Highs and Lows of European Integration

The paper offers a reading of the 1975 Lomé convention as a turning point for the identity of the EU and its embryonic foreign policy. It argues that economic relations to the Global South constitute the original core of European foreign policy. A fundamental component of EU institutional developments ever since the Treaties of Rome, EC development aid was a specific identity tool for the EC, a way to stand out both in comparison with international organizations and with the superpowers during the Cold War. In the mid-1970s, around the negotiations of the Lomé Convention (1975), Europe developed its view of the global, to make the two concepts regional and global go well together. Solidarity with the Third World was intended as a key for geopolitical success, and trade—with the pioneering adoption of the Generalised System of Preferences and of Stabex—stood out as the crucial area where EC policies were innovative and laudable. The EC used the newly acquired political potential to promote European exceptionalism and the idea of Europe as a civilian power.

The EU has discovered the necessity of having a foreign policy of its own in the aftermath of the Balkan wars in the 1990s. Territorial conflicts and ethnic cleansing, weak and unfinished States urgently required answers, raising, at the same time, difficult questions of political and economic stability and of constitutional values. After the Eastern Enlargement of 2004, the EU’s enlargement policy has been considered as a successful tool capable of adding transformative power to the EU Foreign Policy through the enlargement perspective and the conditionality of reforms. However, although its instruments have been adapted in order to meet the specific challenges of the Western Balkans, stabilization and sustainable transformation of the States in the area still have to be reached. There are even signs of pre-accession fatigue, on both sides: the status quo seems to be the preferred solution of elites in the Balkans while the EU seems to have lost its interest in the area and, consequently, its transformative power. This contribution will explore the reasons and examine recent initiatives, such as the Berlin process, asking what may be done in order to regain momentum.

As the largest economic bloc and the largest trading power in the world, the European Union uses restrictive measures as a foreign policy tool. More than 30 States and thousands of individuals and legal persons are subject to EU sanctions. This massive use of sanctions by the EU has raised several legal issues. Some of these problems were caused by flaws in the sanctions framework of the United Nations in the field of counter-terrorism. Autonomous sanctions, the restrictive measures adopted by the European Union without previous UN action, proved to be problematic too. The extensive case law of the EU Courts has demonstrated the deficiencies of the sanctions system but has also indirectly improved the quality of the procedures at UN and EU level. The withdrawal of the United Kingdom from the European Union could determine some changes in the policy of the European Union.

This chapter analyses the establishment of a “multilevel rule of law system” that encompasses the supranational political system of the EU and several interdependent national levels of governance. We show how the principle of the rule of law in the EU has been set up by primary law and rulings of the European Court of Justice (ECJ) based on different traditions of the EU’s member states. We argue that the doctrines of primacy and direct applicability, both developed through ECJ case law, are a manifestation of the principle of legal certainty and focal to the multilevel character of the EU’s principle of the rule of law. We analyse two different kinds of resistance of the national level against the EU’s rule of law system: First, we look into the case law by higher national courts striving to protect “their” national, constitutional principles and, therefore, tending to accept the primacy of EU law only to a limited degree. Secondly, we analyse the current violations of the EU principle of the rule of law in Hungary and Poland. In the final chapter, we discuss the possibilities of the EU’s institutions to react, especially with regard to the Art. 7 TEU procedure, the EU’s “Justice Scoreboard” and the Commission’s new mechanism for prearranging Art 7 procedures.

This contribution analyzes the concept of differentiated integration and its multifarious meanings and applications. After a short historical overview, showing that instances of differentiated integration have existed since the foundation of the European Communities, it focuses on the current phase, which started in the 1990s with the establishment of enhanced cooperation, a general mechanism allowing flexibility in integration among member states. Moreover, it analyzes the areas of the Economic and Monetary Union (EMU), the Schengen Area, and the Area of Freedom, Security and Justice, which are among the most important areas where differentiated integration has taken place. The essay develops a set of elements that allow the classification of all these cases in relation to their centripetal or centrifugal effect, i.e., whether they foster or hamper further integration. Finally, it discusses the recent political endorsement of differentiated integration as a solution for the current multidimensional crisis of the European Union, which may be considered as the recognition of the crucial importance of flexibility and pluralism, but also as an indirect acknowledgement of the inability to move forward together, due to the structural divergences among EU Member States.

