REPORT on differentiated integration

on differentiated integration

(2018/2093(INI))

The European Parliament,

–  having regard to the Commission’s white paper of 1 March 2017 on the future of Europe: reflections and scenarios for the EU-27 by 2025 (COM(2017)2025), and to its accompanying reflection papers on the future of EU finances, on the future of European Defence, on the deepening of the Economic and Monetary Union, on harnessing globalisation, and on the social dimension of Europe,

–  having regard to its resolution of 16 February 2017 on improving the functioning of the European Union building on the potential of the Lisbon Treaty[1],

–  having regard to its resolution of 16 February 2017 on possible evolutions of and adjustments to the current institutional set-up of the European Union[2],

–  having regard to its resolution of 12 December 2013 on constitutional problems of a multitier governance in the European Union[3],

–  having regard to Rule 52 of its Rules of Procedure,

–  having regard to the report of the Committee on Constitutional Affairs and the opinions of the Committee on Economic and Monetary Affairs and the Committee on Budgets (A8-0402/2018),

A.  whereas differentiated integration is a polysemous concept that can define various phenomena from both a political and a technical point of view;

B.  whereas integration processes in the EU are characterised by a rapidly increasing number and diversity of situations entailing differentiated integration, in the context of both primary and secondary legislation;

C.  whereas the political perceptions of differentiated integration vary significantly depending on the national context; whereas in some Member States that have been members of the Union for longer, it can have positive connotations and be associated with the idea of creating a ‘pioneer group’ designed to achieve more rapid progress in deepening integration, while in the Member States that joined the Union more recently it is often perceived as a path towards the creation of first- and second-class Member States;

D.  whereas differentiated integration also refers to a wide range of different mechanisms, each of which can have a very different impact on European integration; whereas one can distinguish between time differentiation, or a multispeed Europe, where the goals are the same but the speed required to achieve them varies, manners differentiation, or Europe à la carte, and space differentiation, often referred to as ‘variable geometry’;

E.  whereas differentiation has been a stable feature of European integration, not only in areas in which the EU has competences, but also elsewhere, and has sometimes allowed for the deepening and widening of the EU to be pursued simultaneously; whereas, as a consequence, one cannot oppose differentiation and integration, nor can one present differentiation as an innovative path for the future of the Union;

F.  whereas, if differentiated integration can be a pragmatic solution to drive European integration forwards, it should be used sparingly and within narrowly defined limits, in view of the risk of fragmenting the Union and its institutional framework; whereas the end goal of differentiated integration should be to promote the inclusion and not the exclusion of Member States;

G.  whereas experience shows that while interdependence works as a factor behind integration, politicisation often works as an obstacle to it; whereas, as a consequence, EU policy areas with the deepest integration such as the harmonisation and regulation of the internal market are, for the most part, the least politicised, while differentiated integration seems most likely to arise in policy areas characterised by deep political polarisation, such as monetary policy, defence, border control, fundamental rights or taxation;

H.  whereas the establishment of political links and interdependence between Member States makes a decisive contribution to their integration within the Union;

I.  whereas the Treaties provide for the possibility for Member States to take different paths of integration, namely via enhanced cooperation (Article 20 of the Treaty on European Union (TEU)) and permanent structured cooperation (Article 46 TEU) without, however, containing provisions for permanent flexibility or differentiated integration as a long-term objective or principle of European integration; whereas these different paths of integration should only be applied to a limited number of policies, should be inclusive, in order to allow all Member States to participate, and should not undermine the process of creating an ever closer Union as prescribed in Article 1 TEU;

whereas, moreover, enhanced cooperation under the common security and defence policy is now a reality, contributing to the construction of a genuine European Defence Union;

J.  whereas with the exception of the Financial Transaction Tax, all existing cases of differentiated integration could have been adopted in Council by qualified majority voting if this had been provided for in Article 329(2) of the Treaty on the Functioning of the European Union (TFEU) instead of unanimity;

K.  whereas some forms of differentiated integration might have centripetal effects, attracting more Member States to join the initiative later;

L.  whereas the process of differentiation has led to the creation of initiatives within the EU legal framework, but also to some more flexible intergovernmental legal arrangements, which have led to the creation of a complex system that citizens find hard to understand;

