EU Integration Process in 2010

Xing Hua

EU Integration Process in 2010

Xing Hua

The year 2010 marked a year of both glorious achievements and great frustrations, which forms a connecting link between the past and the future in the EU integration process. The impressive features of the EU integration process of the year are：First, two new epoch-making programs were established and implemented. The Lisbon Treaty, a new law intended for institutional reform, furthered integration and improved efficiency, came into force in December 2009 and relevant laws and regulations will be implemented one by one this year. And the Europe 2020 Strategy was formulated, which unfolds a grand picture of the EU’s economic development over the coming 10 years. The EU aims to, by virtue of institutional innovation and economic development, increase its internal strength and external influence thus creating a new situation in its integration process. Second, the EU was struck by the sovereignty debt crisis when the economic crisis had not been over, which took place two years ago. Some Euro countries are on the brink of fiscal bankruptcy and the credibility of the Eurozone and even the EU as a whole was damaged. The prospect of the Economic and Monetary Union of the European Union, a core achievement of the EU integration process, is being questioned. Third, the EU increased its reflection on the integration process and took more economic governance measures. When the serious crisis, which broke out two years ago, was drawing to a close, the EU had made through reflec-tions in search of crisis prevention measures. Strongly affected by the debt crisis in 2010, the EU increased its soul-searching in a greater effort to set up a series of long term crisis prevention concepts, regulations and policies in the framework of Economic Governance. Efforts as such will exert a big influence on the future integration process. Mr. José Manuel Barroso, President of the European Commission stated, “Many decisions taken this year will have long-term influence”, which will“determine the identity of a Europe which we want.” Fourthly, the EU takes the common foreign policy as the greatest priority in the EU integration process. When making efforts to complete the establishment of the external action service, the EU makes a more in-depth study and thorough review of it foreign strategy.

The year 2010 witnessed both progress and constraints in the EU integration process. And moving ahead amid difficulties is the general direction.

I. New strive has been made in the EU integration process under the guidance of the new programs

The Laeken Summit held at the end of 2001 put forward the historic mission of formulating a constitution law. The new EU law, following many frustrations and difficulties in the formulation and approval process of the two versions—the European Constitution and the Lisbon Treaty, was finalized in the form of the latter at the end of 2009. The EU had devoted nine years of time and efforts to this. This has been up till now the most notable achievement in the development of the EU as of the beginning of the new century, representing a symbol in the new phase of the integration process.

Initial results have been made over the past year after the implementation of the Lisbon Treaty: Firstly, the position of permanent President was set up for the European Council, which assumes the Union’s supreme power, a move that helped improve the continuity and stability of the Council’s guidance and decision making over major issues of the Union thus enhancing its own authority and function. Secondly, the High Representative of the Union for Foreign Affairs and Security Policy, a newly established position, assumes the roles of both the former High Representative for Common Foreign and Security Policy and External Relations Commissioner of the Commission, is also the Vice President of the Commission and chairs the council of EU foreign ministers’ meeting. It is thus more representative and powerful in implementing the common foreign policy. In the meantime, the External Action Service, the EU’ s institution for implementing the common foreign policy, is expected to be formally launched at the end of the year following consultations among member states and examination by the European Parliament. The new institution has an ambitious planning with a variety of departments covering intelligence and actions. The diplomatic personnel and power of member states will be shifted unto the EU to a certain degree. With the EU diplomacy as a whole being further formed, the EU will take on a new image on the international stage.

Launched in 2010, the EU’s new 10-year plan for economic development titled the EU 2020 Strategy is of profound significance. Adhering to the concept of “Development is of utmost importance”, the EU is fully aware of the fact that, to be strong or leading among the countries all over the world, the EU should take it as a great priority to increase its own economic competitiveness in a step-by-step manner with clear targets by following the new trends of the world and giving full play to group advantages. To this end, the EU formulated the Lisbon Treaty, the EU’s first 10-year economic development program. The new 10-year program is not only a simple continuation of the previous strategy, but more importantly a review of the lessons and experience in the previous one’s implementation, which incorporates the EU’s new reflection on and intentions for economic development in the current situation. Firstly, the global economic crisis and the debt crisis have not only brought to naught the achievements of the EU over the past 10 years in terms of growth and employment, but also exposed some fundamental defects of EU economy as well as the consequent vulnerability in terms international relations. Having an unprecedentedly strong sense of being left behind, the EU takes it as its core strategic interests and an indispensable target to reverse the passive situation in its economic development in pursuit of a global leading position. Secondly, in an objective and pragmatic spirit, the new Strategy abandons the previous one’s unfulfilled target of surpassing the US. It is still the EU’s set objective to pursue a development mode fitting the new trends, to occupy a new commanding point for economic development and seek the maximum social effects from economic development, demonstrating the EU’s constant ambition to develop the world’s first class economy. The programs defined in the new Strategy for the EU’s future economic development are as follows: 1) smart growth based on knowledge and innovation; 2) sustainable growth featuring green economy and increased competitiveness; and 3) inclusive growth based on increased employment and social integration. Thirdly, weakness exposed in the implementation of the previous strategy as well as the difference indicated by the recent crisis in terms of member states’ economic development levels are seriously unfavorable for further development of the integration process, in this connection, the new Strategy, by giving priority to its commanding power toward the members, puts in place measures urging member states to implement the strategy in real earnest and include their respective economic policies onto the track of the Union’s overall strategy. In the meantime, to improve its own operation effectiveness, the new Strategy transform the measures to implement the three programs into five quantitative targets: creating job opportunities, increasing input in scientific research, reducing green-house gas emissions, raising education coverage, and eliminating poverty.

