The European Union in 2017: Fragmentation or Integration?

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by Thomas Rhoades and Mitch Yoshida

Summary

As the European Union (EU) approaches the 60th anniversary of the Treaties of Rome, its leaders and institutions face a rising tide of political risk. Long-held and growing doubts about the EU’s ability to reduce unemployment, stem migration, and counter terrorism have set the stage for electoral gains by euroskeptic parties in the Netherlands, France, Germany, and – if an early election is called – in Italy. These risks are compounded by Russia’s support for euroskeptic parties; the uncertain fate of the EU-Turkey refugee deal; Brexit negotiations; and an increasingly likely economic downturn. If the EU pursues an ambitious program that includes Eurozone reform, a flexible migrant policy, and deeper defense and intelligence integration, it can mitigate these risks and emerge as a stronger union.         

Background

Political risks to EU cohesion stem from rising popular pessimism about the Union. In April 2007, 69% of Europeans were optimistic about the future of the EU and 24% were pessimistic. By November 2013, this balance shifted to 51%-43%; and by April 2016, it moved to 50%-44%. These changes have been largely driven by the Eurozone and migrant crises, which raised widespread concerns about unemployment, immigration, terrorism, and the EU’s ability to address these issues.

Rising popular pessimism about the EU has gradually translated into electoral gains by euroskeptic parties, whose positions range from seeking the reform of the Union to abandoning it altogether. The first major shift came in May 2014, when euroskeptics gained an unprecedented number of seats in the European Parliament. This has had little direct impact on parliamentary voting due to the small number of euroskeptic representatives, who account for 25% of the current parliament; their lack of cohesion; and the existence of a grand coalition between the center-right European People’s Party (EPP) and the center-left Progressive Alliance of Socialists and Democrats (S&D). In November, however, the grand coalition collapsed, elevating the influence of euroskeptics in parliament.  

Euroskeptic parties have gained more political ground at the member state level. In June, the British electorate voted, 52% to 48%, to leave the EU on unspecified terms. The euroskeptic UK Independence Party (UKIP), which led the “leave” campaign, argued that Britain’s membership in the Union led to greater immigration from the continent, an erosion of national sovereignty, and subordination to an undemocratic supranational organization. In December, an Italian referendum on constitutional reform to streamline decision-making in the Senate ended in a 59%-41% “no” vote. Prime Minister Matteo Renzi, who supported the reform and was opposed by euroskeptic parties led by the Five Star Movement (M5S), resigned after the loss. M5S seeks a referendum on Italy’s membership in the Eurozone. 

Outside of Western Europe, euroskeptic parties are less interested in leaving than reforming the Union in ways that transfer powers back to member states. Tensions between West European member states and the Visegrad Group (V4) – the Czech Republic, Hungary, Poland, and Slovakia – increased significantly over mass migration from the Middle East and North Africa to the EU in the first half of 2015. All four states refused to implement the European Commission’s mandatory quota plan for distributing asylum seekers across EU member states. But relations have also deteriorated over three other major issues: renewed calls for a “multispeed” EU after Brexit, in which some West European member states would integrate faster than others; shifts toward illiberal governance in Poland and Hungary; and moves to expand the capacity of the Nord Stream gas pipeline from Russia to Germany (also known as Nord Stream II), which would further circumvent the V4 and other member states as natural gas transit routes – depriving them of transit fees and political leverage with Russia.

Prospects and Implications

It is against this backdrop of widening internal division that the EU faces growing risks to its cohesion. One is the continued rise of euroskeptic parties, which could intensify after Dutch, French, and German elections scheduled for this year. In addition, Italy could hold an unscheduled general election as early as September. In the Netherlands, the far-right Party for Freedom (PVV) – which advocates a Dutch exit from the EU and restrictions on immigration – currently leads ahead of a general election in March. Even if PVV wins, however, the need to form a coalition government is likely to remove “Nexit” from the agenda. In France, the center-left former Economy Minister Emmanuel Macron narrowly leads his opponents – center-left former Prime Minister François Fillon, and far-right leader of the National Front Marine Le Pen – in a tightening presidential race that is set to conclude in May. Le Pen, who currently polls at second place, supports a French exit from the Eurozone and – absent a transfer of EU powers over border controls back to France – leaving the EU. In Germany, the far-right Alternative for Germany (AfD) – which has called for a referendum on Eurozone membership and tighter immigration controls – is projected gain a small number of parliamentary seats during the federal election in September. Even if AfD is able to join a governing coalition, however, its agenda is likely to be sidelined. In Italy, an early election would likely result in a coalition government that includes a weakening center-left Democratic Party and the right-wing M5S. But M5S is unlikely to overcome a constitutional barrier that would allow it to call a referendum on Eurozone membership.    