M.  whereas Member States are not the only potential actors of differentiated integration; whereas Regulation (EC) No 1082/2006 on a European grouping of territorial cooperation (EGTC) already allows for transnational cooperation on the basis of a shared interest;

1.  Insists that the debate surrounding differentiated integration should not be about pro-differentiation versus anti-differentiation, but the best way to operationalise differentiated integration – which is already a political reality – within the EU’s institutional framework in the best interests of the Union and its citizens;

2.  Recalls its conclusions that intergovernmental decision-making structures and processes increase complexity of institutional responsibility, reduce transparency and democratic accountability and that the Community method is best for the functioning of the Union;

3.  Considers that differentiated integration should reflect the idea that Europe does not work to a one-size-fits-all approach and should adapt to the needs and wishes of its citizens; believes that differentiation may sometimes be required for the purposes of embarking on new European projects and overcoming the deadlock arising from national political circumstances unrelated to the common project; believes, moreover, that it should be used pragmatically as a constitutional tool to ensure flexibility without undermining the general interest of the Union and the equal rights and opportunities of its citizens; reiterates that differentiation should only be conceived of as a temporary step on the path towards more effective and integrated policymaking;

4.  Considers that the European Council should take the time it needs to shape the European agenda by demonstrating the benefit of common actions and attempting to convince all Member States to participate in them; highlights that any kind of differentiated integration upon which agreement is reached is therefore a second-best option, and not a strategic priority;

5.  Reiterates its conviction that differentiated integration must remain, as provided for under Article 20 and 46 TEU, open to all Member States and must continue to serve as an example of deeper European integration where no Member State remains excluded from a policy in the long run, and should not be seen as a means to facilitate à la carte solutions that threaten to undermine the Union method and the EU’s institutional system;

6.  Affirms that any form of differentiation initiative that leads to the creation of first- and second-class Member States of the Union, or to a perception thereof, would be a major political failure with detrimental consequences for the EU project;

7.  Calls for any future model of differentiated integration to be designed to provide incentives for and fully support Member States aspiring to ‘opt in’ in their efforts of economic development and conversion aimed at meeting the necessary criteria in a reasonable timeframe;

8.  Considers that one appropriate answer to the need for flexible tools is to tackle one of the roots of the problem; calls, therefore, for a further shift in Council voting procedures away from unanimity and towards qualified majority voting, by making use of the ‘passerelle clause’ (Article 48(7) TEU);

9.  Believes that differentiated integration should always take place within the Treaty provisions, should maintain the unity of EU institutions and should not lead to the creation of parallel institutional arrangements or arrangements that indirectly contravene the spirit and the fundamental principles of EU law, but should instead enable specific bodies to be established where appropriate, without prejudice to the competences and role of the EU institutions; points out that flexibility and adaptation to national, regional or local specificities could also be ensured via provisions in secondary law;

10.  Emphasises that differentiated integration should not lead to more complex decision-making processes that would undermine the democratic accountability of the EU institutions;

11.  Considers Brexit an opportunity to move away from models of ‘opting out’ towards non-discriminatory and supportive models of ‘opting in’; stresses that these ‘opting in’ models would not limit progress towards ‘ever closer union’ to the lowest common denominator of a one-size-fits-all solution but would allow the necessary flexibility to progress while leaving the door open to Member States that are both willing and able to fulfil the necessary criteria;

12.  Demands that the next revision of the Treaties bring order to the current process of differentiation by ending the practice of permanent opt-outs and exceptions from primary EU law for individual Member States, as they lead to negative differentiation in primary EU law, distort the homogeneity of EU law in general and endanger the social cohesion of the EU;

13.   Acknowledges, however, that some transitional periods may be necessary for new members on a strictly exceptional, temporary and case-by-case basis; insists that certain clear and enforceable legal provisions should be introduced in order to prevent the perpetuation of these periods;

14.   Insists, therefore, that membership of the EU would then require full compliance with primary EU law in all policy areas, while those countries desiring a close relationship with the EU without being willing to commit to full compliance with primary law and which either will not or cannot join the EU should be offered some form of partnership; considers that this relationship should be accompanied by obligations corresponding to the respective rights, such as a contribution to the EU budget, and should be contingent on adherence with the Union’s fundamental values, the rule of law and, when it comes to internal market participation, the four freedoms;

