Ever tighter union? Brexit, Grexit, and frustrated differentiation in the single market and Eurozone

Abstract

Many European political leaders and observers have argued that the European Union’s multiple recent challenges call for more “differentiated integration.” At first glance, the EU may seem to lend itself quite well to such an approach, with already variegated memberships in the Euro area or Schengen borderless travel zone. What proponents of differentiation tend to overlook, however, is that the Union’s core commitments are not set up to permit much internal variation at all. Indeed, in the EU’s two flagship policy areas—the Single Market and the Eurozone—the defining institutional principles rule out differentiation to a striking degree. To substantiate this claim, we show that the rules in these areas are considerably more constraining of EU member states than are analogous federal constraints within the USA. We then highlight how these tightly limiting principles of EU economic governance have shaped recent negotiations with Greece in the Eurozone and the UK in the Single Market. While the EU’s core constraining principles make calls for differentiation all the more comprehensible, they also underscore that differentiated options may require rather fundamental change to the current institutional status quo.

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Notes

  1. 1.

    Montenegro and Kosovo use the euro; Iceland, Norway, and Liechtenstein are in the Single Market.

  2. 2.

    Fabbrini (2019). For a related discussion, see Schütze (2009).

  3. 3.

    See the website of the private American National Standards Institute. Its page on state variations (https://www.standardsportal.org/usa_en/key_information/state_level.aspx.) explains, “The hallmark of the United States standardization and conformity assessment systems is its decentralized nature. In large part, this defining characteristic is a product of the United States’ decentralized federal governmental structure organized to balance power with individual U.S. State governments.”

  4. 4.

    The Court has often suggested that it also employs a “balancing” logic to evaluate whether a restriction on commerce is justified by its local benefits, but Regan (1986) argues compellingly that this is so inconsistently applied that the effective logic focuses on purposeful protectionism.

  5. 5.

    These criteria are known as a “Gebhard test” in services, and are similar in goods.

  6. 6.

    See the Brookings Institution’s “tracker” of deregulation under Trump at https://www.brookings.edu/interactives/tracking-deregulation-in-the-trump-era/.

  7. 7.

    As of 2018, seven US states forego individual income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee only tax income on capital investments, including dividends.

  8. 8.

    As quoted in Matthijs (2016: 375).

  9. 9.

    Greece’s gross GDP at market prices decreased by 27% between 2008 and 2015: http://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_10_gdpandlang=en.

  10. 10.

    From May 2015 to November 2015, the Eurobarometer measured an increase in support for membership in the Economic and Monetary Union.

  11. 11.

    As reported in the Financial Times: https://www.ft.com/content/9099a1a8-bcda-11e8-8274-55b72926558f.

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Acknowledgements

The authors would like to thank Vivien Schmidt, Sergio Fabbrini, Mark Pollack, Dan Kelemen, Chris Bickerton, Fritz Scharpf, Jolyon Howorth, Erik Jones, Frank Schimmelfennig, as well as two anonymous reviewers, for very helpful comments on previous versions of this paper. The usual disclaimer applies: the authors remain solely responsible for any errors or omissions.

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Matthijs, M., Parsons, C. & Toenshoff, C. Ever tighter union? Brexit, Grexit, and frustrated differentiation in the single market and Eurozone. Comp Eur Polit 17, 209–230 (2019). https://doi.org/10.1057/s41295-019-00165-6

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Keywords

  • Differentiation
  • European Union
  • Eurozone
  • Integration
  • Single market
  • United States