Ratification of the accession treaty on hold in some member states
Croatia’s ten year long accession process has been a rocky road. The accession negotiations were opened in October 2005 and completed in June 2011. Following the close of negotiations, Croatia’s accession treaty, which was signed in December 2011, had to be ratified by all EU member states. While this was done by most national parliaments, Germany, Slovenia and Denmark have still not made a decision on this issue. Of these three states, the German parliament’s postponement of the ratification truly came as a surprise, for the German government has often been considered one of the strongest supporters of Croatia’s EU membership. However, a change in the German perspective on the issue became apparent following the release of the European Commission’s progress report on Croatia in October 2013.

The report assessed that Croatia needed to further increase its efforts to strengthen the rule of law, to improve its public administration and the justice system, and to more effectively fight corruption and organized crime. Concerning the economic criteria, the Commission requested the “vigorous implementation of urgently needed structural reforms” [1] that would enable Croatia to cope with competitive pressures and market forces within the Union. Accordingly, the Commission called upon the government in Zagreb to consider actions in the areas of competition policy, judiciary and fundamental rights, and set ten obligations that should be met before EU entry. Among others, the obligations include the further privatization and the restructuring of the Croatian shipbuilding industry, the adoption of regulations in order to increase the efficiency of the judiciary, and the completion of border crossing facilities. Croatia was also requested to further increase the capacities of the agencies that are in charge of allocating EU funds.

In response to the progress report, the speaker of the German Bundestag and member of the governing Christian Democratic Union, Norbert Lammert, declared that Croatia was obviously not yet ready for EU membership. Lammert therefore warned that the European Commission’s assessment of the outstanding problems would be taken serious and demanded concrete results in Croatia in meeting the EU requirements. This view was shared by other German politicians, including the chairman of the Bundestag’s European Affairs Committee, Gunther Krichbaum. The German Bundestag responded by delaying the ratification of the accession treaty and implicitly made it dependent on the results of the last monitoring report which was released on March 26th.

“The historic genius of the German people has flourished in this age of peace, and your nation has become a leader in technology and the fourth largest economy on Earth. But more important, you have inspired the world by forcefully promoting the principles of human rights, democracy, and freedom. The United States and the Federal Republic have always been firm friends and allies, but today we share an added role: partners in leadership. Of course, leadership has a constant companion: responsibility. And our responsibility is to look ahead and grasp the promise of the future. I said recently that we’re at the end of one era and at the beginning of another. The world has waited long enough. The time is right. Let Europe be whole and free.”[1]

President Bush did not fully realize how quickly the events of the next few years would eventually lead to a Europe whole and free, let alone the speed of German unification within the following fifteen months. But at the time, the notion of Germany being a partner in leadership with the United States was not enthusiastically received in the then West Germany of a divided Europe. After all, Germany had been the object of American foreign policy for the 40 years of the Cold War as the front line of the east-west divide. Germany was the platform for the confrontation between the Soviet Union and the U.S., and both East and West Germany had understood the constraints which came with those parameters.

What President Bush was asking for in some ways was that West Germany accept this role as more of a subject—meaning to accept more responsibilities, which he felt were the companions of leadership. It was to be a challenging, and at times difficult, adjustment for Germany over the next two decades.

Yet just twenty four years later, a united Germany has become a partner in leadership in more ways than one could have imagined in 1989. It is a partner not only of the U.S., but also of 26 other member states of the EU and its 27 NATO partners. Germany is now a leading partner on the global stage of a world that looks very different than it did in 1989.

Growing German Responsibilities
What about the responsibilities the President Bush spoke of, and have they adjusted over time as well? In some ways, these responsibilities have continued to evolve. German support for the European project has continued to play an important and decisive role in the emergence of the Europe we know today. Amidst the difficult years of forging German unification, Germany pushed equally hard for a stronger Europe, knowing full well that a stronger Europe would in fact assure a united Germany a role and an acceptance within the European community. Germany’s economy began to strengthen even more so on the global stage, having become the dominant economic nation on the continent today and a major player in the global market place.

There will be few set-piece events in David Cameron’s political career that will be more eagerly awaited and closely watched than yesterday’s long-promised speech on the UK’s future relationship with the European Union. In it he had to attempt what must have seemed like Mission Impossible. On the one hand, he needed to respond to his own Conservative Party’s increasing clamour for a referendum on Britain’s membership of the EU. On the other, he needed to address the major international concern over Britain’s perceived detachment from the rest of the EU, reassuring both the UK’s partners in Europe but also President Obama in the United States.

To his credit, the Prime Minister’s message was carefully crafted and deftly handled: he left his audience in no doubt that he personally wanted to keep Britain firmly in the EU. He pointed out that the EU without Britain would be a weak organisation. He also pinpointed a number of genuine challenges for the EU – the Eurozone crisis, global competitiveness and the persistent problems of democratic legitimacy. Laying out these issues may be seen as a pragmatic vision of European integration, which is moreover widely shared by other member-states. But inevitably, it is his promise to renegotiate the UK’s conditions of membership and put the results to the British people in a referendum, to be held if the Conservatives win the next general election in 2015, for which the speech will be remembered most.

