17 September 1998 - 19 September 1998

The Development of the European Union

Chair: The Rt Hon John Major MP

We were keenly aware, as we began our conference, of meeting at a time which combined for the European Union a turbulent global economic scene, a formidable agenda – especially monetary union – and the recent fact or forthcoming likelihood of change in the leadership of several key countries around the world.  We set ourselves to consider how, and how well, the Union might steer its way forward amid all this.

Might there be a route-map, or at least a clearly defined destination, to aid navigation?  However much we might hanker for that, few of us thought that the journey could be simplified in any such tidy way.  The Union as it now existed had come a long way pragmatically, almost by stealth;  neat consensus on its long-term character was unattainable, and any quest now for that probably divisive;  step-by-step evolution had to be the principle, with emphasis more upon useful tasks than upon structural concepts.

The great step impending was of course monetary union, now irrevocable and probably assured, by weight of political commitment, of at least declaratory success.  Its prospect had already had wide-ranging and generally salutary effects on economic discipline (though some accepted qualifiers would no longer strictly pass the entrance examination).  Its implications, we were mostly sure, would very soon broaden out beyond the initial formal bounds;  a strict division between monetary and fiscal policy, said one comment, was an unsustainable anachronism.  We noted a little uncomfortably that the pace of repercussion might well be forced by the pressure of world economic problems (whether or not these were rated as constituting general crisis).  Like it or not, the Euro must be expected rapidly to become a significant global reserve currency;  and this would entail responsibilities alongside the United States dollar - and, so most US participants thought, as a burden-sharer welcome to the US - in the world financial system.  This would propel the Euro’s managers in some degree into international business (even if, as more than one voice suggested, pro-active vigour in public management of interest and exchange rates was not necessarily a desirable response to economic stress).  That development in turn might well highlight questions about the nature and channels of accountability of the European Central Bank, especially given the risk that its assigned primary concern to ward off inflation might make it a whipping-boy for accusations about neglecting recession for yesterday’s problem.  But we were anyway robustly reminded that the impact of the Euro was not only – not even primarily – a matter for governments or public institutions to shape;  private business was already making its own responses, as the upsurge of cross-border mergers and partnerships showed.  Factors like these, and the easier flow of investment EU-wide, would change the landscape – and, most of us thought, provide net benefit to consumers (for example through more transparent pricing) on a scale which political leaders and commentators had not yet sufficiently emphasised to their publics alongside the various "downside” fears about the project.

The scope, prospect and implications of further enlargement of the Union bulked very large in our discussions.  Whatever our hindsighted preferences in the widening-versus-deepening debate, the time for pursuing that was past.  There remained nevertheless real differences in attitudes to enlargement among existing members;  most notably, French opinion polls rated it very low among matters of interest, whereas the UK – at least at governmental and élite-opinion levels – was keen to see it advance (though UK influence with partners in that direction might continue to be diluted by suspicion about motivation so long as the UK remained outside monetary union). 

Why was enlargement a good thing, and how could publics conscious of awkward near-term repercussions be persuaded of that?  Candidate countries viewed EU membership as a cardinal aspect of political “belonging” – NATO, said a vivid aside, was a safe place, but the EU was a home.  The key theme – a moral mission, a historic obligation, as other comments had it – was (in line indeed with the original concept of the European effort) to re-embrace peoples politically and democratically, to help bequeath a better Europe to future generations.  But we rather doubted whether any such sentiment had yet gripped general popular feeling among existing members;  too many perhaps still subconsciously viewed the ex-Communist countries through a psychological Iron Curtain.  We acknowledged the enthusiasm of the United States for EU enlargement;  and we noted how crucial German attitudes would be in sustaining its momentum.

How widely should enlargement eventually reach?  It was, we thought, probably unwise as well as unnecessary to attempt to set final boundaries anywhere;  even among some of the already-declared candidates the difficulties of qualifying and the burdens of negotiating set the timing of possible accession at the outer limits of reasonable foresight, and to advertise permanent exclusions now would harm relationships to no good purpose.  This general principle aside, we were divided about Turkey (and we recognised also how complex and awkward were the interactions between that issue and the question of accession by Cyprus).  None of us found it easy to contemplate Russian membership as ever realistic;  it was powerfully urged, among several other obstacles, that Russia seemed as yet far from shedding the imperial mindset as Britain and France had done.  Our gloomy discussion of the Russian prospect conjectured that if Russia took a revanchist path this might intensify the demand of its westward neighbours for swift entry to the shelter of the EU and of NATO - but that at the same time Russian economic collapse might actually make it more difficult for those countries, like Bulgaria and Romania, for whom Russia remained an important trading partner to develop sufficiently to meet EU entry criteria.

