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February 2012

Paper Series
Is a Two-Speed Europe the Solution?
by Michael Leigh
Henceforth there are clearly two Europes. One seeks more solidarity among its members, and more regulation. The other is attached only to the logic of the single market. Thus spoke Frances President Nicolas Sarkozy in an interview with Le Monde, three days after the European Council of December 9, 2011. At this meeting, only the United Kingdom of all the 27 EU member states refused to approve his proposal for an Intergovernmental Agreement (IGA) giving the force of law to the fiscal compact insisted on by German Chancellor Angela Merkel. At the next summit, on January 30, 2012, all member states except the U.K. and the Czech Republic approved the resulting Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union.1 In his Le Monde interview, President Sarkozy regretted the isolation of the U.K., with which, he acknowledged, France shared a number of interests, not least in the fields of foreign policy and defense. However, there was no escaping a certain satisfaction that a typically Gaullist intergovernmental arrangement, long urged by France, had won general approval because of Britains refusal to amend the EU treaties. He claimed that the summits
By 30 January the IGA had become a formal treaty to be signed and ratified by the Contracting Parties.
1

Summary: Following the British rejection of the EUs fiscal compact and the campaign in the British conservative party to repatriate powers from Brussels, speculation abounds that two Europes may result. But can Europe afford such a split faced with todays internal and external challenges? Is a two-speed Europe the only way out?

outcome established an authentic form of economic governance under the responsibility of the heads of state and government and not, as previously, under the purview of the European Central Bank, the Commission, and the Stability Pact. This view reflected traditional French suspicions of an EU run by technocrats. This February, Jean-Claude Piris, lately director-general of the Legal Service of the EU Council of Ministers, published a study entitled The Future of Europe: Towards a TwoSpeed Europe.2 Despite the French authors careful qualifications and legal analysis, the study implies that a variant of the two-speed Europe model is necessary to cope with the EUs growing size and complexity. The new Treaty, and the circumstances of its birth, have given further currency to the notion that the European Union is disintegrating into two Europes. One consists of the 25 member states that have undertaken to sign and implement the Treaty. The other Europe consists of the United Kingdom and the Czech Republic,

1744 R Street NW Washington, DC 20009 T 1 202 683 2650 F 1 202 265 1662 E info@gmfus.org

2 Jean-Claude Piris, The Future of Europe: Towards a Two-Speed Europe, Cambridge University Press, February 2012.

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which have not done so, as well as any further drop-outs from the first group.3 This vision of the EU as being increasingly divided into two categories of members is accentuated by a number of trends. The first is the expectation that, though limited in itself, the new treaty may well lead to the establishment of a genuine fiscal union embracing a limited number of member states. The second is the perception that enlargement to include 27 disparate member states has made the EU ungovernable in the absence of some form of twospeed arrangement. The third is a growing lobby in the U.K. for the repatriation of responsibility for regulating the single market, labor markets, regional policy, and police-related issues, such as the European Arrest Warrant. In effect, this approach, dubbed selective engagement by its advocates, would mean British self-exclusion from key areas and create, de facto, a new type of partial EU membership. Of course, member states have long participated in EU activities in a variegated way, taking advantage of transitional arrangements, derogations, exceptions, and optouts. Some countries go ahead more rapidly than others in certain policy fields. Others may join in when ready and willing to do so. And it is certainly true that decisionmaking in Europe is more cumbersome at 27. But are Piris and others right in arguing that a two-speed Europe forward is the only way out? A Semi-Detached Britain? While the concept of two Europes is becoming the new orthodoxy among those seeking to strengthen European integration, it has also implicitly gained support in the United Kingdom, whose negotiating tactics contributed heavily to its isolation at the summit on December 9. British ministers have expressed support for efforts to preserve the euro and to strengthen it through progress towards fiscal union. Yet, at the same time, they have been clear that the U.K. will play no part in such a union. This position is reminiscent of the speech given by Winston Churchill at the University of Zrich in September 1946, in which he called for a United States of Europe to give new hope to the peoples of the continent, without suggesting for a moment that the United Kingdom would participate.
3 For example, if a negative referendum vote forces a government to withdraw its signature to the Treaty.

