Report

06/2015

A blueprint for reform of the

European Union
Raoul Ruparel and Stephen Booth
Our Co-Directors
Europe faces a stark
Stephen Booth
choice: fundamental change
Co-Director or permanent decline
The EU is (literally) not working. Millions of its young people
Raoul Ruparel are without work, economic growth is stagnating, and political
Co-Director extremism is spreading across the continent.

I think the people
will go for the kind of
prospectus now being offered
by the think tank Open Europe
stay in the single market, but
axe much of the rest.
Boris Johnson, Mayor of London
Open Europe drives the change Europe needs. Ten years since
its foundation, Open Europe has developed a robust reputation
for its timely, accurate analysis and its ability to formulate and
influence policy.
With offices in London, Brussels and Berlin, we are leaders
in the field of European Union policy. Though many of our
competitors are EU-funded, and have budgets up to ten times
the size of our own, our impact is unrivalled. We are cited more
than any other body looking at EU policy across the Worlds
online, print and broadcast media.

Whatever the future for Europe and the UKs position in

it Open Europe will continue to be at the centre of events,
making the case for democracy, accountability and free markets.

We do hope you will join us.

Stephen Booth Raoul Ruparel

Co-Director of Open Europe Co-Director of Open Europe

Offices

Open Europe Open Europe Brussels Open Europe Berlin

7 Tufton Street 113-115 rue du Trne, Oranienburger Strae 27
London B-1050 10117 Berlin
SW1P 3QN Brussels Germany

+44 (0)20 7197 2333 +32 (2) 540 86 25 +49 (0)30 2758 1365
www.openeurope.org.uk info@openeuropeberlin.de
info@openeurope.org.uk www.openeuropeberlin.de
@OpenEurope
A blueprint for reform of the European Union

A blueprint for reform of the European Union

If the Prime Ministers EU negotiations are to be judged a success the forthcoming In/Out
referendum should not simply be a vote to approve or reject a list of concessions to the UK
but rather a mandate for a path to rolling reform. The target should be a new settlement
that leads to a genuine change of direction to Britains relationship with the EU. It may
not be possible to achieve everything before the referendum but, in order to avoid a narrow
victory for Yes or No, which would only estrange half the British electorate, fundamental
reform will be needed that establishes a path to a multi-form EU.

Flexibility and the rights of non-Euro states

The Single Market should be the foundation for the EU. Upon this foundation, the EU
should be flexible enough to allow the Eurozone states to unite politically as much as
they wish, and other member states, including Britain, to be full participants in the
market but free to opt in or out of common measures in other areas such as defence,
crime, employment law and the environment. Further integration by some should not
discriminate against those who do not take part. This would establish an EU in which
ever closer union would no longer be the guiding principle for all.

Competitiveness

Boosting trade across the Single Market and with global partners should be the EUs
primary aim. The Single Market is a more solid bedrock than a vague aspiration for
political union. Not only would this principle put Britain more at ease in Europe, it could
also attract Norway and Switzerland, creating a more dynamic market.

Though it requires common rules and institutions, trade is created by businesses and
entrepreneurs, not top-down from Brussels. The burden of regulation must be reduced.
Europe should embrace its member states diverse approaches to labour markets,
innovation and public services as experiments that can become best practice rather than
stifling national differences with one-size-fits-all solutions.

The Single Market should place greater emphasis on services, digital and energy
removing trade barriers to the services sectors alone could boost EU-wide GDP by
over 2%. EU spending needs to be overhauled. Its common budget should be devoted
principally to projects too expensive for countries to undertake individually. A modern
EU budget would not spend well over half of its money on agriculture and on recycling
regional development subsidies between wealthy states.

Democratic accountability

Decisions involving sacrifice, whether economic or social, need democratic assent. Across
the EU, average turnout in the European Parliament elections is 43%, compared to 70%
in national elections. The answer is simple: national parliaments should be the ultimate
democratic check on EU decisions.

The free movement of workers helps to allocate human capital across Europe but if
public support is to be maintained, free movement cannot involve unrestricted access
to disparate welfare systems. Meanwhile, foreign policy, pollution and cross-border
crime are areas where common challenges can be best met through cooperation between
national governments rather than being outsourced to the EU.

