Should the whole EU federate at the same time?

Many of the top EU politicians, like the German Chancellor Angela Merkel or the former President of the EU Council, Donald Tusk, have an idealistic objective of achieving ‘an ever-closer union’, i.e. federalization of the entire EU in one stage, even if it happens at a slow speed. They point out on the difference in GDP level per capita, which for the top countries, such as Austria, Belgium or Germany is about 5 to 6 times higher than for the bottom ones, such as Bulgaria and Romania. They also say that waiting for another decade to start the preparation for the Federation, is a safer option because the currently poorer countries will make faster incremental improvements in their GDP and social area than the richer countries, making the differences between members states smaller, and the transition easier.

In my view, this should not be a preferred option and the whole EU should not be converted into a Federation at the same time. The main reason is that there will be new countries joining the EU, which will be less ready than the ‘old’ member states. Therefore, there may never be the right time for all the EU countries to federate together. Waiting a decade or more will be very risky indeed. The risk comes from a higher level of the world’s instability (various nearly existential risks mentioned earlier, the continuous meddling of Russia into the EU affairs and the volatility of the financial markets. The further the moment of the federation is pushed back, the higher the risk.

This is especially true about the risk, which the Eurozone may face. When looking solely at the economic data, there are two important elements: GDP per head and the percentage of the national debt. If the Eurozone becomes federated than all national debts will be put into one pot. It is interesting to note that the poorest countries have lower national debt than the richer countries, therefore they will be less of a relative burden to the overall budget. That would come handy to pay for the current difference in GDP per capita in the Eurozone, which in such countries is about 2.5 times lower than in richer countries. The only ‘problem countries’ are Greece, Cyprus and Portugal but their total GDP is just about 4% of the total Eurozone GDP, so it would have not been an insurmountable problem. Additionally, further procrastination would also slowed down, or make it impossible to achieve a more difficult goal, which is for the EU to act on behalf of the whole Humanity to lessen the gravity of existential risks. EU simply has not enough time left to move uniformly forward at a slow speed. If only economics is taken into account, then the Eurozone could be federated right now.

Transforming the Eurozone into a European Federation, as a single state, would immediately have most positive effect on the stability of the Euro currency, which would almost certainly increase its value in relation to dollar and other currencies. That might create some transient problems regarding export. However, they will not be as severe as they are now, when each Eurozone country looks for its own interest in making most from using the Euro currency to minimize the economic burden for itself. That cannot last for too long and there have already been many initiatives in the Eurozone to solve this problem, like establishing the European Monetary Fund (EMF), which is almost a certainty with Christine Lagarde now at the helm of the European Central Bank. Resolving this situation alone will be the most significant motivation for accelerating the transition of the Eurozone into the EF.

The EU Commission has an unapproved scenario 6, which envisages that EU should have transformed itself into the EF by 2025. Not so long ago it looked very unrealistic. After Covid-19 pandemics, it will be a necessity. The main opposition in some of the EU countries for doing it piecemeal, stems from the fear that starting with the most advanced and mature members first, would split the EU into one, two or even more zones. To help assess various options, I have applied some fundamental criteria that would underpin the creation of the EF as a state:

EF must have a very “shallow” federalization layer, mainly in foreign policy, defence, and economic area (common federal budget and currency). That may require some repatriation of the EU competencies back to the EU member states, which would be an unexpected benefit of the federalization.

EF must be based on the agreed set of fundamental values and democratic principles such as freedom of speech, organization of parties, elections, etc. To meet these criteria, the EU may have to convert the current Venice Commission (an advisory body of the Council of Europe, composed of independent experts in the field of constitutional law) into a Constitutional Court with some significant sanctions that might be imposed on ‘misbehaving’ countries.

EF must facilitate the levelling of economic prosperity across its borders much faster than it is happening now. This area is difficult because it might directly affect the economic position of every citizen. The EF will have its single Finance Minister with considerable powers. It will have its common budget, interest rate, and currency for all its members, and a number of other fiscal policies. Member states will still have some national budgets similarly as the regions of the member states have right now. But those budgets will be smaller. Citizens of the poorer countries might benefit significantly from the common budget, while the citizens of the richest countries would be worse off. It is obvious which will be the net ‘donor’ countries, and which countries will benefit. Most of the beneficiaries are outside the Eurozone. That is why it is unlikely that the donor countries, mainly Germany, France and Benelux would agree to such a transition of their national wealth in the next few years in the current situation. But they might agree to do it all together for the current members, assuming their GDP rises much faster, which will make the difference between the poor and the rich countries smaller. On the other hand, by 2030, they will perhaps be 8-10 new EU countries, such as the remaining Balkan countries or Georgia, with their GDP again being much lower than the EU average. It is like trying to hit the moving target – there will always be countries that will not meet the minimum criteria required to join the Federation.

EF must enable maximum integration of the markets for goods and services and allow for as free as possible movement of people across the member states. Should the EU transition into the EF include only the current member states, then that would have not been a problem. The EU has almost achieved that stage, apart from the services area and setting up some new EU Agencies. However, like in criteria 3, the future EF is to take on new members, which will require a minimum 10-year transitionary period, where candidate countries will have to adjust to the EU’s legal system, changing their constitution, as well as lower the differences in economic and to some degree in cultural areas. Therefore, similarly as with the previous criteria, EF cannot be a single zone organization.

EF must ensure continuing enlargement by accepting new members to make ever more significant global impact on the future of Humanity. If the EF’s long-term goal, as I assume, is to become a de facto World Government it has to enlarge its membership. That would mean accepting initially as associate member states, countries like Morocco, Kenya, Egypt, Iraq, Lebanon, etc. to name just less controversial ones. We have immediately two big problems here. The first one is economic. The difference between these countries’ average GDP per capita and the EU’s average GDP per capita might be 5-6 times lower than the EU’s. Single market would simply stop working. It just cannot happen. On the other hand, to minimize existential risks, such as mass migration, local wars, or pandemics related to poor health etc., the EU should significantly change its accession policy by admitting countries that are nowhere near the above criteria because of corruption, like in Albania, or significantly different system of values, such as in Sudan. The future EF should make the entry point for new member fairly low and then work with the new members from within by helping them make fast and deep changes both in economic as well as in the system of values area. This could only be done within the multi-zone EF, where countries would move progressively up the ladder, until they become members of the EF state.

Therefore, an overall conclusion is that the EU should not move forward towards a federation as one organization. There have to be some transition zones.