Efforts to resolve the euro crisis by taking the first steps towards a possible fiscal union, with its federalist overtones, have crystallized views long present among British political actors and public opinion. The ConservativeLiberal Democrat coalition government formed in 2010 at first eschewed debate about Europe, as the two coalition parties held widely conflicting views. In a political compromise, they both supported the 2011 European Union Act, which provided that a referendum be held in the U.K. whenever a new treaty, or other legal provision, proposed to transfer powers to the EU. Nonetheless 81 Conservative backbench MPs defied the government in October 2011 and voted for a motion that called for a referendum on withdrawal from the EU. The motion was defeated overwhelmingly by 483 votes to 111, as all three main parties instructed their MPs to vote against it. But the prime minister went to the December European Council knowing that he could not rely on the rebels to approve any new step towards fiscal union unless a series of British demands were met. These demands were contentious, and were presented so late in the day that there was no chance of obtaining approval of them by other member states. In the absence of concessions to protect the City of London, it was clear that a majority of Conservative MPs, backed by large sections of public opinion, would demand a referendum if any new arrangements to tackle the euro crisis involved a transfer of sovereignty. Such a referendum could not be won given the prevailing mood of the British public. In this atmosphere, and despite the fact that the proposed arrangements involved no transfer of sovereignty from the U.K., Cameron rejected proposed treaty changes approved in principle by the other 26 member states on December 9, giving priority instead to Conservative Party unity. Indeed, a key minister in his cabinet is said to have argued that preserving such unity, and hence the coalition government, amounted to a British national interest. The British veto obliged other member states to go down the path advocated by France of an intergovernmental agreement. These events reignited the debate in the U.K. about the future of the EU and Britains place in it. The debate is taking place largely within the government, the Conservative party (especially its growing euro-skeptic Fresh Start caucus), and the press. Fresh Start draws its policy prescriptions from Open Europe, a think-tank backed by business

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leaders, which advocates selective engagement with the EU, and the repatriation of powers in a growing number of fields. The Liberal Democrats, while clearly opposed to the British veto and the repatriation campaign, are reluctant to rock the boat, given their low standing in the polls. The Labour Party faces an as yet undeclared leadership crisis and needs time to position itself. This debate is still not resolved; but it points to an increasingly semi-detached vision of Britains role in Europe. The campaign to repatriate broad areas of policy now subject to decisions at EU level to the U.K. is gaining momentum. The protection of the City of London from initiatives such as the financial transaction tax is often put forward as a reason for moving decision-making in a number of crucial areas back to the national, regional, or local level. On February 8, 102 Conservative MPs, including former ministers and committee chairmen, wrote to The Telegraph demanding that well over 100 EU rules governing criminal investigations and the police be repatriated to the U.K. The letter reads in part: We should maintain our national standards of justice and democratic control over crime and policing, but let other nations integrate more closely if they wish. 4 They urged the U.K. to exercise an opt-out under the Lisbon Treaty, which is available until 2014. The same day, an editorial in The Telegraph claimed that the MPs demands not only chime with public opinion but would be of considerable help to the country. The government is clearly susceptible to such partisan pressure. But it seems to be wary of the euro-skeptics demands for fear of reducing Britains influence in Europe still further and damaging the City of Londons financial interests. The government has therefore sought to limit the damage, by accepting that European institutions could be used to enforce the new fiscal compact and that Britain might be ready to contribute to enhanced resources for the IMF to provide liquidity for euro zone countries in difficulty. British representatives participated as observers in the ad hoc group that drew up the fiscal compact. Subsequently, however, the British government has wavered in main-

