The European Union is an 'unidentified political object', according to former Commission President Jacques Delors. It seems to defy classification, having achieved a level of integration far beyond other regional groupings like Mercosur, NAFTA and ASEAN, but never quite having settled its political status. The EU has developed an impressive technocracy, but its political leadership has been of variable quality. Most problematically, the EU still lacks legitimacy in the eyes of many of its citizens, despite the democratic accountability built into its decision-making system at many levels.

Over the past decade, the EU has been preoccupied with its internal governance. It has made three attempts to settle the balance of powers within the Union and bring more accountability and efficiency to its decision-making, with treaty changes at Maastricht in 1992, Amsterdam in 1997 and Nice in 2000. The Union has decided to have another Inter-governmental Conference (IGC) in 2004, and will spend the next few years trying again to find a sustainable equilibrium between levels of government, between large and small members, and also between richer and poorer regions through the budget. By the time they reach the 2004 IGC, the EU's leaders will be facing a whole new range of challenges owing to the accession of perhaps another ten members. The Union's internal debates now have a much wider reach, to the dozen and more European countries that would like to join it.


The 'future of Europe' debate

The debate about the future of Europe has so far been concerned more with the failings of the EU today than the new challenges that tomorrow will bring. The European Commission produced a White Paper on governance in 2001, but it was a half-hearted effort from a politically weak Commission. To prepare for the 2004 IGC, the Laeken European Council established a Convention to debate the future of the Union, which started work in March 2002. By the end of 2002, reform will be more urgent, because negotiations with the members-to-be are supposed to finish in December.

The Laeken summit listed a long series of questions for the Convention to answer, with a very broad agenda. The four main areas are set out in the box below. The first, on defining competences, seeks to address a range of concerns. For the UK, the definition of competences is mainly about subsidiarity, that is, deciding policies at the lowest appropriate level. In British parlance, that means doing less at EU level and more at national level. In the German debate, however, division of powers means something slightly different. Germany's Länder have powerful regional governments that would like to use an EU catalogue of competences to reinforce their sovereignty vis-à-vis the federal government. Their concern about competences also has a protectionist element, as many German politicians would like to roll back the EU's power to block state-aids which distort competition.

However, the IGC will find it difficult to divide powers more neatly, because most competences are shared between different levels of government, rather than held exclusively by the member-states or the Union's institutions. Moreover, a strict definition of competences rigidly might prevent the EU from responding quickly to new challenges. For example, if animal health had been an exclusive competence of the member-states, it would have been difficult for the EU to respond to the cross-border threats of BSE and foot-and-mouth disease.

The second area - simplification of the EU's instruments - follows on from several years of discussion about how to make the treaty structure easier to understand. Successive treaty changes have produced an unwieldy set of documents that are comprehensible only to trained lawyers. The treaties are unreadable, even for the politicians who sign them: Kenneth Clarke famously admitted to never having read the Maastricht Treaty, for example. Several groups of academics have been working on this issue: the Bertelsmann Foundation produced a draft Basic Treaty, while the European University Institute in Florence has drawn up a single integrated text of all the EU's treaties. Others have proposed dividing the EU's legislation into something like a Constitution and a set of more detailed implementing legislation.

The third area covers democracy, transparency and efficiency, issues that have preoccupied many previous IGCs. Not only are all three subjects slippery, they are also potentially in conflict with one another. The EU's system is often described as 'multi-level governance' because power is distributed so widely up and down the political system. This system is hard for citizens to understand, and it tends to produce messy compromises rather than neat solutions. Yet this muddle is the result of the EU's need to balance competing interests in order to maintain internal cohesion. If the EU were a hegemonic organisation run by bureaucrats in the interests of a small elite - as its more extreme critics claim - it would be easy to govern and much more efficient at decision-making. In fact, its priority is usually finding a compromise between a wide range of parties - producers and consumers, big and small states, regional and national governments. No one group is ever wholly satisfied by the result, although it is true that some get their way more often than others: producers more often than consumers, for example. But this lack of efficiency is largely because of the accountability built into the system at many levels. It is the result of having so many actors on the stage rather than the dominance of a puppet-master running the show.

