Enlargement and the Integration Capacity of the EU:
Past Experience and Future Prospects
(concepts, processes, methods, and lessons)

 
 


The Argument

Why European integration?[1] The original motivation for European integration was to make available peaceful, cooperative, methods to deal with conflicts between European nations. Put differently, to find an institutional substitute to the system of nation states that has proved to be extremely unstable leading as it did to repeated, eventually continent-wide violent conflicts. In addition, this alternative arrangement was to put an end to ideological enmities that have often led to grave social conflicts, the collapse of democratic governments, and even to civil wars. The external and internal conflicts were, of course, often not unconnected in a systematic way.

Historically[2] this alternative arrangement has been seen as a system of rule of law, i.e. of a legal system that goes beyond the international law and is a system of European law. That legal framework would allow for:

Deep integration: the internalization of external adversities, tensions, and conflicts – political, economic, and social (providing for legal and political means and procedures to deal with distributional issues). Also, it would be republican that is democratic, i.e. based on individual rights and popular responsibility or rather legitimacy.[3] That in a way defines the depth of the integration though it does not necessarily determine the final or indeed the intermediate forms that it may actually take. To some, it is natural to think of a federal state or political union. To others, it should certainly end up as a political union, but not a state or a federation. In that sense, the depth of the integration is determined, but not its constitution, so to speak.

Integration would first and foremost exclude the use of (external and internal) war as a way to solve conflicts between nations and classes. The former by providing legal and political means for conflict resolution and the latter basically by reducing decisively the probability of political success for extreme political and ideological projects, because most protectionist measures become almost infeasible or less desirable or both; e.g. it is rather impractical, though not altogether infeasible, to argue for an introduction of tariffs either for national or social protection within a common market and the same goes for practically all protectionist measures. Thus, integrated and democratic (republican in the Enlightenment parlance) Europe guards against extremist tendencies, both those based on aggressive nationalism and those exploiting social conflict potentials through sectarian political agendas. That should lead to the moderation of the political and ideological competition in the member states. This may not be a full-proof insurance against the emergence of populist, anti-democratic or authoritarian movements that may gain the support of the majority or of the significant part of the population – e.g. as in Austria, Hungary and perhaps in other countries (Italy may provide another example). So, it is like taking a chance on democracy, on interests and a procedure. In a rather general sense it can be argued that:

The Union is more liberal than the nation states, which accounts for some of the tensions in the process of deepening and widening and for persistent political and social pressure for renationalization.[4] Of course, these are all hypothetical statements that may or may not be borne out by the actual experience of European integration, in the past and especially in the future.

The most immediate way to achieve the desired deep integration would be a political union,[5] but this direct route is not available precisely because of the inherited dominance of nation states. As a consequence, the alternative process has been pursued:

Strategy of integration (or deepening): from economic to political integration via legal and institutional harmonization: in the immediate post-war period, there were still elements of joint industrial planning (Coal and Steel Union) but those gave way to focusing on the common market (free trade, i.e. customs union, and then the four freedoms) with some fiscal transfers, then monetary union and some elements of rule-based economic policy, then fiscal compact and in the future fiscal union, with a gradual process of political integration, and all of that based on contractual rule of law, the acquis comunautaire, and only ultimately the constitution.[6] (This envisaged sequence was quite different from the sequencing in the formation of e.g. the USA or in other instances of nation or empire building.)