taining some of these relatively constructive positions in the face of press and opposition criticism. In the short term, the new Treaty scarcely warrants British fears. It has been called a piece of paper because of its brevity and because it does little more than codify existing rules. By calming the markets and giving stronger legal force to fiscal rectitude, it may encourage Germany to accept an increasingly pro-active role for the European Central Bank. In the medium term, though, the euro zone may well seek to become involved in financial regulation. Many Conservatives now advocate selective engagement with the EU and the repatriation of powers to Britain. It is ironic that British Conservatives should call into question EU regulation of the single market, which is often depicted in France as Britains sole real interest in the EU. However, any illusion that the U.K. could lead a group of the outs, in much the same way as it led the members of the European Free Trade Area in the period before joining the then European Communities in 1973, has now dissolved. Denmark, for example, enthusiastically undertook to implement the fiscal compacts rules on budget discipline and debt limits, despite the countrys opt-out from the euro. The campaign by British Conservatives to repatriate powers covering the single market, financial regulation, the structural funds, and now justice and home affairs puts the government under constant pressure. Some proponents of selective engagement privately acknowledge that such a policy could set the U.K. on a path that ultimately leads to withdrawal. 5 Yet they have no alternative model to offer. The European Economic Area, now involving only Iceland, Lichtenstein, and Norway, as well as the 27 EU member states, is clearly not an option for the U.K., with its much larger economy. The U.K. would then be on the receiving end of rules that it would have to respect to maintain free access to the EU market. Suggestions that the U.K. could somehow align itself with emerging markets as an alternative to the EU equally lack substance. Partial or complete withdrawal from the EU would reduce Britains value to key strategic partners like the United States and leave the country increasingly isolated. It is time for voices that are opposed to such negative scenarios to make themselves heard in the interest both of the U.K. and of the EU.
5

4 Repatriate powers on crime and policing, say Conservative MPs, The Telegraph, February 8, 2012. http://www.telegraph.co.uk/comment/letters/9062615/Repatriatepowers-on-crime-and-policing-say-Conservative-MPs.html.

See: Charles Grant in Europes World, forthcoming, 2012.

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Is a Two Speed Europe Inevitable? It is far from certain that all member states other than the U.K. and the Czech Republic will ratify the new Treaty. Ireland, a euro zone country, may require a referendum to approve it. But after the two referenda on the Lisbon Treaty, the Irish government may well shy away from such a prospect. Anticipating such difficulties, the Treatys sponsors inserted a provision to enable it to enter into force after being ratified by just 12 signatories. An EU with more members and increasingly varied patterns of participation has revived older visions of a Europe divided in two. In the words of Piris: The imbalance of Economic and Monetary Union is not the only reason the issue of the legal feasibility of a two-speed Europe should be carefully studied. Beyond the question of the euro, the fact remains that an EU composed of 27 heterogeneous Member States has proven that it is not able to function efficiently within its present legal framework and that it is not able to answer the needs, interests, and wishes of all its Member States at the same time A two-speed Europe might also help to try and regain the support of European citizens by presenting them with a bold and coherent political project. The cohesiveness and identity of the European project has not yet recovered after the 2004 and 2007 enlargements.6 The EU Councils former legal adviser is convinced that that the European Commission has become ineffective and intergovernmental in style because of its size and because it has become subservient to the European Parliament. The notion that enlargement is responsible for many of the EUs ills is quite widespread,7 along with the view that a twospeed Europe is the best remedy. The most robust rebuttal of the view that the EUs current travails can be attributed to enlargement was given by Radek Sikorski, foreign minister of Poland, in a speech in Berlin on November 28, 2011. Let me first say what this crisis is not about. It was not caused, as some have suggested, by enlargement.
6

