A Beginner’s Guide to the European Union
Powers, decision-makers, and prospects
We’ve already reached over 100 subscribers since this blog was launched only a couple weeks ago! I honestly did not expect readership to grow so quickly and it’s great to see so much interest.
Given that many readers are likely to be unfamiliar with European politics, one of this blog’s core topics, I thought it might be useful to provide an intro piece on the European Union. Few things are as misunderstood as the EU and it is something on which wildly exaggerated claims are commonly made, both by its more enthusiastic supporters and its vociferous critics. This piece has grown longer than I initially expected but I hope it provides an intelligible overview of what is one of the most interesting and original experiments in international politics.
In day-to-day life, EU citizens chiefly experience the Union through a few practical things that are often taken for granted: the ability to seamlessly cross borders between countries of the Schengen Area (border checks are the exception), the clanging of euro coins in our pockets and seamless transactions in countries of the eurozone, and, perhaps most significantly, the right to live, study, and work in other EU countries. Walking in the Union’s cities and villages, the gold-and-blue star-spangled European flag flies from local and national government buildings.
For citizens, the EU is of great convenience whenever something has to be done across borders. If you’re in another EU country, you have reasonable assurance that everything will go smoothly, whereas you never know, say, what the latest conditions are for going to the United States or (after Brexit) the United Kingdom. Even when I order something from outside the EU, I sometimes have an unpleasant surprise like having to pay a customs fee (insignificant in itself, but in Belgium this is accompanied by a €20 administrative fee, even for a cheap book).
The EU is of course much more than these daily conveniences. It has a vast array of powers and policies which have variable impact, involve trade-offs, and, as in any democratic polity, are contestable and contested.
The EU’s major powers: market regulation, trade, monetary policy, and force of attraction
In practice, I would say the European Union is a confederation of nation-states which has achieved state-like powers in some important policy areas, especially in economic fields such as market regulation, trade, and monetary policy.
The EU’s origins however lie in fairly modest and technical cooperation in specific fields. The EU’s ancestors, the European Communities, were founded in the 1950s with provisions to unify markets for coal and steel, cooperate on nuclear power, and eventually create a common market. While the Six founding nations (France, West Germany, Italy, and the Benelux countries) each had their own particular motives, three overarching drivers are evident:
After the disaster of the World Wars, to make armed conflict between participating states impossible, in particular between France and Germany.
To pool European nation-states’ resources and decision-making to achieve the economic and geopolitical scale necessary to remain relevant in the face of the American and Soviet superpowers.
To foster, through growing economic ties, interdependence, and day-to-day cooperation, further momentum towards creating a federal Europe.
By far the most successful EU project has been the creation of the Common Market, entailing freedom of movement of people, goods, capital, and services (the latter is the hardest) within its borders. This goal, set in the 1957 Treaty of Rome, has naturally led to “spillover” of further integration, both to achieve this common market and then to regulate it. Majority voting was gradually instituted in certain areas, and the national veto removed, in order to achieve the needed breakdown of non-tariff barriers.
Any market requires regulation on issues like health and safety, consumer protection, environmental standards, and so forth. As a result, the EU has become an effective regulatory régime deciding the complex rules on medicines, chemicals, food labeling, financial services, data protection (say hello to those notorious GDPR pop-ups), carbon trading, and much else.
Scholars have observed a so-called “Brussels effect” whereby foreign businesses and jurisdictions spontaneously conform to EU regulatory standards so as to automatically be valid in the European market. The standards are high enough as to be assumed to also be up to par in most other jurisdictions. The Brussels effect is visible in the widespread adoption of CE marking (conformité européenne) indicating respect for EU standards. (There is a similar “California effect” within the United States.)
Being a single market, the EU has developed powerful competition authorities tasked with preventing corporations, including world-spanning multinationals like Silicon Valley giants, from engaging in cartels or monopolistic behavior. The EU Commission’s Directorate-General for Competition (DG COMP) has extensive investigatory powers, vets the mergers of large corporations, and can inflict multi-billion-euro fines if these are found to be misbehaving.
Again being a single market, the EU acts as a unified trade bloc in the global economy. The EU economy is of the same order of magnitude as the United States or China, producing $18 trillion of wealth annually or 16% of global GDP. By caucusing in trade negotiations, EU countries have far greater bargaining power. While EU countries are often divided politically, they can show impressive “defensive unity” when foreign powers threaten their trade interests, as seen when the bloc retaliated against US steel tariffs in 2002 (prompting the Bush administration to later reverse the measure) and the EU’s consistently strong position during the interminable Brexit negotiations.
