28 October 2011

BBC Analysis: An EU of two tiers after eurozone debt crisis

Charles Grant, director of the London-based Centre for European Reform, calls the change fundamental: "Henceforth, there will be two clubs: the broader EU and the new euro club with its own rules and institutions".

Until the euro crisis, the EU was run by the leaders of the 27 Member States in the European Council. Now parallel structures are emerging. There have always been separate decisions directly on the euro but this is more than that. For now, Herman van Rompuy will preside over both the euro and the EU summits but in future, the inner core may have a different, permanent president.

Richard Corbett, adviser to Herman van Rompuy, the European Council president, says most policy "will remain for the 27: the single market, rules on consumer protection, competition, trade and other areas like environment or justice and home affairs". But Fredrik Langdal of the Swedish Institute of European Policy Studies says: "The Swedish government is clearly very concerned at the prospect of a two-speed Europe. "They fear the euro 17 could decide on issues affecting the 27 such as banking, resource allocation, the EU budget." British Prime Minister David Cameron has expressed similar concerns. Nor are the "outs" a unified group, says Mr Langdal: "Sweden won't want to ally with eurosceptic UK."

German Chancellor Angela Merkel dominated the outcome of the eurozone's emergency summit on Wednesday but does this mean the inner tier of 17 will inevitably remain German-led? Fredrik Langdal says: "The inner core will be very much up to Merkel and what it can do and what it decides. France is not that strong. Germany is the only strong player."

And the European Commission will still have an important role to play. Josef Janning argues that the political dynamics of the 17 are highly unpredictable: "The dividing lines are within the 17, not outside. It will be more ad hoc, lacking the stable coalitions of the past."

Whether the eurozone publics will support a more integrated inner core intruding more into national policies is at best an open question - they have not been asked. But if and when treaty change comes on the agenda, there will be tricky ratification politics across the eurozone. A two-tier Europe has arrived but with the euro 17 at its core - not the single market or environmental or foreign policy - if growth does not bounce back or the euro falls apart, there will be little to fall back on. A two-tier EU could be a fragile construct.

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