Enlargement has created growth and wealth all over Europe. The EU15 exports to the EU10 countries rose almost twofold in the last ten years. Its even more striking if you break it down by countries. Britains export to the 10 countries that joined after 2004 rose from 2.2 billion in 1993 to 10 billion last year; Frances, from 2.7 billion to 16 billion, Germanys wait for this from 15billion to 95 billion. The total volume of trade between EU15 and EU10 amounted to 222 billion last year, up from 51 billion in 1995. A tidy sum. I guess it sustains a job or two in Old Europe. So, enlargement far from causing the crisis, has arguably delayed the economic turmoil. Thanks to the advantages of trading in an enlarged market, West European welfare states have been forced to face reality only now. Most of the cleavages that have limited the EUs effectiveness in recent years have been among old member states. Within the euro zone, the lines of division have been mainly between the heavily indebted countries that face the risk of default, on the one side, and the dwindling group of triple-A rated countries on the other. Greece, Ireland, Italy, Portugal, and Spain, which are at the heart of the euro crisis, are all older member states. Cyprus, Estonia, Malta, Slovakia, and Slovenia, the new member states that are part of the euro zone, certainly face their own economic challenges; in Slovakia, the government toppled over its decision to ratify the European Financial Stability Facility. But these small states have not been the protagonists of the euro crisis.8 On February 14, 2012, the Commission issued its first Alert Mechanism Report under the EUs new rules on economic governance. On issuing the report, Olli Rehn, the Commission vice-president in charge of economic and financial affairs commented: This crisis has highlighted risks that macroeconomic imbalances pose for financial stability, economic prospects and for the welfare of a country, its citizens, and the European Union as a whole.9
8 Cyprus may be drawn into the maelstrom because of the exposure of its banks to Greek debt. 9 EU Commission, Tackling Macroeconomic Imbalances in the EU, European Commission, Press Release, February 14, 2012. The Commission looks at external imbalances, including the current account balance, investment flows and competitiveness and internal imbalances including public and private sector debt as a percentage of GDP and unemployment figures.

Piris, The Future of Europe, 103.

7 See for example: Lluis Bassets, Ingresara la UE en la UE?, El Pais, January 19, 2012. http://elpais.com/diario/2012/01/19/internacional/1326927608_850215. html.

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The Commission identified 12 member states as facing possible macroeconomic imbalances: Belgium, Bulgaria, Cyprus, Denmark, Finland, France, Italy, Hungary, Slovenia, Spain, Sweden, and the United Kingdom. The Commission excluded Austria, the Czech Republic, Estonia, Germany, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland,andSlovakia from an in-depth review of macro-economic imbalances in light of their economic performance. Greece, Ireland, Portugal, and Romania were not subject to this procedure, as they were receiving financial assistance from the EU and IMF and were therefore already subject to enhanced economic surveillance. In terms of overall macro-economic performance, there is no sign of the emergence of two Europes at least, not along the lines that Sarkozy claimed to discern on December 9. The lines of cleavage are neither between old and new member states, nor between partisans of fiscal union and euro-skeptics. Rather they are between those member states where macroeconomic imbalances could pose the risks described by Rehn and the rest. In other fields, too, the lines of cleavage in the EU have not been principally between old and new member states. The EU services directive, adopted in 2006, whose objective is to release the untapped growth potential of services markets in Europe by removing legal and administrative barriers to trade in the services sector, was watered down mainly because of resistance in old member states such as France, Germany, and Belgium. In order for the EU to strengthen its global competitiveness in the years ahead, the single market needs further reinforcement, particularly with respect to services and the digital agenda. Again, opposition to liberalization comes mainly from older member states. The absence of a single European patent and the lack of agreement over the location of the European patents court, too, are principally down to squabbles among founding member states. On February 20, the prime ministers of 12 member states wrote to the Council and Commission presidents calling on them to make greater efforts to open up the single market and to promote labor mobility to stimulate growth and jobs.10 It is striking that conservative prime ministers
Robin Emmott, Britain, Netherlands call for EU to focus on growth, Reuters, February 20, 2012.
10