Graph 1: The EU’s integration strategy

This process should contribute to the supply of Europe-wide public goods: in the first place security, in parallel with it justice (legal and social), and persistent growth and convergence of welfare.[7] Most of the public goods can be broken down to more specific goods; e.g. there are more specific types of security and various aspects of justice, and the same goes for setting framework conditions for overall welfare, growth and convergence being its two sides with distributional issues being a third, but others should be specified when designing specific research questions. These public goods are interconnected and that has to be taken into account too. When it comes to welfare, there seems to have been clear from the very beginning that welfare improvement is a necessary condition for deep integration to be desirable and sustainable.[8]


Graph 2: Provision of principal public goods

The supply of public goods being the aim or justification of deep and wide European integration, the chosen strategy of integration can be understood also as addressing the problem of free riding as it starts with economic integration where it is the least present. It also allows an explanation for the common observation that it is an elite project as that is a functional substitute for a centralized decision making procedure usually seen as necessary to secure the adequate supply of public goods. It may also provide for a way to assess the need and effectiveness of the use of softer mechanisms of integration like solidarity or the enhanced role that civil society is expected to play in the processes of widening and deepening. Of course, there is a difference between deepening and widening here because in the latter case EU public goods have a character of an externality that may provide for both incentives to join and incentives to stay out (depending on whether these externalities are negative or positive).

In view of the adopted strategy of integration, economic community precedes the legal and political communities. In general, deepening initially refers to enhanced economic integration which requires the expansion of the legal framework and then also of institutions and procedures of political cooperation. Also, growth of welfare indirectly supports the improved security and its legal underpinning leading eventually to the political union with democratic legitimacy on all levels of government. For the last step, however, the issue of social welfare and thus of distribution via the political union has to be properly addressed; in other words, the relationship between taxation and representation needs to be resolved.


Table 1: Economic integration

The assumption implicitly made in the initial conception of deep and Europe-wide integration that justifies this process and supports expectations that it will be efficient is that all problems between nations (ethnic, territorial) and between classes (social justice) across Europe are basically the same – in a way they are specifically European. Underlying this proposition is the assumption of common history and overall institutional development. In a sense, Europeanization, as that specific European inheritance of national and ideological problems, is given by history (i.e. all European countries are Europeanized in that they did partake in specifically European problems in the various phases of European history), as is the understanding that European integration is the adequate answer to these inherited problems.[9] Of course, the effectiveness of this European way to solve inter-state or ethnic problems has been tested in Cyprus or in the Balkans. So this assumption may not be as general as it is often supposed to be.

Deepening therefore means a process of increase of Union’s responsibilities in accordance with the integration strategy, i.e. from those in the economic and legal areas to those in political and social areas. It implies increased supply of Union-wide public goods and growing, democratic legitimacy of the institutions of the Union, from interstate to corporate or social interest based to the one based on individual rights and representation. It does not, however, determine the level of centralization of these responsibilities; in other words, the Union can still be “a minimal state” or polity and may require a minimal degree of federalisation.

Widening means the process of gradual inclusion of all European states by a process that in essence repeats that of deepening though the speed and to an extent the sequencing can differ. Widening may speed up, retard or change the sequencing of the process of deepening and the same applies to the possible influence of the process of deepening on the progress of widening. Indeed, the idea of one Europe may be too wide to threaten the collapse of the EU integration.


Table 2. Concepts and objectives

Because of the assumption about the fundamental European problems being basically the same, this process of deep integration and the strategy to achieve it are both applicable to Europe as a whole (the extent of widening), though it could not and cannot be simultaneously applied to a politically, i.e. militarily and ideologically, divided Europe. As a consequence, it had to start in the core of the democratic Western Europe, democracy in the member states being the necessary condition for the whole process to start, and then be enlarged as the circumstances allowed. In that, the success of the deepening of integration should serve as an inducement for the enlargement process. The aim of enlargement, of course, is still deep integration and thus:

Enlargement should repeat the process of deepening, should rely on the same integration strategy, though in many cases as a process of catching up (i.e. with possibly changed speed and sequencing).

It should still deliver the same public goods (i.e. security, justice and the necessary conditions to achieve welfare) with the appropriate political and institutional changes. That may include a partial change of the integration strategy in that some of the countries may have to democratize first and go through economic reforms next accompanied by institutional development proceeding with the European integration. In that sense, enlargement is a process of catching up (in institutional and economic terms) as well as gradual accession to deep integration. This can raise the issue of speed of both enlargement, or rather accession, and deepening of integration because the speed of the process of catching up may be slower than that of deepening. That could lead to a gap that may prove disruptive to the whole process of European integration. Sometimes this gap is described as one of diversity.

