Europe faces big choices after a year of ups and downs

The delay in forming a government in Germany will not hinder the effectiveness of the EU in 2018, European Commission President Jean-Claude Juncker said last week. As 2017 comes to an end, Brussels is in a bullish mood after an extraordinary 12 months in which sentiment about its future has ebbed and flowed in remarkable fashion.
At the start of the year, many in Brussels feared the potential victories of Euroskeptic, far-right populist parties in France and the Netherlands. But liberal centrists emerged victorious in both elections, and there has been a spate of positive economic news to buttress this, with the euro zone economies recording improved growth.
The contrast with a year ago is stark, when the mood music surrounding the EU after the Brexit referendum was much more negative. However, the volatility of sentiment toward the continent has been underlined yet again in recent weeks by seccessionist political tensions in Catalonia, the failure so far of Angela Merkel to form a new government after September’s election, with the rise of the far-right Alternative for Germany.
In this fast changing environment, 2018 will be another critical year for the EU with key national elections, for example in Italy; a potential conclusion of the Article 50 Brexit talks between the UK and the other 27 states; and major internal projects such as euro zone reform. This last issue was discussed by EU leaders last Friday at the European Summit, where they agreed important new priorities for euro zone integration, including the completion of a banking union and expansion of the role of the euro zone bailout fund, while putting off contentious issues such as a budget for the currency area — an issue where there are key differences between important players such as French President Emmanuel Macron, Merkel, and Juncker.
EU leaders in Brussels are seeking to steer and shape debate about the continent’s future with a view to finalizing a vision in which Europe emerges stronger from the challenges and opportunities facing it. To facilitate this, Juncker has outlined a number of key scenarios to try to forge consensus in 2018.
They range from the EU retreating, post-Brexit, to no more than the current economic single market, which guarantees freedom of movement of goods, capital, services and people. At the other end of the spectrum, however, is a quite different future for the continent in which the remaining 27 member states decide to do much more together, reigniting European integration, which is favored by Macron.
However, of the five scenarios, “carrying on” is perhaps the most likely; the EU would muddle through from where it is today and seek to deliver on last year’s Bratislava Declaration. This manifesto includes better tackling of migration and border security, beefing up external security and defense, and greater stress on enhancing economic and social development, especially for young people who have been badly affected by the fall-out from 2008-09 international financial crisis, not least in Spain and Greece.

There is a positive mood in Brussels despite the challenges of 2017, and the coming year will bring major decisions that will shape the EU’s future well into the 2020s and beyond.

Andrew Hammond

However, further setbacks in coming years could instead mean either a “nothing but the single market” or “doing less more efficiently” scenario. In either of these, the scale of EU functions would be rolled back, with attention and limited resources focused instead on a smaller number of policy areas, including the single market. A year ago, the least likely scenario to be realized by 2025 was “doing much more together,” but some in Brussels are now more optimistic on this, especially with the election of the strongly pro-EU Macron. This option would mean all 27 states sharing more power and resources, with decisions made and enforced much more quickly. 
Perhaps more likely, however, is the “those who want to, do more” scenario, in which coalitions of the willing would emerge in select policy areas to take forward the integration agenda on a flexible basis rather than across the board. A model here could be the euro zone itself, a monetary union of 19 of the current 28 EU members with the euro as the single currency.
One scenario that is conveniently left out is the worst-case one of the bloc imploding, but given the build-up of challenges that go well beyond Brexit, this outcome cannot be completely dismissed in the next decade.
Indeed, 60 years after the Treaty of Rome, which established the original European Economic Community, European Council President Donald Tusk said in February that the threats facing the EU were now “more dangerous than ever.” They include what he called the new geopolitical reality for Europe of an increasing assertive Russia and China, and instability in the Middle East and Africa that has driven a migration crisis. Intensifying this is the new uncertainty coming from Washington, with Donald Trump questioning much of the post-war tenets of US foreign policy, including broad-based support for European integration.
Taken overall, 2018 will be another massive year for the EU with debate over its future intensifying, especially given that the Article 50 Brexit talks with the UK could come to an end before ratification of any final exit deal. Decisions in coming months, including the one that determines the euro zone’s future, will define the longer-term economic and political character of the bloc well into the 2020s and beyond.
• Andrew Hammond is an Associate at LSE IDEAS at the London School of Economics