Special report: Europe’s future. A venture at a standstill

Twelve months after the French and Dutch said no, the European Union has yet to rediscover its purpose

AS CHOU EN-LAI observed of the 1789 revolution in France, the full impact of events in that country can take centuries to discern. That may yet prove true of the French no to the European Union's draft constitution, expressed in a referendum on May 29th last year. But there was no doubting the shock, especially when it was amplified three days later by an even bigger no from the Dutch. For the first time since a European common market was set up in 1957, two of the six founders of the club had decisively rejected a step in the long march towards fuller integration.

Ever since, Europe's leaders have been unsure what to do next. The immediate gloom was deepened by one of the EU's periodic budget squabbles, prompting Jean-Claude Juncker to declare that "Europe is not in crisis: it is in a deep crisis." As Luxembourg's prime minister, he spoke with authority: his country was then president of the European Council, the group of national leaders who together are the ultimate decision-makers in the EU. Discombobulated summiteers hurriedly agreed to a "pause for reflection".

A year on, what has the pondering brought forth? There have been speeches galore, by such luminaries as Britain's Tony Blair, France's Jacques Chirac and, most recently, Germany's Angela Merkel. The European Commission, the EU's policy-proposing executive, has produced not a plan B but a plan D (for democracy). Its president, Jose Manuel Barroso, has issued many papers. Belgium's prime minister, Guy Verhofstadt, has even written a book. And yet, as EU foreign ministers meet to discuss the constitution this weekend, before a summit under the Austrian presidency, the answer to the question is: precious little. The summit will simply extend the pause for reflection for another year.

After such a shock, it was perhaps inevitable that a year would not be enough. But three other problems have increased the EU's paralysis since last May. The first is a familiar lack of leadership, exacerbated by the electoral cycle. After a tight election in September, Ms Merkel replaced Gerhard Schroder as German chancellor only last November. After an almost equally narrow win in April, Romano Prodi has only just become Italy's prime minister in place of Silvio Berlusconi. Meanwhile France is going through the drawn-out denouement of Mr Chirac's 11-year-old presidency. He is now so feeble politically that little can be expected in the way of fresh EU initiatives until he leaves office next May.

The second problem is that nobody agrees about the reasons the French and Dutch said no. Eurosceptics were swift to hail the votes as a rejection of the drive towards ever-closer union that had, they said, been foisted on reluctant voters by the European elite for 50 years. Euro-enthusiasts were just as quick with a very different interpretation: that the voters wanted more Europe, to increase social protection and to keep at bay the excesses of free markets. Still others thought the voters were merely taking the chance to bash unpopular national governments.

What seems certain is that the naysayers were not rejecting the EU constitution as such: few could have mastered such a complex text, and fewer still could have grasped how it differed from existing European treaties. Rather they were showing dissatisfaction with the European project in a wider sense. The no campaigns played on fears of globalisation, on slow growth and on high unemployment. These feelings found expression in hostility to the expansion of the union to take in low-wage countries to the east, and to plans for more liberalisation of energy markets and trade in services. Yet none of these was directly linked to the constitution.

Unlike the first two problems, the third was self-inflicted. This was the refusal of many governments to draw the clearest conclusion from the two noes: that the constitutional treaty was dead. Countries that had already ratified it were understandably loth to give it up. Much stranger has been the spectacle of six more countries solemnly ratifying the text even after last May. Luxembourg did it by referendum in July. The others put it through their parliaments. Finland is expected soon to become the 16th of the EU's 25 members to give it final approval.

Any EU treaty has to be ratified by all members before it can come into force. Yet those who still want to press ahead with the constitution point to two previous experiences. In 1992 Denmark's voters turned down the Maastricht treaty; and in 2001 the Irish threw out the Nice treaty. After each rejection the treaty was slightly titivated, with various declarations or opt-outs added, after which the voters were asked to pronounce again--and then they said yes. It was also noted that the constitution itself envisaged that ratification might be difficult in some countries. A declaration attached to the text provided that if, within two years of the treaty's signature, four-fifths of the members had ratified it but some had not, the European Council should meet to consider what to do.

Carry on regardless

The implication of this declaration, some have argued, was that a rejection by one or two of the EU's members should not deter the others from proceeding. Only after every country had had its say would it be right to discuss the next steps. The unspoken assumption was that, if only one or two had jibbed at the text, some way would be found of getting them to vote again and say yes. To make that look more plausible after the no votes, it was also noted that elections were due in 2007 in both France and the Netherlands.