The Commission negotiates free trade agreements (FTAs) with foreign states, typically conditioned on respect for EU interests and values. A recent striking case was the conclusion of an FTA with Canada. The FTA required Canadians to respect EU geographical indicators (e.g., that champagne comes from the Champagne region of France or that prosciutto di Parma comes from Parma). Beforehand, Czechia, Romania, and Bulgaria had threatened to block the agreement until Canada granted their citizens visa-free travel possibilities, as was already the case for other EU citizens. Thus the FTA, among other things, promoted European farming interests and heritage, as well as greater freedom of movement for all EU citizens.
The EU has a federal-style budget of around €150 billion annually. That may sound like a lot, but it is only equivalent to about 1% of GDP or 2% of public spending within the EU. The three biggest chunks are:
Since the 1960s, agricultural subsidies support farmers and stabilize their incomes. There has been much criticism of the Common Agricultural Policy (CAP) and it is stereotypically perceived as a kind of bribe to French farmers. However, the fact is most economies (including China, the United States, Japan, and others) provided similar support to their agricultural sectors.
Since the 1980s, cohesion spending, and especially regional policy, has mitigated social and territorial disparities. This notably funds development projects, especially in less wealthy regions. Walking in European towns, you may notice the many signs left wherever EU funds have been spent on local development projects, such as infrastructure or urban renewal. Regional policy incidentally puts local and regional elected officials in regular contact with EU programs, an effective means of securing buy-in from them beyond national governments.
The EU finances scientific research and mega-projects such as the ITER fusion reactor and the European Space Agency (including the Galileo global navigation satellite system). Since the 2000s, the EU has dedicated a growing share of funds to science and innovation: all states can agree that science is worth funding and can contribute to Europe’s prosperity, sustainability, and sovereignty. The flagship Horizon Europe program has a budget of €95.5 billion over 6 years.
EU budgetary negotiations are extremely complex as the six-year financial frameworks must be unanimously agreed by all 27 national governments. Each EU program will have various rules, more or less stringent, on accessing them (compare U.S. conditional federal funding to the states). There have recently been moves to cut certain funds to Hungary and Poland, as these countries are considered to be in breach of EU values. While the EU’s budget may only be about 1% of GDP, the transfers can be massive for net beneficiaries such as poorer eastern European countries, amounting to as much as 10% of national public spending.
The EU has a Common Currency, the Euro, which has replaced national currencies in 19 out of the EU’s 27 member countries. Monetary policy is run by the European Central Bank (ECB). National governments agreed to create a common currency in the 1992 Maastricht Treaty, with Germany spelling out two important conditions: that the ECB be independent of “political” influence from governments and that it be mandated primarily with fighting inflation.
This was the price to pay given that monetary union meant the Germans were giving up their prestigious Deutschmark and subsuming the Bundesbank within the ECB. The idea was to lock in postwar West Germany’s track record of stable money and prevent the euro from suffering from inflation and repeated devaluations, as had many southern European currencies.
The creation of the eurozone is in itself a great achievement almost on the order of science fiction: many have dreamed of a European federation of some kind and the eurozone represents a genuine federal institution. The euro has simplified daily life for people traveling and shopping across national borders, as well as consolidating its position as the world’s second most important reserve currency after the U.S. dollar (about 20% of exchange reserves worldwide are held in euros).
The eurozone’s actual operation however has often not been a happy one, especially since the 2007 financial crisis. While EU governments agreed 30 years ago on federalizing monetary powers in the hands of the independent, notionally apolitical ECB, there has been no consensus on a parallel federalization of fiscal powers, such as debt pooling, joint decision of deficit limits, or a more substantial federal budget.
As a result, the ECB has often had to act as a political actor to stabilize the eurozone economy and prevent its collapse. While interminable negotiations go on in Brussels to define the EU budget (~1% of GDP), with a snap of its fingers the ECB Executive Board can and does inject trillions of euros into the economy. Perhaps surprisingly, despite the ECB’s massive power and evident political role, the institution receives scant attention in the academic literature on the EU. (E.g., there is no chapter dedicated to the ECB in the Oxford Handbook of the European Union and only two pages of dedicated publications listed on LibGen.)
The EU has a major regional impact in being a powerful pole of attraction: neighboring countries, especially in eastern Europe but not only, are eager to associate with the EU (and, as the case may be, become members) in order to gain access to the common market, enable their students and workers to migrate to wealthier European countries, access EU research and development funds, and more generally achieve the good governance (relatively corruption-free), high standards of living, quality of life, and human rights associated with western Europe.
