Future Evolution of the European Union

Chaired by Helmut Schmidt
11-12 April 2002
Paris, France

On the 11th and 12th of April, 2002, the High-Level Expert Group met in Paris as the guests of UNESCO. Under the chairmanship of Helmut Schmidt, the group discussed the future evolution of the European Union.

Introduction

1. The citizens of Europe today face unprecedented challenges. The dramatic achievements of previous European Union initiatives - the growth of the European Community to encompass all of Western Europe, the thorough integration of European economies, and most recently the launch of the common currency - have validated the faith of all those leaders who, over the last 50 years, worked to foster common aims of deeper and closer union. The very success of their efforts, however, has forced Europe to address new and even more daunting questions.

2. The present state of the European Union must be seen in historical perspective. Over the past 50 years, at first six, then nine, then 12 and nowadays 15 nations have embarked on a political journey without any parallels, relinquishing and sharing sovereignty, joined together out of shared political interests and a common civilization. They joined voluntarily rather than by a violent conqueror. Viewed through the prism of time, the success of the EU in establishing structures and institutions is remarkable and unique in the history of mankind.

3. Today, however, the problems facing Europe are grave. National leaders seem to have lost their drive, they appear to lack conceptual energy in regard of the future of the EU. The expansion of the EU to the east, which will raise the number of member states to more than 25 over the next decade, raises issues of governance with which the current institutions of the EU are incapable of dealing. The recently established Convention may succeed in reforming the structure of power in Europe, but the outcome of that process is far from certain. Demographic plus climatic changes are looming large. They will result in geopolitical changes, which will challenge Europe to face the outside world united, or to gradually lose its own autonomy.

4. The several points in this report may appear as if there is already consensus about them between national governments. In fact the EU is far from that. One might even call the present situation a standstill-crisis.

Reforming the Institutions

5. The institutions of the EU have been modified piecemeal wise over the years. But the structures which exist today were meant for six states only. When faced with 15, those institutions have gradually declined both in operational efficiency and in democratic legitimacy. Both these problems will be exacerbated by the upcoming enlargement. Wholesale reform of the EU structure is a vital necessity.

6. Many hopes are now pinned on the general Convention of leaders currently meeting under the direction of Mr. Valery Giscard d'Estaing. Everyone recognizes the absolute necessity of this effort's success, and it is to be hoped that the Convention recognizes the need for fundamental reform. The Convention should concentrate on the most basic and high-level ideas; it is vital that it not become bogged down in the narrow or specific immediate difficulties. A unitary, solid structure would be a vastly more desirable outcome than a patchwork design. Whenever possible, the right of a single state to veto European policy should be abolished: meaningful union implies the agreement to accede to the decision of the majority, even when that decision is controversial.

7. No democratic polity can succeed without the support of its citizenry, and European enthusiasm for the institutions of the European Union has steadily waned. Europeans find themselves unable to understand the Byzantine treaties and regulations governing the Union's activities, and alienated by its highly centralized and professionalized network of bureaucrats. Discontent is demonstrated by low voter turnout in elections to the European parliament, in the results of European referenda, and in popular unrest with the accretion of power in a non-transparent Brussels. This feeling of disengagement must be immediately addressed by the European leadership.

8. The European Parliament is a clear case calling out for empowerment. The Parliament should be intimately involved in all legislation, and in the selection of the Commission. Direct election of the Commission's President by the Parliament should be considered, along with other means to strengthen the democratic mandate of the Parliament itself.

9. The European Council system itself is one of the institutions most in need of reform. The proliferation of Councils has decentralized decision-making, and should be reversed. Most importantly, the rotation of the Presidency every six months should be amended so as to allow for better continuity of leadership.

10. The fiction that all members of the EU are equal is itself a structural failing, and will become more glaring with the addition of transition states from the former Soviet bloc. Reform proposals should take account of political and economic reality - a stable structure will emerge best from institutions, which adequately represent the genuine, legitimate interests of the Union's dominant members.

11. Similarly, differentiation between states with different goals - variable geometry - should be encouraged as a means of fostering flexibility and realism within the European system. Long transition periods for new entrants and new initiatives, opt-outs for particular states, enhanced cooperation on certain issues and other means of customizing the application of European policy to meet the needs of specific situations should be viewed not as a derogation from a European ideal, but rather as beneficial and practical means of furthering the goal of European integration.