There was no gainsaying that enlargement must, at least for a considerable time ahead, heighten the reality of a two-speed Europe and so of added complexity in managing Union business.  Whoever the earlier entrants might prove to be (and we heard a vigorous plea that laggards should not hold back the readier) it was not to be expected – nor indeed, some participants thought, would it be desirable amid their incomplete economic development – that they would quickly conform to the entire EU acquis (monetary union quite aside) as it had evolved for advanced economies.  That thought led us to note in parallel that it would be important domestically, within new-entrant countries, not to let adjustment to EU needs become a general scapegoat for the pain of changes which in reality were essential anyway in the transition to full free-market rule-of-law conditions.

That argument in turn triggered another analogous idea of much political importance : that among the publics of existing members enlargement itself should not be made scapegoat for (or excuse for delay in tackling) uncomfortable changes which – even if the need might be deepened by the fact of enlargement – had to be confronted in any event.  The Union already had no alternative but to address such hard issues as reforming the common agricultural policy;  settling future financial contributions (where in particular the striking imbalance between France and Germany could scarcely endure);  adapting for the future the operation of the structural funds;  and undertaking institutional reforms.  Of these four issues the first three, for all their difficulty, might be brought to some degree of resolution in the next year or so, especially during the German Presidency in the second half of 1999.  None of us however was optimistic about the Union’s likely performance in solving the main institutional puzzles, plainly unsatisfactory as current arrangements were.

As we turned our attention to the trade field we were minded to judge the institutional performance of the EU within the world trading system on the whole favourably, agriculture perhaps apart.  The next (“Millennium”) Round in WTO negotiations would inescapably bring in matters found difficult in the past, such as intellectual property and certain service categories;  it was to be hoped that the EU would be constructively active and open in this Round.  One or two voices expressed unease at the extent to which individual-nation pressures of narrow motivation might still dilute EU firmness or challenge the scope of EU competence (for example by invoking the hard-to-define concept of subsidiarity – in itself an important and necessary strand of EU evolution – to mask protectionist concern).  We heard it urged also that EU commercial stances should be sensitive to environmental and social dimensions – at least to the extent of rigorous observance of relevant agreements already entered into.  That urging was however matched by strong comment that the EU should not distort trade policies by using them as a lever to advance its objectives in these fields;  such objectives – often undoubtedly important – should be pursued in their own right by their own political mechanisms (which might themselves, one participant conjectured, need for effectiveness to include some extension of EU collective competence).

If Union collective performance in the trade arena was mostly to be applauded, that could by no means be echoed in foreign and security policy.  Maastricht aspirations remained unfulfilled;  Europe, said more than one non-European, remained in these matters slow and incoherent, and a difficult interlocutor.  However plain the advantages of a single voice, for example in multilateral diplomacy or in issues of international law, there seemed little solid prospect of its being provided.  We suspected that, despite current ideas of appointing an eminent individual to speak for the Union, this weakness (compounded, some thought, by the inefficiency and unevenness of a continually-rotating Presidency system) would remain for a long time to come a reality which must simply be accepted.  If the EU as a collective entity attracted the label once harshly pinned upon one of its members – “economic giant, political dwarf” – that might be fact;  for example, we were nowhere in sight of conditions in which Britain, France and Spain would assign to the Union, or to majority voting within it, prime responsibility for conducting historic relationships with (respectively) the Commonwealth, Francophonie and Latin America.  We noted uneasily that all this would continue to make collective Europe from time to time appears to the United States – especially the Congress –an exasperating partner or an unsatisfactory burden-sharer.  But the increasing habit of timely dialogue and pragmatic case-by-case cooperation in doing the doable could nevertheless yield valuable dividends in combined output and in credibility.

All this applied also – some thought a fortiori – to the defence field.  Europeans still overwhelmingly saw NATO, not the EU, as the prime institutional player (and though differences in membership were plainly manageable in the near term, some participants saw closer convergence as inevitably logical on a longer view).  Despite the striving towards a more effective joint European contribution within NATO, the political realities –unlikely to be reversed – of comparatively modest and even declining defence budgets in Germany and elsewhere set sharp limits to hopes for a Europe of enhanced free-standing weight in global security.  We were very ready to recognise the value of moves to rationalise European defence industry into a more efficient and less fragmented configuration capable of a healthier relationship with US industry;  but most of us doubted whether this in itself could play more than a secondary part in evolution towards common defence policies or force structures.

We came back repeatedly, within almost every particular subject, to the linked issues of the Union’s perceived legitimacy – the “democratic deficit” – and the levels of public sympathy and acceptance.  Eloquent interventions argued variously for the direct election of the Commission President or of the postulated foreign-policy representative (a personal focus, it was urged, was essential to perceived accountability) or for more extensive direct involvement of national Parliamentarians in EU business.  We were reminded that the prime obstacles to change in such respects were often national governments, jealous for their own authority and status.  We found ourselves disappointingly unable to identify agreed and politically-promising paths forward.  But we were all aware how important it was to devise ways of progressively strengthening a sense of shared Europeanness – a common body politic – among publics who would over the coming years have to be reconciled to numerous developments (such as economic changes, the acceptance of free movement, and acquiescence in the impact of law different from one’s own national tradition) which would entail real discomforts, with winners and losers, and which as a result would readily offer many fear-focused soundbites to those opposed either to the whole European idea or to key components.  Near-term political temptations to deflect blame to these components, or to a demonised Brussels, or generally to a Union accused of simply failing to provide the protection for which its peoples looked, would be widely felt, especially if (as seemed only too likely) world economic conditions increasingly made job insecurity a central focus of popular concern.