called for more labor market mobility given the sensitivity of all issues related to migration. The signatories of this letter included not only the usual liberal suspects Britain, the Netherlands, Estonia, Latvia, Finland,Ireland, the Czech Republic, Slovakia, Sweden, and Poland, but also Italy and Spain. Clearly, the lines of division on economic liberalization are shifting under the weight of austerity and unemployment. In the field of foreign and security policy, the lines of division on crucial issues in the EUs neighborhood have rarely been drawn between old and new Europe. This was illustrated by the vote in the United Nations Security Council on resolution 1973 (2011) establishing a no-fly zone over Libya and authorizing all necessary measures to protect civilians. This vote saw Germany, one of the EUs founding member states, abstaining along with China and Russia, while France and the United Kingdom voted in favor and subsequently took part in military action to enforce the resolution. In fact, enlargement had nothing to do with the EU member states difficulty in mustering a consensus on how to deal with the uprising in Libya. Barely two months after the British veto at the December 9 European Council meeting and Sarkozys announcement of the birth of two Europes, with the U.K. consigned to the second rung, the French president and British prime minister held a summit in Paris.11 Commenting on the veto, Sarkozy stated: Perhaps, had I been in David Camerons position, I would have defended British interests in exactly the same way. In Paris, the two leaders agreed to cooperate on civil and military nuclear development, including a joint nuclear export drive.12 To be sure, there was an electoral element in the Anglo-French summits show of entente amicable, just two months before the French presidential elections. But given the integration of the two countries nuclear industries, with lectricit de Frances dominant position in the British nuclear sector, and the far-reaching 2010 Anglo-French military cooperation treaty, it is clear that the two countries have a longterm commitment to work together in these fields. This sharply distinguishes both from Germany, whose coalition
James Boxell, Sarkozy and Cameron smooth over differences, Financial Times, February 17, 2012. http://www.ft.com/cms/s/0/4ef7a89c-596a-11e1-abf1-00144feabdc0.html#axzz1nIRmlyre.
11 12 Patrick Wintour, Drone and nuclear deals to dominate Cameron-Sarkozy summit, The Guardian, February 17, 2012. http://www.guardian.co.uk/politics/2012/feb/17/ cameron-sarkozy-summit-drones-nuclear.

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government decided in 2011 to close down the countrys nuclear plants by 2022, following the Fukushima nuclear catastrophe. Decision-making among the EUs 27 member states is undoubtedly cumbersome. Most member states have at times blocked a proposal or demanded amendments when a measure was considered inimical to national interests. Polands blockage of efforts to raise targets for cuts in carbon emissions in June 2011 is a case in point. But Poland counts on coal for more than 90 percent of its power generation. There are countless examples of proposals blocked by old member states, well before the 2004/2007 enlargement, when they considered national interests to be at risk. In sum, the perception that enlargement made a two-speed Europe inevitable because the EU institutions virtually ground to a halt following the 2004 and 2007 enlargements is widespread, but false. To be sure, table rounds in the Council take longer with 27 ministers wishing to speak. But longer debates do not imply incapacity to take decisions. Enlargement has not prevented the Commission from making new proposals, implementing existing decisions, or functioning as guardian of the treaties. It is the euro zone crisis, rather than enlargement, that has cast the deeper shadow over the EUs capacity to address its many current challenges. A Commission with 27 members is no larger than many national governments and is able to take most decisions without a vote. True, the institutions management style has become more presidential. This too follows the pattern in many member states, faced with the complexity of todays political, economic, and technological agenda. Popular disenchantment with political elites is a response to the economic crisis, ineffective leadership, corruption, the failure of politicians to regulate markets effectively, topdown decisions, and the increasingly opaque and technocratic nature of the policy process at all levels.13Some have spoken of a crisis of democracy. It would be facile to lay this at the door of EU enlargement, or to use it as an argument in favor of two Europes.

There is thus little foundation for the view that the current EU crisis was somehow caused by enlargement or that the EUs increasing diversity makes a two-speed Europe inevitable. Indeed, the EU is built on cross-cutting interests, alliances, and coalitions across issues, not a neat division into two Europes. Britain Should Re-Engage Britains conservative leaders should resist pressure from euro-skeptics to repatriate powers to the United Kingdom. The benefits of EU membership accrue over a wide range of issues. It is self-defeating to press for the repatriation of powers in each individual policy area where a net benefit to Britain cannot be clearly demonstrated at a given time. If the U.K. were successful in repatriating responsibility for financial regulation to London, an unlikely hypothesis, it would be on the receiving end of legislation that vitally affects the well-being of the British people. It could then neither make nor shape the relevant laws. This is a standing complaint of Norway, Iceland, and Lichtenstein. A semi-detached Britain would have less influence in Europe and less value as a strategic partner to the United States, China, and the emerging powers. A policy of selective engagement would put the U.K. on the slippery slope towards eventual withdrawal. No plausible alternative framework conducive to Britains influence, growth, and prosperity has yet been put forward. Under these circumstances, re-engagement would better serve British interests than selective engagement. Britain should put forward a positive agenda in areas that are important to the U.K. and the EU. It can give a strong lead on strengthening the freedoms of the single market, under the auspices of the EU of 27, particularly on services and the digital economy. It can press for action on climate change and the diversification of energy sources.14 Britain can work on this positive agenda with other member states, and with the European Commission, which is a defender of the treaty-based responsibilities of the EU as a whole, even if some of its proposals are unwelcome in the City of London. The U.K. is ahead of the wave on flexible labor markets, now part the adjustment programs of stricken euro zone economies. Britain will find allies, for example, in pushing for revision of the Working Time
14

13 Ivan Krastev, Europes Democracy Paradox, The American Interest 8 (2), Spring (March/April) 2012, pp 41-48.

See: Grant, Europes World.