12. Europe should be united, but not uniform. Europe needs simplicity and efficiency, and the EU should not confuse lack of harmonization with a lack of effective integration. As the EU grows and matures, it should resist the temptation to regulate and legislate every issues. Those issues not directly related to the Union's core competencies - development of the common market, expression of shared foreign policy objectives, promotion of justice and human rights - should be left to the individual states. Subsidiarity should be actively pursued, and European leaders should use the current period of institutional reappraisal to exercise a tactical retreat from EU involvement in issues more properly relegated to the various nations.

13. Finally, it should be recognized that institutional reform will take Europe only so far. In many cases, institutions can facilitate the development of good policies. Well-designed structures, however, are not a substitute for properly crafted laws, properly applied regulations, and skilled political leadership.

Expansion to the East

14. The expansion of the European Union will begin within a few years, and the EU is not yet ready. Ultimately, the EU will include more than 25 nations.

15. Enlargement, if pursued without dramatic institutional reform, will challenge the decision-making capability of the entire EU structure. While expansion will pose severe economic challenges, the European Union has long ago demonstrated its ability to surmount purely economic problems. The more difficult questions will be political and psychological. Political paralysis and bureaucratic drift would be a disastrous conclusion to this ambitious project, and can be avoided only by long-term thinking and preemptive action.

16. Turkey represents a special case, and one which will require special delicacy by European leaders. History, culture, religion, and geography pose obstacles to the integration of Turkey into the fabric of the Union. Yet it cannot be denied that Turkey is not only an eager applicant but has been officially added to the list of candidates - though at the very end of the list. It should be made clear that the distinction between membership and non-membership is not black-and-white. There should be grades and degrees of participation in EU activities, and some levels of integration may be more appropriate for certain countries, at certain times, than others. This concept should be asserted with regard to all the countries on the EU's borders: it would be extremely unwise to paint the distinction between members and non-members in stark and unnuanced terms.

17. Enlargement of Europe is a priority, a duty, and an ideal. The process of accession will transform Europe fundamentally, and some aspects of this adjustment are completely unforeseeable. What the EU faces is not merely the addition of several new states to its roster of members, but also deep going changes in the mentality of an entire region of the world. The extent and depth of the upcoming changes, for the current member nations as for the newcomers, must not be underestimated.

Supporting the Monetary Union

18. The successful launch of the Euro has been a symbol for the accomplishments of European unification. It has astonished skeptics of EU integration. It leaves Europe with the challenge of deepening the integration of other aspects of the financial system. The financial architecture of the EU is not yet complete.

19. The Euro has replaced its predecessor currencies with astonishing rapidity. Euro-denominated bond issues already dominate outstanding issues in national currencies. The Euro is more widely used for bank loans than the combination of all its constituent currencies together, though it does not yet have as large a market share as the US dollar. The Euro is the global leader as the reference currency for OTC interest rate derivatives. It does not yet compete with the dollar as a reserve currency, but this is expected to change gradually. It is, in fact, highly desirable that shifts in asset holdings be progressive, not dramatic.

20. At this point, the major challenge for the EU is to remove the remaining barriers to the integration of European financial markets. Complete integration will lead to lower prices for borrowers, greater efficiency, and higher growth across the Euro-zone. The European money-markets have already achieved full integration, as have fixed-income markets and payments and clearing systems. It should be noted that many of these integration measures came about only as unforeseen by-products of the adoption of the Euro. Some issues, however, remain.

21. The Stability and Growth Pact which sets limits for the budgetary deficits of Euroland - Countries remains an important foundational aspect of European monetary policy. It should be recognized that maintaining the credibility of this agreement is important, and it will require political determination to objectively apply the thresholds, the surveillance procedures and, if necessary, sanctions.

22. Thought should be given to the stabilization of US dollar and Euro exchange rates. Extreme volatility in the dollar-Euro exchange rate has negative systemic effects, not only for Europe and the United States but also for third parties. Asia has been especially impacted by this volatility, and trade flows are hard hit by unpredictability in exchange rates.

23. Finally, the EU needs to be seen as competent to speak for Europe as a whole on matters of monetary and financial policy. The European Central Bank cannot represent the entirety of the financial and fiscal policy-making establishment in discussions with outside nations. A common financial policy and an institutional base for that is still absent.

Toward a Common Foreign and Security Policy

24. From Asia to Africa, from the Middle East to South America, nations around the world strongly support the emergence of a stronger, more unified Europe. There currently exists the perception that the EU does too little for the international community: eloquently espousing concepts grounded in democracy, liberty, and equity, yet lacking the united political and military power necessary to put those principles into action. Today, the common foreign and security policy is more smoke than reality.