2 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
A blueprint for reform of the European Union

What needs to change?

A fundamental change of direction in the EU will not come about through political
declarations alone. Concrete reforms are required. Below we outline the key reforms
which would contribute to the overarching objective of achieving a new vision.

Flexibility and the rights of non-Euro states

1. Qualify ever closer union

It was confirmed in the June 2014 European Council conclusions that, de facto, not
every member state is heading in the same direction or at the same speed. This should be
set out in the EU treaties. This could be achieved by allowing the UK an opt-out from ever
closer union or by amending the wording to formally establish that this concept does not
bind every member state to further integration.

2. An explicit commitment to a multi-currency EU

As long as the EU is seen as a single currency union, non-Euro members will be second-
class citizens. Removing the requirement for all countries to join the Euro and affirming
the EU as a multi-currency union would establish that the Eurozone is not the vanguard
of the EU but simply a voluntary constellation within the Single Market.

3. Safeguards for non-Eurozone states

To further reinforce the shift to a multi-currency union, non-Eurozone safeguards would

establish one or a combination of:

a) An emergency brake or voting mechanism allowing a member state or group

of member states to suspend the majority voting process if a proposal impinges
on the Single Market or the rights of non-Euro members (as seen by national
governments).

b) Extension of the double majority principle (currently used at the European

Banking Authority) into other policy areas to protect rights of non-euro states
more broadly.

c) The right to object to specific EU proposals on certain grounds, such as

fundamental economic or social national interests or objections by national
parliaments.

4. A mechanism to opt in/out of future integration in non-Single Market areas such as

employment, environment and justice and home affairs

Integration outside the Single Market, which should be tightly defined as the four
freedoms (goods, services, capital and people) plus common rules on competition policy
and state aid, should be voluntary. This could be achieved by formally establishing
the areas of the EU treaty in which future integration would be voluntary. This would
not prevent other member states integrating further under enhanced cooperation, a
procedure which already states that further integration should not discriminate against
non-participants or undermine the Single Market.

3 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
A blueprint for reform of the European Union

Competitiveness

The competitiveness agenda is crucial to refocus the EU on what it does best and where it
adds most value. For too long the EU has been seen to be doing too much but too little of
it well. Increasing the economic and trade benefits from the Single Market should be the
shared aim of Eurozone and non-Eurozone member states alike.

5. Liberalisation of EU services, energy and digital markets

Launch a renewed push to liberalise the EUs services sector. Ensure strict implementation
of the Services Directive. Push ahead with breaking down barriers in energy and digital
markets.

6. Ambitious timetable for new EU free trade agreements (FTAs)

Set out a timetable and process towards ambitious FTAs with Emerging Markets such as
India and China. Consider pushing for partial or sector specific FTAs if all-encompassing
FTAs cannot be agreed quickly enough. Living FTAs which can be expanded over time
should also be considered.

7. Less and better quality regulations

a) Open up the ability to review old legislation. Allow for amendments or

opt-outs to high cost regulations outside the Single Market for example the
Working Time Directive or the Agency Workers Directive.

b) Improve the process of regulation with the creation of an independent

Impact Assessment Board. Include sunset clauses and growth tests for all EU
legislation. Review old legislation to remove protectionist clauses.

8. EU budget reform

a) Only EU member states with GDP per capita below 90% of the EU average
should be eligible for regional development funds. Richer member states should
conduct their own regional policy.

b) Common Agricultural Policy subsidies should be cut and more directly

linked to delivery of environmental public goods such as biodiversity.

c) Shift EU budget spending towards R&D and innovation, areas where it can
have most impact and which benefit from cross-border cooperation.

4 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
A blueprint for reform of the European Union

Democratic accountability

There is not a European demos. National democracies and national parliaments remain
the root of democracy across the EU and the answer to the democratic deficit. Much of
the mission creep and focus on unnecessary issues has been driven by EU institutions
giving national parliaments a check will help to prevent this in future.