15.  Underlines the fact that respecting and safeguarding the EU’s fundamental values are the cornerstone of the European Union, a community based on values, and bind the Member States together; considers, therefore, that differentiation should not be permissible when it comes to respect for the existing fundamental rights and values enshrined in Article 2 TEU; insists, moreover, that differentiation should not be possible in policy areas where non-participating Member States could create negative externalities, such as economic and social dumping; demands that the Commission carefully examine the potential centrifugal effects, including in the long term, when it submits its proposal for enhanced cooperation;

16.  Recalls its recommendation to define a partnership in order to set up a ring of partners around the EU for states which cannot or will not join the Union, but nevertheless want a close relationship with the EU[4];

17.  Suggests the establishment of a special procedure that would allow, after a certain number of years, when enhanced cooperation is launched by a number of states representing a qualified majority in the Council and after Parliament’s consent has been obtained, the integration of the provisions of enhanced cooperation into the EU acquis;

18.  Underlines the fact that flexibility and differentiation should go hand in hand with reinforcing common rules in core areas in order to ensure that differentiation does not lead to political fragmentation; considers, therefore, that a future European institutional framework should include ineluctable European Pillars on political, economic, social and environmental rights;

19.   Recognises that regional cooperation plays an important role in strengthening European integration and considers that its further development has strong potential to consolidate and deepen integration by adapting it to local specificities and a willingness to cooperate;

20.    Suggests that suitable tools be developed within EU law and a budget established for testing cross-border initiatives within the EU on issues of EU-wide interest, which could eventually be turned into legislative proposals or cases of enhanced cooperation;

21.  Instructs its President to forward this resolution to the Council, the Commission and the parliaments of the Member States.

• [1]  OJ C 252, 18.7.2018, p. 215.
• [2]  OJ C 252, 18.7.2018, p. 201.
• [3]  OJ C 468, 15.12.2006, p. 176.
• [4]  OJ C 252, 18.7.2018, p. 207.

Differentiated integration in the EU takes many different forms: opt-outs, enhanced cooperation initiatives, permanent structured cooperation and intergovernmental formations outside the Treaty framework. In fact, the landscape of flexible solutions allowing some Member States to move forward with deeper integration in a certain policy area has become so varied that it is getting increasingly difficult to identify all cases of differentiated integration and to make sense out of them, not only for European citizens but also for policy-makers.

Differentiated integration is not a new phenomenon, however. Discussions on the possibility of differentiated integration started as early as the 1970s and accelerated in the 1990s to reach one of the principal example of differentiation - the creation of the Economic and Monetary Union in 1993. Since then the landscape of flexible solutions has diversified exponentially and now covers five forms of opt-outs[1] , two agreed cases of enhanced cooperation[2] and three more on the way[3] , permanent structured cooperation (PESCO) under Article 46 TEU and intergovernmental cooperation through the European Organisation for Nuclear Research and the European Space Agency.

Differentiated integration can be considered a good instrument to bridge the gap between the diverse political opinions in Europe but it also raises some important political, legal and institutional questions. The first one is how to balance between flexible solutions and the Union’s unity. The second one considers the choice between intergovernmental and more flexible legal arrangements, and the homogeneity of Union law. The third one questions the need to create separate institutions for the cases of differentiated integration or the need to preserve the institutional unity of the EU.

While differentiated integration could be seen as a positive instrument for the advancement of European integration at the pace and in the form most appropriate for the current political climate, its use and the forms that it can take should be simplified and streamlined in order to improve its democratic legitimacy.

Clarification of the concept of differentiated integration

Differentiated integration has various technical and political meanings. Technically, one can distinguish between time differentiation (often referred to as multispeed Europe: same goals but different speeds to reach them), manners differentiation (Europe à la carte, which means participation in policies of interest without aiming to reach the very same goal for all at the end) and space differentiation (variable geometry that can last over time and is of more geographical nature). All these instruments can be defined as “differentiation” but have very different impact on the EU.

The political rhetoric on differentiation also follows different patterns. When it is used by relatively more populous Member States or those that have been members of the Union for a longer period of time, it is often perceived as showing their willingness and aptitude to deepen the EU integration process, and such groups of Member States often consider themselves “pioneers”’. On the contrary, differentiated integration is often perceived, especially in Member States that recently joined the EU, as a path towards the creation of first-class and second-class membership of the Union.

