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What Holds Europe Together?

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Krzysztof Michalski

What Hope for Solidarity in the Enlarged Union?

Heather Grabbe

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Introduction1

  • 1 Part of this paper is based on a joint article by the author and Henning Tewes which was published (...)

1In enlarging to 25 member-states and beyond, the EU will change its nature. It will move from being a predominantly rich country club to a truly continental union. On what basis will this large community of states live together? Today, European countries are more alike than they have been for 200 years, with nearly all being democracies and market economies. But although the shared values of freedom, democracy and market economics are necessary conditions for harmonious co-existence in the EU, they are not sufficient. The Union needs solidarity as well.

2But it is difficult for any community to feel a strong sense of solidarity if it increases rapidly in size. “Why should we pay to help all these newcomers?” is a common social reaction, whether the community in question is a small village or the larger part of a continent. If a community’s membership is clearly defined, it is easier for the members to accept that they should help each other. But when the community is growing rapidly in ways that the members cannot fully control, their feeling of sharing a common cause begins to diminish. This change in sentiment is evident within the societies of individual European countries, particularly if they are experiencing—or fear— a rapid influx of new immigrants. In many countries over the past decade, claims that immigrants and asylum-seekers are unfairly taking welfare benefits have featured in election campaigns, especially at the local level.

3This phenomenon is also evident at the EU level in response to the forthcoming enlargement. Can people feel a sense of solidarity with other EU citizens when they live as far apart as Oporto and Lublin, or Thessaloniki and Narva? Many people in the existing 15 countries express resentment at the prospect of a rapid expansion of the community to include one-third more members, all considerably poorer than the old members. The existing recipients of funds from the EU’s budget—whether they are French farmers or the poorest regions in Spain—understandably do not want to lose their transfers. The current recipients of the EU’s structural funds have made frequent reference to the “statistical effect” of enlargement: no Spaniard will suddenly become richer owing to the enlargement, but overnight, many Spanish regions will become far wealthier relative to the EU average, because that average will be pulled down by the entry of poorer new members.

4But the question of solidarity is not just about the EU’s budget; it goes much further than that. Solidarity has been a sort of emotional glue for the EU over the past half-century. Even if member-states have often behaved in a self-interested fashion, they have also shared a general belief in the idea that there should be an ‘ésprit communautaire,’ a sense that EU policies should serve the common good. This sense is also evident among the new member-states. However, a country’s willingness to make sacrifices for the good of its neighbors could diminish as the community widens and economic competition increases. Already in the accession negotiations and the pre-negotiations for the next budget round, any sense of altruism was quickly disappearing.

5The member-states’ increasingly self-interested behavior in the past decade has been due to a variety of reasons. Germany was traditionally the ‘paymaster’ of the Union, financing the lion’s share of EU projects. The German contribution to the EU budget is still more than a fifth of the total. However, since unification in 1990, Germany has found its public finances under unprecedented pressure, owing to the cost and economic impact of integrating the eastern Länder. These pressures have caused the ‘Nettozahlerdebatte’ to rise up the political agenda, with more and more Germans questioning their country’s traditional role. The German public’s willingness to pay the costs of solidarity with poorer parts of the Union has consequently diminished. Unlike in previous enlargements, it is unlikely to increase after the present one, as signaled by Germany’s reluctance to provide any extra money from its own budget for new members at the end of the accession negotiations in December 2002.

  • 2 See Heather Grabbe, ‘The Copenhagen deal for enlargement’, CER Policy Brief, London, Centre for Eu (...)

6The new members will also find themselves under unprecedented fiscal pressure upon accession.2 Even before their actually joining the Union, opposition politicians and the domestic press in several countries are demanding that their governments get a better financial deal out of the EU. These days, any government, wherever in Europe, that claims to be acting in the ‘ésprit communautaire’ is likely to be asked by an angry domestic press why it is not defending the national interest.

