UBS: The EU at 60 - Happy birthday?

At the crossroads, the EU is looking for a new strategy

The EU's 60th birthday celebrations in Rome this weekend are overshadowed by the perception that the union is facing unprecedented challenges. To facilitate the search for a new strategy, European Commission President Jean-Claude Juncker has presented five scenarios for the future: carrying on as before; concentrating purely on the single market; allowing Europe to move ahead at multiple speeds; doing less more efficiently; and striving towards much deeper integration. We think the EU will eventually combine several strategies. It will seriously consider the strategy of moving forward at multiple speeds, which enjoys solid political backing in many of the "older" EU states – although the EU would have to apply this strategy with care, to address the concern that multiple speeds could lead to new divisions in the EU. In addition, tighter budgets and questions over legitimacy will force the EU to do less more efficiently – although we would expect institutional and political resistance. In reality, of course, the EU is a supertanker that cannot be turned around overnight. We therefore believe that most things will stay as they are – but the EU is unlikely to admit that.

Happy birthday?

While the EU has good reasons to celebrate, the mood among the heads of state and government will be clouded, as the Union is facing unprecedented challenges.

Enthusiasm for the European project has suffered during years of economic crisis and disagreements, above all on burden-sharing and immigration. The EU's sense of security is being dented by conflict in the Middle East and Eastern Europe, and by a new US government that wants Europe to take greater responsibility for defence. The UK's decision to exit the EU has made the union more conscious of how it is perceived. But perhaps the EU's greatest challenge is the rise in populism and Euro-scepticism among its own citizens.

As a result, the EU is at a crossroads and needs to adopt a strategy for the future. To stimulate the discussion, EU Commission President Jean-Claude Juncker presented on 1 March a White Paper on the Future of Europe in which he sketched out five generalised scenarios that might provide a blueprint. The paper will be discussed this weekend and in subsequent meetings over the coming quarters. In the months ahead, the EU Commission will present additional papers on European social policy, defence policy, globalization, and the future of the monetary union (thus providing an update of the Five Presidents' report from June 2015). The aim is for EU leaders to formulate their views in more concrete terms at the EU summit on 14/15 December, and for the EU to have a new vision by the time of the European parliamentary elections in June 2019.

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