9. Balance free movement against the national responsibility for welfare

An EU which respects the different political traditions of its member states must balance
the freedom to seek work across Europe with member states rights to regulate access to
their welfare systems. The UKs universalist welfare model is the product of decades of
domestic politics as are the contributory systems more prevalent elsewhere in the EU.
Restricting access to national welfare systems to those who have been lawfully resident
for several years establishes the principle that individuals rights to welfare are dependent
on a contribution to their host country.

10. Red card for national parliaments

Allow a group of national parliaments to collectively block new EU legislation. This

would be an extension of the current Yellow card but with more teeth so that the
Commission has to drop a proposal if national parliaments oppose it on the grounds of
either subsidiarity or proportionality.

11. Return judicial control over justice and home affairs to member states

Allow member states to opt-out of European Court of Justice (ECJ) jurisdiction over
EU justice and home affairs legislation, returning their participation in this area to
intergovernmental cooperation under the control of national parliaments and domestic
courts.

5 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
 - Blueprint for Reform
Countries free to integrate further voluntarily such as the Eurozone, the Schengen passport union,
Justice and Home Affairs policies, etc but this should not impact those that do not join
The Single Market and trade as the EUs core mission
Flexibility and the rights of Competitiveness Democratic accountability
non-euro states
Qualify ever closer union Liberalisation of services, digital, capital
and energy markets A red card for national parliaments to
block EU proposals
Curtailment of the power of the Eurozone Ambitious timetable for free trade
to caucus against non-Eurozone states, agreements and reduced EU protectionism
including a safeguard mechanism in global trade, particularly in agriculture Individuals freedom to seek work should
not impinge on member states right to
Less and better quality regulations regulate access to national welfare systems
Explicit commitment to a multi-currency EU
EU budget devoted principally to projects Mutual cooperation on crime, security and
Further integration in non-single market too expensive for countries to undertake non-EU migration, without supranational
areas (social, employment, environment, individually. Richer nations should conduct jurisdiction for the European Court of Justice
taxation) should become more voluntary their own regional subsidy programmes
www.openeurope.org.uk
6 | Open Europe We Drive Change in Europe @openeurope
A blueprint for reform of the European Union

Annex 1: How can it be achieved?

There are various legal means of achieving the reforms discussed above. These include
changes to the treaties, legally binding political agreements between national leaders
(which could include post-dated treaty changes), amending the agreements between the
EU institutions and/or their rules of procedure, and changes to existing EU Directives or
Regulations.

It is likely that a mixture of these options could be used to deliver reforms. In order to
establish the lasting structural and constitutional reforms to create a multi-form EU,
treaty change would be required at some point. This could however be incorporated
as post-dated treaty changes following a legally binding commitment from EU leaders
ahead of the referendum.

Immediate Treaty change

The advantage of a treaty change is legal certainty. There are several different procedures
to change the EU treaties all of which require unanimous agreement of national
governments and ratification in national parliaments but the two most relevant for the
UKs negotiations are the so-called Ordinary Revision Procedure (ORP) and Simplified
Revision Procedure (SRP) (see Annex 2).

The ORP can be used to change any element of the EU treaties but is more onerous
as it can, at the request of the European Parliament, require a Convention of national
parliaments, national governments, the European Parliament and the Commission.
It is possible to skip the potentially lengthy Convention stage if a majority of national
governments and the European Parliament agrees to do so.

The SRP can only be used to make changes to the part of the treaties that deals with
the EUs internal policies and must not increase the EUs competence (Part Three of the
Treaty on the Functioning of the European Union). It has the advantage of avoiding the
Convention process and is appropriate for technical policy changes rather than wider
constitutional changes.

Since the Lisbon Treaty came into force in December 2009 there have been no less than
four treaty changes. The ORP has been used three times: for a protocol to temporarily
increase the size of the European Parliament; a protocol to address Irelands concerns
following its first No vote on the Lisbon Treaty; and a protocol on the application of the
Charter of Fundamental Rights to the Czech Republic. The SRP was used to allow the
intergovernmental treaty which established the Eurozone bailout fund, under the so-
called European Stability Mechanism.

It is frequently argued that treaty changes would require referenda in other member
states, but this entirely depends on the substance of the change. None of the changes
above required a referendum in any of the member states.

