May 2010 will go down in history as the beginning of greater economic solidarity in the European Union as a result of the one-two punch of the Greek loan agreed on May 3 and the massive loan guarantee mechanism of May 9-10. But what shape that union will take remains unclear. German Chancellor Merkel wants more governance by rules, to enshrine restrictive budgetary discipline and draconian punishments for violators. French President Sarkozy wants more governance by leaders, with Eurozone countries to form a kind of economic government that determines Eurozone policy on an on-going basis. Neither will work, the first because it is too rigid as well as economically problematic, the second because it is too flexible as well as politically problematic. Neither, moreover, is very democratic.

The sovereign debt crisis revealed the institutional weaknesses of fiscal policies in Europe. To an institutional weakness, it must be given an institutional response. How? We propose the creation of independent, national budget committees, as well as a European committee that would evaluate, on the basis of the information provided by the national committees, the impact of national fiscal policies for the Eurozone. Comparable to the European organization of competition or financial regulation, such an architecture would preserve national sovereignty in fiscal policies while offering a European diagnosis on the economic policy. (in French)

In 2007, a group presided by Felipe González was set up to write a report on “the future of Europe”, which was delivered to the European Counsel on June 17th. One understands that right now the priorities may be concentrated on finding parades to the attacks of the markets, rather than to envision the distant future of the Union. But this report is capital in more than one way. First because the relief that followed the signature of the Lisbon Treaty gave place to the question of what to do in the next twenty years. Second because the financial crisis obviously imposes to reform the European model of governance and the European policies. (in French)

On October 25th 2007 the Wall Street Journal published a blistering attack on Europe entitled “Regulatory Imperialism”. The editorial took issue with Europe’s intent to force its norms on the rest of the world by taking advantage of the dynamism of its internal market both affluent and attractive and in addition highly organized. Examples cited included the Microsoft Affair, the ban on the importation of chlorine-rinsed poultry, the Reach legislation on chemical products, as well as the plan to tax airline companies as part of the battle against climate change.

The prescriptions of the 2004 Constitutional Treaty which proved to be the least controversial were, paradoxically, those in the field of the common foreign and security policy (CFSP). The arrangements agreed to in Berlin last weekend represent little change from the 2004 text. The most important elements are the creation of the new post of “High Representative”, the post of President of the Council and the development of a European diplomatic service. These measures will not, by themselves, turn the EU into a new type of international power-broker, but they will help the Union formulate joint policy and, above all, will assist in the coherent presentation of that policy to the outside world.

The election of Nicolas Sarkozy as President of the French Republic has been widely regarded as the signal of a shift in France’s policy towards Europe. In a campaign where European issues were conspicuous by their absence, Mr Sarkozy was by far the clearest of all the principal candidates regarding his ideas for the EU. A quick fix was needed to overcome the stalemate created by the French and Dutch rejection of the draft constitutional treaty. Turkey, as an Asian country, had no justification to join the EU: instead, a type of “privileged partnership” had to be established to anchor this country to the Union. Having settled these two thorny issues, Europe should then focus on topics that matter most to ordinary citizens, such as how to create growth and jobs.

Formal criteria don’t define the limits of Europe; they only delay the membership of determined applicants. The true limit is the EU’s capacity to absorb newcomers. Eastern enlargement challenged this capacity, but the forthcoming institutional reforms that allow the EU27 to function will – quite inadvertently – make it easier to enlarge the EU further. EU42 anyone?