The State of the European Union

Dalibor Rohac is a Senior Fellow in Foreign and Defense Policy at the American Enterprise Institute in Washington, of Slovak origin. He has a doctorate in political economy from King’s College London and has also studied at Oxford and worked at center-right think tanks in London, Brussels and Washington.

He has written a book about the current state of the European Union, its evolution during the last two decades, and what to do about it. It consists of seven chapters. Three chapters deal with the functioning, or dysfunction, of the EU, two chapters discuss enlargement, one chapter the euro and the final chapter is devoted to the EU’s foreign policy.

Rohac has a complex approach to the EU. He declares that his book is “unabashedly pro-European” but it “embraces Europe as it exists” (p. 18). He opposes European federalism, arguing that “the EU has to move away from the increasingly stale dogma of ‘ever-closer union’” (p. viii). Instead, he wants to “turn the EU into a flexible, rules-governed platform which allows national governments to solve policy problems through their own initiative” (p. ix). Rohac favors the EU and its enlargement and opposes Brexit. 

The author’s main thesis is that “rather than insisting on unrealistic end goals of European unity […] it is time to reconceptualize the EU in more modest terms: by identifying the minimum on which the EU is able and willing to act in concert” (p. 127). He states: “that the EU is bound to make itself irrelevant if its officialdom continues on the alternative trajectory of pretending that there is European union and European capacity for action when in truth there are none.” (p. 128)

The strength of this short but dense book is that it is erudite. It accurately reports many contradictions in EU policy and governance and the underlying philosophy. Rohac offers a clear picture of these contradictions and their implications.

Rohac’s two chapters on enlargement are highly positive. He documents how the EU enlargement of 2004 led to great economic convergence and amazing economic and social achievements in the new EU members. “Central and Eastern Europe has also become much healthier as a result of reduced pollution, better diets, rising incomes” (p. 24), leading to sharply rising life expectancy and falling infant mortality. Western European economies also benefited from the EU’s enlargements through economic integration and systemic competition that drove down West European taxes.

Yet, the EU enlargements also led to greater diversity within the EU and Rohac opposes excessive EU conformity. Instead, he celebrates diversity and decentralized decision making. His main response to the European federalists is polycentric governance that involves “many centres of decision-making which are formally independent of each other” (p. 67). He draws on the work of the Nobel Prize Laureate Elinor Ostrom. 

But how far should diversity go? Rohac wants it to go quite far. He comments on the current problems in Hungary and Poland: “One may wish […] for a reversal of the de-democratization taking place in countries such as Hungary and Poland […]. Yet some of those afflictions are not problems that can be solved by clever top-down politics or new rules. Instead, they are conditions that Europeans must live with.” (p. 78) Really? Why should the EU accept that Viktor Orbán violates the prime universal EU values such as democracy, media freedom and rule of law and supports Putin rather than the EU? Orbán is certainly taking diversity too far.

The weakest chapter is “Out of the Euro Trap.” It starts with the conclusion: “The introduction of the common European currency was a triumph of politics over economics.” (p. 82) If so, why has no country abandoned the euro? It is now used by twenty-two countries, including the non-eurozone countries Kosovo and Montenegro. After the euro crisis in 2010, Estonia, Latvia, Lithuania, and Croatia adopted the euro, and Bulgaria is likely to follow soon. There are many good economic reasons for adopting the euro. Small open economies suffer badly from exchange rate fluctuations and a common currency facilitates trade and economic integration. The Baltic countries were hit by a serious liquidity crisis in 2008, because they did not have access to the liquidity of the European Central Bank. At present, Hungary has three times higher interest rates and thus much higher capital costs than the euro countries. The euro also facilitates financial integration, cross-border banking and a common capital market, that Rohac favors. The euro has proven to be a viable economic project.

Rohac’s main thesis is that “under the right conditions, decentralized, polycentric solutions can reconcile different interests than a one-size-fits-all approach” (p. 96). He takes energy and immigration policy as examples. But a key problem with EU energy policy was that Germany ignored it and concluded its own unilateral Nord Stream 2 deal with Russia. A stronger and more centralized EU could have stopped Germany’s negligence of common EU policy. Arguably, Germany adopted a polycentric approach together with Austria, the Netherlands, Belgium, and Russia, undermining the market-oriented EU energy policy. On refugee allocation Rohac is perfectly right. That EU policy never made sense. Why did the EU try to allocate refugees, when the individual nations decided about residence and work permits?

Rohac correctly complains about the negative selection of senior EU officials, but the usual culprits are Germany and France that want to keep the EU and its institutions weak. I would rather complain about these two countries wanting to dictate EU policy.

The chapter on EU foreign policy is perceptive. It made no sense that Cyprus could delay EU sanctions on Belarus for two months in 2020 because it also wanted sanctions on Turkey, or that Hungary can block sanctions on Putin favorites. In these cases, we could apply Rohac’s polycentric approach.

In his sharp criticism of the EU, Rohac is mostly right, but where is the solution to be found? Rohac is perfectly correct that most of what the EU does is not consistent, while it interferes in matters that it does not master, but is a general polycentric approach the best solution? The alternative is to apply the old EU principle of subsidiarity more widely. The EU should regulate overall markets more consistently, while staying away from less obvious activities, such as refugee allocation.