Wishful thinking is an occupational hazard for those who assess the health of the European Union. Those who want to see the EU fail underestimate its powers of resilience and recovery. Those who want to see it prosper underestimate its capacity for self-inflicted harm.
On the eve of last week’s European Council its president, Donald Tusk, claimed to have seen “a surge of pro-European sentiment in recent weeks, according to the polls.” (Other interpretations of the Dutch and French elections are available. Indeed, other polls are available.)
Tusk said he has never had such a strong belief that things are going in a better direction. He also claimed that the EU has maintained political unity in the face of multiple threats and challenges. He over-gilds the lily. There is a veneer of unity, but beneath the surface there are plenty of cracks. That none of the fault lines is as glaring as the chasm opening up between the United Kingdom and the EU27 is hardly a reassuring comparison.
Last week’s EU summit did not, for instance, resolve the disagreement that has festered for months over accommodating migrants. Germany and the European Commission insist that all countries must share the burden. In practice, Central European states have ducked the targets — helped, it should be acknowledged, by migrants’ preference for going to Western Europe.
At the beginning of the year, there were rumblings of dissent among ministers from the older and richer member countries. If the Central European states refused to receive migrants, then there should be consequences, such as being denied a share of EU funds that are distributed as part of the “Cohesion Policy” — i.e., the money intended to help Europe’s poorer countries and regions catch up economically with their richer neighbors.
This notion of “conditionality” has since taken root in different parts of the EU’s institutional machinery, for a number of different reasons, but championed at every turn by Germany.
Four weeks ago, when Günther Oettinger, the European commissioner for the budget, presented the Commission’s proposed EU budget for 2017, I asked for his views on conditionality. To the distress of the Commission spin-doctors, Oettinger gave a preview of a so-called reflection paper on the EU’s finance and budget, which is to be published Wednesday.
While pointing out that conditionality was not part of the 2018 budget, he acknowledged that it was a possibility for the longer term.
He cited two examples of where conditionality might be warranted. Firstly, where a member country was supposed to be pursuing a program of economic reform, a condition might be set to ensure that EU money was used to meet those objectives. Secondly, the receipt of Cohesion Funds might be made conditional on complying with the EU’s norms for democracy and the rule of law. He didn’t mention Poland and Hungary by name, but the Commission is in dispute with both countries in this area.
The commissioner gave the impression that he could see merit in increasing conditionality, but it’s not clear how strong a push his reflection paper will give.
Poison in the system?
Oettinger, not for the first time, seems to be more in step with his Christian Democrat colleagues in Germany than with his boss at the Commission. In May, the German government adopted a position paper on the EU’s future financing that called for greater conditionality. But Jean-Claude Juncker, the Commission president, speaking at a conference in Berlin on the same day that Oettinger unveiled his budget proposal, described such conditionality as “poison.”
“I believe it won’t be helpful to divide the European Union,” Juncker said. “That would be poison for the Continent.”
Too late: the poison is already seeping into the body politic.
The idea has taken hold in the capitals of Western Europe that those countries that joined the EU in 2004 or later are not true believers in the European project — they’re just out for what they can get. Witness Emmanuel Macron, France’s new president, complaining that Central and Eastern European countries use the EU as “a supermarket.” Witness Guy Verhofstadt, leader of the liberals in the European Parliament, railing against Viktor Orbán: “You want to keep the EU funds, but you don’t want our values.”
It’s a short step from Verhofstadt’s righteous indignation to a threat to cut off EU funds and there is indeed a superficial attractiveness to doing just that. Although the EU’s treaties provide specific sanctions that could be used to bring Poland and Hungary to heel over democracy and the rule of law, those sanctions are considered excessive, whereas budget conditionality is the kind of solution that appeals to bureaucrats — it might be effective, while appearing less political and more procedural.
In practice, though, budget conditionality would prove just as difficult to enforce as the EU’s rules on excessive deficits. They too were supposed to be procedural and not political — at least until France and Germany ran deficits in excess of 3 percent of GDP and yet escaped punishment.
One of the risks inherent in making a weapon of the budget — using it to enforce policy on macroeconomic reform or the rule of law — is that the EU would reinforce the illusion that the point of membership is to extract direct and immediate financial return. But the benefits that flow from membership cannot be reduced to a simple netting off of contributions to the EU budget against amounts of money received (as some in the U.K. are now realizing).
In theory, money spent in one part of the EU to improve infrastructure or stimulate a market can have benefits elsewhere. In practice, it may well be Germany that has most benefited from economic improvements in Poland and the Czech Republic.
Hit hard, face backlash
The politics don’t stack up either. Imagine if the EU did turn off the tap and stopped EU money flowing to Poland or Hungary. It would feed a sense of injustice and encourage Euroskepticism. Any government leader with an ounce of demagoguery (and Viktor Orbán is carrying weight) would soon be explaining to voters that they were being punished for not taking in migrants, while Austria (almost as unwelcoming) was escaping punishment.
The older member countries would be accused of denying the newer members the benefits of EU membership that they had previously enjoyed (and in the case of French farmers, continue to enjoy).
Perhaps, if the EU budget was a model of rationality and transparency, these counter-arguments could be refuted. A case might be made that conditionality for economic reform would improve the return on EU funds. But that is not where the EU starts from. The EU budget is a multiannual, multi-heading, multi-rebate mess, distorted by years of trade-offs and catering to special interests. That’s not a sound foundation on which to defend conditionality.
Instead, the likely upshot is that the argument over conditionality will widen the gap that is opening up between Eastern and Western Europe, between newer members and old, between eurozone and non-eurozone. The discussions that are now being set in train by the European Commission about the future financing of the EU risk becoming a proxy war for competing visions of Europe after Brexit. The early signs from Emmanuel Macron are that he wants to advance the development of the eurozone, with its own finance minister and its own budget.
Germany’s enthusiasm for conditionality stems from an earlier obsession with enforcing economic reform, now reinforced by a desire to make the migration crisis the main priority of the EU budget. The result is tunnel vision. Germany has lost sight of the bigger picture, which is that the EU post Brexit is in danger, not of falling apart, but of coming loose at the seams.
Tim King writes POLITICO‘s Brussels Sketch.
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