II. Many difficulties crop up in the course of implementing the two new programs

The Lisbon Treaty is no doubt of milestone significance in the EU integration process. However, what has been taking place in the course of the Treaty implementation over the past year has indicated a gap between the actual implementation results and the requirements by the Treaty. And some negative results have been produced.

Firstly, the Treaty in its final form has a reduced role in furthering the integration with less vigor in institutional innovation. At the strong request of some member states, the Lisbon Treaty had to abandon the concept of “Constitution”, which assumes a sovereignty state identity. Compared with the originally planned constitution, the Lisbon Treaty has changed the name and removed the relevant contents.

In the course of formulation and approval, with a view to overcoming the different views by some member states, the Treaty, in quite a few provisions, providing exceptional treatment to these states or freezes reform measures such as sliming down the size of the European Commission. As pointed out by some people critical of the new law, “the Treaty is a hotchpotch of free options for exit and implementation delay.”The Treaty is hard to be understood and implemented being not conducive to the integration process. It is being questioned whether the Union’s decision-making process could be improved as a result of the Treaty.

Secondly, some complicated designings in the Treaty give rise to some operational obstacles. Some new institutions and leading positions have not been clearly defined in terms of functions and relationships, which gives rise to certain chaos in operational order. How shall the President of the European Council and the leaders of the half-year presidency divide their responsibility in terms of the EU’s daily affairs? Who can better represent the EU, the President of the European Council or the President of the European Commission? —There are a lot of similar knots. In the meantime, as the EU media pointed out,“Once a problem crops up, a specified institution will be set up to address it. It is not the right approach.” Different kinds of bureaucracies mushroomed, which waste a lot of resources and impede one another. As the media complained, the expenditure of the various EU institutions has been increased by three times since 2005 while in the meantime, member states had to “tighten their belts and cut down on expenses”. The former Prime Minister of Spain wrote in an article, “It is better to improve the policies than to set up institutions.”

Thirdly, though reform measures to increase the power of the European Parliament have strengthened the supervision over the Union’s decision making, the decision making process is getting more protracted and arduous.” Encouraged and supported by the decision in the Lisbon Treaty to increase the power of the European Parliament, some members of the European Parliament claimed that they will be no longer“spectators who give comments only”, but rather “participate all throughout the legislation and the formation of fundamental principles.” They even demand participation in the EU delegations for external negotiations. The original triangle balance of the Union has been broken with a greater conflict among the parliament, the member state governments and the European Commission.

Fourthly, disputes have arisen in the course of institution reform between the newer member states and the core major members with regard to power distribution. The newer member states complained that their seats in the newly set up institutions are not enough. The three programs and five “measurable” targets as set in the new EU 10-year economic strategy are noble ideas in themselves but will be more and more difficult to be implemented. The EU economy in general is on a recovery track but has not been stabilized. The difficult fiscal situation of some member states has not been improved remarkably. And the austerity measures widely taken in the Union make the economic revitalization more difficult and unleash social conflicts everywhere. The implementation of the long-term development plan starts in an unfavorable situation. More importantly, though having world leading strength, the EU economy is confronted with quite a few bottlenecks in terms of further structural reforms and competitiveness improvement. There is still a great uncertainty with regard to whether the EU can regain a strong development momentum within the 10 years.