The UK’s exit from the European Union (EU) raises many questions and fears about the future shape of European politics and the rise of right-wing populism across the Union. The roles and deeds of political parties, the official referendum campaigning groups and the media during the run up to the vote in June 2016 have all been the subject of analysis. Yet the role of civil society during the campaign and after the vote has not been the subject of much discussion. The absence of different types of civil society groups (both organised groups and citizen movements) from the debate about the referendum is understandable given their relative silence during the campaign. Yet there has been a noteworthy rise in civil society activities aimed at stopping and/or shaping the process of the UK’s exit from the EU (Brexit) since the vote. For this reason, a closer look at the subject seems warranted.

This chapter focuses on how the “populist turn” of recent years has affected EU institutions and the non-state actors which interact with them. It argues that in the broader context of the legacy of the 2008 financial crisis, the success of populist parties and movements has affected the composition, agendas, and political culture of European institutional actors and has then been negatively reflected in the prospects of the non-state actors that interact with them, their funding opportunities and strategies. It argues that as a consequence of the impact of populist formations, a fragmented reaction has occurred in each of the institutional domains considered—the European Commission, the Parliament, and civil society organizations. In particular, the success of populist forces in several member states and at EU level has specifically affected inclusionary antidiscrimination organizations. Changes have occurred in their perceptions of legitimacy and general political opportunities, and in the structure of their networks, which increasingly divide between a pro-EU and an anti-EU component.

This contribution examines rising economic patriotism in Central and Eastern Europe, mainly in Hungary and Poland, after the global financial and economic crisis. A closer look at patriotism in these EU Member States seems warranted given the global shift towards more inward-looking national policies and the challenging of neo-liberal ideas of free trade and competition, where these ideas were taken on board by local elites rather keenly.

Economic policy in the CEE countries is organised according to a rather particular combination of objectives and priorities. Patriotism, as shown by the case of Poland and Hungary particularly well, has been part of a policy mix derived from ideological considerations and, partly, from the interests of a new business elite since the collapse of communism. There are, however, quite apparent country-specific differences; Orenstein observed that ‘whereas neo-liberal ideas have shown resilience in some Central and Eastern European countries, a trend towards greater statism is clearly visible in others’ (Orenstein, Resilient liberalism in Europe’s political economy. Cambridge University Press, 2013, p. 375). In the case of Hungary, certainly after 2010, patriotic trends in economic policy have been especially prevalent as supported by assessments that Hungarian economic policy ‘represents the greatest departure from the neo-liberal development model yet attempted in Central and Eastern Europe’ (Orenstein, Resilient liberalism in Europe’s political economy. Cambridge University Press, 2013, p. 395). It seems, as discussed in this contribution, that Poland may be rather keen to follow suit.

This work illustrates the nature of the core/periphery imbalances and anaemic long-run growth in the Euro area and discusses the problems associated with addressing them through expansionary fiscal policies in the core regions and greater domestic expenditures in unreformed peripheral areas. As competitiveness imbalances across regions have widened, both fiscal measures may backfire, and a more nuanced policy mix is in fact needed to reverse the unequal spatial distribution of high-value-added activities and resource misallocation. Addressing the factors behind such imbalances is key for the survival of the Euro area because their size and persistence clash with the tendency towards an equalization of workers’ aspirations: this aspirations/resources mismatch is in fact fuelling discontent and populist animosity against the EU institutions and the core countries.

TARGET2 is the intra-euro area payment system. Before the outbreak of the euro crisis, the TARGET2 balances of the individual euro area member countries have always been fluctuating closely around zero. Thus, current account transactions have been financed by corresponding private financial account transactions. At the height of the euro crisis in 2012, TARGET2 liabilities of the five major crisis countries accounted for the first time to roughly 1 trillion euros. At that time a massive capital withdrawal from the crisis countries was cushioned by the Eurosystem through almost unlimited lending to crisis-struck banks. Currently (in 2017), TARGET2 imbalances are reaching a second height, in which for many countries, the 2012 levels are exceeded. The narrative of this episode however differs from the capital flight story of 2012. This time the Eurosystem is actively buying government bonds of euro area member countries within its large-scale asset purchase program. The majority of these bonds are purchased by the national central banks from banks located outside the eurozone which are connected to TARGET2 through an account at another national central bank (such as the German Bundesbank). This chapter aims at giving an economic interpretation to these two episodes. On the one hand, it will be argued that the Eurosystem’s role as lender to banks and governments of distressed economies is responsible for the increase in TARGET2 imbalances and that in both cases the increase in TARGET2 liabilities is an indicator for the unwillingness of financial markets to continue lending to these borrowers. On the other hand, in the absence of such lending, the euro probably would not have survived the crisis.