According to the Rapporteur, differentiation should reflect the idea that Europe does not work on a one-size fits all approach, but can adapt to the needs and wishes of its citizens. Therefore, differentiation should be a constitutional tool to ensure flexibility when needed without compromising the entire political system and the equality between citizens.

The need for differentiation

•  Differentiated integration is integration:  

Various studies demonstrate that differentiation has been concomitant to the EU integration deepening and widening. In fact, differentiation has increased and consolidated as the EU’s powers, scope of policies and size of memberships have grown. Therefore, while it is often wrongfully described as a pragmatic and temporary path towards policy convergence, reality shows that it is actually not an exception but a “normal” feature of EU integration.

The debate should therefore not be about pro-differentiation versus anti-differentiation but about how to organise differentiation within the EU, what kind of mechanisms are acceptable, under which conditions and in which domains.

•  Differentiated integration has responded to obstacles in highly politicized areas  

When looking at policy areas and their variation in terms of differentiation, we can observe that interdependence works as a driver of integration while politicization often works as an obstacle to integration. The consequence of this observation is that differentiation tends to emerge in cases of high interdependence and high politicization.

This also explains when the types of differentiation in the EU have evolved over time. Before the 1980s, we had more vertical differentiation (variation of the level of centralisation in certain policy areas but on the whole EU territory) but no horizontal one (same degree of centralisation but variation of the territory on which the policy applies). Horizontal integration has grown with the level of politicization of the topics and with the widening of the EU.

The result is that, while the EU has very integrated policies when it comes to low politicized area like the harmonization of goods and market regulation, it has very differentiated policies in core political areas like monetary policies, defence and foreign affairs, fundamental rights, taxation, social affairs etc.

Challenges of differentiated integration

1) The need for differentiation is often procedurally explained by the need to reach a unanimous decision in the Council. Indeed, with the exception of the Financial Transaction Tax, all the different cases of enhanced cooperation could have been adopted with qualified majority. It is worthwhile noting that some enhanced cooperation are only done to avoid the veto power of only two Member States (the European unitary patent has 26 Member States participating!).

2) Differentiation has occurred in sectors that are more “political”: Fundamental rights, Schengen, the Euro-zone, the Financial Transaction Tax. Less politicized areas have led to more integrated policies (internal market rules etc.) However, in an interdependent, interconnected and democratic political entity, such as the EU, differentiation cannot be acceptable in all fields.

3) Some forms of differentiation have had centripetal effects, leading to more Member States joining later, but others can have centrifugal effects if they create deadweight effect by giving the possibility to non-participating Member States for having negative effect on the participating Member States.

4) The overall process of differentiation has led to the creation of some instruments within the Treaty framework (few enhanced cooperation initiatives, PESCO etc.) but also outside the Treaty (intergovernmental solutions). This has led to a complex and non-understandable systems for citizens, which reduces the accountability of public decisions. Among the underlying problems of these intergovernmental arrangements outside the EU treaty framework is the lack of parliamentary scrutiny, as the Parliament’s involvement is essential for ensuring the democratic legitimacy.

The way forward

Without Treaty change:

1) The first step to solve the roots of the problem and to reduce the need for differentiated integration is to remove the unanimity rule in all possible areas. This can be done by making use of the ‘passerelle clause’ (Article 48(7) TEU), which could authorise the Council to switch from unanimity to QMV in applicable cases where the Treaties currently require unanimity.

2) Opt-out from Treaty provisions should not be possible anymore as they are cases of negative differentiation. Instead of a group of Member States moving forward with European integration, opt-outs are permitting Member States to move backward towards less integration. Therefore, they should be eliminated.

3) If differentiation is sometimes the price to pay for integration, democracy should never be the price to pay for differentiation. Therefore, differentiation should not lead to more complex decision-making processes that would undermine the accountability of EU institutions. One way to ensure this is to make sure differentiation always takes place within the treaties framework, be it enhanced cooperation (Art. 20 TEU) or permanent structured cooperation (Art. 46 TEU).