Diversity issue: it is not in the desirability of the public goods or in the applicability of the process of integration but in the gaps that the difference in the speed of the two processes of deepening and widening may be opening up (those can be between the insiders as well as between the outsiders or between these two groups). E.g. all the considerations connected with the common currency and the optimum currency area issues revealed by the current economic crisis of the Euro-zone. The gap may prove to be too wide at times so that integration capacity of the deepened EU may not be there or that enlargement needs to proceed in stages and at different speed and might even prove to be inferior to alternative arrangements.

The policies of closing of this gap have resulted in various ways in which enlargement was handled, e.g. the setting up of Structural Funds coinciding with the ‘Southern Enlargement’, by the adoption of Copenhagen criteria coinciding with the move towards Eastern Enlargement or Maastricht or Stability and possibly now Fiscal Compact Criteria (all linked to the setting up and functioning of EMU). This gap between deepening and enlargement may allow for the understanding of the process of enlargement as well as provide a way to determine the absorption capacity and its development.

The absorption capacity is given by the adjustments that insiders need to make to integrate the outsiders which can be combined with the conditions that outsiders have to satisfy in order to accede and those will depend on both the gap and the absorption capacity. Given that all that is endogenous, it is negotiable between the insiders themselves and also with the outsiders. This is in a way about the distribution of costs and benefits and also about keeping the whole process as originally envisaged intact. Clearly, there will be maladjustments and badly conceived conditions, which is what we need to learn about. The distribution of costs and the chosen institutional arrangements are obviously the key to the issue of absorption capacity and of the implementation of the integration strategy. However, a clear understanding of the strategy and of the end it aims at is needed in order to evaluate the particular sequencing of deepening and the conditions attached to the widening. For instance, integrating countries at different levels of development necessitated the adoption of certain elements of a fiscal union in order to make fiscal transfers possible. Those were essentially compensations for the removal of tariff barriers and of instruments of trade policy altogether.[10]

Among the public goods, the framework conditions to achieve welfare are the most problematic ones. While the supply of security is implied in the idea of integration and justice is in part delivered by the spreading of the rule of law, welfare requires the existence of certain instruments of economic policy and of redistribution. This is related to the history of ideological and social conflicts that have led to the development of the welfare state in Europe.[11] The explanation for the emergence of social Europe or of the varying scope and scale of welfare state that is to be found in Europe is that these are consequences of the history of social conflicts in Europe. Clearly, there are other influences and alternative explanations.[12]

The issue, in any case, is how much of a welfare state can be shared between the nation states of the European Union? The initial instrument of providing increasing welfare is faster growth and convergence. But, that cannot be the end result. So, the issue of social integration and social insurance and welfare across the integrated and enlarged Europe is to be addressed at some point in the whole process. The initial starting points in welfare levels is one point at issue here, the other is that there is a diversity of social insurance conceptions which might characterize different European countries also in the longer-run (e.g. Scandinavian vs. Anglo-Saxon ‘models’). A related issue refers to the (historically grown) differences in the functioning of labour markets and labour market institutions which are long-term institutional characteristics of ‘diversity’ in Europe. The analysis to which extent such ‘diversity’ conflicts with ‘integration’ (of labour and product markets) is a central question to the functioning of an ‘ever-widening’ European Union.[13]

Given the strategy chosen and its gradual implementation, there are two key properties that these processes may or may not exhibit. Both come out from:

Mechanism-design considerations of the integration strategy: self-sustainability (or consistency) and self-reinforcement (or dynamic incentive compatibility). The first refers to the consistency property of the integration strategy while the latter refers to its dynamic stability.

