Differentiated integration – an enabler for ambitious EU reforms?

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By Thomas Winzen

“Overall, differentiated integration is unlikely to push through the key reforms currently under discussion.”

Institutional reform and enlargement are back on the EU agenda. However, the reform proposals require changes of the EU’s treaties and are highly controversial. The group of accession candidates is the most challenging yet. It is far from certain that the 27 member states that will have to adopt and ratify treaty changes will be able to find common ground. Against this backdrop, one might wonder whether differentiated integration could enable an agreement where the need to get all 27 countries on board threatens to block negotiations.

I recommend caution, however. Differentiation – the practice of exempting or excluding select member states from certain policies, rights, and obligations – is a realistic and helpful enabler of reforms only under certain conditions. With respect to key reforms on the current agenda, it is (1) ill-suited as an instrument since opposition is not limited to select countries, or (2) not viable since the reforms require the participation of all countries. Finally, differentiation is useful and viable for enlargement, but its actual application is years of challenging reforms away.

Can differentiated integration facilitate reform?

The appeal of differentiated integration is understandable. It has facilitated major reforms in the past. The Euro, the Schengen area and cooperation in justice and home affairs would not have been possible without exempting reluctant member states. Each round of enlargement has required transition periods. However, differentiation is not a panacea for all bargaining problems. It is a feasible and helpful option only under certain conditions (e.g. Schimmelfennig 2019; Schimmelfennig et al. 2015; Schimmelfennig & Winzen 2020):

• First, opposition must be limited to a small number of countries. If opposition is widespread, for ideological or other reasons, reform negotiations tend to be unsustainable in the first place and cannot be saved by national opt-outs and transition periods for select countries. In exceptional cases, an avant-garde group of countries could still emerge, but it would have to be viable and meet permissive institutional conditions.

• Second, differentiated integration must be viable. The avant-garde group must provide the scale, resources, and political will to advance on their own and exclude or exempt sceptical members. They must also be willing to tolerate possible free-riding opportunities (“positive externalities”) from their efforts (Kölliker 2001).

• Third, the EU’s formal and informal rules and norms must permit differentiated integration. For example, if decision-making rules require all member states to agree, as is typical in treaty reform negotiations, any form of differentiation that leaves a potential outsider worse off becomes unlikely. Organising cooperation outside the treaty framework remains a possible alternative only in the case of new mechanisms, such as the European Stability Mechanism.

  Moreover, differentiation could run counter to EU norms and practices. For example, in some policy areas there is ample experience and precedent for differentiation, while in others uniform integration has always been or has become the norm. In these areas, proposals for differentiation might be perceived as illegitimate. In addition, differentiation may require the support of EU institutions such as the Commission and the Court of Justice, which may be called upon by proponents to prepare the ground for it and by opponents to assess its legal validity.

In prominent cases of differentiation in the past, these conditions were in place. For example, the creation of the Schengen area was supported by some but not all member states, and could be organised in a viable way among the proponents. Moreover, as a new policy, it could initially be established outside the treaty framework, thus circumventing the concerns and objections of other member states. It remains to be seen, however, whether current reform proposals could also be facilitated by differentiation.

Differentiation and major reform projects

I illustrate the application of the conditions discussed so far on the basis of three reform ideas: the extension of qualified majority voting (QMV) to all areas of external relations, the creation of new and stronger fiscal solidarity mechanisms in the EU’s permanent budget, and the enlargement of the EU to include the current candidate countries. summarises my assessment that differentiation is unlikely to help in the adoption of two of these reforms.

Reform	Opposition to the reform	Viability of differentiation	Institutional conditions	Differentiation facilitates reform
QMV in FP	Many governments	Limited	Mixed	No
Fiscal solidarity	Many governments	Limited	Mixed	No
Enlargement	Select governments	Viable	Permissive	Yes

Extending qualified majority voting to foreign policy

The main challenge in extending qualified majority voting (QMV) to foreign policy is the widespread opposition. According to a recent report (König 2020), with 7 governments in favour, 10 against and 10 ambivalent or sceptical, select opt-outs would not allow the reform to pass. Even if the proponents of the reform wanted to go ahead as an avant-garde, the viability of their endeavour would be in doubt. While France, Germany, and Spain would provide scale and resources, other key actors such as Italy and Poland would be missing. Moreover, the impact of EU foreign policy depends in part on the ability to leverage market power, which may require trade or travel sanctions or conditions in international treaties. In these areas, the participation of all or almost all member states would be required to have an impact.