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Directive, which regulates holidays, breaks, and rest periods. Britain can also take a lead on foreign and defense policies, pointing out ways to make the new European External Action Service, set up by the Lisbon Treaty, more effective. In the present national mood, a more pro-active policy on Europe will require political courage and a major effort to explode myths about the EU and to explain the benefits of membership. The British government should make a point of setting out clearly how British interests can be advanced by working with EU partners in areas like the single market, digital industries, energy, climate change, development assistance, foreign and security policy, and enlargement. The EU today bears the British imprint in a wide range of policy areas. The coherence and effectiveness of the coalition government can only gain by making this better known to the British people. Encouragingly, Britain has indeed begun to re-engage, with rather promising efforts to build alliances in favor of a positive agenda. Britain has found allies not only in the Nordic countries, Eastern Europe, and Ireland but also in Italy and Spain, where the new governments seem convinced that further liberalization of the single market can provide an effective form of economic stimulus. Make Unity in Diversity Work The notion of a two-speed Europe reassures those who are nostalgic for a smaller, more homogenous EU and who consider that EU enlargement is at the origin of many of Europes current woes. And it comforts those, like British euro-skeptics, who want to reverse the EUs development towards an ever closer union, or at least to have no part in it themselves. But advocacy of a two-speed Europe is a misguided response to the many challenges facing the EU. The formalization of a two-speed Europe would weaken the determination of member states to act together. This would reinforce the perception at home and abroad of a Europe divided against itself and unable to act. The EU faces a number of fundamental challenges that have been partially masked by the euro crisis: global competitiveness, innovation, an ageing population, pensions, migration, climate change, diversification of

energy sources, and foreign and security policy. These issues were high on the EUs agenda before the crisis and will remain challenges for decades to come.15 Major political challenges on the EUs door-step remain, not least consolidating the new modus vivendi between Serbia and Kosovo, and nudging Bosnia-Herzegovina towards a workable form of state governance. Turkey, Cyprus, the eastern Mediterranean, and the Middle East are bristling with unresolved issues that demand the exercise of the EUs soft power. The EU needs to rethink its response to the Arab Spring, with new initiatives to address the needs and aspirations of the different peoples concerned. Iran and Syria will continue to require firm action by the EU. The EU is still seeking an effective means for responding to an increasingly assertive Russia. It must reinvigorate the eastern partnership with Ukraine, Moldova, Belarus, and the countries of the southern Caucasus, finding practical and effective ways to strengthen democracy, protect human rights, foster economic development, and encourage the resolution of frozen conflicts. In tackling these challenges, the EU faces many constraints. Public opinion, mired in nationalism and xenophobia, often opposes moves like visa or trade liberalization, which are needed to give hope to populations seeking support from Europe. The economic recession, rising unemployment and austerity have exacerbated nationalist feelings in a number of member states, swelling the ranks of political parties whose appeal is based on nationalism and intolerance. Governments in the most heavily indebted countries face popular resistance to austerity measures adopted by unelected leaders imposed by Brussels. Under these circumstances, it is particularly important for the EU to stand together, as a bulwark against nationalism, and to speak with one voice, whenever possible. An EU divided in two cannot hope to exercise the soft power which has become its hallmark. On the other hand, a multi-dimensional Europe has been a reality since the EUs inception, with the treaties permitting a considerable degree of flexibility in addressing each member states particular concerns. More recently, the concepts of enhanced cooperation and coalitions of the willing have permitted limited groups of member states to
15 EU Commission, Europe 2020: A strategy for smart, sustainable and inclusive growth, March 3, 2010.