In other words: is political integration achievable through economic and legal integration and is this process stable? In the latter sense, is it designed in such a way to withstand various types of shocks and crises? The periodic emergence of crisis should be implied in this integration strategy because it is an inverted one, proceeding as it does from economic to political integration. Thus, the ability to address the consecutive crisis with the instruments of deepened integration and further enlargement is the crucial test of consistency of the process of integration and its stability. Crises provide a sort of ‘stress-test’ of the institutional set-up of the EU at a given time and responses to the crisis (whether to EU-sclerosis in the 1980s or in the current economic and financial crisis) are a way to achieving the required type of ‘deepening’ which ex ante planning to deal with analytically perceived stresses and strains of arrangements (such as in the EMU) could not bring about politically.

This mechanism-design approach can also serve as a way to assess the steering or governing of the integration strategy. This is basically a political economy issue and involves also the public choice type of questions about the adopted voting procedure, the agenda-setting process or power, and the extent to which vote-trading is developed. This applies to the process of enlargement and even to the evolution of neighbourhood policy because the influence of the outsiders on the outcome can also be modelled with the same public choice considerations (e.g. the decision to join or be accepted also requires unanimity of both insiders and outsiders, agenda for negotiations has also to be set, and votes are certainly traded during the negotiations).

The above issues have to be investigated at a detailed level on the basis of the analysis of the cycles of integration and enlargement so far. In addition there is the issue of the relations with the outside or the neighbourhood and the comparison with alternative forms of integration.

The relation with the neighbourhood is governed by the fact that the European Union cannot have external enemies as well as it does not have internal enemies. This is captured by the memorable characterization that the EU integration is a move from Schmitt to Kelsen; that is from friend-foe relation (Schmitt) to the rule of law (where the international or European law holds precedence over the domestic or national law – therefore Kelsen; that is not to be seen as conflicting with the principle of subsidiarity, however).[14]

The considerations of alternative types of integration have a horizontal and a vertical aspect as it were. Horizontally, EU can be compared to alternative regional arrangements. Vertically, i.e. participation in the various levels of ‘depth’ of integration required from full members, integration with the neighbours may stop short of the legal or the political step and could involve the mediation of international, bilateral or regional arrangements, at times in competition with other regional arrangements (such as currently with the Russia-led ‘Eurasian integration bloc’). Though the idea of European integration is cosmopolitan, in its liberal and social philosophy, it may not be the only one and may not be universally applicable.

Who are the subjects of these integration processes? These processes need to be legitimate and in that sense they have to be supported by the citizens or the individuals. However, given the integration strategy, the process starts as an inter-governmental one and gradually turns from being indirectly democratically legitimized to full democratic legitimacy, which of course relies on the support of the individuals. So, conceptually understood, it moves from methodological collectivism to methodological corporatism (i.e. including the representation of organized groups in society) and finally to methodological individualism. Because of this sequencing it has often been argued that the process of integration and the existing institutions lack democratic legitimacy. The same check on the existence of properties of self-sustainability and self-reinforcement apply here. The historical steps of integration, and especially its current state, reveal that the stages are not clearly demarcated, but over-lapping, and complicated political processes define the characteristics and moves through these stages. The joint analysis of these issues together with the issue of ‘diversity’ should form another important direction of research in this project.


Sustainable and reinforcing: the role of theory

The presence of the two important properties of the process of integration and enlargement, sustainability and reinforcement, can be detected by first looking at whether those can be found in theoretical models that feature the described characteristics of the process of EU integration. Perhaps an easy way to see what is meant by this model based approach is to discuss some examples.

Overall integration strategy – the issue of sustainability and reinforcement: there is a sequential strategy here: security then welfare and legal and increasingly social justice: starting as intergovernmental contracts, bringing in the interests of enterprises and financial institutions leading eventually to legitimization by the individuals i.e. voters. One problematic aspects of this sequencing: Alesina, Krugman, Eichengreen, Feldstein and others have raised the issue of sustainability as has persistently the UK. On top of that, there is the issue of reinforcement as it may be the case that the wider the EU, the less consistent is the argument for its gradual deepening.

