ukraine remains the critical source of tensions between the EU and Russia.

EU 28 and further European Union enlargement: [dark blue] Current members; [medium blue] Candidate countries; [light blue] Potential candidate countries; [green] Membership possible.

EU 28 and further European Union enlargement: [dark blue] Current members; [medium blue] Candidate countries; [light blue] Potential candidate countries; [green] Membership possible. Article 49 of the Maastricht Treaty (as amended) says that any European state that respects the “principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law,” may apply to join the Union.

The map shows that the current member states are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. It shows that Serbia, Montenegro, Albania, Macedonia, and Turkey are candidate countries. It shows that Bosnia and Herzegovina and Kosovo are potential candidate countries. Finally, it shows that Greenland, Iceland, Norway, Switzerland, Poland, Ukraine, Moldova, Georgia, Armenia, and Azerbaijan are countries for which membership is possible.

In 2002, the European Parliament noted that Armenia and Georgia may enter the EU in the future. However, in 2015, to the east of the EU, Belarus, Kazakhstan, and Russia launched the creation of the Eurasian Union, which was subsequently joined by Armenia and Kyrgyzstan. In 2017, Tigran Sargsyan, the Chairman of the Eurasian Economic Commission stated that Armenia’s stance was to cooperate and work with both the European Union and the Eurasian Union. Sargsyan added that although Armenia is part of the Eurasian Union, a new European Union Association Agreement between Armenia and the EU would be finalized shortly. Both Armenia and Georgia are members of the Council of Europe and the Euronest Parliamentary Assembly, which seeks to foster greater cooperation between the EU and Eastern European states. Currently, Georgia is the only country in the Caucasus actively seeking EU membership.

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