III. Sovereignty debt crisis: impact, response and lessons

Since the end of last year, as a result of the full exposure of difficulties in Greece’s national fiscal situation, investors have been increasingly losing faith in the country’s ability to pay back debt, which resulted in rising borrowing costs and falling international credibility for Greece. The credibility of the Eurozone was dragged down by the Greek crisis and the PIIGs countries have been put on the brink of fiscal crisis. It is worried that the “next Greece” is forthcoming. Consequently, investors” confidence in Europe has fallen and the European stock markets have been moribund. The Euro, which had once been called “the Gem on the European Crown” is losing its luster and was once falling to a record low. To make matter worse, there are more and more negative comments from outside Europe on the prospect of the Eurozone as its deep seated disadvantages have been exposed without mercy. Attacked by both immediate and future worries, the Eurozone and the Europe Union as a whole have come under greater pressure. The President of the European Central Bank，Jean-Claude Trichet, who had been positive about the Euro, once changed his position to admit that the Eurozone “is faced with the worst crisis since the second World War or possibly the first World War.

Initially, the EU underestimated the gravity of the crisis and was hesitant to take actions because the EU did not allow financial allocation to fill the fiscal gap of member states and Germany, the EU’s largest economy, was unwilling to contribute fund. Always stating in principle that it would not abandon Greece, the EU had not put forward any specific plans or just shelved the plans, if any, in a hope that its assistance commitments alone could work together with Greece’s austerity measures to rebuild market confidence without giving Greece real financial assistance. Greece itself had also hope to go through the difficulties by its own efforts with commitments from the EU only instead of real financial assistance put in place. Only when speculation activities against the weak Greece as well as the Eurozone as a whole had been growing on and on and the Eurozone was on the brink of collapse, the EU made the decision to put forward specific plans to rescue Greece and “protect the Eurozone”. Germany, a country which has been industrious and thrifty and strict in managing its own fiscal situation as well as in implementing the Eurozone disciplines, had reservations and concerns over offering financial assistance to Greece. Only when the situation got worse did Germany made the hard decision to give up resistance to the EU’s assistance to Greece and take up the responsibility of providing financial assistance to Greece in the long term interest of the Eurozone, Once the rescue efforts were launched, the EU demonstrated strong determination and ability in tackling the crisis as a well-developed regional bloc with good strength. The rescue measures were substantial and unconventional. Following the Eurozone and IMF agreement of May2 on a 3-year financial support program for Greece with a total of €110 billion, the Eurozone agreed on May 10 to an emergency loan package that could reach 750 billion euros ($1,000 billion) with the support of the IMF to stabilize the Euro-zone and prevent a sovereign debt crisis spreading from Greece through the Eurozone. These efforts were reinforced by the extraordinary measures taken by the ECB of purchasing bonds issued by members of the Eurozone. EU leaders and the regular and special meetings held on an intensive basis have all declared in high profile their confidence in the Eurozone and gave it political support. The PIIGS countries and most countries in the Eurozone take preemptive measures to implement fiscal consolidation and austerity with a view to avoiding repeating the mistakes committed by Greece. Following strenuous efforts by the parties concerned, in the second half of 2010, the situation in the Eurozone had been stabilized in general though some individual member states had not shaken off the shadow cast by the crisis. In his State of the Union Address 2010 made in early September, President Barroso said, “the EU has withstood the test” and “the economic situation has turned for the better. Why was the Eurozone, a major economy of the world with great strength and good prospect, was struck so hard by the crisis and became so fragile? There are three major lessons:

First, the Eurozone has many institutional defects, the crux of which is the separation between the economic policies and the unified monetary system. German Chancellor Angela Merkel pointed out that there was a huge gap among member states in terms of economic strength and debt levels. As such, the unified monetary system is just like a high building without a firm foundation. When a storm comes, part of the building would collapse and the building as a whole would shake. Though the Eurozone is governed by the Stability and Growth Pact (SGP) and the Euro itself is strictly regulated by the ECB, the member states have their own fiscal governance with rather relaxed fiscal rules. Some member states, though not reaching the criteria for admission, entered the Euro zone shortly after it was set up. They were not fully qualified. Violations of rules by some member states, either openly or covertly, have been a common phenomenon over the past 11 years. In addition, some countries like France have been challenging the tough disciplines set out by the Pact and the ECB in a search of relaxation of the rules. Greece had spent more money than it took in for years. After it was admitted into to the Eurozone, this problem was covered by the invisible guarantee of the Eurozone and a time bomb was thus planted.

Second, Greece’s development mode of “low efficiency and high welfare spending” is the root cause of the serious debt crisis. The Greek problem is common in Europe and some other countries are also heavily burdened by social welfare spending. The hard efforts made by these countries to reduce the pressure had hardly paid off. With the ageing problem getting increasingly challenging, European countries find it more and more difficult to reduce cost and control public spending. This represents another background for the debt crisis.