Legal development – from contract to law, which is the issue of sustainability: The process starts and indeed proceeds as an intergovernmental contractual relationship and only gradually develops into a system of European Law, the latter requiring the emergence of political integration.[15]

Political integration – the issue of reinforcement: it starts as a system of cooperation and consultation and evolves into a highly representative system of governance with gradual increases of democratic legitimacy. The key areas of research are political procedures and power and the incentives for the democratization of the EU.

Economic integration – here we are going to mention a few of the crucial areas. There is the Balassa issue of sustainability of regional free trade arrangements and of the critical level of economic integration that is self-enforcing and leads to institutional, policy, and political integration. There is also the Meade (1955) issue of consistency of free trade with common money and monetary policy.

(i) Common market – issue of reinforcement: the assumption here is that price taking leads to policy taking which leads to centralization of policy making and implementation. The idea is that small open economies have limited policy space or rather limited space for right policies; e.g. given that trade policy is not available and so is increasingly investment policy, monetary policy has limited free space that constrains fiscal policy significantly. Therefore, policy space and effective policy making shift to the Union level, which requires the delegation of state powers to the Union, not necessarily if bad policies are followed by member states, but in particular if they are.[16]

(ii) OCA (optimal currency area) – issue of sustainability: ex ante monetary integration with ex post fiscal integration. One should keep in mind that the original Mundell’s argument for common European currency[17] did not envisage a role for fiscal union to support monetary integration. Asymmetric shocks were not supposed to matter because countries hit by those would have recourse to their reserves held in common currency and could thus smooth their consumption. Common currency would spread the effects of the asymmetric shock throughout the monetary union and that was preferable to the effects of the costs being completely absorbed by the country experiencing this asymmetric external shock. It would basically mean that the country subjected to the shock would be able to borrow in common currency and pay back once the effects of the shocks have been adjusted to, e.g. growth has speeded up. So, rather than closing down the current account deficit, it would basically widen as a consequence of the external shock. The question which emerged with a vengeance in the current economic crisis is, of course, whether this mechanism is sustainable?

(iii) Increased welfare and convergence – the issues (a) of sustainability of liberalization, i.e. of growth and distribution based on the neoclassical model of development via reliance on foreign finance and (b) backward induction type of reinforcement from the end result of full integration to stable short term development and the appropriate medium term structural changes and shifts. The policy framework lacks instruments for short term stabilization, which is basically the effect of reliance on rules and regulations that should anchor expectations and remove the need for an EU wide stabilization mechanism. This is clearly an issue in the current crisis.

(iv) Feasibility to apply a ‘European insurance principle’: fundamentally, a theory of a fiscally federal system for the EU is needed and then the feasibility of an insurance system across Europe as a whole can be assessed. Again, the ‘gaps’ may in some cases be too wide and a gradual process of deepening and widening may be required. The issue will be whether such a process exists and even if it does whether it can be found.

Policy framework – issues of both sustainability and reinforcement: backward induction argument for initial introduction of long term policy instruments that should lead to the development of short term, stabilization policy instruments. Basically, expectation based arguments all rely on one or the other version of the backward induction argument. If deep integration is expected, current behaviour should be compatible with that expectation, which should exclude the need for short term or stabilization policy. There are only shocks to worry about. This is obviously incorrect, as we are learning now, but it clearly was assumed when the EU policy framework was designed. There is also the issue of short term stabilization policy being left to the IMF due to the insufficient level of fiscal integration which would be needed for proper stabilization policy. That was in part corrected for in the Lisbon Treaty but is essentially corrected for now in the crisis or on the go as it were.

The use of rules and conditioning (for enlargement) – issues of incentive compatibility (a variant of the sustainability property): enlargement as a process of gradual satisfaction of conditions that lead to catching up with the process of deep integration. One issue is that conditions are set by the insiders but the assessment of their satisfaction can be negotiated between the insiders and outsiders. Thus, the often voiced complaint is that the letter and the implementation of the conditions, and in the end of the whole legal structure, differ rather widely across different rounds of enlargement.