Finally, the Convention is supposed to consider how to move towards a constitution, something long supported by Germany and other founding members of the Union. The word 'constitution' used to cause British politicians to twitch, fearful that the creation of an explicit founding document would suggest the EU is becoming a state. But the government's views are changing: Tony Blair was fairly relaxed about discussing a constitution at Laeken in December 2001, while Foreign Secretary Jack Straw likes to point out that the Labour Party has a constitution, as does the BBC. Germany, for its part, might be able to compromise by calling such a document a 'basic law'.

The Convention has 105 members and 13 observers, so its deliberations could be chaotic owing to the number of voices competing to be heard. The Convention's members are drawn from current member-states and the candidate countries. Just under two-thirds of them are parliamentarians, and the others are representatives of governments, the European Parliament and the Commission. Its chair, former French President Valéry Giscard d'Estaing, has every incentive to give a strong steer so that the Convention produces some useful results rather than degenerates into a talking-shop. Its secretariat - run by the former head of Britain's diplomatic service, Sir John Kerr - will have to run a tight ship if it is to produce a coherent and compelling final document that the member-state governments cannot ignore.

The other danger is that Convention's agenda could become dominated by traditional remedies for long-standing problems, rather than the new challenges that enlargement will bring. There are some familiar refrains already, such as calls to enhance the role of the Commission and the European Parliament in foreign policy and internal security. However, the EU needs to look beyond the problems in its current system, and think imaginatively about how the political dynamics of the Union will change when another dozen members join. The first enlargement eastwards could take place in just 18 months' time.

The EU is not just expanding across blank spots on the map of Europe. It is moving into countries with particular histories and active political debates. The candidate countries have sent some of their best politicians and most creative minds to be their representatives on the Convention, and they are already contributing actively to its discussions. Once they join, the new member-states will bring new ideas to the EU's age-old dilemmas about its democratic deficit. After rebuilding democracy over more than a decade of transition, many people in central and eastern Europe have strong views about how they should - and should not - be governed.


How enlargement will change the EU

Europe's leaders need to show more imagination in thinking about how the enlarged Union will function. At present, they tend to assume it will just be a bigger version of the current EU. More member-states and greater diversity will put the current structure under strain, but the difference will be more than arithmetical. There will be a qualitative change in the Union's ambitions, responsibilities and political dynamics.

In terms of ambitions, the enlarged Union should become a more important actor on the world stage because of its greater size and because of the United States' need for a strong ally. It will have to square a circle, between the small group of large countries which will drive foreign policy - owing to their size, and military and diplomatic assets - and the others, which will want to be involved, but are unwilling or unable to play a major role. The EU needs to find an answer to Tony Blair's question of how member-states can meet in groups numbering between two and the total membership, without provoking resentment that a directoire of large states is running foreign policy. Soon there could be nearly 30 members, increasing the risk of paralysis. The answer may lie in informal coalitions of countries with an interest in particular parts of the world: for example, Germany with the new member-states on eastern policy; the southern member-states on the Mediterranean and North Africa; or Finland and the Baltic states on the northern dimension.

The accession of ten new members will also bring the EU new responsibilities. The Union will cover another third of the European continent, and share a border with poor countries that need its help to achieve stability. The EU may not want to continue enlarging indefinitely, so it will need to forge new bonds with neighbours like Ukraine and Russia that are not based on membership aspirations. The Union will also need a much more coherent aid and development policy for its poorer and less stable neighbours, to prevent them from posing security threats like cross-border crime and human trafficking.

The EU needs to consider how to unite its different internal and external security policies. In particular, the division of the Union into three different 'pillars' may be unsustainable; at present, there is an uneasy and increasingly fuzzy separation between the areas of inter-governmental decision-making - for foreign and security policy, and the police and judicial co-operation parts of justice and home affairs (called the second and third pillars) - and the areas that are dealt with through the EU's institutions (known as the first pillar). For example, every one of the three pillars now supports some form of police co-operation, but in different fora and potentially with different aims.

