Future of Europe
Robert Skidelsky
Moscow School of Political Studies | Tuesday, July 27, 2004

I would like to speak about the three most discussed issue about the future of the European Union today.
The first concerns the European Constitution.
The second concerns foreign and defence policy
The third concerns the future of the Euro
I will conclude briefly about how all this may affect Russia.
The New Constitution
First, the EU has a new Constitution. This was agreed at the Brussels Conference on 18 June of this year. Agreed, but not ratified. A number of countries, including Britain and France, will hold referenda on ratification, probably next year.
Constitutions are associated with creating governments. But the European Constitution is mainly a consolidation of existing treaties into one, 370 page, document. The changes from what already exists are largely designed to deal with the problems of enlargement. They point in two opposite directions.
On the one hand the EU has been given some of the symbols of a state –a President, a Foreign Minister, even an embryonic Finance Minister. There has been an attempt to give its decisions greater legitimacy –by enhancing the role of the European Parliament in making rules.
More areas of policy can now be decided by weighted majority voting –notably to Justice and Home Affairs, where it is useful to develop a common visa and asylum policy.
On the other hand, the Constitution has strengthened the principle of ‘variable geometry’, that is allowing groups of members to go further than others in policy cooperation. The precedent for this was the creation of the eurozone within the EU. Only half the states in the EU have a single currency.
In the new Constitution, the Council can approve of a group of members establishing ‘enhanced cooperation’, if at least 1/3rd of the members wants to. This will not necessarily lead to ‘two-speed’ Europe, as different groups of countries will pick and choose issues on which to cooperate: for example, UK might join an ‘avant-garde’ on defence, but not on tax harmonisation.
CER Summary: EU’s new constitution doesn’t create a European super-state. It is a constitutional treaty for oganising relationship between sovereign states, not a constitution which governs the relationship between a state and its citizens. Any member can leave the Union whenever it wishes, and the constitution provides for first time an exit procedure for any member which wants to leave.
Foreign and Security Policy.
Until now this has been a matter for individual member-states most of whom –as well as some non-members – were members of NAT0. But since the end of the Cold War an attempt has been under way to give the EU a foreign policy independent from that of the United States, though not necessarily opposed to it, and a capacity to carry out such a policy, including military capacity.
This is based on the view that Europe has interests and obligations –particularly in the Middle East and Africa - which are not identical to those of America’s, and may call for a different approach.
The attempt to give the EU a strategic dimension arose from the experiences in the Balkans in the 1990s and has accelerated the aftermath of the terrorist attack on the United States on 11 September 2001.
In the first case, the EU proved incapable of concerted action: its members had neither the will nor capacity to intervene to stop the bloody civil wars in Yugoslavia.
The second exposed a rift between France and Germany and the United States about how to deal with the Middle East –Iraq, and the Israeli-Palestinian conflict.
The European reply to George W. Bush’s National Security Strategy of September 2002 was a document headed ‘A Secure Europe in a Better World’, agreed at Thessaloniki on 25 June 2003. This identified three collective threats: terrorism, proliferation of weapons of mass destruction, and failed states Regional conflicts, particularly in the Middle East, and organized crime were added in December 2003.
At Thessaloniki the EU set itself the task to ‘promote stability and good governance in its immediate neighbourhood’, as part of multilateral organisations, but also, where necessary, by acting independently.
The European counterpart to the American doctrine of ‘pre-emptive action’ to counter security threats is the doctrine of ‘preventive engagement’ . That is, EU members prefer to use what American political scientist Joseph Nye has called ‘soft power’ to secure their goals –roughly economic, cultural, and diplomatic pressure, as well as contributing to UN peacekeeping operations.
The EU has used ‘soft power’ to try to get Iran to agree to inspection of its nuclear programmes. It will also take over from NATO peace-keeping operations in Bosnia.
However, the EU has also come to accept the need to create an independent military capacity to support its foreign policy.
The problem is that whereas the EU faces collective threats, the only means of dealing with them are individual, since no EU member wants to surrender control of its foreign and security policy. There is no EU foreign policy and no EU military forces because there is no EU government. Since no individual European state is powerful enough to protect the whole of Europe, this means s the continued dependence of Europe on the United States, and therefore subservience to US strategic priorities.
Britain is essential to building a European military dimension. It is the strongest military power in Europe. But it is also the most strongly pro-American and the most committed to national sovereignty. So it is also the biggest obstacle to a European Foreign and Security policy.