Yet a moment's consideration shows that dreams of proceeding with the constitution are utterly unrealistic. It contains nothing that could be adjusted to give France or the Netherlands opt-outs. And, anyway, there is something undemocratic about asking electorates to endorse a text and, when they deliver a resounding no, asking them again. No French or Dutch leaders, now or in prospect, have floated the idea of putting the constitution to a fresh vote (though France's Valery Giscard d'Estaing, who presided over the constitutional convention, has suggested it). Besides, six countries--Britain, Ireland, Sweden, Denmark, Poland and the Czech Republic--have made clear that, after the French and Dutch votes, they have no plans to ratify the constitution. Most of these had promised referendums.

One sensible thing that next month's summit could do is to agree to forget the present text. That would enable the summiteers to move on to the more fundamental questions that the constitution was supposed, but failed, to answer: how to restore the EU's purpose (and, just as desirable, its popularity), and what institutional changes this might require.

What is wrong with Europe? The main answer is, as it has been for some years, the economy. Especially but not only in the core euro countries of Germany, France and Italy, growth has been sluggish, at best. In many countries unemployment seems both high and stuck. The morosity that underlay the French and Dutch noes was primarily about growth and jobs.

Not surprisingly, the constitution, which was meant to be about the efficiency and organisation of the EU, offered little on the economy. The prime responsibility for getting economies growing again remains national, not European--a point that is obvious when you contrast the performance of Britain and Spain (average growth of 2.6% in 2001-05) with that of France, Germany and Italy (average annual growth of 0.9% in the same period). Some have blamed tight monetary and fiscal policy in the euro zone for holding back growth, but such euro-members as Spain, Ireland and Finland have done well.

As it happens, growth in Europe has picked up in recent months, though a rising euro may slow it down again. The most urgent measures now needed are the further deregulation of labour markets, services, energy and so on. The obstacles to this liberalisation lie largely at national level, although the EU's Lisbon Agenda--the self-imposed measures needed to make Europe "the most dynamic and competitive knowledge-based economy in the world" by 2010--can help to chivvy governments along. So long as the Lisbon Agenda lacks carrots or sticks, it will be up to governments to decide how far to pursue it, and how far to push reform over resistance by unions and other lobbies.

The task of the Brussels commission is to sustain whatever it controls that contributes to Europe's economic growth. This means, above all, safeguarding the single market and its competition rules. A nasty outbreak of economic nationalism struck earlier this year, when several countries started to talk of fostering national energy champions and of protecting their biggest companies from foreign takeover. This must be beaten back. Indeed, much work is needed to bolster all the EU's four freedoms--of goods, services, movement of labour and of capital--each of which has been under attack this year. Once again, the constitution has little directly to do with this. But its demise might be used as an excuse to roll back the single market.

A pause for digestion

Similarly, some politicians are using the constitution's troubles to question the EU's expansion to take in new members. At least some of those who voted no may have done so in protest at the recent and future enlargement of their club. The threat of the mythical Polish plumber played strongly in France. The prospect of Turkey joining was a factor in both France and the Netherlands. Indeed, it was partly because of this that Mr Chirac changed the French constitution to provide that any new entrant after Bulgaria, Romania and Croatia must be approved by a referendum in France. Austria has similarly promised a vote on Turkey, and other countries may yet follow suit.

The expansion of the European club is widely touted as its biggest single success. The lure of membership has helped to entrench stability and democracy, first in the southern Mediterranean and now in central Europe. A similar pull is at work in Turkey and the western Balkans, and even as far afield as Ukraine and the Caucasus. Moreover, the economics of enlargement looks good. An exhaustive commission analysis recently concluded that the entry of new countries from central Europe in 2004 had raised economic growth and created jobs not only in the new members but also in existing ones.

The EU should continue to welcome aspirant countries, for its own benefit as much as for theirs. The alternative is distinctly unappealing. Analysts of the western Balkans agree that, if Brussels were to slam the door, these countries could easily slip back into nationalism, drug- and people-smuggling, organised crime and even war--with lots of undesirable consequences for western Europe. Similarly, a Turkey spurned by Europe could soon regress into a sour and militant Islamist mood, right on Europe's front line.

So the question left by the failed constitution should not be: how can we resurrect it? It should be: what changes are needed to ensure that the EU continues to benefit from its single market, to help promote economic reform and to keep the club open to new members?