The enlarged EU's political dynamics will change because it will have to become more flexible. The ability and willingness of member-states to be integrated into the EU's policies will vary much more than in the current Union. Progress in individual policy areas - like economic reform, taxation and borders policies - will often be driven by coalitions of the willing and able, rather than by the Franco-German partnership that has long guided the Union.

The old remedy for reconciling competing interests is an extension of qualified majority voting (QMV). This is unlikely to suffice in future: the policies left with unanimous voting are the most politically sensitive, so QMV will soon reach its limits. That is the reason why the 'open method of co-ordination' - whereby governments set targets for themselves and publicly monitor each other's progress, as used in the Lisbon process on economic reform - should be used more often. In sensitive areas like taxation and labour markets, the EU will only be able to integrate through unanimity or the open method.

The EU already has a number of areas of flexibility, where the member-states are involved in a policy area to different degrees - the most important are participation in the single currency, border policies and defence. More issues like this will emerge after enlargement, where the new members are unwilling or unable to participate fully; eco-taxes for energy are one example. The Union needs to consider how to manage flexible coalitions successfully. The key is to ensure that it can maintain a consensus on the broad principles of European integration, even if its members' involvement in individual policies varies.


How to reform EU governance: policies before institutions

In reshaping the institutions, the EU's leaders should consider which policies will become most important over the next decade. Recent Eurobarometer polls have shown that the top three concerns of its citizens are subjects which the EU has only recently begun to address: tackling unemployment; maintaining peace and security in Europe; and fighting organised crime and drug trafficking. The EU has moved slowly into these areas over the past decade. It still spends a wildly disproportionate amount of its resources - financial, institutional and political - on old policy areas of little interest to most if its citizens, such as agriculture. The EU needs to re-order its resources to match its new priorities; for example, nearly half the Community budget is spent on the Common Agricultural Policy, and it takes up over half of the 80,000 pages of EU rules and regulations (known as the acquis communautaire). The EU also needs to re-deploy its officials to fit its changing activities. The old directorate-generals in the Commission - dealing with areas like internal administration - have plenty of bureaucrats, while new ones like Justice and Home Affairs consist of small teams stretched to the limit. There is a case for allocating more officials to the mergers task-force, and fewer to sport, for example.

The EU has achieved its original aim of making war between members unthinkable. But it has grown far beyond the intentions of its founding fathers, both in terms of the number of countries it covers and its functional areas of responsibility. There are now very few areas of public policy in which the EU has no role; its activities even touch education and healthcare. But its governance is a patchwork. In its core competence of the Single Market, the Union has built an elaborate system on robust principles, and its economic governance will develop further now that the single currency has been established. But although the EU has detailed regulations for the exchange of goods and services, it has few rules for some fundamental elements of governance: for example, the rights of the citizen, or the balance of power between regional and national governments. The Commission has highly specified rules to govern competition policy, for example, but the EU has almost no specified norms of its own on minorities - so it has to borrow them from the UN and the Council of Europe - and its member-states have widely varying standards of minority protection.

This patchiness makes the EU difficult to understand. It seems overly meddlesome in some of its regulations, yet its models are very sketchy in many areas of growing concern to its citizens. After enlargement, the EU will become more diverse, so there will be a greater need for policies to protect minority groups and to develop common standards in areas like migration and asylum policy.


Conclusions

The debate about the 'future of Europe' has been overly preoccupied with the present EU - rather than the new challenges that enlargement will soon bring. The mentality at European Councils is predominantly one of a regional organisation whose primary concern is finding internal agreement. It needs to concentrate more on deciding common positions that are optimal for relations with its neighbours and potential partners. Institutional debates are still about internal compromises and domestic concerns, with little regard to the implications for the wider Europe.

Yet the EU is becoming a more effective foreign policy actor, and its internal structure and policies are starting to affect neighbouring countries, regardless of when they might join. It is a major - if often unwitting - shaper of its regional milieu, because non-members increasingly look to it for policy models and institutional templates. It has become a 'voluntary empire', as Robert Cooper calls it. The next IGC in 2004 will have to be bolder in considering the EU's governance to be more than a question of finding internal agreements. It will need to shape the Union for new, continent-wide responsibilities.

Heather Grabbe is Research Director at the Centre for European Reform


© CER 2002