Third, the Eurozone, without a crisis response mechanism, had not been prepared for an adverse environment. It was at a loss as to what to do and missed the opportunity to effectively respond to the crisis shortly after it broke out. After it launched measures repeatedly to tackle the crisis, the EU, learning a lesson from a painful experience, made painstaking efforts to design long and mid-term crisis prevention policies and mechanisms, especially measures to make up for the institutional flaws.

In building the crisis prevention mechanism, the EU is trying to address the fundamental problems and make innovations, in addition to taking precautions after suffering a loss. President of the European Council Herman Van Rompuy chaired the Special Task Force, which is consisted of Finance Ministers of member states and the President of the ECB, collected opinions from all the parties concerned and thrashed out a program themed on “economic governance” to prevent crisis over a long period of time. The main points included enhancing budget disciplines, increasing economic supervision, increasing coordination over economic policies and setting up effective crisis management mechanisms and institutions which are especially responsible for economic governance. The proposals were endorsed in principle at the summit on October 28. To implement the plan, the EU has taken several effective measures, including the establishment of the European Systemic Risk Board (ESRB), which is attached to the ECB and three new European authorities for the supervision of financial activities – for banks, markets and insurances and pensions respectively. The institutions are intended for giving financial risk warning, guiding financial institutions to operate with compliance, controlling high risk financial products and transactions; carrying out stress tests for European banks with a view to ensuring the health and credibility of banks; planning bank levy and financial transaction taxes. A mechanism which will be getting involved in the budget or even major economic policies will be set up. The “European semester”, a cycle of economic policy coordination, requires that member states’budget and relevant policies have to be submitted to the European Commission and fellow states for review before they are approved by the national parliaments.

The EU countries are similar to one another in terms of the orientation and requirements of long term governance. But the prevention mechanism has different impacts on the interests of different countries. Some governance considerations, once turned into specific resolutions, will confront objections thus facing a lot of constraints. Having long been the protector of rules of Eurozone, Germany was anxious to use this good opportunity of planning the future of the Eurozone to promote its proposals which had not been sufficiently adopted. Germany took the lead in putting forward radical suggestions such as fiscal or non-fiscal measures like organizing “orderly national bankruptcies” for members severely violating the rules and “expel them from the zone”.

However, in defense of their national sovereignty, quite a few countries refused to accept some proposals which might impose strong control or even severe penalties against them and they found it difficult to agree to Germany’s suggestions. It is no easy task to implement some measures for long term economic governance. For instance, the EU needs to change its legislation if the European Financial Stability Fund, which would close in 2013, is to be turned into a permanent mechanism or the member states, which have seriously broken the rules, would be deprived of the voting rights as a penalty. A heated debate has been going on within the EU over legislation issues. Germany is pushing hard for revision of some treaties and presenting proposals to the EU by making France as its ally. This attempt, however, has been steadfastly opposed by some EU leading institutions and member states. The EU Summit in October only took a “compromising” position over this by stating unequivocally that the legislation would be only slightly changed and no specific plans have been put forward. Settlement of the disputes would be put off to a later stage.

IV. Planning the foreign strategy in the new situation: priority of the EU integration process

The EU’s diplomatic efforts in 2010 were quite impressive. When putting in great efforts into the construction of the European External Action Service, a common platform for foreign policies, the EU made a comprehensive review of its foreign strategies and policies. The European Council Summit on September 16, 2010 made a discussion of the EU’s external relations mainly from the “strategic perspective” and released the conclusion titled “A changing world: a challenge for the EU”. Recently, both Mr. Van Rompuy and Mr. José Manuel Barroso repeated on many occasions that the EU should make new achievements in the rapidly changing international situation, indicating the EU’s determination to maintain its dominant position in the international landscape. The essentials of the EU’s new foreign strategy are shown as follows.

Firstly, the EU shall stick to its global ambitions. In line with its “traditional political culture” and interests, the EU has all along had the sense of mission to be a leader in world affairs. It clearly claimed at the beginning of the century that “a Europe which is being united can lead international affairs in terms of both promoting stability and providing a development model”. However, when “the internal development of Europe is becoming more dependent on the external environment over the past years”, the international balance of power has been experiencing changes. The leading position on the international stage pursued by the EU had been eroded and it has become increasingly difficult to lead international affairs by following the European concepts. The EU was very much hyped up about the fact that Europe’s voice was no source of influence at the Copenhagen Summit. As such, the EU leaders are anxious to call for a “central role by the EU on the international stage” in the post crisis era, “a role that others can learn from”. They said,“This is a crucial mission and test for this generation of people”and stressed that the EU is qualified on many aspects to be among the “leading positions”.

