CRITICAL AGE

The 50th anniversary of the Elysee Treaty of Friendship, Cooperation and Peace between France and Germany was celebrated on 22 January 2012. Two great leaders French President Charles De Gaulle and Chancellor Konrad Adenauer of West Germany signed the treaty that ended the political problems not only between the two countries but also in Europe as a whole.

It is the agreement between two once bitter enemies - Germany and France - that made it possible to strengthen their cooperation within the framework of an agreement to establish the European Coal and Steel Community signed on 18 April 1951, as well as the Euratom and the European Economic Community established on 25 March 1957. The three organizations initiated the process of establishing in 1992 the European Union (EU), in which Germany and France are playing the major role.

Interestingly, whereas 50 years ago the cooperation between France and Germany was a necessary condition for the start of integration, now the two major actors in the EU have now become guarantors of its conservation and further development.

Today, Germany and France have to resolve the economic problems of the EU largely with their own resources by pursuing a coordinated policy to prevent the effects of the financial crisis in some EU member countries. Considering the fact that the EU is a coherent systematic structure, the problems of one of its links inevitably affect all of its components. This is exactly the challenge the EU is facing with the debt crisis in Greece which began in 2010. The financial crisis subsequently spread to other EU members. Assistance to Greece was followed by aid from the EU stabilization fund for Ireland, Portugal, Spain, and Cyprus. Negative consequences can also spread to other EU countries.

The financial crisis in the EU was exacerbated by the fact that, despite the establishment of the single currency, an agreed fiscal policy of eurozone countries has yet to be approved. The EU is only a monetary union with no authority to interfere in budgeting and taxation issues of member countries. Under such circumstances, it is difficult to exercise control and regulate the activities of national financial institutions. As a result, donor countries do not agree to provide assistance under the existing rules and require a new consolidated approach to the issues of financial assistance and recovery. With this in mind, the latest EU summit in Brussels in December 2012 decided to create Europe's Banking Union. The purpose of the newly formed structure is to ensure control over the activities of European banks and promote the establishment of institutions for the insurance of banking risks. The European Banking Union is expected to start its operations in March 2014. The introduction of such a mechanism will strengthen and develop the economic and monetary union by delegating national sovereign powers of EU member-states to supranational bodies of the organization, which should improve the management of economic and financial policies in the eurozone.

The establishment of the new structure is not the only innovation in the financial sector. In parallel to the reforms of the banking sector, the European Central Bank plans to launch the second generation of the euro banknotes with a new design and a more complex level of protection. The new banknotes will bear the image of the Phoenician princess of Europe who, according to a mythical legend, was kidnapped by Zeus. The first 5-euro banknote should be put into circulation in May 2013.

Attempts to overcome the financial crisis have compelled the EU to forge a closer relationship among its members by playing a more active economic role. Therefore, a new round of integration is expected to develop a common economic policy and create a federal economic government of the eurozone. But not all EU countries agree to this development. The financial recession in Europe and attempts to resolve it through further integration among member countries have prompted a discussion on the very existence of the European Union. This position is shared by the United Kingdom, which does not want to lose its sovereign powers in favor of the community.

British Prime Minister David Cameron has repeatedly said that Britain could leave the EU if Brussels does not agree to change the formula of its participation in the community. The reasons for the possible exit, according to David Cameron, include the ongoing eurozone crisis, a lack of competitiveness and a significant reduction of public support for the idea of a federal Europe. Britain is not only opposed to a further deepening of integration within the EU, but is also considering the possibility of changing the structure of relations with Brussels. Thus, London will try to return some of its sovereign powers that were previously transferred under the jurisdiction of the common EU bodies to the national parliament. Cameron's position is that the UK should play a more important and active role in the community. But the current state of affairs prevents the UK from being optimistic of the future of the EU. The UK will only stay in the EU if the community is changed. Otherwise, the EU will become even less competitive, while economic growth will slow further.

The main theses concerning the UK position were to be announced in the Dutch capital on 18 January. But due to the hostage-taking crisis involving employees of British energy company BP in Algeria, the prime minister postponed his visit to focus on the resolution of the crisis in the North African country. Cameron had been preparing a speech to address the meeting with for months and considers it crucial not only for relations with the EU, but also for the foreign policy of the United Kingdom.

Prime Minister Cameron announced his theses on 24 January, addressing the World Economic Forum in Davos. According to Cameron, if his party wins the next general election, he intends to hold a referendum on the UK's relationship with the EU.

In general it is possible to say that the position of the prime minister is shared by British society. Recent polls in Britain show that 40 per cent of the Britons are in favor of the country staying in a united Europe, while 34 per cent would vote for an exit. Figures suggest that a growing number of the British are disappointed in their expectations from the community. Only 11 years ago about 68 per cent of the country's population was in favor of being part of a united Europe.

Curiously, the EU itself views Cameron's statement as sheer speculation. No-one discusses the right of the United Kingdom to hold a referendum but there is a certain degree of skepticism about the seriousness of the UK's intentions. The point is that, despite a number of problems faced by the community, it is still an important factor of stability and stabilization on the whole continent.

Contrary to the position of one of the most important community partners, Germany and France are in favor of strengthening the EU institutions. The reasons for the differences in the views of the United Kingdom on the one hand and of France and Germany on the other should be looked both in overall and cyclical aspects. In general, the UK is a kind of a "conservative" in the European Union for whom it is traditionally difficult to give up its national powers. The United Kingdom never became part of the eurozone after refusing, along with Sweden and Denmark, to adopt the euro in 1999 and retaining its own currency. Even then skeptics were voicing "pessimistic scenarios" about a crisis in the EU, halting of further integration and a collapse of the community in the future.

The paradox lies in the fact that, due to its nonparticipation in the eurozone, the United Kingdom can not participate on an equal basis in the development of mechanisms to overcome the financial crisis. At the same time, Britain is one of the main donors of the EU budget - it is in 4th place for the volume of payments. It is no coincidence that it threatened to use its right of veto during consideration of the 2013 budget if it was contrary to its own interests.

Despite the crisis and the position of the UK in relation to further integration, it should be noted that the main problems regarding the formation of the institutional framework to solve the eurozone crisis have already been resolved. Mechanisms, as well as control and management institutions, have been put in place. Besides, the crisis has contributed to further integration among eurozone member-states. The creation of new supranational structures for banking supervision was considered impossible a few years ago. Therefore, it is too early to take seriously the skeptical predictions about an impending collapse of the EU. Further evidence of the fact that these speculations are wrong is the expansion of the EU due to take place on 1 July 2013. Croatia is to become the 28th member of the community and second former Yugoslav republic after Slovenia to have met all the requirements to join the community. Other Balkan republics are expected to follow suit as they meet their obligations. In short, the EU will continue to pursue the course for expansion and deepening of integration, which will take place in line with the realities and requirements of time and circumstances.