7This contribution looks at how enlargement will affect three dimensions of solidarity in the EU. One is the political atmosphere, which will become sourer over the next few years owing to the difficult negotiations that will follow the 2004 accessions. The second dimension is economic diversity, which will increase as a result of poorer countries joining the Union. Finally, there are the social changes occurring across Europe, and their impact on notions of solidarity within individual member-states.

Changing political atmosphere

8Inevitably, the overall political atmosphere in the EU affects any feeling of solidarity. The first few years after enlargement will be a turbulent period for European politics, one in which notions of solidarity are unlikely to flourish. The 10 newcomers will upset the balance of power between the existing 15 members, and the dominant mode of behavior is likely to be dogged defense of national interests.

9After the warm words of welcome in May 2004, the battle will commence on the EU’s most fiercely contested issues. The new members are joining just as the EU is finalizing its new constitution, and deciding the tricky questions of representation and the allocation of money. The 25 countries are already arguing fiercely about institutional reform in the Inter-governmental Conference that began on 4 October 2003. It is evident that Poland will be as feisty as Spain in defending its voting power and demanding greater representation in decision-making, both in the Council and the Commission. Within months of joining, the EU-25 will also start work on allocating the EU’s central budget after the current settlement runs out in 2006. These debates could quickly turn acrimonious. The old members will be trying to hang on to their acquired rights—Spain to its regional aid and Britain to its budget rebate, for example. Meanwhile, the Central and East European members will fight very hard for more budget funds. The new members want to make up for what they lost in the accession negotiations, in which the 15 old members used their greater muscle to retain more than 90 per cent of the funds for themselves.

10Once inside, however, the newly-admitted 10 will have votes and veto powers. They will want to exercise their rights to the fullest, ensuring that they get better deals in future. At the same time, the old members will be trying to hang on to their long-standing privileges. This combination of defensiveness among old members and resentment among new ones will make for longer and bitterer arguments than before—and reduce any sense of solidarity between countries. These battles will also be hard-fought because their outcome will reverberate for many years to come. The budget settlement will dole out the spoils until 2013, and the new constitution will decide the voting power of each country in future negotiations.

11Negotiations in the EU will also become more complex, because the ten new members are wildcards in the new game. The present 15 members know each other well. When beginning a new round of negotiations, each usually has a pretty good idea of their partners’ positions, as well as of the strength of the opposition to their own stance. But the addition of two-thirds more players will alter the balance of forces. Where problems—such as reform of the Common Agricultural Policy—previously reached a stalemate, the new members may break the impasse by taking one side or another. On many issues, their governments have no position as yet, so one faction or another can attempt to court each.

12The new members are also unlikely to form an ‘eastern bloc,’ by frequently voting together. They will have a common interest in focusing the EU’s budget on policies for economic competitiveness, because most are much poorer than the original 15. But on the majority of questions each country will have to fight for itself, so that shifting coalitions of new and old will emerge, and change according to the issue on the table. The lack of long-standing partnerships like the old ones that characterised the original six members—particularly the Franco-German relationship and the Benelux grouping—will also have an impact on member-states’ willingness to develop solidarity policies.

Increased economic diversity

13Debates about solidarity have often been mostly about money, as they will be again after the 2004 accessions. Since 1989, income gaps in all European countries have widened. Despite economic growth in the aspiring member-states, there are still large inequalities of wealth within the current EU-15. EU GDP per capita now averages more than €20,500, but the Czech average is only €11,380, while Hungary’s is €10,384 and Poland’s €8,061. However, the richest Central Europeans have converged with the poorest EU countries: Slovenian per capita GDP has now overtaken that of Greece.

14The range of economic performance and income across Central Europe is wide. The Czech Republic, Hungary, Poland, Slovakia and Slovenia enjoy GDPs per capita that is between one-third and two-thirds of the EU average, whereas the remaining countries are below one-third of the EU average. GDP per capita in Slovenia, the richest EU candidate, is over €15,000, while it stands at just one third this level in Bulgaria and Romania.