A common European foreign and security policy, centrally conceived and consistently pursued, would both counter-balance the sometimes disproportionate influence of the United States in global affairs, and present the European Union as an international actor worthy of serious partnership. World leaders would greet such a development with enthusiasm. At the start of a millennium which may well come to be dominated by the vast populations of China, India, or Brazil, alongside the powerful economies of the United States and Japan, Europe is simply too small to preserve its sovereignty and pursue its own interests unless it can be perceived abroad as a single, credible actor.

The goal of a common foreign policy is a relatively recent development in the EU's history. It should not be surprising, therefore, that the instances of European solidarity on international affairs are, more often than not, outnumbered by examples of intra-European disagreements. This discord weakens the ability of all European states to effectively pursue their interests overseas.

25. One of the greatest challenges facing Europe today is management of the relationship with the United States. The collapse of the Soviet Union has left the US virtually alone in terms of military, political, and economic might, transforming the world political network overnight into a unipolar system. The emergence of Europe as a major player on the international scene would be a major realignment of global politics. Though Europe would undoubtedly serve to temper American unilateralism, it should be remembered that the EU and US are fundamentally allies, brought together by historical ties, economic interests, and shared political ideals. On the world stage, amicable and beneficial competition would benefit all parties involved, including the United States.

Linked to Europe's interaction with the United States is the North-Atlantic Alliance plus NATO. This alliance has been the mainstay of trans-Atlantic security cooperation for almost half a century, and Europe will strive to maintain that special relationship. NATO has changed significantly, however, over the last decade. The fall of the Soviet Union has left NATO in search of a new enemy, and the threats of the 21st century - non-traditional conflicts, international terrorism, drug trafficking, and the proliferation of nuclear capacity and weapons of mass destruction - are not easily dealt with by NATO, which was conceived to fight a ground war in central Europe. Simultaneously, the increasingly disparate military capabilities between the United States and its European partners has led to a diminished voice for the EU within NATO councils.

26. Weapons of mass destruction and terrorism based in remote areas of the world cannot be countered with conscript armies tied to depots in central Europe, and the transformation from current force structures to a modern military will require a political and financial commitment which Europe has heretofore avoided. That reluctance, however, robs Europe of the ability to project abroad its legitimate interests, and does a disservice both to itself and to the world as a whole.

27. Concurrently with the development of military power, however, Europe will strive to further the efficacy of international law and of the U.N. The rule of law, enforced through international tribunals such as the newly inaugurated International Criminal Court, offers the world the best long-term prospect for lasting international peace. Europe should work with its allies and partners around the globe to encourage participation in these agreements and institutions.

28. Finally, the EU should examine its relationships in regions where its interests have traditionally been less fully represented. China should be the focus of sustained diplomatic attention. In the Middle East, the active participation of a strengthened Europe in the resolution of the Israeli-Palestinian conflict would be of tremendous benefit.

Addressing Long-Term Concerns

29. The European Union is a work-in-progress. In the rapporteur estimate it will take at least another half century to reach maturity. This applies particularly to a joint foreign and security policy. During that time, however, the world will have changed dramatically. Europe as a whole will represent a much smaller proportion of the world's population, and the vast majority of humanity will live in material poverty. Demographic shifts will increase the pressure of immigration, and with the immigrants may come new threats - conflict, disease, and international crime.

30. Globalization will continue, and poses huge difficulties to the economies of all but a few developing nations. Simultaneously, the developing states all together continue to spend far more for their military than they receive in Official Development Assistance. The instability of the Third World will pose problems for Europe.

31. The development of information technology creates additional questions: the rise of globally dominant information networks makes it possible to disseminate ideology rapidly and internationally. Cultural war-fare should not turn the thesis of a clash of civilizations into a self-fulfilling prophecy.

32. Europeans share a rich cultural identity, though this identity may be more easily discerned from outside the EU than from within. Europe's civilization clearly encompasses the fields of democratic civilization, the rule of law, private entrepreneurship and market orientation, plus the welfare-state. If we look at the fields of literature, science, religion, philosophy or music, painting, sculpture and architecture, most of the European nations have over centuries contributed and do still participate in one great civilizational mosaic or in one closely knitted culturel fabric, that is unique in the world. By far most of the European nations have their own national language, they are cultivating their national heritage and identities. This is absolutely normal - but at the same time it is the multi-faceted obstacle to trans-national integration.

The present crisis in Europe is due to a lack of a common concept for the future shape of the EU. This crisis is a danger and as well a challenge and an opportunity. Within less than five years will the outcome become clearer. European development so far has been a story of many steps moving progressively toward major accomplishments. The European Union represents a tremendous success of skilled diplomacy and bold leadership. Future progress will depend on a similar level of leadership.