Jun 25, 2013 | 12:29 GMT

7 mins read

Differing Views on the Future of the EU

German Chancellor Angela Merkel and French President Francois Holland in Paris on May 30.

Most members of the European Union agree that further economic and political integration is necessary to fight the current crisis in the bloc, but they do not agree on what the process should look like. Over the weekend, three founding members of the bloc (Germany, France and the Netherlands) made it clear that core member states have not reached a consensus when it comes to policies to deepen the process of European integration.

The disparity of objectives and goals for the future of the European Union will increase as the crisis deepens. As a result, substantial strengthening of the union's role as a central decision-making body in Europe is unlikely in the short to medium term.

German Chancellor Angela Merkel's Christian Democratic Union and its sister party, the Christian Social Union of Bavaria, presented on June 23 their electoral platform for the Sept. 22 general elections. According to the document, Germany's economic development is linked to Europe's prosperity. It also said more economic and political integration was needed in the Continent. But the platform rejected the creation of eurobonds, a debt collectivization scheme among eurozone members.

Mediterranean countries have defended eurobonds, but they are controversial in Germany and other northern European countries. The most common criticism is that a debt collectivization scheme could reduce incentives for countries in the periphery to apply economic reforms while weakening Germany's position in international debt markets. The main German opposition party, the Social Democratic Party, recently toughened its criticism of eurobonds to reflect public opinion.

Merkel's electoral platform also rejects proposals for a shared deposit guarantee among eurozone banks, a system that would essentially mean taxpayers in core countries would underwrite depositors in the periphery. This is considered to be the third stage of a banking union in the eurozone. The first stage, the creation of a single supervisory mechanism, was already agreed upon in late 2012 and is expected to become operational by mid-2014. EU members are currently debating the second stage of the banking union, which seeks to create a joint resolution mechanism for eurozone banks. But German objections forced Brussels to shelve its proposal for a single deposit guarantee scheme in September 2012. The formal rejection of the idea in the Christian Democratic Union and Christian Social Union platform suggests that this stage of the banking union will probably not be implemented in the foreseeable future.

Also on June 23, French Industry Minister Arnaud Montebourg defended his country's right to protect the French economy from foreign competition. Montebourg's statements came after EU Commission President Jose Manuel Barroso criticized France's determination to protect the country's audiovisual (TV and film) sector in negotiations over a free trade agreement between the European Union and the United States. Montebourg said Brussels was alienating ordinary Europeans by ignoring their concerns. He also said the European Commission's austerity policies were helping far-right parties, such as the National Front in France, and anti-establishment parties, such as Italy's Five Star Movement.

The Socialist government of French President Francois Hollande has defended the need for further economic and political integration in Europe on several occasions. In May, he presented a series of proposals for EU reform, including the creation of a special budget for the eurozone and the issuance of eurobonds. (Germany rejected both proposals.) But Hollande also criticized the European Commission, arguing that Brussels cannot dictate to Paris what policies to implement to aid the French economy. This is a clear example of the balance between continental integration and protection of national sovereignty and interests faced by most of the members of European Union.

The View from the Netherlands

The Netherlands is surrounded by stronger political and economic powers (Germany, France and the United Kingdom). As a result, it often operates as a political broker between the Continent's largest powers. In the early stages of the European crisis, The Hague supported the fiscal consolidation policies promoted by Brussels and championed by Berlin. But as the economic crisis began to hit the heart of Europe (the Netherlands is currently in a recession) and The Hague was forced to reduce spending, the Dutch government began to express concerns about the negative effects of austerity policies, echoing France and the periphery's misgivings on the issue.

On June 21, the Dutch government issued an internal assessment of its position regarding several EU policies. According to the document, which will be discussed at the Dutch parliament before being sent to the EU Commission, the European Union should provide guidelines and goals for its member states but leave the specific details and implementation to national parliaments.

The memo criticizes proposed salary increases for EU staff and says EU-funded programs should have "demonstrable added value." In this regard, the document calls for "a more modest, more sober but more effective EU" based on the principle that policies should be implemented at the European level only when necessary. This highlights the Netherlands' concern about the impact of European integration on national sovereignty, a view that somewhat echoes Paris' recent approach on the issue.

But the Dutch government criticized France's proposals for a separate eurozone budget. It also rejected the Commission's push for a deeper harmonization of social security systems and labor markets among member states. The memo expressed concerns about "the negative impact of labor migration," which includes "the abuse of social security systems" by immigrants from other members states.

These misgivings are in line with the United Kingdom's criticism of the European Union. According to British Prime Minister David Cameron, London will negotiate opt-outs from EU legislation on labor markets before calling for a referendum on Britain's EU membership. The British government has also announced plans to try to limit the arrival of immigrants from EU countries. The Dutch government's concerns about labor migration also highlight political pressure from the nationalist Party for Freedom, whose electoral support dropped in the 2012 elections but could surge if the economic crisis deepens.

Different Views on EU Integration

Germany, France and the Netherlands are founding members of the process of European integration. Along with Italy, Belgium and Luxembourg, they founded the European Coal and Steel Community in 1951 and the European Economic Community (the EU's predecessor) in 1957. Despite occasional episodes (such as the 2005 referendums in which the Netherlands and France rejected the project for a European constitution) the governments and the populations of the three countries largely support the European Union and the eurozone. Moreover, their governments understand that institutional reforms are needed to mitigate the effects of the crisis.

However, Berlin, Paris and The Hague do not have the same long-term vision of Europe. The French believe that the most powerful economies in Europe must become more involved in financing the periphery but that the sovereign prerogatives of national governments should be protected. France is also willing to apply protectionist measures in order to protect jobs in the country. Germany rejects any measures that could threaten its strong fiscal position and the strength of the German financial system and believes that such issues can be negotiated only if governments in the periphery give away greater sovereignty in fiscal matters.

In the middle of both positions, the Dutch government believes that Brussels' constant presence in economic, political and social affairs reduces The Hague's ability to fight the crisis and increasingly infringes upon national sovereignty while lacking democratic accountability. Like France (and the United Kingdom), the Netherlands believes that Brussels should have a guiding role in Europe but should not intrude on specific issues of national policy. Like Germany, the Netherlands defends free trade and fiscal consolidation measures but opposes the use of taxpayers' money to create mechanisms to fund banks and governments in the periphery.

The European crisis led to greater political fragmentation in the Continent, weakening the European Union's ability to make decisions. The economic slowdown in Europe is causing most EU members to re-evaluate their priorities and visions for the future of the bloc. This disparity of long-term goals will only increase with the deepening of the crisis, and as the economic slowdown more severely affects the economies in the continental core, it will be harder for Europe to make decisions in a fast, unified and effective way.

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