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go ahead with new initiatives, in the hope that others will join them at a later stage. A multi-track Europe is, thus, already a reality in many fields. The provisions of the new Treaty approved on January 30 fall well short of its title: Treaty on Stability, Coordination, and Governance in the Economic and Monetary Union.16 In itself, it does little to create two Europes as suggested by President Sarkozy. The Treaty largely consolidates existing EU rules, although it may eventually become a step towards fiscal union. Article 16 of the Treaty provides that: Within five years at most following the entry into force of this Treaty, on the basis of an assessment of the experience with its implementation, the necessary steps shall be taken, in compliance with the provisions of the Treaty on the European Union and the Treaty on the Functioning of the European Union, with the aim of incorporating the substance of this Treaty into the legal framework of the European Union. Nick Clegg, the British Liberal Democrat leader, predicts that Britain will eventually sign the treaty. We believe that it should, over time, be folded into the existing EU treaties, he stated in January 2012. We all see this as a kind of temporaryarrangement rather than one that creates a permanent breach in the EU.17 While this view is not shared by many of Cleggs Conservative coalition partners, its logic may well become compelling, even in Britain, after a few years of watching from the sidelines. Meanwhile full use should be made of those aspects of the EUs emerging economic governance that apply to all member states, such as the monitoring of fiscal policy and macroeconomic imbalances. The European semester, under which national economic and fiscal policies are assessed by EU institutions before adoption, applies to all the 27. These mechanisms provide a framework for discussing fiscal and macroeconomic problems at EU level. Leaders of small member states do not want to be confined to an arrangement that is dominated by France and Germany, or perhaps simply by Germany. This is particu16

larly the case for peripheral countries whose harsh adjustment programs have produced a backlash against Germany. On February 14, the French socialist presidential candidate Franois Hollande said we need a Great Britain that will take its place in Europe.18 President Sarkozy has himself sought to breathe new life into the entente amicable with Britain. Germany, with its dependence on the single market and the open international trading system, needs the U.K. to join it in resisting protectionist pressures. It is time to recognize that the EU is a complex, multi-level system of governance, with shifting coalitions and alliances across issues. A simplified vision of the EU today as harboring two Europes is misleading and potentially damaging. Faced with todays challenges, the EU would do better to stick to the motto it chose in 2000, unity in diversity, and to act accordingly.
18 Henry Samuel, French Socialist candidate Franois Hollande attempts to reassure The City, The Telegraph, February 13, 2012. http://www.telegraph.co.uk/news/worldnews/europe/france/9080133/French-Socialist-candidate-Franois-Hollande-attemptsto-reassure-The-City.html.

About the Author

Michael Leigh is a consultant and senior advisor to GMF in Brussels. Leigh became EU director-general for enlargement in 2006 after serving for three years as external relations deputy director-general with responsibility for European Neighbourhood Policy.

About The EuroFuture Project

The German Marshall Fund of the United States understands the twin crisis in Europe and the United States to be a defining moment that will shape the transatlantic partnership and its interactions with the wider world for thelong term. GMFs EuroFuture Project therefore aims to understand and explore the economic, governance and geostrategic dimensions of the EuroCrisis from a transatlantic perspective. The Project addresses the impact, implications, and ripple effects of the crisis in Europe, for the United States and the world. GMF does this through a combination of initiatives on both sides of the Atlantic, including large and small convening, regional seminars, study tours, paper series, polling, briefings, and media interviews. The Project also integrates its work on the EuroCrisis into several of GMFs existing programs. The Project is led by Thomas KleineBrockhoff, Senior Transatlantic Fellow and Senior Director for Strategy. The group of GMF experts involved in the project consists of several Transatlantic Fellows as well as program staff on both sides of the Atlantic.

Antonio Fatas and Ilian Mihov, New Treaty, Same Old Flaws, January 30, 2012. http:// fatasmihov.blogspot.com/2012/01/new-treaty-same-old-flaws.html.

17 Nick Clegg: Britain will sign EU treaty, Mirror News, January 10, 2012. http://www. mirror.co.uk/news/uk-news/nick-clegg-britain-will-sign-eu-157857.