15There are considerable inequalities between regions in Central Europe as well, so it is important to look beyond the national averages for income and employment. Regional unemployment rates vary enormously, and income levels in the regions around capital cities usually greatly exceed the national average. Rapidly growing cities such as Budapest, Prague and Warsaw are already ineligible for some of the EU’s considerable regional aid funds. The average income in Prague, for example, is now 119 percent of the EU average.

  • 3 EBRD, Transition Report, London, European Bank for Reconstruction and Development, 1999.
  • 4 World Development Report, Washington DC, World Bank, 1997.

16The speed with which the economic disparities between new and old member-states narrow will depend on whether the applicants grow at a faster rate than the current EU members. The EBRD estimates that these countries could achieve long-term average annual growth rates of 4 to 7 per cent.3 But to realize this potential requires both high investment and rapid productivity growth. The World Bank estimates that the front-runner candidates are 20 years away from attaining average EU incomes. And during that time, EU incomes will continue to grow, so that catching up will require much faster growth or significantly more time, possibly as much as 40 years.4

17Given this outlook, the enlarged EU faces the prospect of having to deal with considerable disparities between income levels over a long period. New budget lines may have to be devised to mitigate the differences in income and employment between cities and regions in the enlarged EU, since inequality has social and political as well as economic consequences.

18In principle, the EU’s common policies are meant to address precisely this problem of disparities. The Community budget therefore provides aid to poor regions and farmers. However, more than half this budget is spent on agricultural subsidies that often go to richer farmers, and distort fair competition. This policy is no longer justified, but in the budget battles between the different member-states, the basic objectives of agricultural policy have receded from sight. Instead of a policy that fosters economic competitiveness, the EU has created a cover-up for social security to farmers. Many people in Europe find it difficult to understand why farmers should be singled out as the one social group to receive direct aid from Brussels. Why does taxpayer solidarity, they ask, extend to farmers but not to steelworkers, coalminers or small shop-owners?

19The EU cannot put off major changes in its agricultural policy for much longer, not only because of enlargement, but also because of world trade negotiations and consumer opposition to industrialized farming. The next few years thus offer a valuable opportunity to rethink common agricultural policy, and to better achieve its aims and objectives in helping poor farmers and rural areas.

  • 5 HM Treasury et al., A Modern Regional Policy for the United Kingdom, London, HMSO, 2003.

20With income differentials growing after enlargement, Europeans will also have to rethink the objectives of structural and cohesion funds. Whom do we want to help? Some economists argue that only states with less than 70 % of the EU’s average GDP should receive structural funds. The UK Treasury has argued, for example, that richer EU countries should not receive regional aid from the EU budget at all, but rather fund them from national sources.5 Poland would qualify in such a case. But regional disparities in some of the EU’s new member-states will be vast, and unemployment rates will vary tremendously. In some regions of Poland—for example, Warsaw—the average GDP is high, and it would be absurd to maintain that an investment in Warsaw is also an investment in the poorest regions in Europe. If the structural funds are an instrument for equalizing income levels, some regions in the new member-states ought to be excluded. Overall, the EU needs to focus its regional aid on the poorest regions of the enlarged Union, regardless of what country they lie in. That is the only way to ensure that policies designed to promote solidarity between Europeans are not primarily determined by intergovernmental horse-trading.

21The new member-states will not gain full access to the EU budget for several years after accession, and it will be nearly a decade before they are fully eligible for the bulk of agricultural funds on the same basis as the EU-15 countries. This prospect raises the question of second-class membership for the candidates, but it may also cause the new member-states to demand a fundamental change in the next EU budget. That could present an opportunity for the enlarged EU to fundamentally rethink how it deals with economic inequalities and rural development. The recommendations of the Sapir report offer many useful points for that debate, particularly in matching up the objectives of the budget with the EU’s aims for long-term competitiveness in the Lisbon agenda.

22The only way that European countries can ensure their prosperity in the long run is if they work together to develop economies that can cope with international competition. Good economic policy is good social policy, and vice-versa. But the EU can help in this task by promoting better economic governance in the member-states—by benchmarking their progress in achieving economic reform, for example— and by making sure that the single market maintains a level playing field for all member-states.