While these risks to EU cohesion are small at present, they are compounded by others. Russia’s past attempts to influence elections in Europe are likely to be repeated, to the benefit of euroskeptic parties that are more willing to lift economic sanctions on Russia. Another risk is posed by the uncertain fate of the EU’s March 2016 refugee deal with Turkey, which is partly credited with reducing migrant flows to the EU. Its cancellation, and a subsequent increase in migration, would likely strengthen euroskeptic parties that have largely gained prominence for their opposition to migrants. If Britain divides member states and secures lenient Brexit terms, moreover, it would increase the perceived viability of withdrawal in other EU member states. Added to these risks is the increasing likelihood of an economic downturn, which would further stress the political integrity of the Eurozone and strengthen euroskeptic parties. This is likely to occur if the Eurozone fails to reach an agreement on Greece’s next tranche of bailout funds, or if the common currency area faces an expected cyclical downturn.

Apart from this growing array of political risks facing the EU, it is increasingly likely that member states will bolster cohesion through deeper defense cooperation and integration. While European publics have long-favored this, past attempts to achieve it fell short of expectations due to national concerns about losses of strategic autonomy, technological advantages, and employment. But two recent developments are pressing EU member states to overcome these obstacles. One is U.S. President Donald Trump’s assertion that America’s commitment to NATO is contingent on increased contributions from European members of the Alliance. Another is Britain’s impending departure from the EU, which will end its ability to obstruct EU defense initiatives but could – depending on the outcome of Brexit negotiations – significantly weaken the EU’s defense industrial base and intelligence capabilities. 

Recommendations

To mitigate mounting risks and strengthen the EU’s political cohesion, its leaders must enact ambitious reforms centered on euroskeptic concerns about unemployment, migration and terrorism.

Unemployment: Nearly seven years after the start of the Eurozone Crisis, the German-led focus on structural reform and fiscal rules remains necessary to narrow the currency area’s internal fiscal and trade imbalances. But it should, as analysts at the IMF and elsewhere have argued, be accompanied by solidarity in the form of debt forgiveness or risk-sharing in the issuance of new debt that would a) enable the periphery to invest and reduce chronically high unemployment that is eroding political support for the Eurozone and EU, and b) reduce the common currency area’s vulnerability to future economic shocks. Preventing an increase in unemployment will also be a critical challenge as Brexit negotiations commence. Punitive terms for Britain’s departure are necessary to discourage member states from leaving the Single Market and the Eurozone, which would further weaken economic prospects and increase unemployment across the Union.

Migration: EU leaders should adopt the Slovak Presidency’s “effective solidarity” concept instead of attempting to impose mandatory migrant quotas on member states. By widening the definition of solidarity beyond the number of migrants accepted, the EU would defuse a major euroskeptic criticism – that it is attempting to force migrants onto legitimately elected governments and societies. After the V4’s refusal to adhere to the mandatory quota system, which revealed the limits of EU solidarity on migration, more ambitious steps do not appear possible at this time.

Terrorism: Investigations of recent terror attacks in the EU have revealed that fragmented and incomplete databases on terror suspects, and a lack of cooperation among intelligence agencies, are key deficiencies that need to be addressed. Political support for greater investment in and cooperation among intelligence agencies, including the formation of an EU-wide terror suspect database, is urgently needed. Additionally, the political opening for increased defense cooperation and integration should be seized to bolster cohesion and ensure that the EU has the military capabilities – as a part of its broader foreign policy toolkit – to address sources of radicalization before they threaten Europe.

Through a combination of integration and renationalization, the EU would mitigate other threats to its cohesion: Russia’s support for euroskeptic parties, the potential collapse of its refugee deal with Turkey, British efforts to secure lenient departure terms, and future economic shocks.

Photo credit: MPD01605

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  1. Adding to all this is the latest developments between Netherlands and Turkey and the growing proximity between Russia and Turkey

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