Kemal Derviş

By : Kemal Derviş

Informal discussions on the United Kingdom’s relationship with the European Union are now underway. With a referendum on the UK’s continued EU membership set to take place before the end of 2017, the talks are the first step toward negotiating changes which, EU leaders hope, will convince British voters to choose Europe.

And changes will certainly be needed. Indeed, as Prime Minister David Cameron is well aware, given the current dynamic of the UK’s relationship with the EU, British voters would undoubtedly choose to leave the EU.

But Cameron also knows that he must handle the negotiations with care. If he asks for more than the EU can accommodate, he will look as if he caved in. If he asks for too little, Britain’s Euroskeptics will have more fuel for their campaign against continued membership.

Likewise, if EU leaders give Cameron too much — allowing the UK to reap the benefits of membership, without shouldering the same responsibilities as its partners — their populations could turn on them. But if they give too little, they could lose the UK as a partner.

Beyond such tactical matters, the UK and its European partners must address long-term issues relating to the changing shape of the eurozone. The euro crisis has given rise to a consensus that, in order to function effectively, the eurozone must pursue further integration. Specific proposals include a designated eurozone budget, increased fiscal-policy coordination among members, and a eurozone finance minister.

The euro crisis has given rise to a consensus that, in order to function effectively, the eurozone must pursue further integration.

Kemal Derviş

For the UK, which opted out of the euro, this is a cause for concern, as it could leave the country on the sidelines of major decision-making processes — especially if the necessary shift toward weighted majority voting removes the need for unanimity in more areas. Cameron already has pressed for an “emergency brake” mechanism to slow down decisions on issues that are important to the non-euro countries.

Clearly, the need for much greater eurozone integration must be balanced against some countries’ strong desire to preserve more national sovereignty than is feasible in the monetary union. The best way to do this would be to divide Europe into two groups. Inclusion in one or the other would be based not on the potential “speed” of integration, but on a country’s permanent (or at least long-term) decision on adopting the euro.

Of course, to some extent, this is already the EU’s fundamental structure. But establishing this categorical division — beginning with, as the UK has requested, an explicit recognition that the EU is a multi-currency union — would allow for the creation of a decision-making framework that better protects both group’s interests. The non-euro group — including Britain, Denmark, Sweden, Poland, and some other Eastern European countries — would continue to elect representatives to the European Parliament and participate fully in EU institutions. Meanwhile, the euro group would pursue far greater fiscal integration, in addition to their current cooperation. To ensure democratic legitimacy and satisfy national constitutional courts (not least Germany’s), a second European parliament would have to be established to serve as the eurozone’s legislative branch.

This new eurozone parliament could be formed either by a subset of members of the larger European Parliament, or by some combination of representatives from the European Parliament and national parliaments. The proposed finance minister, responsible for overseeing fiscal policy in the monetary union, would be responsible to the eurozone parliament.

Full realization of this vision would require either a change to the existing European treaties or, more feasible, agreement by eurozone members on a new treaty, like the “fiscal compact” that entered into force in 2013. In the meantime, Article 136 of the existing Treaty on the Functioning of the EU would allow for some preliminary steps, such as the designation of votes at the European Council that are reserved for eurozone countries only.

Establishing “two Europes in one,” rather than a “two-speed Europe,” would allow Europe to organize itself in a lasting way. The more federal eurozone would be embedded in a larger union that cooperates on defense, foreign policy, climate-change measures, and migration policy. Free movement of European citizens within the EU would be upheld.

This system would allow those who do not wish to share monetary sovereignty, or engage in the kind of fiscal cooperation that must eventually come with it, to make that choice. At the same time, it would avoid the complications of having multiple Europes — an option that may be attractive to veteran Eurocrats from a purely functional perspective, but soon becomes hopelessly complicated. A political system’s clarity and comprehensibility, together with its voluntary nature, are essential to democratic legitimacy.

Of course, this process will be long, and many details remain to be worked out. But important progress can be made by the time the UK’s referendum is held — if, that is, EU leaders begin pursuing this goal in earnest now. The talks being held now are an opportunity that neither side can afford to miss.

The writer, former Minister of Economic Affairs of Turkey and former administrator for the UNDP, is a vice president of the Brookings Institution. ©Project Syndicate

Disclaimer: Views expressed by writers in the Column section are their own and do not reflect RiyadhVision’s point-of-view.

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