We were challenged to ask ourselves whether, amid all this massive and testing agenda and the lukewarm character of much public reaction to what was still too widely seen as a project of political élites, there might be a real possibility that the project would stall – that enlargement would simply not happen, for example, and the outstanding financial and institutional issues remain permanent stones in the Union’s shoe.  We did not think so, or at least we did not want to think so.  But if the risks were to be fended off there was a mounting need for determined leadership – above all by governments in the larger countries – to re-connect the project with peoples, to re-energise a sense that it mattered and was good, and to clarify and emphasise its long-term opportunities and benefits.

This report reflects the Director’s personal impressions of the conference. No participant is in any way committed to its content or expression.

Chairman: The Rt Hon John Major MP
Prime Minister of the United Kingdom 1990-97


Mr Thomas d’Aquino
President and Chief Executive, Business Council on National Issues
HE Monsieur Jean-Pierre Juneau
Ambassador to the European Union
The Hon Barbara McDougall PC
Chair, AT&T Canada Long Distance Services Company;  formerly Secretary of State for External Affairs
The Hon Roy MacLaren PC
High Commissioner of Canada to the United Kingdom
Mr Grant L Reuber OC FRSC
Chairman, Canada Deposit Insurance Corporation;  President, Canadian Ditchley Foundation

Mr Max Jakobson
Independent consultant;  formerly Permanent Representative to the UN

Madame Pascale Andréani
Adviser on European Affairs to President Chirac
Monsieur Gilles Andréani
Director, Centre d’Analyse et de Prévision, Ministry of Foreign Affairs
Monsieur François Lagrange
Chairman, National Commission for Privatisation

Dr Konrad Adam
Correspondent, Frankfurter Allgemeine Zeitung
Dr Bernhard May
Senior Research Fellow, Research Institute of the German Society for Foreign Affairs

Dr László Surján
Member of Parliament;  Vice-Chairman, Foreign Affairs Committee

The Hon John Bruton TD
Leader, Fine Gael party;  Prime Minister 1994-97

HE Ambassador Sadayuki Hayashi
Ambassador of Japan to the United Kingdom

Professor Drs Ruud Lubbers
Professor of Globalization, Catholic University of Brabant at Tilburg;  Prime Minister 1982-94

Dr Miguel Herrero y Rodríguez de Miñón
Lawyer;  Member of Parliament 1977-93

Mr Jan Ström
Political Adviser to Prime Minister


Professor Vernon Bogdanor CBE FBA
Professor of Government, Oxford University
Sir Samuel Brittan
Principal economic commentator, Financial Times
Sir Nigel Broomfield KCMG
Director-designate, The Ditchley Foundation;  formerly Ambassador to Germany
Mr Robert Cooper CMG MVO
Minister, British Embassy, Bonn
Professor Norman Davies
School of Slavonic and East European Studies, University of London
Mr Andrew Gowers
Acting Editor, Financial Times
Lord Haskins
Chairman, Northern Foods plc
Mr Emyr Jones Parry
Political Director, FCO
Sir John Kerr KCMG
Permanent Under-Secretary of State, FCO
Lord Levene of Portsoken KBE JP
Chairman, Bankers Trust International;  formerly Chief of Defence Procurement
Mr Roger Liddle
Prime Minister’s Policy Unit, No 10 Downing Street
Dame Pauline Neville-Jones DCMG
Vice Chairman, Hawkpoint Partners Limited;  formerly Political Director, FCO
Mr Xan Smiley
European Editor, The Economist
Lord Tugendhat
Chairman, Abbey National plc;  formerly Vice President, European Commission
Mr Hugo Young
Political columnist, The Guardian

The Honorable Reginald Bartholomew
Vice Chairman, Merrill Lynch Europe Holdings Limited;  formerly Ambassador to Italy, to Spain and to NATO
Mr Robert  Conway
Limited Partner, Goldman Sachs International, New York
Mr T Jefferson Cunningham III
Chairman, Premier National Bancorp Inc
Mr Thomas G Donlan
Editor, Editorial Page, Barron’s National Business and Financial Weekly
Mr Francis Finlay
Co-Chairman, President and Chief Executive Officer, Clay Finlay Inc
The Honorable Richard N Gardner
Henry L Moses Professor of Law and International Organization, Columbia University;  formerly Ambassador to Spain and to Italy
Mr Anthony Gardner
Associate, Coudert Brothers, New York
The Honorable James G Lowenstein
Senior Consultant, APCO Associates;  formerly Ambassador to Luxembourg
Mr Richard K Thomas
Chief Economics Correspondent, Newsweek magazine