‘Multi-Speed Europe’: а high risk (differentiated) integration project?

This post is also available in: Français (French)

On 1 March 2017, the European Commission (EC) submitted its White Paper on the Future of the European Union. It presents five scenarios for the future of Europe: the third being for eventual ‘multi-speed Europe’ (MSE). This is the scenario where a “Coalitions of the willing” can, if the countries want so, go further in the integration of policies, such as defence, internal security, taxation or social affairs[i]. This scenario can be summarized by the simple sentence: “those that want more do more”[ii].

On 25 March 2017, gathered in Rome on the occasion of the 60^th Anniversary of the Founding Treaty of the European Economic Community (EEC), the heads of states and governments adopted a declaration in which they assert that EU Member States will act together but “if necessary, with different pace and intensity, while moving in the same direction, as [they] have done in the past, inline with the Treaties and keeping the door open to those that want to join later”[iii]. Without naming it, this document asserts the existing European tendency towards differentiated pace integration: A ‘multi-speed Europe’.

Whereas the idea of a MSE is not a new one, it had never been stated in an official document of the 27 Member States. “Enhanced cooperation” of the Amsterdam Treaty[iv] is one example. More obvious, the eurozone is another one. The latter joins 19 countries that share the single currency. On those borders, eight countries have decided to keep their national currency. While these two entities belong to the same single market, they are subject to different legislations and evolve in different integration circles in all aspects of the monetary and financial policies.

“Opportunity” for some, “threat” for others, the MSE project is dividing, even those who claim fighting to protect the economic and social rights. Some assert that Social Europe, the Social Pillar or the reformation of the 1996 directive on posted workers are objectives that can be achieved through a model of Europe of circles of different level of integration. Others, without denying these existing opportunities for a Social Europe, are focused on the threat that the MSE triggers for the EU and fear the consequences for the social rights for those outside the enhanced cooperation, either because of national government’s choices or because of a lack of means, or of solidarity…

A “Multi-speed” Europe is the term used to describe the idea of a method of differentiated integration whereby common objectives are pursued by a group of EU countries both able and willing to advance, implied that the others would follow later[v].

As for each of the scenarios, the EC exposes both advantages and shortcomings that are to be expected in a Europe where those who want more do more. The goal is, the positive effects to overcome the negative ones. It is aimed to achieve: preservation of the unity of the 27 and the decrease of the discrepancies between the expectations and the results of the Member States (vis-à-vis EU) that want to reach further. In terms of social policy, the EC horizon 2025 envisages: “Greater harmonisation of tax rules and rates [that] reduce compliance costs and limit fiscal evasion. Agreed social standards provide certainty for business and contribute to improved working conditions”[vi]. In return, the EC specifies, “Citizens’ rights derived from EU norms start to vary depending on whether or not they live in a country that has chosen to do more”[vii].

Nevertheless, the EC’s expectations are far from being funded and the expected results of each scenario deserve deeper investigations.

First, based on the last evidences, it is difficult to assert that the unity of the 27 will be preserved through a multiple-speed Europe. Strictly speaking, what EC present is an European Union where the citizens’ rights will have variable geometry according to the place of residence.

Yet, the “convergence” has been the key word of economic policies decided – or imposed – by the European institutions until now. According to the Commission, the coordination of budgetary policies imposed by the European Semester, at the cost of dramatic austerity that has been disastrous for social rights in Europe[viii], should at least allow for more competitiveness and convergence of the national economies in order to improve the global functioning of the Economic and Monetary Union (EMU).

In 2000, the Lisbon Strategy, and later the Europe 2020 strategy, have both set the target figures to foster economic and social convergence of the Member States, in line with the common construction dynamics since its beginning in 1957. These targets are the following:

Achieve a 75% of employment rate within the 20-64 years old,
Reduce by at least 20 million the number of people affected or threatened by poverty,
Lower below 10% the early school leaving,
Achieve 40% of the people to have higher education.