Pick and choose

Many different answers have been proffered during the pause for reflection. In some ways, the argument has turned into a new round in the long debate between "institutionalists", who would like a new institutional framework that then produced closer integration; and "incrementalists", who would prefer the club to develop organically, with institutional change coming later.

In this second camp stand, in particular, the British, supported here by Mr Barroso, who thinks further discussion of the EU's institutions should be put off for now. They admit that the current set-up has unsatisfactory features--the six-monthly rotating presidency, a bizarre system of voting, a commission that is too big, a continued muddle over who is in charge of foreign policy. Despite all this, though, the EU is able to function.

Yet it is hardly tenable to suggest that the EU's treaties need no changes at all. Under the Nice treaty, new voting weights and seats in the European Parliament must be fixed for Croatia or any country that joins after it. At that point, too, Nice scraps the rule that gives each country one commissioner in Brussels, though it does not offer a replacement. So some treaty amendment will be needed by 2009 or 2010, when Croatia is likely to join. For that reason a new inter-governmental conference may have to be called to consider treaty changes, perhaps in late 2007, after the French elections.

This gives heart to those who still insist on pursuing the constitution and nothing but the constitution. Even though that looks unrealistic, several governments, including (at least formally) Germany's, stick to it. So does Italy, under Mr Prodi, Luxembourg, Belgium, Spain and some members in central Europe.

A wide variety of ideas lie between the two extremes of no action and the full constitution. Most involve picking the best bits of the constitutional treaty and producing a shorter version, which might even be brought into force without approval by referendum. The trouble with that idea is that few EU members agree on which parts of the document to keep. Typically, big countries want to slim the commission, change the voting system and install a permanent presidency in place of the present six-monthly one. But small countries see most of these changes as steps backward: if they are to accept them, they want something in exchange, such as more majority voting and a stronger European Parliament.

It was the need to balance such widely differing desires that led to such a cumbersome constitutional treaty in the first place. Several leaders have duly given warning against attempts to unpick the compromises that went into the document. Indeed, some countries are no longer willing to honour the concessions they made in the constitution. Poland, for instance, which in 2003 was, with Spain, a fierce opponent of a proposed new "double-majority" voting system, only to give way in the summer of 2004, now says that it wants to stick to the system agreed on in the Nice treaty in 2000.

Besides the practical and political difficulty of resurrecting bits of the treaty, there are two other objections. The first is the democratic one: the people have voted no, which makes it unattractive to bring in any change by the back door, especially if an avowed goal is to avoid consulting the people again. The second is that if, despite that, any new treaty ends up being put to the vote, its odds of passing are small. Around a dozen national referendums have now been held on such EU issues as new treaties and whether to join the euro. As many as six have been lost. In an EU of 25, soon to be 27, in which half the members now choose to put significant constitutional changes to the vote, there is a risk that no treaty will ever be passed.

If cherry-picking does not work, that leaves two other options. One is to put into effect changes that do not require any treaty amendment at all. These could include more openness in the EU's legislative procedures and a bigger role for national parliaments. Such changes could be made at once. The other is to pursue closer European integration within a smaller group. This idea of a hard core that might proceed without the foot-draggers has always appealed to some of the original six. Mr Verhofstadt has proposed basing it on the 12-strong euro group. Mr Chirac has spoken repeatedly of pioneer groups.

The EU is, indeed, turning into a variegated organisation, with clubs such as the members of the euro, a defence grouping, the Schengen passport-free area and the seven-country Prum group that is pursuing police exchanges and border co-operation. The existing treaties allow "enhanced co-operation" to form such clubs-within-clubs. Yet the notion of a hard core seems unlikely to work. Any such group would have to include France, yet this is now one of the countries most hostile to the European project. As for the euro group, it is destined to expand to take in most central European countries in the next few years. When it has, say, 20 members, it will surely be too big to be a core.

In short, almost any big institutional change is now fraught with difficulty. It is true that some treaty amendments will be necessary when Croatia and, later, others join. Perhaps then, to please the growing band of small countries, a commissioner could after all be retained for each; and the votes in the council might then be reallocated to give a bit more weight to big members. But any such changes will probably have to be kept to a minimum.

If such minor amendments went into the accession treaties rather than a new constitutional treaty, ratification should become easier in most countries. And in one way, such an outcome would be refreshing: it would mean that, instead of the past decade of endless tinkering with new treaties and constitutions, the European Union would have to concentrate on delivering benefits to its members. Now that's a prospect to reflect on.

Twelve months after the French and Dutch said 'no' to the proposed Constitutional Treaty in referendums, the European Union has yet to rediscover its purpose.