The possibility of exit – the issue of optimality, a variant of the issue of sustainability: the issue of secession and integration at different speeds introduced only later once the mainstream process of deep integration is seen as being sustainable. It is usually argued that the possibility of orderly secession from the Union can prove to be stabilizing for the Union because it buys additional credibility by integration being permanently and not voluntary only at the point of entry.

Alternatives – la finalité: one alternative can be called the Klaus‘ claim – the EU is an instrument of national liberation; at the end, there is a system of nation states that are at peace with each other under a system of international law. Other alternatives are either the ones that stop short of full integration (perhaps based on the same understanding as Klaus’ claim only with no need to achieve liberation through EU integration), e.g. Turkey, or are just different because those are answers to the same challenges but not in the specifically European manner – e.g. Russian Euro-Asian cooperation or MENA cooperation or other types of regional arrangement – there is, of course, huge literature on regionalism.

Searching for European identity as a process of putting together a constitution – the issue of sustainability: this is essentially an issue of founding European integration on individual rights and obligations, i.e. on citizens rather than just on nation states. One key issue is the creation of the Europe wide tax payer and thus voter that underpins the legitimacy of the emerging political union. Identity plays a strong social role because it is a type of a protectionist measure, against the foreigners, or a type of an insurance by the insiders, solidarity as reflected in social welfare systems. That explains why social and employment issues are most difficult to integrate and are kept at a national and even local level. There is a large literature on economics of identity and federalism that should be consulted. There is also the literature on the size and number of nations based mostly on the work by Alesina and his collaborators. He assumes, without sufficient or any justification, that diversity increases with the size of a state or a federation without providing a measure of diversity. Weitzman (1992) has one proposal of such a measure. Social choice theory is to a very large extent all about that (especially the work by Harsanyi).

These are some of the examples of the types of issues that can be addressed both theoretically and also assessed empirically with these two (possibly more) criteria for the appropriateness and the efficiency of an integration strategy as well as of the way the process has to be governed.


Lessons

What is meant by lessons learned? We need to answer this question in order to know what we are looking for and to design the methodology of analysis and of drawing policy conclusions and recommendations.

In general, one means by lessons learned a list of do’s and don’ts. That means that one learns that (i) if you want y, do x and (ii) if you want y, do not do x. These lessons can be formulated in different ways and there will be quite a number of different cases, but these two are the most basic.

Now, to be able to learn that doing x will give you y, there needs to exits a pretty stable relationship between x and y. For instance, x may be necessary but not sufficient for y and thus doing x will give you y if there is a stable overall environment in which that instrument achieves that aim. For instance, common market may not deliver higher welfare if there is no appropriate regulation or taxation. Similarly, to learn that doing x is not a way to achieve y it is necessary that this is a stable property of this policy relationship and not just a consequence of particular circumstances.

This is rather obvious because it just says that one cannot rely on indicators of association to draw policy conclusions. Methodologically, we need to rely on tools that deliver causal relations in order to be able to draw policy conclusions. In that context, case studies can be very informative because they enable a detailed description of the way various factors interrelate in any policy strategy and that may not be recoverable from cross country and cross section analysis.

In general, it will be important to think of the ways in which causal methods could be used and thus policy impacts measured or simulated. The process of enlargement provides for a series of quasi-experiments because each round of enlargement distinguishes between the treatment group, which is joining in, and the control group that, which is being left out – indeed, there are several groups undergoing various doses of treatment: e.g. the insiders, those joining in, those left in the queue, those which face delays (potential entrants), and those that are left out. Similarly, every enlargement has effects on deepening with similar differential effects on various groups of countries. That should allow for various causality identifying methods to be used (e.g. difference in difference and instrumental variables estimation). There is also a possibility to use the long-term effect causal analysis of Acemoglu and Robinson to detect possible processes of identity formation that have consequences for the interest in enlargement and for absorption capacity.


