Ever tighter union? Brexit, Grexit, and frustrated differentiation in the single market and Eurozone

Many European political leaders and observers have argued that the European Union’s multiple recent challenges call for more “differentiated integration.” At first glance, the EU may seem to lend itself quite well to such an approach, with already variegated memberships in the Euro area or Schengen borderless travel zone. What proponents of differentiation tend to overlook, however, is that the Union’s core commitments are not set up to permit much internal variation at all. Indeed, in the EU’s two flagship policy areas — the Single Market and the Eurozone — the defining institutional principles rule out differentiation to a striking degree.

To substantiate this claim, we show that the rules in these areas are considerably more constraining of EU member states than are analogous federal constraints within the USA. We then highlight how these tightly limiting principles of EU economic governance have shaped recent negotiations with Greece in the Eurozone and the UK in the Single Market. While the EU’s core constraining principles make calls for differentiation all the more comprehensible, they also underscore that differentiated options may require rather fundamental change to the current institutional status quo.