Widening and Deepening: Reforming the European Union.
The European Union is the product of a unique institutional process: individual states, often with a history of belligerent relationships, have gradually given up ever more sovereignty to produce an increasing number of common goods, including the Single Market, a joint currency, and common policies. In the process, the Union has integrated increasingly diverse countries and achieved institutional progress beyond its borders. These achievements are particularly remarkable given that member states have had, and still have, widely different views of the desirable speed and ultimate depth of integration. Possibly the single most powerful force sustaining the process of integration has been the implicit, and often explicit, threat by more committed member states to form an inner core, a “club-in-the-club.” Conversely, less enthusiastic members have supported extending membership to more countries as a strategy to frustrate deeper integration. We build a simple theory to analyze how “deepening” and “widening” interact. Members have different costs in contributing to a common good, a “reform.” Decisions require unanimity so that the level of reform is determined by the highest-cost (or “weakest”) member. To push through more deepening, “stronger” members can threaten to form an inner club. A two class Union involves costs for all members, but benefits only the members of the inner club. Weaker members may, hence, spend more effort on reforms, in order to prevent the threat from being executed. We show that widening can have different effects on deepening. When a new member is stronger than the weakest incumbent member, deepening and widening are complements, and the effort of the Union increases. When the new member is weaker, though, they can be substitutes and the effort of the Union may fall. The results above hold when the threat of forming a club-in-the-club remains off equilibrium, as has been the case in the EU until now. We apply our analysis to the history of the treaties governing the European Union. We show that its key elements can be understood as outcomes of a delicate balancing act between maintaining the pressure to pursue further integration (deepening) and enlarging the Union to more member states (widening). We demonstrate the differences between the enlargement to stronger countries such as Austria, Finland, and Sweden, and the Eastern Enlargement, which more than any previous enlargement increased heterogeneity. We finally expand the logic of our theory in two directions: first, to rationalize the general move from unanimity voting to different types of majority; and second, to explore the possibility that a club-in-the-club may actually form and its implications for further EU reforms.
Berglof. E., Burkart, M., Friebel, G., & Paltseva, E. (2008). Widening and Deepening: Reforming the European Union. American Economic Review (Papers and Proceedings), 98, 133-137.