4) Differentiation should be a way to accommodate the heterogeneity between Member States without risking to undermine the general interest. While the insufficient level of preparedness (for example, criteria for joining the euro or Schengen are not met yet) is a legitimate factor to provide for temporary multispeed solutions, unwillingness cannot be legitimate in every fields, especially when it has negative impacts on the other Member States or on the EU as a whole.

In addition, the policy fields which would be open to differentiation would say a lot about what kind of EU we want to build in the future. As the EU is democratic space based on shared values and objectives, the Rapporteur believes that no differentiation should be possible in terms of existing fundamental rights and values and in domains where non-participating members generate negative externalities on the others, such as social and economic dumping.

5) The existence of flexibility and differentiation, being via enhanced cooperation or via legislation itself (when for example certain specificities are taken into account within a regulation or a directive) should go hand in hand with a reinforcement of common rules in core areas, like the rule of law.

6) Differentiated integration should maintain the unity of EU institutions and should not lead to the creation of parallel institutional arrangements. In its recent resolutions Parliament expressed the view that differentiated integration must remain open to all Member States and to continue to act as an example of deeper European integration, not as a way to facilitate ‘à la carte’ solutions’ [4].

With Treaty change:

1) As a step beyond the existing Treaty limitations, the Rapporteur considers useful to consider the possibility to introduce two sorts of Union memberships: full and associate membership. Full membership would mean full compliance with primary law and with the policies that are excluded from the possibility of launching enhanced cooperation. Associated members would participate in certain policies only and would not be fully integrated into the EU decision-making processes.

2) When enhanced cooperation is launched by a number of Member States representing a qualified majority in the Council, there should be a special procedure to integrate it easily into the EU acquis after a number of years of implementation.

3) Member States are not and should not be considered as the only potential source of differentiation and flexibility need in the EU. For this reason, the Rapporteur believes that, when competences attribution allows it, regions should be permitted to participate in cases of enhanced cooperation as well as should candidate countries.

4) Tools for the testing of trans-border initiatives that could eventually turn into cases of enhanced cooperation should be provided by the Treaty and opened to Member States and/ or regions. These tools could be opened to a smaller number of states/regions at first. If the initiative is positive, the Commission could decide to initiate a legislative proposal. This could allow regional trans-border initiatives to be tested (and financed) within the EU framework.

5) There is a need to have European Pillars of Civic, Economic, Social and Environmental rights from which it would not be possible to derogate.

6) Other forms of differentiation via mirror legislations could be envisaged, based, for example, on good practices observed in the Australian federal model.

• [1]  The UK and Ireland from the Area of Freedom, Security and Justice; UK and Denmark from the single currency; UK and the Czech Republic from the Treaty on Stability, Cooperation and Governance; the UK, Ireland and Denmark from Schengen; and Denmark from the Common Security and Defence Policy
• [2]  European Unitary Patent and Divorce Law
• [3]  European Public Prosecutor, Financial Transaction Tax and Property Regime Rules
• [4]  Resolution of 16 February 2017 on “Improving the functioning of the European Union building on the potential of the Lisbon Treaty” (P8_TA-PROV(2017)0049) and Resolution of 16 February 2017 on “Possible evolutions and adjustments to the current institutional set-up of the European Union” (P8_TA-PROV(2017)0048)

for the Committee on Constitutional Affairs

on differentiated integration
(2018/2093(INI))

Rapporteur for opinion (*): Doru‑Claudian Frunzulică

(*)  Associated committee – Rule 54 of the Rules of Procedure

SUGGESTIONS

1.  Recalls its conclusions that intergovernmental decision-making structures and processes increase complexity of institutional responsibility, reduce transparency and democratic accountability and that the Community method is best for the functioning of the Union;

2.  Calls for the integration of the European Stability Mechanism (ESM) into the EU’s legal framework; looks forward to the Commission’s initiative to identify areas of qualified majority voting in order to ensure more efficient law-making in the field of taxation; calls for the creation of a Vice-President of the Commission responsible for the Economic and Monetary Union (EMU); calls for the creation of a budget line for the Euro Area as part of the multiannual financial framework, which should support the implementation of Euro Area policies;