What future for the European social model?

23One of the most evident ways in which Europeans are different from Americans is in their attitude towards inequality, and particularly towards the role of the state in reducing economic inequality within societies. The new members generally share the preferences of the old ones in this respect, having generally experienced less inequality in incomes across society during the communist period. They too are seeking a balance between economic competitiveness and social cohesion.

24Many Europeans fear that globalization and international capitalism will erode European societies, widening the gap between the ‘haves’ and ‘have-nots.’ Others argue that liberalization and increased competitiveness for the European economy are the only way that EU members can ensure their prosperity in the long run. Some people envy the US economy’s dynamism, while others fear that the social problems associated with American-style capitalism might be transplanted to Europe.

25One of the EU’s greatest successes is the creation of a single market covering 15 countries and an economic output that rivals the United States in size. After enlargement, that market will grow to nearly half a billion consumers. One of the aims of removing barriers to the free movement of factors of production was to increase Europe’s international competitiveness: the logic was that if European companies were forced to innovate and become more efficient, they could better cope with international competition. But although many Europeans are in favor of a market economy, they do not necessarily want a market society.

26The EU’s social policies are somewhat haphazard, because most social issues are dealt with at the level of national, regional and local governments. But the Union has been moving towards more comprehensive policies on issues like social exclusion and fighting discrimination, with mixed success. This is clearly a policy area that will need further development after the 2004 enlargement.

How much solidarity will European citizens feel in future? Social change and the EU

27Independently of the EU’s official agenda, both old and new member- states are already facing major challenges as their societies change. Many of the current EU’s member-states contain significant immigrant populations. In Britain and the Netherlands, migrants have, for the most part, been integrated successfully; but even there, tensions remain, as race riots in the north of England in 2001 revealed. Moreover, immigration and citizenship issues have grown in significance within the political agenda in recent years, as populist right-wing parties have exploited them for political gain in France, Austria, Norway, Denmark and the Netherlands. In Germany, the question of whether ‘guest workers’ should be given German citizenship divided the political class in the late 1990s, and the search for a new immigration law was lengthy and difficult.

28Europe is experiencing falling birth rates, so it will need substantial immigration in order to have enough young workers to support the economy and pay the pensions of the aging population. Similar processes are at work in the new member countries. Few realize it today, but Eastern Europe could soon turn into a region of net immigration. Today, trade unions in Germany and Austria fear that labor migration in the wake of enlargement will cost jobs in the current EU. In 5–8 years, these fears will be long gone as European countries (including the new members) are likely to be competing for skilled workers from elsewhere in the world.

29European countries have dealt with their minority populations using very different policies—from integration to assimilation to discrimination. Populations are becoming still more mobile, as the fall of the Iron Curtain and the introduction of the Schengen area of passport- free travel have redrawn the map of free movement across Europe. Some borders have become easier to cross, while others have become barriers to entry. These changes raise the question of whether the enlarged EU will need a common approach to migration and asylum issues, so that would-be migrants will face the same criteria for gaining entry and employment in each European country.

30Labor market issues are increasingly connected with social change: employers facing shortages of key skilled workers are calling for governments to grant more work-permits to people from outside Europe. But these workers often want to remain as permanent residents, and bring their families with them, creating new challenges to social cohesion. At the same time, immigration of younger workers may be essential, as the current population of most European countries is ageing and birth rates are falling. This flow of people into and around Europe is likely to cause long-term changes to the social fabric.

31The question is how to benefit from the dynamism that cultural diversity and social change can bring to Europe, and to ensure that there is sufficient social solidarity, so that different groups (whether ethnic or economic) do not become alienated from one another. Recent years have shown how easy it is for the far right in many countries to exploit people’s fear of change, difference and competition, and to blame immigrants and minorities for social problems. One of the EU’s greatest achievements in the second half of the 20th century was to knit populations together across borders through economic integration in order to reduce tensions and eliminate the incentives for armed conflict. The major challenge of the 21st century could be to reduce tensions between different groups within national borders as well.

