The EU between Federal Union and Flexible Integration

The sixth volume in the Interdisciplinary European Studies assesses the changes that are taking place in the EU’s policies, institutions, and political structures. On the eve of a new chapter of European integration in the dark shadow of the war in Ukraine, it is high time to assess the changes that have taken place in recent time and consider whether current developments are taking the EU on the route towards federalism or if flexible integration patterns dominate. It is crucial to assess the future direction of European integration at a time when the EU is facing challenges that will test the resilience of its political structures and ability to take common action. The book brings together scholars from economics, law, and political science to provide insights into a number of issues with a bearing on the future of the EU.

This chapter addresses the challenges to liberal democracy in Europe and how a questioned liberal democracy has become a threat to the European Union (EU) and European integration. This chapter reviews the research on democratization and autocratization and explores the democracy status among EU member states. It further discusses how previous decades of democratization provided for EU enlargements and an expanded democratic peace order, but how recent years of democratic decline has become an existential threat to the EU. The chapter concludes with a discussion of what the EU should do if some member states further declines into populism, illiberalism and autocracy.

In the last decade, it has become increasingly clear that the EU has drifted into a ‘rule of law crisis’. This crisis concerns the very core of the EU: It is about its foundations and identity. The chapter argues that because of the crisis, the EU is in limbo between federalism and flexible integration. Federalism, understood as ‘unity’, where all member states pursue the same objectives and at the same speed, is not feasible, given that the political leadership in several member states are questioning the common values. Flexible integration, understood as closer cooperation among only those member states that continue to respect the rule of law, is not possible either, because the EU cannot have ‘multiple speeds’ when it comes to values. There is no obvious way out of the limbo, but in order to maintain its credibility, the EU must continue to fully apply the political, legal, and economic tools that are currently at its disposal.

This chapter analyses the standing of democracy in the EU and, in particular, the extent to which parliaments (national and European) function as arenas for political opposition in European affairs. It identifies two opposed views in previous research. According to the one, political opposition is essentially absent from EU politics. According to the contrary view, lines of conflict between government and opposition are becoming clearer in the politics of the Union. In a systematic examination of plenary debates in five national parliaments and in the EP, the authors test the viability of these hypotheses. They find that vigorous opposition prevails in the parliaments examined, and that EU politics is marked far more by conflict than by consensus. The problem, from a democratic perspective, lies not in any lack of opposition, but rather in the fact that the opposition conducted in the parliaments only reaches the voters to a limited extent.

Crises are a major driving force behind cooperation in the European Union. During severe crises, cooperation has been enlarged and intensified. The Ukrainian war and the covid-19 pandemic are two examples of this pattern, not least when it comes to the conduct of stabilization policies in the EU. In this chapter, we discuss the implications for the EU of a move towards increased fiscal federalism. First, the role of crises as a driver of political change is analysed. Next, we examine in greater detail, the effect of crises on the design of stabilisation policies in the EU since the introduction of the euro, the common currency. Finally, we discuss the significance of the recent pandemic-induced steps towards increased federalism for the EU. We raise the question as to whether this is a desirable path for the future of European cooperation.

This chapter concerns the role of competition policy, and in particular EU State aid rules, in the European integration process. The Treaty of the Functioning of the European Union contains a ban on State aid. However, this ban is not without exceptions. Through a centralized system, there is scope for exceptions in many policy areas. This also applies to areas where the member states are reluctant to transfer powers to the EU. To illustrate this situation, three such areas will be described: tax policy, industrial policy and housing policy. It will be demonstrated that that the development of an increasing number of detailed exceptions to the State aid ban raises important questions of competence. While the member states have been careful to delimit the EU’s powers, this has not prevented the EU from indirectly steering these policies through the application of the State aid rules.

This chapter addresses developments in EU tax policy with an emphasis on processes for decision-making. It explores the change in views on tax competition and how this has led to restrictions in member states’ ability to design their own tax systems. The chapter highlights the impetus towards increased federalism entailed by the EU policies to recover from COVID-19 and to promote a green and digital transition for the EU economy. The chapter discusses how the Commission has worked to change the EU decision processes in the field of taxes from unanimity to qualified majority voting. The chapter concludes that the EU must show that it can promote economic growth and efficiency in the tax systems before member states will have enough confidence to entrust more decision-making in tax matters to the EU.

The key question addressed in this chapter is the extent to which the European Public Prosecutor’s Office (EPPO) is a suitable model for a future ‘federal’ system of European criminal law. The analysis approaches that question especially by studying the relationship between EPPO, national sovereignty and legitimacy. On this basis, the first section of this chapter proceeds to comprehensively analyse the scope, nature and type of enforcement powers enjoyed by the EPPO. The chapter’s second section discusses in detail the ways in which the exercise of the EPPO’s powers may constitute a threat to national sovereignty whilst the third section considers EPPO from the perspective of legitimacy, with a particular focus on judicial review of the EPPO’s activities. The final part of the chapter analyses the pros and cons of establishing the EPPO by means of enhanced cooperation.

This chapter analyses if the EU is developing a defence union, and what that would imply for the EU. In order to analyse the development of EU defence policy since 2016, this chapter first discusses what measures would need to be in place in order for the EU to have a defence union, given previous literature on defence union. Then it analyses the development from 2016 to 2022. The conclusion is that the EU so far has not developed a defence union, even though the traits of union in EU security and defence policy have increased. In particular, three aspects found are of importance. The first is the European Defence Fund, the second the common capability development, that in combination with islands of specialization increase future possibilities of specialization and burden sharing; and the third some of the PESCO-projects which indicate defence of the member states within their own territory.

This chapter outlines what has happened to economic inequality in the European Union over the past decades. It does so from three different perspectives: (1) economic inequality in terms of differences in average incomes between EU countries, (2) economic inequality between citizens within the respective EU countries, and (3) economic inequality between all citizens of the EU. The different perspectives and their respective developments over time illustrate the importance of keeping track of all these different levels. With respect to questions concerning further integration or steps toward a more federal union some argue that these are necessary to achieve goals on social cohesion, while others instead argue that further integration is not possible due to inequalities being too large. The chapter concludes with a discussion about the impossibility of making progress on these issues without being clear on the different levels and perspectives on economic inequality outlined in the chapter.

In the concluding chapter, the editors take stock of the state of integration seventy years after the EU’s inception. In the early 2020s, the EU faces once again the fateful question of whether integration should proceed in a federal direction, or whether varied flexible solutions to concrete problems should guide its development instead. The stock-taking is seen against the acute challenges that the current situation in the world underline, not least the war in Ukraine, the energy and cost of living crises, with impact on how the EU and its member states tackle the long-standing climate crisis. In this ominous context, it is important that the member states hold together and find strength in their common endeavours. Nonetheless, certain member states are challenging the Union’s fundamental values in a way never seen before and which have clear implications for further integration. The authors argue that political leadership is needed to stake out the way ahead. The EU’s institutions have a role to play, but they cannot act without legitimacy and support from the member states.