The AEDH has already in December 2015 requested mid-term review of these objectives[ix]. The OECD and Eurostat[x] data provide an up-to-date comparative analysis of convergence so far, and the latter appears to be slow. Indeed, we note that the 2020 targets for employment and enrolment rates may not be met. Poverty is declining, but at an excessively slow pace, which leaves almost no doubt about the future failure of the objective pursued. Some eastern and southern countries such as Romania, Greece, Hungary, and Bulgaria – which registered a record 41.2% of people at risk of poverty[xi], and 13.5% of early school leavers among the 18 -24 years old [xii] consistently display some of the lowest indicators, unlike the countries in northern Europe, some of which have already achieved the targets[xiii].

The EC in its report from June 2015 “Completing Europe’s Economic and Monetary Union (EMU)[xiv]”, also called “the Five presidents’ report” acknowledged that social convergence is a necessity for the European Union. It asserted that: “Europe’s ambition should be to earn a ‘social triple A’. For EMU to succeed, labour markets and welfare systems need to function well and in a fair manner in all eurozone Member States. (…)It is in each member’s common and own interest to be able to modernise economic structures and welfare systems [because] it is equally in each member’s interest that all others do so at a similar speed”[xv]. Equal conclusions can be found in Roland Begrer Strategy Consultants’ report on European economies’ discrepancy. According to it, the solution for EMU’s issues lies on an integration scenario[xvi]. Therefore, a MSE seems to be in conflict with the necessary convergence, advocated by the EC itself. One may ask: why then this contradiction?

The first hypothesis is to assert that the poor results of the convergence during past seven years are responsible for this reverse. Since nothing is feasible for all 27, it has to be done with those that want more without taking into account those that do not in order to do better with fewer. If this hypothesis is confirmed, it would mean the end of the common project and aim to achieve convergence with only a few Member States. Thus, it is relevant to also ask if it will be enough to address issues that are inherent to the economic construction of the area? Would it not, on the contrary, take the risk of nullifying the convergence efforts made so far?

According to Roland Berger Institute, achieving the EMU needs to finalize both social convergence and the taxation rules harmonisation of the eurozone Member states. In order to make it possible it underlines the need for a specific European budget that enables financial transfers from the North to the South of Europe so that European unemployment insurance could be created, investments in research and development could be generated, freedom of movement for workers and retired people could be eased and strategic investments in environment and education could be financed. Through such innovations, the eurozone could reach the Optimum Currency Area (OCA) criteria.

The Optimum currency area is an economic concept theorised by Robert Mundell in 1950’s. It describes an economic area characterized by four main elements:

– The predominance of symmetrical chocks between the different regions of the area.

– The high mobility of both workers and capital.

– High commercial integration.

– The existence of adjustment mechanisms to face asymmetrical chocks (namely: financial transfers).

In such an area, it is relevant to implement a common currency to boost economic growth, consumption and investments. Although the EU implemented a unique currency, it does not comply fully with the Optimum criteria. The subprime crisis revealed the predominance of asymmetrical chocks within the eurozone and the lack of efficient mechanisms to face them.

Among other things, it was the Welfare System’s Coordination project’s purpose, as it was set out by the EC on 13 December 2016 within the “mobility package”. AEDH already expressed concerns about this project’s ability to guarantee equal access to social benefits[xvii], and reminds to supports projects aimed at unifying national social legislations, as long as they enable upward social convergence, because they are a useful tool to fight against social dumping[xviii].

Social dumping: “the concept covers a wide range of intentionally abusive practices and the circumvention of existing European and national legislation (including laws and universally applicable collective agreements), which enable the development of unfair competition by unlawfully minimising labour and operation costs and lead to violations of workers[xix]”. It deals with economic aspects, such as abusive or illegal practices, like undeclared unemployment or false self-employed, with social aspects, such as unfair or discriminatory treatments of Union’s workers, and with financial and fiscal aspects, such as tax or social contribution avoidance practices that are made possible through the discrepancies of national welfare systems[xx].