32Enlargement, combined with demographic and social changes, also calls into question who is European—raising identity questions. Enlargement brings the EU new neighbors, countries that are poorer than the existing EU. People in Ukraine, Belarus and Russia regard themselves as European. But many EU citizens have little sense of solidarity with those neighbors who need help to achieve stability and greater prosperity. The danger is that a bigger Union might become a ‘Fortress Europe’ if the EU’s border policies increase the isolation of the countries left outside without solidarity policies to help integrate them into the rest of Europe.

Conclusions

33Solidarity refers to a sense of togetherness, as well as to the practice of helping one another. Without a sense of common purpose, people are unwilling to come to one another’s aid. The wealthier European countries are not going to help the poorer ones simply out of idealism, but they must do so through a recognition that their self-interest is best served by pursuing common goals. The EU was created because the people living on this crowded continent have to work together and their destinies are intertwined. Solidarity is about recognizing that the world is a big and complex place, and Europe a rather small part of it.

34This analysis leads to the following conclusions:

  • In the negotiations for the EU’s next budgetary period from 2007 onwards, the member-states—including the new members— should think more objectively about what future policies the enlarged EU will need. They should not focus on past precedents for spending, but instead establish a set of policy goals to address the new challenges of economic and social cohesion after enlargement.
  • Solidarity is not a one-way street. The poorer EU member-states should not define solidarity in Europe as just “the rich helping the poor.” They need to ask themselves instead what they can contribute as well, and that means developing the capacity to use EU aid sensibly. Ireland and Portugal have spent EU money wisely, and their economies have benefited, whereas Greece failed for years to use EU funds to modernize its economy. Eastern Europe should learn from those successes and failures to make good use of EU money.
  • Demographic change in Europe is already taking place, and immigration will be needed to ensure that our economies can continue to grow. Europe’s political leaders need to explain to their publics how immigration is in their own best interests. Equally, they need to establish common EU policies to ensure that there are legal routes of managed migration, to halt the growth in people trafficking and to ensure that immigrants who become residents are integrated into society rather than socially excluded.
  • Solidarity begins at home. All European countries are trying to find the right balance between economic competitiveness and social cohesion. They are facing similar policy challenges in reforming pensions, welfare benefits and healthcare. These policies are best managed at the national level, rather than through the EU’s institutions, but the Union can help countries to benefit from comparing their experiences and sharing the best practices.

35In the 1950s, the integration of Western Europe was spurred on by the experience of the war and the communist threat. Today, war is a distant memory to most Europeans and there is no communist threat. The peoples of Europe need a different reason to pull together. That reason is our common destiny. During the Cold War, problems on one part of the continent could be isolated from the rest because border guards stopped people from moving, and economic contacts were limited by trade barriers and mutual suspicion. But now the frontiers are more open and the economies are more integrated. War, instability and poverty in one part of the continent have an effect on all the rest. The only way each country can ensure the security and prosperity of its citizens is to work with all its neighbors in a spirit of solidarity.

Notes

1 Part of this paper is based on a joint article by the author and Henning Tewes which was published in Gazeta Wyborcza in June 2002.

2 See Heather Grabbe, ‘The Copenhagen deal for enlargement’, CER Policy Brief, London, Centre for European Reform, www.cer.org.uk., 2002.

3 EBRD, Transition Report, London, European Bank for Reconstruction and Development, 1999.

4 World Development Report, Washington DC, World Bank, 1997.

5 HM Treasury et al., A Modern Regional Policy for the United Kingdom, London, HMSO, 2003.

Auteur

Heather Grabbe is a member of the Cabinet of the EU Commissioner for Enlargement. Recent publications: The Constellations of Europe: how enlargement will change the EU, London, 2004; Germany and Britain: An Alliance of Necessity, London, 2002 (with Wolfgang Münchau); Profiting from EU Enlargement, London, 2001; Enlarging the EU Eastwards, London, 1998 (with Kirsty Hughes).

© Central European University Press, 2005

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