We have seen this effect time and again as various countries have lined up to join the EU after overthrowing dictatorships of the right (Greece, Spain, Portugal) and left (Poland, Romania, Czechia…). The effect is also seen in the EU’s relations with Turkey (long in the EU orbit, though drifting away and perhaps irrecoverably so since the accession of the Islamist Prime Minister Recep Tayyip Erdoğan), in the former Yugoslavia, and now in Moldova and Ukraine. Even countries that do not join the EU - such as Iceland, Norway, and Switzerland - negotiate particular, often complex agreements so they can take part in free movement of people, the common market, and research programs.
The EU’s attractiveness to Ukraine and the Russian military invasion of the country provide a striking case study of the clash between soft power and hard power. Though, to not put too fine a point on it, the EU’s soft power there will only matter insofar as the Ukrainians are able to exert sufficient hard-power resistance to the Russians.
Unanimity: between “thin” policies and transformational politics
Since the Maastricht Treaty of 1992, the EU has officially had policies in other areas such as defense, foreign affairs, and social policy. These policies typically require unanimity and so the results will be consensual and often “thin.”
One example of this is the so-called Youth Guarantee whereby national governments have agreed to provide all people under 30 with access to employment, continued education, an apprenticeship, or a traineeship. Obviously, all national governments were anyway keen to do what they can to reduce youth unemployment; but that is easier said than done. Youth unemployment in the EU (defined as under 25s) currently stands at 13.9%, with sharp national disparities ranging from 29.6% in Spain to 5.5% in Germany.
It can sometimes be difficult to say what is done thanks to “the EU.” Do we mean the EU institutions as such or their action together with national governments? Because of the limitations of EU budgetary and taxation powers, much EU policy is made up of unfunded mandates (also a feature, often unpopular, of U.S. federalism): targets or rules that lower levels of government must reach without necessarily being provided the resources to do so.
Because EU policies can only be agreed to and effective if there is a high level of agreement and consensus, even these targets may often boil down to what most national governments would have been doing anyway. An example of this would be the EU’s climate and energy goals: to become the first carbon-neutral continent by 2050. No doubt many member states would have done this anyway (e.g. Britain, after leaving the EU, also set itself a goal of achieving net zero emissions by 2050). The effect of the EU targeting is to Europeanize the discussions, to have a complex elite-driven coordination mechanism, and to bring this topic onto the discussion in “laggard” states (e.g., eastern European states who otherwise wouldn’t have these on the agenda).
On the other hand, where national governments do all agree on something new, the rules of the game can change quite dramatically. European integration has always gone forward like this: day-to-day gradual work, periods of stagnation or fits and starts, and the occasional leap forward. The basic concord and joint leadership of France and Germany has been crucial to such leaps throughout the EU’s history.
A recent example was the overnight creation of the so-called Next Generation EU post-COVID recovery plan, crucially, with the blessing of Germany. This recovery plan, worth €807 billion, effectively doubles the EU budget for a period of six years, and will provide substantial loans and transfers to countries suffering the most from COVID’s economic impact, especially in southern Europe.
How does the EU decide things?: The EU institutions and the democratic deficit
The EU’s day-to-day operation is in many ways not all that different from any national government. The major EU institutions are basically analogous to national ones with some quirks reflecting the compromises of the founding Treaties that have been negotiated between national governments over the years. These include the European Commission (the executive), the Council of ministers (representing national governments, somewhat like a senate), the European Parliament (directly elected and able to amend or veto legislation), and the European Court of Justice (ECJ).
Major “quirks” include the fact that the Commission is the only institution able to propose legislation and that its President is not directly elected, but nominated by national governments in Council and approved by Parliament. In the Council, passage of legislation is possible in “regular” policy areas with a “qualified majority” of national ministers representing 55% of states and 65% of the population. However, given that implementation is often done by national governments, there are strong practical and power-political reasons to aim for consensus in practice.
The EU does have the ability to fine non-compliant governments, but this is a last resort (and, in a major crisis, this would not be very effective against a net donor government, as it could simply threaten to stop paying into the EU budget, as Margaret Thatcher did in the late 1970s).
Having grown from an international organization to a multinational confederation, the EU’s integration has been led by heads of state and government, ministers, diplomats, judges, and European civil servants. As an elite-led project, there has long been a “democratic deficit” in EU affairs which has fluctuated in size over the years (typically growing when powers are first delegated for a new policy area and then eventually shrunk as institutions and decision-making is democratized in a new Treaty, typically by strengthening the power of Parliament).
This democratic deficit is real but should not be exaggerated: the EU has been built up over the years not as a plot, but at the instigation and with the tacit consent of elected national governments. Not only does a nation have to apply to freely join the EU, but any member is free to leave, as occurred four years after the 2016 Brexit referendum. The regular EU legislative process is almost comparable to that of any national government (i.e., requiring approval of the executive, an upper house, and a lower house).
