Tensions between the European Commission and France have escalated in recent weeks. After Brussels suggested that Paris should apply geopolitical-weeklystructural reforms to reactivate the French economy, French President Francois Hollande said that the Commission cannot dictate policy to France. A few days later, the Commission’s president, Jose Manuel Barroso, criticized the French pressure to exclude the audio-visual sector from the negotiations for a free trade agreement between the European Union and United States.

These episodes are indicative of a defining characteristic of the European Union: the permanent friction between supranational integration and national sovereignty. This friction has marked the European project since its beginning six decades ago, and it will be at the core of every effort to overcome the bloc’s current economic and political crisis.

The European Union is an entity like no other in world history. After the end of World War II, the international system was configured around a series of multilateral organizations such as the United Nations, the International Monetary Fund and NATO. But the process of economic and political cooperation that West Germany, France, Italy, the Netherlands, Belgium and Luxembourg began in 1951 is fundamentally different from the rest of the post-war organizations.

While the United Nations, International Monetary Fund and NATO were cooperation forums for sovereign nations, the European Coal and Steel Community and its heirs (the European Economic Community and the European Atomic Energy Community, both created in 1957 by the Treaties of Rome) were an amalgam in which intergovernmental elements coexisted with novel supranational mechanisms that required member states to give up some sovereignty. The project was a direct challenge to the classical idea of ​​the nation-state and generated new forms of government and administration hitherto unknown.

A Continent Unified by Peace

The idea of a united Europe was present in the Continent’s political thought since the modern era and perhaps even earlier. Philosophers including Jean-Jacques Rousseau, Jeremy Bentham and Immanuel Kant believed that Europe would only overcome its constant state of war by achieving some form of political unity. From the Roman Empire to Nazi Germany, all the attempts to unify Europe meant war and conquest. It took World War II to convince the Europeans that the future of the Continent depended on overcoming age-old antagonisms and building a lasting political settlement to boost trade and prevent another war.

The central problem to be solved was the historical emnity between France and Germany, a rivalry that led to three wars between 1870 and 1945. The French government understood that the only way to achieve lasting and sustainable economic growth in France was by ensuring a stable peace with Germany. Paris was also scared of the rapid economic recovery in the Federal Republic of Germany. The idea of a more integrated Europe was enthusiastically received by the Germans, who were eager to return to the international scene in terms of parity with Western European nations and enter a trade agreement that would benefit its industrial exports.

The European Economic Community, the institutional heart of the emerging continental unity, had three main objectives. Its immediate goal was to create a customs union, which would eliminate trade restrictions between member states and establish a common external tariff for trade with the rest of the world. It would also seek the consolidation of a common market, to allow the free movement of people, goods, capital and services. Finally, it would seek the progressive coordination of social and fiscal policies among its members.

The legislative initiative in the new organizations was given to the European Commission, a supranational entity that was meant to represent the bloc’s global interests. Meanwhile, the adoption of the initiatives was reserved to the Council of Ministers, an intergovermnental institution composed of representatives from each member state (who voted according to the orders of their own governments). The treaties also created the European Parliamentarian Assembly, consisting of lawmakers drawn from national parliaments (which would later evolve into the European Parliament, the only international organization in which its members are directly elected by universal suffrage), and a European Court of Justice.

The rationale behind the European Communities was that if countries gave up sovereignty in specific areas, over time a greater amount of national prerogatives would be transferred to the supranational institutions. Throughout the process, unanimity would be replaced by majority voting (so that the interest of the majority would overtake individual interests) and concessions of sovereignty would not be limited to economic issues, but also political and military affairs. In other words, the process of European integration would progressively weaken the nation-state and its strategic interests.

Six decades later, many of these goals have been achieved. The European Union (which was created in 1992 by the Maastricht Treaty) currently covers a number of issues unimagined by the signatories of the Treaties of Rome. The Commission, the Parliament and the Court of Justice today have powers that notably exceed those designed in the 1950s. More impressively, the European Union currently has 28 members, 17 of whom share the same currency. In 1945, with Europe in ashes and occupied by foreign powers, it was unimaginable to think that six decades later France and Germany would share the leadership of a continental alliance stretching from Portugal to Finland and Cyprus.

However, the remarkable growth of the European project did not bring about the abolishment of the nation-state that many analysts predicted. International cooperation is possible between nations that seek common goals, but most countries are not willing to abandon their traditional prerogatives if cooperation goes against their national interests. Domestic needs and strategic imperatives are the result of history and geography and generally lead to international conflict rather than convergence. In the case of the European Union, member countries are willing to cede sovereignty only if they expect to benefit from it and become more reluctant when national interests are at stake.

At the same time, EU institutions tend to generate their own agendas, which often go against the national strategies of some member states. As a result, the clash between national and supranational interests is often unavoidable.

