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« Felix Salmon on Vulture Funds | Main | A Raise it is Then »
Thursday
Feb222007

Holding Together Europe?

You think that two-speed Europe is a good idea? As Edward Lucas so eloquently puts it in his recent Europe.View column this depends on where in Europe you are standing and essentially which countries you are talking about. The thing is here that this question of a two-speed Europe seems to be a double edged sword. The first aspect is the fall of the constitution and the issues this posed for European integration. As such, it was suggested by many (among those I might add The Economist) that the idea that 25 countries could agree on one common step at the time was not very probable and therefore pragmatism was the way out. Europe needs to integrate in different tempi and to different degrees and this is the only conceivable way forward. Returning to Edward's column this week he points to another point and another dividing line in Europe, namely that between old Western Europe and new Eastern Europe. And as he argues we are dealing with quite a different set of problems and issues here which makes the idea of two-speed Europe more risky for Eastern Europe and indeed for the whole of Europe perhaps.

DEPENDING on where you are standing, the phrase “two-speed Europe” can be tempting or terrifying. For the people who run many of the continent’s old democracies, it must be very tempting—a device for marginalising all the prickly Poles, hapless Hungarians, sleazy Slovaks, chattering Czechs and baffling Balts who have made the European Union so much more diverse a place in the past couple of years.

If the EU were to fracture, the natural fault-line would be the edge of the euro zone, as Toomas Hendrik Ilves, Estonia’s thoughtful president, has observed (see map, below).

The common currency includes most of old Europe, but excludes most of the new democracies (including his). What would happen to the outsiders?

It would be nice to think, as a worst-case scenario, that the single market would hang together, and that the baker's dozen of countries outside the euro zone would at least remain part of this thriving free-trade area.

They would find themselves in much the same position as Norway and Switzerland do today―bound by the EU's rules and standards for trade and industry, in exchange for free-trade arrangements, but with few of the other main burdens and privileges of EU membership.

Probably, however, the unravelling would go further. The EU already finds it a huge effort to make the Poles, for example, abide by European competition law. Without a seat at the top table in Brussels, no Polish government would allow foreigners to claim full national treatment, especially when it came to buying the country’s big companies. With that, the single market would unravel too.

Edward's column this week is as always but perhaps especially well worth a read this time around.

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