The growing band of Eurosceptics within the Conservative Party has demanded a referendum on continued British membership ever since Mr Cameron managed to wriggle out of a commitment to a public vote on the Lisbon Treaty by a technicality. What is more, the UK Independence Party, which campaigns for outright exit, is currently riding high in the polls; many of his MPs and strategists fear that UKIP will split the Conservative vote at the 2015 election, thereby consigning the party back to the opposition benches. The pledge to hold a referendum after 2015 will therefore be heralded by the Eurosceptics as a major strategic and tactical victory. In turn, the Prime Minister may hope that this pledge will neutralise their complaints. History would suggest, however, that such appeasement rarely silences rebellious voices, but rather emboldens them.

Furthermore, by playing to what is ultimately a domestic audience, Mr Cameron is stretching the patience of European partner-states ever further. Practically all member-states have accepted, albeit grudgingly, that the UK is now adopting an à la carte approach to new proposals for integration, and has for instance not adopted the Euro or participated in the common immigration policy. However, the suggestion that other existing aspects of integration, for instance in social rights, should be re-opened for Britain to opt-out from retrospectively is typically met with incredulity in European capitals. Yet, without agreement by each of the other 26 member-states, this renegotiation will amount to nothing. In recent months and especially in the run-up to the speech, the German government has been on an explicit charm offensive but at some stage in the not too distant future, Chancellor Merkel will presumably conclude that there is no longer any point in engaging with the UK.

Preface

Following the Obama administration’s announcement of its pivot toward Asia, there has been a great deal of debate about what this strategic shift means for the transatlantic relationship. The Transpacific Partnership (TPP) project is symbolic of the U.S. administration’s endeavors toward Asia. But at the same time the final report of an EU-U.S. High Level Working Group—expected in early 2013—will probably recommend starting negotiations on a Comprehensive Trade Agreement (CTA). Will there be a shift to Pacific in US trade policies? Could the EU become marginalized?
I. Europe’s Woes

Economic Relationship

According to the perception of many U.S. observers, experts, and commentators, Europe is an economically declining and politically dysfunctional entity (euro crisis) of increasing strategic irrelevance. Europe’s current economic woes have only reinforced this view. While the transatlantic economy represents the most powerful economy in the world, it is followed very closely by China and a host of other Asian nations. What sets these Pacific economies apart from Europe is their potential. There is little doubt that these countries possess the tremendous growth potential that European economies lack. Furthermore, the transatlantic economy is in more of a maintenance stage, as there is little room for deepening an already close relationship. The transatlantic economy is already largely open and remaining issues are those that are hotly contested across the Atlantic, such as agriculture and consumer protection. These are unlikely to see successful resolution. Thus it makes sense for the U.S. to begin devoting a larger share of its resources to strengthening ties in markets that are of growing importance to the American economy.
Security Relationship

Despite the close military collaboration that exists through NATO, Europeans have been decreasing their role in global burden-sharing since the start of the 60 year old alliance, and show a preference for a far diminished role in the years to come. There is little political willingness in Europe, on a country-by-country basis, to provide adequate public funds to the military. Due in part to this shrinking military capacity, as well as geographic location, Europe’s influence on affairs beyond its borders will be sharply limited in the coming decades. Other allies are likely to become more relevant partners for the U.S. in the regions that present the greatest potential challenges. In Asia, this might mean Australia, India, South Korea, Japan, and Vietnam, especially if U.S.-China relations deteriorate. The willingness of these countries to engage more, especially in financial burden-sharing with the U.S., might increase considerably.
Shared Values

Cameron’s speech rests on one key assumption. He believes that the nature of the EU is about to change and that his European colleagues have embarked on a journey that will force them to share more sovereignty and strengthen centralized, European institutions. Cameron also believes that a Europe of multiple groups is not a far and distant possibility but rather today’s reality. According to Cameron, “the club we belong to is changing. We can’t ignore this. Change is under way.” Cameron recognizes that those inside the euro area “are likely to need to make some big institutional changes. By the same token, the members of the euro zone should accept that we (i.e. the UK) need to safeguard our interests.”

Cameron is not telling the euro zone members that they should not integrate further, quite the contrary. But he is stating that further integration at the core should not come at the expense of non-euro zone members of the EU. This is a legitimate concern. That is why Cameron resists the term of a Europe of multiple speeds. The prime minister simply refuses to accept that some members (such as the UK) will always be forced to play catch up with the core just because they might choose not to join the euro zone.

According to Cameron, the common European denominator of the EU, a union that will continue to expand and be open to new members, is not the common currency but rather the single market. Britain is merely asking for a firm commitment from its partners that deepening the single market will remain the highest priority of Europe’s efforts in the coming years, even if the euro zone moves towards greater political integration. What the prime minister is essentially asking for is a recalibration of a changing union in order to accommodate older (the UK) and possible future members (Turkey potentially being one of them).

Not surprisingly German Chancellor Angela Merkel’s reaction to Cameron’s words was far from belligerent—quite the opposite in fact. She carefully refused to jump on the bandwagon of those who flatly criticized Cameron’s remarks and instead signaled that she might even agree with much of what he said. In her speech at the World Economic Forum, Merkel, much like the prime minister before her, focused on the need for Europeans to become more competitive in global markets. She stressed that painful structural reforms and growth are two sides of the same coin and need to be pursued with determination.

