Crisis may create 'two-speed Europe'

Updated: 2011-11-15 08:20

By Fu Jing and Cecily Liu (China Daily)

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BRUSSELS / LONDON - A "two-speed" European Union may come sooner than expected, analysts said, as the worsening debt crisis requires deeper and stricter fiscal discipline in the eurozone.

The European Council is expected to submit a report on possible changes to the union treaty at December's EU summit, where the leaders are likely to approve a roadmap on how to implement the agreed measures.

Ratification among the member states will occur in 2012-2013, which will strengthen fiscal union and transfer decision-making powers from member states to Brussels.

"Clearly, there will be a two-speed Europe: One gear with greater integration in the eurozone and a more confederal gear in the European Union," French President Nicolas Sarkozy said in Strasbourg on Nov 9.

France recently held a Senate hearing on a motion on a two-speed union, which implies that the eurozone countries will in the future answer to a different set of rules than the wider EU.

"This is not an ideal solution, but a practical and pragmatic one," said David Fouquet, director of the Brussels-based Asia-Europe Network. Fouquet said this shows that European leaders have accepted the fact Europe is full of economic, cultural and traditional diversity.

To achieve common prosperity, Fouquet said EU members should abandon their "inward-looking" attitudes and transfer their decision-making power to European institutions such as European Council, Commission and Parliament.

"That is not the situation now because major decisions have been made by France and Germany," said Fouquet.

But European media reported that the acceptance of a two-speed Europe did not occur naturally for Germany.

Berlin had always insisted on keeping the EU as a single entity, for fear that a two-speed Europe would unravel the Single Market and hamper its access to lucrative export markets.

German Chancellor Angela Merkel has since changed her mind and now seems to consider the crisis as an opportunity to enforce strict budgetary surveillance on the entire eurozone.

Merkel's ruling party has even launched a working group to amend the European treaties, reported European news website A motion endorsed at her party's November congress suggests moving toward a "political union" in the eurozone and supports "further devolution of powers to the European level".

The "two-speed" proposal has fueled concerns in the United Kingdom, a major player in the 27-member EU although not in the eurozone.

British Prime Minister David Cameron is due to meet Merkel to discuss her plans this week, while George Osborne, Britain's finance minister, has urged eurozone countries to cooperate more closely on tax and spending issues.

"I think we have to allow the eurozone to do it while protecting Britain's interests and making sure that the European Union can still work for all those members who aren't in the euro," Osborne said.

Jonas Parello-Plesner, of the European Council on Foreign Relations, a think tank headquartered in London, said that Britain, with its heavy reliance on trade with its European neighbors, has a great interest in seeing the eurozone being financially integrated.

"Turbulence will be created in the European markets if Greece leaves the eurozone, and this will in turn hurt countries that are currently implementing strict austerity measures to reduce debt levels," said Parello-Plesner.

Former British prime minister Tony Blair warned Europe's leaders of the "catastrophic" consequences of the breakup of the eurozone a day after his former political ally Silvio Berlusconi resigned as Italy's prime minister.

"Right now for the single currency it is absolutely essential, if it is to be preserved, that the whole weight of Europe and its institutions come behind it," Blair told the BBC.

European Council President Herman Van Rompuy said he would be pragmatic about changes to the union treaty. "My intention is that first we discuss what before we discuss how," he was quoted as saying in a recent speech. "Treaty changes take time, whereas an immediate financial crisis can only be dealt with by other, swifter means."