The extent of the EU’s military weakness is obvious. EU countries spend euros 180bn. a year on defence –as against –the US’s 330b.- but most of this is waste from a military point of view, supporting national policies of conscription derived from the era of the nation-building and the great European wars. Germany, in particular, has completely dysfunctional military forces, and is almost pacifist.
EU military technology has not kept pace with America. The United States has 200 aeroplanes able to carry the heaviest loads: the EU has 4, which are leased by Britain from the United States.
The revolt of France and Germany against making war on Iraq was the first breach in the postwar transatlantic alliance, forcing the US to go outside the UN. But the two powers, even with China and Russia in support, had no influence at all on what America did.
In response to these events, the three leading military powers in the EU –Britain, France, and Germany –have taken the lead in calling for the creation of a modest military capacity focussing on a modest range of small tasks for theatres where NATO –that is the USA-may not choose to get involved.
In April 2004 EU Defence Ministers agreed that the EU should have 9 battle groups of 1500 soldiers each by 2007, which can be deployed within 2 weeks. Only Britain and France can currently put even one together.
They also agreed to set up a ‘defence capabilities agency’ of 80 officials to develop research and procurement policies for these groups.
In April 2003 France and Germany produced the so-called Tervuren Plan calling for an EU military planning cell outside NATO. The British tried to kill it; result was the Naples compromise of November 2003, when the planning cell was agreed but only for operations which NATO didn’t want to do, or which didn’t use NATO assets. The military planning cell will consist of 30-40 officials.
These initiatives have had two agreed purposes: to heal the rift between Britain and France and Germany over Iraq, and create the basis of a division of labour between the USA and the EU.The most likely field of independent EU action in sub-Saharan Africa. One can imagine an EU rapid reaction force going into the Sudan to stop genocide there.At present such a force does not exist, and any military action will have to be US-led.
A third purpose is much more controversial: an independent Could all this be the independent EU foreign and security policy . The British do not want this, the government’s view being that ‘EU-controlled military operations would be a last resort’, requiring the approval of all 25 members. The US veto is likely to be more effective: The United States ‘cannot accept independent EU [military] structures’ said Colin Powell. This is the language of an imperial master.
The Future of the Euro
This is a complicated matter. Let me just pose two questions.
Over the next decade will the eurozone grow, shrink, or remain about the same?
What will be the place of the euro in the world monetary system of the future? Will it for example become an alternative reserve asset to the dollar?
Obviously these two issues are interconnected.
The basic problem with theuro is that it is the first major currency in history wiuthout a government. Like the EU itself, it is a political invention, and its future hangs on the further progress of political invention.
The Maastricht Treaty of 1992 set up the European Central Bank as the independent manager of a single currency system for eleven members of the European Union. The euro system rests on two pillars –the monetary constitution and the Stability and Growth Pact. The Maastricht Treaty of 1992 set up the European Central Bank as the independent manager of a single currency system for eleven members of the EU. The ECB is mandated by treaty to maintain price stability, and has one instrument for doing so, interest rate policy. The Stability and Growth Pact of 1997 specifies that the budget deficit of an EMU member must not exceed 3 per cent of its GDP a year.
What is lacking is a third pillar –a government able to make this rigid construction work properly, or modify it as and when necessary. A central bank cannot be wholly independent of politics. But the politics must be such as to support, not undermine it. A combination of a central eurzone bank and national politics is a recipe for failure.
Since I don’t see a eurozone state developing quickly, I believe the eurozone will shrink, as countries break away and resume monetary independence, and new members ‘opt out’ like Britain has done. A smaller eurozone based on close Franco-German cooperation seems possible. This is in line with the variable geometry concept.
Until the political conditions for a credible euro emerge, the dollar will remain the hyper-currency, whatever the state of the US balance of payments. Just one set of statistics. In 1973 the dollar accounted for 76 per cent of official reserves held by IMF members. It then decline, but is now back at 72 per cent. The European currencies held as reserves peaked at 31 per cent in 1989; today the euro has just 12.5 per cent.
Europe and Russia
My last topic s is Europe and Russia. This is what Dmitri Trenin will be talking about
next, so I will be brief. Russia will not join the European Union, but it will integrate more and more into the european economic and political space. There are a whole lot of potential economic synergies based on, but not limited to energy. As Russia reforms, European countries will invest more and more in her, replicating the pattern of before 1914. This will be good for both.
There are also large potential political synergies in foreign policy and defence –especially defence procurement. Russia could, for example, supply the European rapid reaction force with the heavy aircraft it needs for rapid deployment.
Russia is as important for the EU as the EU is for Russia.
Closer links with the EU will help westernise Russia.
Closer links with Russia will help de-Americanise the EU.
Together they can build a new civilization.