This friction did not begin with the current economic crisis. In 1965, the French government withdrew its representation in the European Commission in protest of a plan that would give more power to Brussels in the management of the Common Agricultural Policy. To resolve the crisis, the Europeans reached an agreement under which a de facto veto power was given to member states on issues that were considered crucial to national interests. This agreement (commonly known as the Luxembourg Compromise) was designed to protect the intergovernmental nature of the European Communities and virtually froze the process of supranational integration in the 1970s and 1980s, until the Single European Act in 1986 introduced new mechanisms for qualified majority voting.

Economic Crisis and Political Fragmentation

The European Union has traditionally struggled to find a definitive answer to the dilemma posed between strengthening supranationalism or protecting national sovereignty. European leaders generally act ambiguously, and every reform of the bloc’s legal framework seeks a balance between these two irreconcilable extremes. The dilemma becomes particularly relevant in times of economic crisis, when national circumstances differ strongly and lead to a greater divergence in views regarding strategies to reactivate growth. On top of the traditional tensions between national governments and supranational institutions, in times of crisis member states also tend to distrust each other.

The creation of the euro has further complicated things. Seventeen countries with very different levels of economic development and competitiveness now share a common currency. This has particularly reduced Mediterranean Europe’s room to maneuver, because it has deprived those countries of the possibility of applying independent monetary policy to tackle crises.

In addition, member states are not monolithic entities. Governments must find a balance between their foreign policy objectives, pressure from the European Union and their desire to be re-elected — which means decisions that may make sense for the future of the European Union (such as fiscal consolidation efforts) would probably not be made if governments consider them too unpopular among voters. Other institutions, such as constitutional courts, often threaten to block decisions accepted by national parliaments. The recent investigation by the German constitutional court on the validity of the European Stability Mechanism and the decision by the Portuguese constitutional court to block some austerity measures promoted by Brussels and implemented by Lisbon are examples of this situation.

The deep unemployment crisis in the eurozone adds yet another complication to this problem. The European elites are still largely pro-European, and most of the voters in the eurozone want to keep the euro. But with the European Union’s promise of economic prosperity weakening, its members have begun to rethink their strategies. Fidelity for the European project is not unbreakable. Nor is it strong enough to support an indefinite period of extremely high unemployment. Despite its remarkable evolution, the European Union is still a contract. And contracts could be modified or even canceled if they stop being beneficial for their signatories.

The United Kingdom was the first to prove this, as evidenced by London’s recent efforts to renegotiate its relationship with the European Union. In other Western European countries, growing electoral support for nationalist parties that reject the common currency and criticize immigration prove that euroskepticism is gaining popularity. Non-eurozone countries in Central and Eastern Europe have also begun to think of a more independent foreign policy. They remain formally aligned with the European Union and NATO, but the pursuit of closer ties with Russia is no longer taboo. And for most of them, joining the eurozone is no longer a priority.

The Future of Europe

Because of the pervasiveness of the nation-state, the future of the European Union will not be in the hands of the EU institutions, but in those of the same actors of 1951: France and Germany. Since the beginning of the economic crisis, Paris and Berlin have reiterated their commitment to the European Union, but as the economic downturn moves to the core of Europe, the differences between them become more obvious. The French economy is in recession and unemployment is rising. And while Germany is starting to feel the impact of the crisis, Berlin has so far escaped recession, and unemployment is at its lowest point since reunification.

As a result, Paris is feeling increasingly uncomfortable with its role in Europe. Like most economies in Mediterranean Europe, France’s has lost competitiveness since the creation of the euro, and the common currency has led to a constant trade deficit with Germany. France will seek to change its relationship with Germany without breaking it (as Paris is still interested in containing Berlin), but Paris is increasingly aware that the European project should be remodeled.

In this context, Paris and Berlin will need to find a balance between their desire to preserve their alliance and the need to protect their national interests. In the coming years, the French will demand the creation of a system of fiscal transference among EU members, the creation of some European scheme of debt mutualization (in the form of eurobonds or some similar bond issued jointly by eurozone countries) and the reform of the European Central Bank to include growth — instead of just low inflation — as the institution’s core goal.

The Germans are interested in preserving their alliance with France and protecting the currency union because it benefits its exports to its neighbors and out of fear of the immeasurable financial consequences of a breakup of the eurozone. But Berlin knows that the French proposals will be politically unpopular at home and in return will demand a stronger control over EU members’ power to spend and borrow — something that would significantly weaken France’s sovereignty. The outcome of this negotiation will define the next stage of European history.

Since the tension between supranational integration and national sovereignty will increase in the coming years, Europe’s main challenge will be to prevent these frictions from paralyzing the bloc. The European Union will also face the test of mitigating the alienation of its eastern members and closing the gap between eurozone and non-eurozone countries. In the meantime, Brussels and national governments will have to find ways to alleviate the bloc’s corrosive unemployment crisis before it leads to dangerous levels of social unrest. In all these challenges, the European Union is running a race against time.

Sovereignty, Supranationality and the Future of EU Integration is republished with permission of Stratfor.”

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