Letters to the editor

Polls and Comment

Library - an archive
of speeches


Economists write

Bibliography of EMU

The Euroland Economy

Links

 









A  B  C  D  E  F G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W Y Z

V

Value added tax

See VAT.

Variable geometry

The concept of a Community in which some countries may integrate more (or faster) than others has been given many different names - among them variable geometry, flexibility, differentiated integration, closer (or enhanced) co-operation, concentric circles, Europe la carte and two-speed (or multi-speed) Europe. The 1997 Treaty of Amsterdam represented the first attempt to formalise this principle. Before that, however, the UK's and Denmark's opt-outs on EMU, the UK's and Ireland's exemptions from the Schengen Agreement and Denmark's opt-out on anything to do with a common EU defence policy had already created de facto variable geometry. Another example was the admission to the EU of the neutral states of Austria, Finland, Ireland and Sweden, which were not full members of the WEU and would inevitably be forced to resort occasionally to 'constructive abstention' in foreign and security affairs. In their different ways, Sweden's refusal to join the euro and Greece's unwilling exclusion added to the tally. Given the prospect of the EU growing even less homogeneous with the accession of former Soviet bloc countries, such divergences appeared likely to increase rather than to diminish.

The proponents of variable geometry fall into two camps. On the one hand, there are the integrationists, impatient to accelerate the process of unification and unwilling to be held up by the 'slowest ship in the convoy'. Such countries, often led by Germany and France, expect the laggards to follow later and rely on the ratchet effect of the acquis communautaire to ensure that there is no regression to national individualism: they refer to themselves as the 'hard core' and use the phrase 'two-speed Europe' to imply a common destination. On the other hand there are the countries that wish to slow or halt the federal momentum but are prepared to allow others to go ahead provided that they themselves can be left out of policies they consider unsuited to their national interests.

The opponents of variable geometry are similarly divided into two camps. There are those who fear it will be an excuse for creating a privileged inner circle, a 'top table' of decision-makers within the EU from which they will be excluded (a particular anxiety of British Europeanists). And there are those who suspect that their exemptions will prove transient and that sooner or later they will be sucked into an unwanted process of ever deeper integration (the chief fear of some Eurosceptics). Finally there are those - from both sides of the debate - who believe that institutionalised flexibility may lead to the ultimate break-up of the Community or its transformation into a 'mere' free trade area.

The Amsterdam Treaty's formulation, entitled 'closer co-operation', was that groups of member states wishing to act together, using the Community's institutions including the Court of Justice, could 'as a last resort' do so by qualified majority vote in the Council of Ministers, provided that none of the non-participants exercised a veto at head of government level (the 'emergency brake'). There were other conditions, too. The participants must represent a majority of the member states, the acquis communautaire must remain inviolate and there must be a right of deferred participation by those who chose to stay out initially. Whether the Treaty would prove the point of departure for a radical reappraisal of the EU's constitutional structure or whether it would signal little more than a form of words to appease the anti-federalists, time alone would show.

VAT (Value added tax)

VAT has been mandatory in the Community since 1967. The Cockfield Report of 1985, which preceded the introduction of the Single European Act, advocated greater standardisation of indirect taxes in order to further the completion of the single market. This process of harmonisation is popular in the Commission for its relative ease of administration (a share in national VAT revenues also forms part of the financing of the EU budget). Harmonisation is, however, made problematic by political, cultural and economic factors. For example, there are wide national differences in the degree of reliance on indirect, as opposed to direct, taxation, ranging from Greece, where reliance on indirect tax is low, to Denmark, where it is high; certain countries attach particular importance to low VAT on basic necessities or on items such as books; the Protestant countries tend to levy special duties on spirits; and taxes on petrol and cigarettes are affected by health and environmental policies. Exceptions apart, the Council sets a standard minimum VAT rate of 15% and a maximum of 25%.

VAT harmonisation may also have unintended effects on competitiveness. The London art market lost business heavily to New York when the Commission imposed VAT on imports in 1995, a measure designed to make the UK conform with the inactive markets of the rest of the EU, seemingly oblivious of the fact that art is mobile and its market global. (See also Tax.)

Veto

The veto power of member states (known more emolliently as the unanimity requirement) is central to the structure of the EU. From the earliest days of the Common Market, integrationists such as Jean Monnet and Walter Hallstein argued that ever closer union implied the erosion of the right of individual nations to veto legislation; otherwise progress could always be blocked in the Council of Ministers by one recalcitrant state, however small. President Charles de Gaulle countered that the loss of the veto meant the transfer of power to technocrats and would expose France to being overruled by foreigners; to that extent, he considered the Treaty of Rome flawed. This dispute led to France refusing all co-operation with the Community in 1965, a crisis only resolved by the Luxembourg Compromise, under which it was conceded that decisions affecting a vital national interest would have to be unanimous, even if the Treaty specified majority voting.

By the early 1980s the Luxembourg Compromise had been virtually abolished and the Single European Act of 1986 brought a vast increase in qualified majority voting (QMV). The unanimity principle still exists for Accession Treaties, Treaty amendments, appointments to the Commission, changes to the Community's revenue-raising power and the resolution of certain disputes with the European Parliament. The Common Foreign and Security Policy and co-operation in Justice and Home Affairs (the two intergovernmental pillars of the Maastricht Treaty) are also by definition subject to unanimity. But single market measures, the budget, EMU, the Common Agricultural Policy and implementation of agreed foreign policy, together with a growing number of other areas, are now determined by QMV, the scope of which was most recently enlarged by the 1997 Treaty of Amsterdam.

The concept of variable geometry allows countries to opt out of unwanted policies rather than being obliged to choose between vetoing them or accepting a majority verdict. Whether this flexibility weakens or strengthens the power of the nation state vis--vis the EU's federalising institutions is an important and much debated question. (See also Unanimity and Variable geometry.)

Visegrad states

The Czech Republic, Slovakia (together Czechoslovakia until 1993), Hungary and Poland, formerly satellites of the Soviet Union and members of the Warsaw Pact, which met at Visegrad in 1991 and agreed to co-operate in seeking membership of NATO and the EU as a route to total integration into Western Europe. All four countries are members of the Council of Europe and have Association Agreements.

 
Return to top