The formal and informal institutional context for using differentiation to extend QMV to external relations is also not favourable. The ordinary and simplified treaty reform procedures would give all opponents a veto. Moreover, the vetoes could not be circumvented by a new treaty outside of the treaty framework. External treaties are an option for new competences and actions that can be integrated into the EU framework over time, but not a formally defined and thus possible way to redefine existing competences and procedures.

In other respects, including informal norms and practices, the institutional context is more mixed. In foreign policy, Denmark and Malta have set a precedent for differentiation. Moreover, “differentiated cooperation” is widespread in this area (Klose et al. 2023). And the mechanism of constructive abstention, whereby a country allows a decision to be taken but is not bound by it, already allows for legislative differentiation. Precedent and existing flexibility should increase the legitimacy of proposals for new differentiation.

To sum up, it is unlikely that the area of external relations will move to QMV due to government opposition. Differentiated integration is unlikely to help, given the level of opposition, the limited viability of the proponents as avant-garde, the restrictive reform rules and the ambition to reform existing rather than create new procedures. The flexible nature of the policy domain lends legitimacy to differentiation proposals, but is a secondary consideration. If anything, opportunities for constructive abstention and differentiated cooperation further reduce the pressure for formal reform.

Enhancing fiscal solidarity

Proposals to enhance the EU’s fiscal solidarity through common debt or increased own resources typically face resistance from likely contributors. Even recent reforms have been so controversial that they had to remain one-offs (Covid recovery), outside the EU treaty framework (European Stability Mechanism, ESM) and/or subject to reform conditions for recipients (both). Germany, in particular, has consistently been highly sceptical of major budgetary reforms (Heermann et al. 2023; Schramm 2021). This reform may therefore stall and differentiation may be unhelpful if opposition proves to be widespread.

But what if, in the right circumstances and under the right pressure, as in past reforms, all but a few fiscally strong member states supported strengthening fiscal solidarity in the EU budget? Even then, the viability of the project would be in doubt. If a major net contributor to the EU budget or guarantor of EU debt, notably Germany, refused to participate, the project could prove fiscally unsustainable (irrespective of the political question of proceeding without a large member state). An opt-out for smaller or medium-sized contributors such as Finland or the Netherlands, might be feasible. However, such an opt-out could trigger a cascade of further demands as the remaining contributors would have to shoulder more of the burden (Jensen & Slapin 2012).

The institutional conditions for the use of differentiation to reform the permanent EU budget are also restrictive. Opponents of fiscal solidarity can veto reforms. Moreover, the EU’s permanent budget, as an existing policy, can only be reformed from within the treaties. Proponents of reform could not circumvent vetoes by proceeding outside of the treaties (e.g., Nettesheim 2020). Whether differentiation would be legitimate, precedented, or supported by the EU institutions, then becomes a secondary question. In any case, the EU’s permanent budget has remained largely undifferentiated. Proposals for a differentiated fiscal solidarity mechanism would have to overcome this precedent and the likely reluctance of the Commission, the Court of Justice and the European Parliament if they wanted this mechanism to be integrated into the permanent budget.

The institutional conditions for the creation of entirely new solidarity funds or mechanisms outside of the treaty framework are more permissive, as the case of the ESM and proposals made during the negotiations of the Covid recovery fund illustrate. Considering this possibility, the main obstacle to strengthening fiscal solidarity in the EU and the application of differentiation for this purpose, lies in limited political support and viability.