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Peščanik.net, 15.03.2012.

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  1. Our main interest is in enlargement, but of course there is no enlargement before integration, i.e. there is no widening without some deepening. Literature on the roots and motives of European integration is vast though comprehensive treatments are rather rare. This research however needs to be comprehensive with an integrated view of political, economic and social considerations.
  2. E.g. all the ideas of “permanent peace” since the rise of the system of nation states; see e.g. Wight (1977), Bobbitt (2002), Kissinger (1994).
  3. All of the proposition like statements in the text should be seen as assertions or hypotheses and can be proved wrong.
  4. See Baldwin (1993, 1997) for one theory of why liberalization deepens and spreads. A recent account, somewhat debatable, of why renationalization may continue to be attractive (due to decision making procedures) see Berglöf et al. (2008).
  5. For an influential argument for European Constitution see Buchanan (1990).
  6. For early treatments see Scitovsky (1958) and especially Balassa (1961). For an even earlier statement see Hayek (1939). The idea of stages of integration and of interconnection between market liberalization and policy coordination is implicitly or explicitly present in all these early discussions of European integration: on Balassa’s contribution and its relation to other early authors on economic integration see Sapir (2011). See in addition Tinbergen (1954, 1959).
  7. On public goods aspect see Alesina and Wasziarg (1998) and also a score of papers on international unions, currency unions, and optimal number of currencies by Alesina and various collaborators.
  8. The underlying idea has been that of Pareto improvement with distributional issues being faced only later, e.g. with the understanding that certain mechanisms of compensation are needed. The exception is common agricultural policy which has been there almost from the beginning and has raised questions about the trade-off between efficiency and equity that it introduced which is not necessarily Pareto improving and indeed leads to Pareto inferior outcomes.
  9. This is not to say that global experiences are not relevant. Clearly, Great Depression has had a profound implication for the understanding of the desirability of economic integration. Further, the experience of political and economic development of the USA has been very influential on the institutional development. Also, the European assumption, an assumption that there is something distinctly European may not be true. Clearly, Britain may see itself and be seen by the others as different and the same goes for Russia and countries close to it and also for the Balkans, in particular Turkey. So, this is an assumption, which means that it may be false. That would lead to different understanding of the boundaries of various types of integrations, e.g. of various types of neighbourly relationships. Also, some countries may participate in different regional integrations and all kinds of relationships are possible. All of that should be explored. The key however is that this assumption is not theoretical but historical. That is why we need to relate history with theory, which gives us the understanding of the chosen strategy of integration and the gradual understanding of its final aims.
  10. See an early discussion by Sapir (1992).
  11. See Lindert (2004).
  12. On different social or welfare states in Europe see Sapir (2006).
  13. One influential treatment, at least at the time, is Alesina and Perotti (2004).
  14. See Weiler (2001).
  15. See e.g. Habermas (2006, 2011).
  16. As everything, this is a claim or a hypothesis, we may learn through our research of successive rounds of integration that this in fact is not the case and that price taking can be divorced from policy making – which is probably the UK position. It may also be the case that this is true but not necessarily desirable in which case it may turn out that the process of deepening leads to rising opposition to the whole integration idea, which however would require the abandoning of the common market and the attempt to strengthen price taking conditions and behaviour.
  17. See Mundell (1971). On the lessons that can be learned from the history of monetary unions see Borda and Jonung (1999), Cohen (2001), Flandreau (2001), Dornbusch (1993) Rockoff (2000). On some theoretical issues see McCallum (1999). The literature on OCA is extremely large; a more recent review is by Mongelli (2008) based in part on earlier work Mongelli (2002) and De Grauwe and Mongelli (2005). There are also book length histories of monetary unions e.g. Chown (2003). On political economy considerations see e.g. Goodhart (1995) and Vaubel (2004).