Secondly, forceful measures are taken to tackle the pressing challenges brought about by the fact that new competitors are coming up to the stage on after another.“The emerging new players bring about new interests, images and values”, said President Van Rompuy. “The power is being shifted”. Remarks as such indicate that the EU has felt the impact from new emerging powers economically, and is worried about the fact that its political influence is being squeezed. In an attempt to be compensated and regain dominance, the conclusion of the European Council Summit stated that, in the principle of reciprocity and mutual benefit, the EU will be more assertive in pursuing European objectives and interests, based on mutual interests and benefits and on the recognition that all actors have rights as well as duties. The conclusion claimed that the full participation of emerging economies in the international system should allow its benefits to be spread in a balanced manner and its responsibilities to be shared evenly. In view of the impending EU-China summit, the conclusion presented a long list unilaterally asking China to make extensive concessions economically and calling these specific demands as Europe’s strategic interests, which the EU should pursue assertively.

Thirdly, the EU’s foreign strategy should be better defined and weak determination toward foreign policy should be changed. As Mr. Van Rompuy pointed out, the EU’s current foreign policy cannot tackle the complicated situation of global challenges that have been sprung up. “We have many strategic partners, but we are short of strategic concepts and measures.” The EU needs to find solutions on the basis of enhanced strategic studies. In order to catch up with the changing situation, the future summits will invariably put diplomatic issues on the agenda. He also stressed that the situation that each member state does things in its own way should be changed with a view to improving the EU’s international influence by way of a common foreign policy. The EU’s efforts to strengthen diplomacy will be facing two challenges: Firstly, the achievements in common foreign policy up till now have been only reflected in the establishment of relevant institutions. There is still a question mark on whether member states will make further diplomatic and sovereignty concessions; whether different foreign advocacies and interests could be integrated to ensure common foreign polices. Secondly, to maintain its leading position on the international stage, the EU must work to address some difficult diplomatic problems. First, when looking at and handling its relations with emerging countries, the EU should accommodate their interests instead of taking care of defending its own partial interests only. Otherwise, it would be difficult for the EU to increase its international credibility. Second, though it takes the United States as the “central partner “in leading the global governance, the EU finds it difficult to get help from the cross-Atlantic alliance when responding to major global challenges. It is another central task for the EU to coordinate the relations across the Atlantic Ocean in the new situation.

V. EU will continue to forge ahead amid difficulties

The EU is faced with a very arduous task in pursuit of its grand economic and diplomatic goals. EU members’ confidence in the integration process, their concerted efforts and stronger determination to assist each other represent a necessary precondition for success. In this connection, there are two major adverse factors within the Union:

Firstly, the political belief is being eroded as people are thinking about the root causes of the economic crisis and EU skepticism is on rise. For instance, Chris Patten has made some remarks representative of views as such. He claimed that he opposed “an increasingly closer political union” and that Europe must focus on what works”. In an effort to correct the direction of the EU integration conceptually, he stressed that“the legitimacy of the EU’s democracy is dependent on its member states”.

Secondly, mutual confidence between member states is adversely affected by the widening gap between member states in terms of economic development pattern and level, the growing difference in member states’ considerations of their national interests and the interests of the Union as a whole, and increasing disparity in their influence on the Union affairs as a result of the huge impacts of the severe crisis. In this round of economic crisis, Germany has been standing out too much within the Union by way of its incomparable economic strength and strong political voice. As a result, the imbalance in the Union’s decision making process was caused and murmurs of discontent have been arising from other member states. And Germany is thus prone to destruction. Recently, it has been repeatedly emphasized by EU leaders that it is important for member states to act in concert saying that “all member states should cross the river together and those that fall behind would be doomed to be drowned”, “the individual member, however strong it is, is less powerful than the 27 member states combined as a whole”.

In the new situation, the EU integration process, as a whole, has made great headway but in the meantime is also confronted with barriers and stumbling blocks that could not be neglected and the road ahead will remain tortuous. After all, the EU integration process is still serving the fundamental interests of EU member states and representing their common policy orientation. It is an inevitable choice of Europe’s historical development. Therefore, the EU integration will continue to develop amid difficulties in the years to come. By virtue of the long standing perseverance of the member states, the EU will make continuous new strides in internal governance and external relations.

Xing Hua, Senior Research Fellow of China Institute of International Studies.