Enlargement

Current events have revived the enlargement debate. However, the candidate countries face serious economic, governance, democratic, territorial, and security challenges (Schimmelfennig & Sedelmeier 2020). Their accession is likely to meet with resistance from member states concerned about the (future) redistribution of subsidies, competition in labour and services markets, efficient implementation of EU economic, monetary, migration, and border policies, and democratic backsliding. Even the opening of negotiations has been protracted, in particular because of France’s scepticism. The candidates themselves are likely to seek to relax certain obligations, such as the EU’s competition and state aid rules.

If the candidates make progress in the negotiations, which is uncertain given domestic challenges and ambivalent EU promises (Schimmelfennig & Sedelmeier 2020), a situation similar to previous enlargements could emerge, with most member states in favour and some sceptical. Temporary differentiation – transition periods and conditions before the new members can benefit from full membership rights – could then help shift costs that some member states fear to future governments or even avoid these costs entirely if the new members adapt successfully (Schneider 2007). Thus, while enlargement is not realistic in the immediate future, it could become likely over time and could plausibly be facilitated by differentiation.

The use of differentiation in the context of enlargement is also a viable option. For one thing, it has been used extensively in previous enlargements (Schimmelfennig & Winzen 2017). The viability of differentiation presupposes that enlargement remains sufficiently attractive to candidate countries to prevent them from withdrawing their applications. The time-tested practice of making differentiation temporary and conditional and of flanking it by favourable exceptions has helped to ensure that this condition was met in past enlargements. Evidence also shows that willing new members can end almost all differentiation within the first decade of membership (Schimmelfennig & Winzen 2017). If the EU continues its current practice, differentiation is unlikely to make membership unattractive.

Finally, EU rules facilitate differentiation in the context of enlargement. All member states must support the accession of new countries, which gives sceptics the power to push for differentiation. Candidate countries, on the other hand, could withdraw their application but tend to be more eager to join. For them, joining the EU remains the best option, unless the transition periods on the table prove so unattractive as to make membership a losing proposition (Schneider 2007). Moreover, as noted above, there is ample precedent to strengthen the legitimacy of enlargement differentiation, provided it is applied consistently and temporarily or conditionally (Schimmelfennig 2014).

In sum, in contrast to the previous two cases, differentiated integration remains a likely and helpful, as well as viable and proven, instrument in EU enlargement. However, differentiation is unlikely to be applied soon. Candidate countries first have to overcome significant reform challenges, and the EU faces its own challenge of maintaining a consistent and credible membership promise (Schimmelfennig & Sedelmeier 2020).

Is differentiated integration losing relevance?

Overall, differentiated integration is unlikely to push through the key reforms currently under discussion. Where it could help, in enlargement, years of accession negotiations lie ahead. It may seem puzzling that differentiation has helped integration in the past but should be less useful now. Yet the EU is now far more integrated than it was before the Treaty of Maastricht, and, as it is concentrating on reforming the few remaining areas where integration is weak, government scepticism is strong and solidarity is needed. In these areas, differentiation often proves irrelevant because opposition is too widespread, unworkable because solidarity rather than opt-outs is required, and institutionally illegitimate or difficult to adopt.

This does not mean that differentiation has become irrelevant. Opt-outs have been crucial for major legislative projects, such as the creation of the European Public Prosecutor. The threat of differentiation has also proved to be an important and recurring negotiation tool, for example when the EU proposed to adopt the Covid recovery mechanism or aid to Ukraine partly outside of the EU treaty framework to overcome veto threats. For the time being, however, the main application of differentiated integration may be found in decision-making (Duttle et al. 2017) rather than institutional reforms.

Thomas Winzen is professor of European Politics and International Relations at Heinrich Heine University Düsseldorf.

This contribution is part of the thematic forum “Supranational governance between diplomacy and democracy – current debates on EU reform”, published in cooperation with the online magazine Regierungsforschung.de.

Pictures: Meeting room of the European Council: EU2017EE Estonian Presidency [CC BY 2.0], via Wikimedia Commons; portrait Thomas Winzen: private [all rights reserved]; EU flag: Arno Mikkor (EU2017EE) [CC BY 2.0], via Flickr.