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April 25, 2005

The EU Constitution: Plan B?

Wolfgang Munchau writes in the Financial Times (subscription required):

Three weeks ago, the political leadership of the European Union had no Plan B if the French vote No in their referendum on the EU constitutional treaty on May 29. This is no longer the case. As the prospects of a French No have grown, at least two such plans have developed.

The first of these, proposed by Jean-Claude Juncker, the prime minister of Luxembourg, seems a bit thin.

Assume, for argument's sake, that after a French No, the Dutch were to vote Yes in their referendum three days later. Assume further, that all the others ratify the Treaty, except perhaps the UK. That means 23 or 24 countries would have ratified by the autumn of 2006, an overwhelming majority of countries representing an overwhelming majority of EU citizens.

This is a circumstance under which France might conceivably agree to hold a second referendum, perhaps one that raised the stakes and combined acceptance of the constitution with continued EU membership. If France voted Yes in such a referendum - a likely prospect - this would still leave the problem of a potential No vote in the UK. But this is a problem Europe has been facing all along. Nothing new here.

But, according to Munchau, that potential UK "no" is exactly the point.

Mr Juncker's plan therefore looks far more innocent than it is in reality. It would turn the political spotlight immediately away from France back towards the UK - which is exactly what the EU's political establishment wanted all along.

The other Plan B?

There exists an alternative Plan B that has generated some excitement in political circles in Paris and Berlin - the "core-Europe scenario". Under this plan, the constitution would be dropped, while France and Germany would agree bilaterally to enhance their co-operation in economic and fiscal policy. This could include the imposition of minimum tax rates or tax bands for some categories of taxation, and perhaps an attempt to preserve or strengthen their social model.

Spain and Belgium would almost certainly join such an arrangement. So might Italy, especially if Romano Prodi, the former president of the European Commission, were to emerge as Italy's next prime minister. France, Germany, Italy and Spain make up about 80 per cent of the eurozone's economy.

There is a strong case to move the next stage of European integration down from the level of the EU to the level of the eurozone, the 12 of the 25 EU countries that have adopted the euro. The eurozone needs further integration simply to survive.

Munchau isn't optimistic.

But, whatever the long-term political and economic merits of closer policy co-ordination in the eurozone, there exists a seemingly insurmountable problem. The political leadership in Europe is so weak that such a bold plan is extremely unlikely to move beyond the drafting stage.

I think this option might lose Tyler Cowen as well.

UPDATE: Daniel Drezner has faith that the EU will sail on (even if in choppier waters) if the French vote no.

April 25, 2005 in Europe | Permalink


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The funny thing about core Europe is that when Germany made noises in that direction in the mid 1990's, France was dead set against it, the then minister of external affairs - he also is the guy who coined the "hyper-power" term, which is so popular with you guys - proclaiming that Schaüble et alii were completely wrong. Of course at that time, France still feared a strong Germany, not having realised the extent of the troubles linked to reunification. Now if France scrambles for core Europe, will Germany still be agreable ?

One point where I disagree with Munchau is the idea of a second referendum raising the stakes in France. Even two years later, this smacks of electoral ultimatum and is a recipe for almost certain political suicide. No, there won't be a second referendum, in fact I suspect there won't ever be another referendum on a Europe linked subject. There will be the congress, consisting of the reunion of the parliament and the Senate, and that's that.

In fact, there is a precedent in France, regionalisation - that's French for decentralisation -. De Gaulle resigned on a lost referendum on this hardly exercising subject (I am not suggesting that Chirac would resign, I do not know). When, 10 years later, Mitterrand decided to implement basically the same reforms, he did not put it to a referendum, he put it to congress.

But whichever plan B, Munchau is right. It can only happen with credible leadership, thus ex ante political clarification. There cannot be a rush then, and we will have to withstand market pressures somehow.

Posted by: godement | April 25, 2005 at 08:54 AM

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