However, if the EU adopts differentiated integration measures in these fields, it undermines the common cooperation basis which is necessary to the struggle against tax competition between Member States. Indeed, tax and social legislations’ harmonization of countries belonging to the coalition willing to go further will deepen the (already big) gap between western and northern countries’ legislation and the ones of southern and eastern countries. The use of social dumping may become systematic. As a result, the countries of Eastern Europe, specializing in a low-cost labor force, will enter the perverse circle of resistance to deepening social rights in order to combat rising labor costs and retain what makes their economic specialization within the internal market. Thus, the gaps are bound to widen unceasingly and pose the threat of a real break. This situation already exists but is likely to be amplified by the so-called ‘multi-speed Europe’, in contrast to the Commission’s predictions on the preservation of 27 EU. The ‘multi-speed Europe’ is also the risk to abandon global social convergence and with it the fight against social dumping.

Yet, it is true that this scenario offers the opportunity to deepen social rights for the countries such as France, Germany, Spain or Italy – the self-appointed “leaders”- that are willing to go further in these fields.

Nevertheless, countries such as Lithuania, Hungary, Bulgaria, Romania, Poland, or some countries from the south such as Portugal and Greece, will be assigned to some “second-class” circle, aimed at recording the new legislations or at remaining excluded. The preservation of the unity of 27 lies on the hope that the lagging behind will follow the firsts. But the hope may also conceal the new paradigm of decisions taken by the coalition of the willing to be imposed to the rest.

From that perspective, a ‘multi-speed Europe’ is more of a risk than an opportunity. Indeed, it is the fertile ground for growing discrepancies between European countries and it is driving the EU into the paradigm of a Europe of rights of variable geometry.

There is another hypothesis dealing with the existing contradiction, which is not incompatible with the first one. It asserts that the social perspectives in the EC’s white paper MSE scenario are more a political gimmick of the new paradigm of integration than a real objective. Social Europe is not the top priority of countries in favour of the MSE. The convergence is not given-up but other outlooks displace it, making also space for the contradiction.

As a matter of facts, it is noteworthy that Germany and Spain are not “first class” in convergence. While Germany already reached its objectives of 75%[xxi] of employment, its poverty and exclusion risk rate is about 20%[xxii], and its early leaving school rate is still above the 10% objective[xxiii]. Regarding that the MSE scenario is also advocated as a tool to achieve Social Europe, it is surprising to notice that it is encouraged by countries for which social convergence is not the priority.

Is not this last element an evidence of how those who have been the first and the more enthusiastic about claiming the MSE think about it? Through the multi-speed Europe, are these counties not willing to foster the European defence project and Schengen issues before all? Through such an act, the welfare system harmonization, the reformation of the directive on posted workers and the implementation of the Social pillar could be subject to the success of another field of competences. Once again, Social Europe is not Member States’ priority.

In this programme, social issue is not entirely useless because social convergence is still seen as an inference of both the integration and the deepening of the single market. However, it will remain subject to economic objectives. While the ideology according to which Social Europe will come as a natural result of single market’s integration is fading, it has not died in the decision makers’ minds yet.

Thus, there is a risk that this possible and new subordination of social rights to the other policies, that will come as a result of this MSE project’s conception, confirms the status of Social Europe as “the poor cousin” of the European integration. The AEDH expresses concerns about the reproduction of the same subordination scheme inside what seems to become the new European integration paradigm.

Furthermore, the social issues’ subordination enhances the threats of a MSE. Indeed, while the MSE’s effects on economic and social rights are hypothetical for the moment, it is certain that they will be harmful if Member States decide to offer only a limited attention to this scenario and its stakes for social Europe and continue to use the same methods that have driven to insufficient results compare with what could have been achieved by now.