7 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
A blueprint for reform of the European Union

Post-dated treaty change the Danish and Irish precedents

An alternative to the above is the solution that was found after Danish voters rejected
the Maastricht Treaty in a referendum in 1992. EU leaders subsequently reached a
Decision in the European Council, the so-called Edinburgh Agreement, which addressed
the concerns raised by Denmark in four areas: EU citizenship, Economic and Monetary
Union, defence policy and justice and home affairs. This agreement was legally binding
and formed the basis for Denmarks opt-outs in future EU treaties.

In the case of Ireland, EU leaders agreed to set out the content of the European Council
Decision in a protocol to be attached to the treaties at a future date.

Such an arrangement could be used to enable technical or wider constitutional reforms to

the EU to be incorporated in future EU treaties.

Agreements between the EU institutions and rules of procedure

So-called inter-institutional agreements can be concluded between the Council of

Ministers (representing national governments), the European Commission and the
European Parliament. These agreements can be binding, and could be used, as an
alternative to treaty change, to implement reforms such as the Red card for national
parliaments for example.

Another avenue for reform could be the rules of procedure of the institutions. For example,
there is a separate agreement on the qualified majority voting rules in the Council of
Ministers which could be amended without treaty changes to potentially establish a
safeguard for non-Eurozone member states.1

Changes to existing EU legislation

Amendments or repeal of individual pieces of EU legislation under the co-decision

procedure could be used to secure changes to specific rules, such as the Working Time
Directive, or to further qualify EU migrants access to national welfare systems. While this
would avoid treaty change and only requires a qualified majority of national governments
rather than unanimity, the European Parliament has equal decision making rights
under co-decision, which could see proposed reforms held hostage by what is largely an
integrationist institution.

1See Professor Steve Peers, Is it possible to reform the EU without amending the treaties?, EU
law analysis, 22 May 2015; http://eulawanalysis.blogspot.co.uk/2015/05/is-it-possible-to-reform-
eu-without.html

8 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
A blueprint for reform of the European Union

Annex 2: How to change the EU treaties

Ordinary revision procedure (Article 48(2) TEU)

Step 1:
Any national government, the European Parliament or European Commission can
make a proposal for treaty change. The European Council (heads of state or government)
votes whether to examine the proposal a simple majority amongst EU member states is
required to proceed to the next step.

Step 2(a):
The default scenario is that a Treaty Convention composed of representatives of national
parliaments, heads of state or government of the member states, the European Parliament
and the European Commission, is called to debate the proposals. National leaders can
vote by simple majority to skip this stage but the European Parliament must also agree
to do so.

Step 2(b):
Following a Convention (or not), EU leaders then meet to debate and agree the proposed
changes by unanimity at an Intergovernmental Conference (IGC).

Step 3:
Treaty changes must be ratified under the domestic law of all member states in order to
take effect. In some countries this could require a referendum, depending on the extent
and content of the treaty change.

Simplified revision procedure (Article 48(6) TEU)

Step 1:
Any national government, the European Parliament or European Commission can make
a proposal for treaty change.

Step 2:
Because it does not constitute full blown treaty change, the process simply requires the
European Council (heads of state or government) to agree and approve by unanimity the
proposed treaty amendments, after consultation with the European Parliament.

Step 3:
Treaty changes must be ratified under the domestic law of all member states in order to
take effect. In some countries this could require a referendum, depending on the extent
and content of the treaty change.

9 | Open Europe We Drive Change in Europe www.openeurope.org.uk

@openeurope
Our

6,670
Annual
Media
Hits
Open Europe Staying ahead of the game www.openeurope.org.uk.
We are available for 24/7 analysis of rolling EU developments.
info@openeurope.org.uk +44 (0)20 7197 2333

292 194 91 383

The Times The Financial Times The Guardian The Telegraph

We average 18.3 media hits per day

Open Europes start-up charm and the international

make-up of its team are positively surprising. English
is spoken and written in its office but the thinking is done
in Polish, Belgium or German.
Frankfurter Allgemeine Zeitung

Open Europe. 7 Tufton Street, London, SW1P 3QN

 Open Europe
Staying ahead
of the game

www.openeurope.org.uk
@openeurope

Open Europe. 7 Tufton Street, London, SW1P 3QN