German Chancellor Angela Merkel had already lowered expectations by repeatedly reminding her domestic and international audiences that the crisis could very well last five more years. The head of the European Stability Mechanism, Klaus Regling, in recent days struck a slightly more positive note, but he too said that the crisis would still take some time to be resolved — two years, but probably no sooner.

Whatever the timeline, bond markets remain calm and yields for sovereign bonds of peripheral European countries have continued to fall. Given the fact that political uncertainty is making a comeback in Italy, and in the U.S. the end of year distraction known as the “fiscal cliff” is not over yet, markets could have easily reacted badly to a European glass so obviously only half full. Instead, for the moment at least, investors chose to see the positive side of things or more simply to look the other way.

This calmness is most discomforting to those observers who thrive when the crisis is most acute. Wolfgang Muenchau, writing for the Financial Times, paints the result of last week’s summitry as a victory for Angela Merkel’s stalling tactics, with no substantial progress on a real banking union and no progress at all on moving closer to a fiscal union. According to Muenchau,“If you study the details of what was agreed last week, the substance evaporates. The common supervisory structure will affect only 100 to 150 banks out of a total of 6000, (…).”He added that of course theoretically the supervisor, the European Central Bank (ECB) can overrule national regulators and exert control over all of Europe’s 6000 banks, but “the rules of engagement are not clear.” That sounds a bit disingenuous, as nobody expected the rules of engagement to be ready at this meeting — not even the ECB, which after all will be the regulator that needs to implement the political decisions made last week. Nicolas Veron, an expert on banking regulation at the Peterson Institute for International Economics and at the Brussels based think tank Bruegel, points out how much has in fact been accomplished in his latest post.

It has been clear for months that this end of year summit would only produce the foundations for the banking union. What matters most is that the building of the new house has actually started. Furthermore, the ECOFIN (council of EU finance ministers) also needed to address and recognize the need for a banking resolution authority (a body, in other words, that can unwind failing banks) and a common deposit insurance scheme (either provided by a brand new unified, European fund , by a pool of coordinated national deposit schemes, or a combination of the two). On both counts the Finance ministers addressed those needs and agreed on a road map. In other words, they broadly stuck to the plan European leaders produced at the end of the June summit.

As the U.S. recalibrates its relationship with the EU in the second Obama administration, it behooves observers to contemplate different trajectories for the EU’s future. The three possible scenarios of Disintegrating Europe, Diffident Europe, and Decisive Europe range from a pessimistic outlook to an optimistic one.

In Disintegrating Europe, current differences over the euro zone crisis magnify and no resolution to the crisis is reached. A so-called “Grexit” (Greek departure from the euro zone) occurs and the single market is irreparably harmed. As economic and political conditions further deteriorate,  countries threaten to leave the EU, thus creating a self-fulfilling downward spiral.

In Diffident Europe, piece-meal, limited agreements continue – otherwise referred to as the ‘kicking the can down the road’ approach. Europe is a confused actor internally and externally, stymied by lack of purpose and incomplete institutions.

In the Decisive Europe scenario, the EU assumes a more (not complete) federal structure. Under this new structure, the EU projects greater institutional rationalization and efficiency, resulting in a more purposeful and efficacious international presence.

Disintegrating Europe

In recent weeks, the extensive concern about a Greek exit from the euro zone has weakened somewhat. The German Finance Minister Wolfgang Schaueble and Chancellor Merkel are being a little more supportive of Greece publicly, and the German Foreign Minister Guido Westerwelle is warning his fellow politicians of the harm they are doing by calling for or assuming a Greek departure. At the end of November, the euro zone finance ministers and the IMF reached an agreement with Greece on debt reduction, such that Greece can receive the next installment of funds.

However, we are certainly not out of the woods. A lot still depends on whether Greek leaders can make deals that are acceptable to the EU and to Greek citizenry amidst the rise of nationalist forces. Whether they can also actively sell the EU by depicting the chaos and instability of the alternative to the euro will remain an uphill battle.

The other factor that severely clouds the EU future is the British attitude toward the community.  There is a telling anecdote that David Cameron recalled at the Tory Party Convention earlier in October. According to news reports, “Cameron reminded his listeners of the negotiations with other European Union member states over the fiscal pact last December: ‘There were 25 people in the room, urging me to sign’ he said proudly. ‘And I still said no.’”

At the end of June, Cameron indicated a referendum on UK membership of the EU might be possible. In October, and repeated recently, Cameron said he didn’t want an in-or-out referendum, but insisted people in the UK “want a new settlement put to fresh consent.” He did say he would not be happy if the UK left the EU, but also stated that he was not happy with the status quo.

Ulrich Speck is a foreign policy analyst based in Heidelberg and is a frequent AICGS contributor, as well as a former DAAD/AICGS Fellow.

“The real value of the EU for Britain is geopolitical”, by Ulrich Speck, originally published by the European Council on Foreign Relations