On the other hand, some of the most impactful areas of EU policy-making are not “regular” but follow in-built rules meant to be free of the “political” interference of elected leaders, as is the case for macroeconomic policies related to the eurozone.
What next for the EU?
The EU has constantly evolved since its humble origins in the 1950s. The drivers of unity are fundamentally steady, accounting for the Union’s basic resilience despite chronic crises. Brexit is, thus far, very much an exception in the history of the EU. In a recent Eurobarometer survey, 65% of EU citizens said their country’s membership of the EU was a good thing. Greece and Slovakia (?) had the lowest figures at 41%. Most voters have little appetite for the uncertainty that would accompany a breakup of the EU and, especially, the eurozone.
Europe is certainly not alone in seeking to better integrate its nations. Many other regional organizations have emerged over the years, such as the Association of Southeast Asian Nations (ASEAN), the African Union, Russia's Eurasian Economic Union, and several Latin American organizations. None however has yet achieved a level of integration, economic agency, and geopolitical relevance comparable to the EU.
On the other hand, the EU has certainly not become a genuine federal state of the kind dreamed of by many of its founders. In principle, a European federation is possible, as proved by the existence of the Republic of India with its astonishing diversity and many regional languages and states. The EU could become such a federation with English as the common working language (malheureusement for French; personally I advocate Latinam continenti restituet). But one need only compare the EU’s means with the budgets and powers of the federal governments of America or Germany to realize just how big the gap still is.
As a multinational confederation, the degree and effectiveness of European unity must always be sustained by political will in the member states, but this is always fluctuating according to two critical factors:
The particular narrow interests and inclinations of its constituent nation-states, which retain material sovereignty in most areas (i.e., the administrations that actually implement many EU policies in their territories and the military/police forces which are the ultimate enforcers of sovereignty).
The electoral cycles of these national democracies, which are by no means in sync with one another, either in timing or orientation. Indeed, national politicians have significant electoral incentives to run against “Brussels” and its policies. EU policies necessarily reflect an uneven and sometimes messy synthesis of the continent’s interests and inclinations, rather than solely those of one’s country. As we see in binational states like Belgium and Canada, elections are often inherently centrifugal in the absence of a common demos.
Certainly, since I came to Brussels in 2010, the EU has mostly been in a period of struggle and crisis. Financial globalization had been severely mismanaged and the eurozone poorly designed, leading to the prolonged economic crisis of the 2010s. The EU came to be perceived as serving the interests of corporations and educated, mobile elites who could most benefit from borderless globalization, rather than the more rooted working classes who faced outsourcing and downward pressure on wages.
The EU institutions were also perceived as indifferent or hostile to national identities and as enablers of mass illegal immigration. While nations as diverse as Spain, Greece, and Hungary had built border walls to mitigate what had become an overwhelming migratory challenge for local authorities, EU Commission President Jean-Claude Juncker declared that “walls and fences have no place in an EU member state” and that national borders are “the worst invention ever made by politicians.”
Judging from UKIP’s “breaking point” poster and the narrowness of the “Leave” referendum victory (51.89%), it seems likely Brexit would not have occurred had the EU not been associated with the chaos of the 2015-16 migration crisis and the horrifying wave of crime and terrorism of those years. Successive attacks in Cologne, Paris, Brussels, Nice, and elsewhere all contributed to an apocalyptic atmosphere. The attack in Nice, near my hometown, made a deep impression on me at the time: on July 14, 2016, the French national day, an Islamist terrorist plowed his truck through crowds all along the Promenade des Anglais, killing 86 people and injuring hundreds more. The sense of crisis has since subsided but it seems certain continued migratory pressure and its impact will continue to be salient and divisive issues in European politics.
More recently, the EU’s response to the COVID crisis, enabled by a more generous Germany and a reoriented ECB, has been decidedly more favorable to economic stability, growth, and job creation than during the euro crisis. Moreover, there has been a palpable “realist turn” in EU affairs with French President Emmanuel Macron’s championing of European strategic autonomy: the idea that Europe can no longer to be so dependent on unreliable foreign powers like China, Russia, and even the United States in areas like microchips and medical products, fossil fuels, and military industry and defense.
Time will tell the extent to which these ambitions will be achieved and whether European leaders can capitalize on citizens’ partially restored confidence to reform and further perfect their Union. In any case, for students of history and political science, the EU is worth watching as a remarkable political experiment and one whose fortunes, one way or the other, will greatly influence the course of history.
Another great article. But have one question for you..
How do you think Macron's vision of 'strategic autonomy' holding up now? Esp with the Ukrainian crisis, don't you think the vision is ever so bleak?