3.  Welcomes the progress made in the work on the Banking Union over the last few years; recalls that the negotiations for its completion must continue so as to successfully achieve risk reduction and a fiscal backstop for the Single Resolution Fund (SRF); calls for the ESM to be reformed so that it could serve as a fiscal backstop to the SRF; welcomes, in this regard, the statement made at the Euro Summit on 29 June 2018 affirming that the ESM will provide the common backstop to the SRF and be strengthened further; welcomes and strongly encourages initiatives from some Member States to consider joining the Banking Union;

4.  Requests a strengthened role for the European Parliament and the national parliaments in the renewed economic governance framework to reinforce democratic accountability;

5.  Considers Brexit an opportunity to move away from models of ‘opting out’ towards non-discriminatory and supportive models of ‘opting in’; stresses that these ‘opting in’ models would not limit progress towards ‘ever closer union’ to the lowest common denominator of a one-size-fits-all solution but would allow the necessary flexibility to progress while leaving the door open to Member States that are both willing and able to fulfil the necessary criteria;

6.  Calls for any future model of differentiated integration to be designed to provide incentives for and fully support Member States aspiring to ‘opt in’ in their efforts of economic development and conversion aimed at meeting the necessary criteria in a reasonable timeframe;

7.  Stresses the importance for convergence of the Cohesion and Structural Funds and takes note of programmes such as the Reform Support Programme, which are supposed to support Member States to join the Euro Area and adopt the Euro as their currency; stresses the importance of the investment funds and the EIB in closing the investment gap in the EU, in supporting capacity-building and in bringing to bear additional efforts and resources to achieve socio-economic convergence between and within Member States; recalls that the completion of the Single Market is a catalyst for economic integration and the convergence of the Member State economies it comprises; calls on the Commission, as a matter of priority, to enforce the current legislation and accelerate work on removing obstacles to its completion.

INFORMATION ON ADOPTION IN COMMITTEE ASKED FOR OPINION

FINAL VOTE BY ROLL CALL IN COMMITTEE ASKED FOR OPINION

Key to symbols:

+  :  in favour

-  :  against

0  :  abstention

for the Committee on Constitutional Affairs

on differentiated integration
(2018/2093(INI))

Rapporteur: Charles Goerens

SUGGESTIONS

The Committee on Budgets calls on the Committee on Constitutional Affairs, as the committee responsible, to incorporate the following suggestions into its motion for a resolution:

1.  Considers that democratic accountability is inseparable from budgetary accountability; points out that ‘a “galaxy” of funds and instruments, with variable participation of Member States and a diverse range of decision-making and accountability procedures, has emerged around the Union budget to support Union policy objectives’[1];

2.  Requests a strengthened role for the European Parliament and the national parliaments in the renewed economic governance framework in order to reinforce democratic accountability;

3.  Underlines the need to safeguard the principle of unity of the budget; stresses the need to ensure parliamentary oversight over all EU expenditure;

4.  Sees as a necessary step towards curbing the above-mentioned ‘galaxy’, the adoption of the MFF Regulation through the ordinary legislative procedure, thus aligning the decision-making procedure applicable to it with that of EU multiannual programmes and the EU annual budget; believes that the consent procedure deprives Parliament of the decision-making power that it exercises over the adoption of the annual budgets, while the unanimity rule in the Council means that the agreement represents the lowest common denominator, based on the need to avoid the veto of a single Member State; is convinced, moreover, that qualified majority voting should replace the unanimity rule in the Council;

5.  Supports the rationalising and operationalising of differentiated integration; underlines the fact that devising ad hoc solutions for EU issues under time pressure, partly or completely outside the EU institutional setup, also generates unnecessary additional costs;

6.  Calls on the Commission to prepare an annual report to accompany the general budget of the Union, bringing together available and non-confidential information relating to the expenditure incurred by Member States in the framework of enhanced cooperation, to the extent that this is not included in the general budget of the Union.

INFORMATION ON ADOPTION IN COMMITTEE ASKED FOR OPINION

FINAL VOTE BY ROLL CALL IN COMMITTEE ASKED FOR OPINION

Key to symbols:

+  :  in favour

-  :  against

0  :  abstention

• [1]  ‘The European Budgetary Galaxy’, European Constitutional Law Review, 13: 428–452, 2017

Key to symbols:

+  :  in favour

-  :  against

0  :  abstention