The handling of the euro crisis and the subsequent refugee crisis has sparked a rapid growth of integration-critical parties in virtually all member states. While the popular mobilisation of integration-critical sentiments has diverse roots, a major cause lies in rising social inequalities within and between countries. In an effort to win back popular support for its programme of an ever-closer union, the European Commission, along with the member states, has come to place more emphasis on the social dimension of European integration with the hope of strengthening popular identification with the EU.

However, the road to a socially more active Europe via the development of an activist social policy at EU level is blocked by the traditional determination of the member states to keep the design, management and funding of welfare programmes under their own control, a resolve that, if anything, has been strengthened by the growing electoral popularity of integration-critical movements. Nor is such a road economically necessary. Mounting socio-economic disparities are not primarily the result of globalisation or the primacy of negative integration but of the orientation of the EU’s macro-policy regime that has provided for low growth and high unemployment. Accordingly, the currently dominant strategy of improving performance via primarily microeconomic supply-side measures such as flexibilisation of labour markets, improved employability and social investment in education, training and family-friendly policies will also largely fail to produce the hoped-for results. The most promising road to a more socially equitable Europe instead lies in the change in macroeconomic strategy that effectively stimulates private investment. In practice this may call for a more differentiated form of integration that recognises the differential developmental needs as well as social policy preferences of the member states.

The paper firstly aims to analyse the historic evolution of European social policy, which has been both significant and incoherent at the same time. Thanks to this evolution, the European Union (EU) was able to build up its own labour and social law system, based on the huge increase in legal competences within the treaties and many directives, capable of partially harmonising the respective legal systems of the Member States (MS). Nevertheless, a high level of incoherence has always been a characteristic of European labour and social law, for different reasons (shared competences, exclusion from EU competences of collective labour law, a high degree of flexibility, etc.), that has made the harmonisation process very weak.

This weakness—aggravated by the enlargement to include the Central and Eastern countries—was probably one of the reasons why European authorities decided to deal with the labour and social side of the recent economic and financial crisis in a way which has completely abandoned harmonisation, pushing through the adoption of national reforms by some Southern MS that were severe and generally perceived as a disintegrative element within the EU context. Against this background, the paper secondly tries to assess the impact of the economic and financial crisis and these national reforms on the future of European social policy, underlining that it could be very negative (de facto leading to the marginalisation of the harmonisation process) but also considering the recent efforts made by the European Commission to relaunch this policy through the so-called European Pillar of Social Rights.

This assessment will be conducted taking into account that the social dimension of the EU is currently highly contested, even with regard to one of the most important successes of European social policy, i.e. the regulation of free movement of workers (more precisely: of persons), considered in many countries as encouraging “social tourism”.

Taken together, the chapters of this book have clearly illustrated the complexity, the discontinuities, and the limits to but also the successes of the process of European integration. At 60, the Union is a set of organizations that has undergone a long and, in some areas, surprisingly effective process of institutionalization. Political and bureaucratic institutions have stabilized many of their procedures, taken-for-granted assumptions, and even political values. However, the EU is also a structure that has continued to change. The often-used metaphor of the bicycle to describe the EU is as relevant as ever, that is, of a structure that needs to constantly move forward in order not to fall over. This is an asset, as it shows the dynamism behind the idea of EU integration. The architects of EU integration have successfully instilled this dynamism into the EU institutional settings: in his famous speech on 9 May 1950, inaugurating the first European Community, the European Coal and Steel Community, Robert Schumann prophesied: “Europe will not be made all at once, or according to a single plan. It will be built through concrete achievements which first create a de facto solidarity (…) By pooling basic production and by instituting a new High Authority, whose decisions will bind France, Germany and other member countries, this proposal will lead to the realization of the first concrete foundation of a European federation indispensable to the preservation of peace.” This fundamental link between economic integration and peace and democracy is the most important legacy of the original design of today’s European Union. Yet, in the present time (and even before the eruption of the economic crisis in 2008), the focus seems to be predominantly on the economic side, leaving a dangerous gap in the evolution of specific democratic features which are essential for any viable European integration project.