In the case of both hypothesis, the compatibility of the MSE scenario with the deepening of social rights can be questioned.

In other words, the MSE triggers obvious problem of complexification of the European legal framework, that will affect both the respect and the opportunities for deepening the “acquis”. As a matter of facts, if “those who want more do more” it is legitimate to grant to the coalition of the willing right to propose their project to the European Commission. In that case, it is a new power of initiative that emerges, in the hands of those who whish to go further into the integration.

This is what the EC makes reference to when it acknowledges that: “Questions arise about the transparency and accountability of the different layers of decision-making[xxiv]”. Nonetheless, this breach in the unity of rights is a threat for the future deepening of social rights in the entire European Union. First, because the transparency of the law is thus compromised and so is the access to the judge of the EU. Yet, the construction of social Europe’s history shows that the judge of the EU, through its jurisprudence, is one of the main actors responsible for the deepening of social rights. Second, because the aim at entirety of the rights is constituent of the European project and a core value for which the AEDH is standing. Opting for MSE can be a synonym of giving up a community initiative to foster a restrained one which will cease to think social rights in an inclusive way.

It is worth reminding that principles of Equality and Dignity are enshrined in chapter III and chapter IV of the Charter of Fundamental Rights of the European Union of 18 December 2000[xxv].

Therefore, the AEDH asserts that a MSE project, that is not paying sufficient attention to preservation and deepening of the social rights, is in breach with the principles enshrined in the Charter of Fundamental Rights of the European Union. As long as the MSE is a wanted and thought towards differentiated integration circles, which makes the opportunities for deepening social rights different from a country – and its citizens- to another one, the AEDH claims it is in breach with the Charter.

The president of the European Council, Donald Tusk, did not hide his concerns about this scenario during the Summit on 25 March. As a Polish citizen he declared he spent “half of his life behind the iron curtain [at a moment when] it really was a two-speed Europe[xxvi]”. Such concerns are shared by some leaders of Eastern European countries such as the President of the Romanian Senate, Călin Popescu Tăriceanu, who publicly expressed his fear to see the EU split in two parts again if the MSE scenario would come to be implemented[xxvii].

The remaining problem – which is back in the MSE project – is the new social subordination to economic policies. The Rome declaration on 25 March 2017 set out economic and social improvement objectives such as the promotion of men and women equality, the fight against unemployment, discrimination, social exclusion and poverty… The AEDH notes the presence of these objectives but still expresses concerns about their necessary linkage with the “preservation of the single market integrity”. All is there. Would social improvement and convergence be acceptable only if they are not an obstacle to the broad economic policy guidelines? With that spirit, it is logical to forsake those who are not good enough instead of going together to give a sense to what “Union” really means.

Nonetheless, a pragmatic gaze of the situation forces to look at the situation from a different perspective. Indeed, if the MSE scenario is not without risks, it is also possible to look at it as the only known “exit door” of the exacerbation of intergovernmentalism that makes the decision-making process impossible. According to Guillaume Balas, it is today the only reasonable scheme to avoid the EU blowing-up and to foster the (imperfect) integration[xxviii].

Looking at the on-going situation the AEDH wants to ask the Member States: What ambition do you have for the European Project?

[i] European Commission, White paper on the future of the European Union.

[ii] Ibid

[iii] European Council, The Rome Declaration on 25 March 2017.

[iv] Amsterdam Treaty. The principle is now enshrined by Article 43 and 45 TEU, and 326 and 334 TFEU.

[v] EUR-lex definition.

[vi] European Commission, White paper on the future of the European Union.

[vii] Ibid.

[viii] AEDH, Austerity and the well-being of citizens : an impossible compatibility, 27 March 2017.

[ix] AEDH, Europe 2020 strategy: what are the mid-term results ?, 15 December 2015.

[x] Eurostat, Press release of 8 July 2016 and of 16 October 2015.

[xi] Eurostat, Press release, 25 April 2017.