Why do EU Countries Resist Sharing Sovereignty?

The recent debate on European integration has highlighted the need to increase the provision of European Public Goods (EPGs) in the economic, security and defence fields. This need was also one of the key messages of Draghi’s report.

While the latter has obtained large consensus on its diagnosis of European woes and a broad (though not unanimous) praise amongst commentators for the related policy recommendations, the solutions and their implementations have been met with political reservations.

These objections reflect a strong national resistance to transferring sovereignty to the European Union (EU) as required for building a central fiscal capacity to supply an adequate amount of EPGs. In an accompanying paper, we examine the underlying reasons for such resistance by looking at the national costs and benefits of sharing sovereignty to supply EPGs. Our analysis is applied to four EU countries: France, Germany, Italy, and Sweden.

The costs and benefits of sharing national sovereignty are different across EU countries. In our framework, costs mainly depend on the relative strengths of each national state and intermediate institutions.

Countries at the two ends of the spectrum (i.e. countries with very strong or very weak national institutions) have costs smaller than those in between, since, below a certain threshold, such transfer of sovereignty does not call into question their domestic institutional balance. Therefore, Sweden and Italy tend to have lower costs than “intermediate” countries like Germany and France.

Benefits mainly depend on the relative strengths of national economies and intermediate bodies combined with different types of EPGs. ‘Strong’ countries prefer EPGs aiming at boosting innovation (dubbed in our paper EPG-I), ‘weaker’ countries prefer EPGs improving solidarity (EPG-S). Hence, Sweden and Germany value EPG-I, whilst Italy and other fragile countries go for EPG-S. The relative share between EPG-I and EPG-S also depends on countries’ negotiating power.

This implies that, for instance, Sweden is likely to appreciate centrally funded projects in cutting-edge biotechnology to further strengthen its position at the innovative frontier. Such projects may also be of interest for Germany, which has enjoyed high economic and social strengths but currently needs to undergo a sizeable restructuring. Conversely, weaker countries like Italy may feel threatened by these projects due to the fragilities of their production specialisation and intermediate bodies.

The latter countries are more interested in a centralised programme for human resources, that mimics the SURE programme launched during the pandemic possibly integrated by new clauses for minimum investments in education and re-skilling. Sweden would appreciate little this renewed SURE because it already organised more efficient and advanced national initiatives in the field.

Whilst we have characterised EPG-I and EPG-S as separate EPGs, one could also think about projects that deliver on both innovation and solidarity, thereby appealing to all EU countries.

A good example is offered by a trans-European rail network for freight transport ensuring fast and efficient connections across the EU and thus gradually replacing road transport for distances above a given threshold. Such EPG would lower the negative environmental impact, help overcome bottlenecks in logistics that also matter for advanced countries, and benefit fragile countries by optimising the allocation of intermediate products in their value chains.

This discussion emphasises two aspects. First, it will be difficult to make the sharing of national sovereignty viable, if the aim is just the supply of an EPG with a given feature (either EPG-I or EPG-S). Second, there are European projects that lead to composite goods and services satisfying both features. It follows that a better chance to fly is to build packages of both EPG-I, EPG-S, and  of composite EPGs.

In any case, these packages must create sufficient added value to compensate for the high costs of sharing sovereignty suffered by “intermediate” countries and for the low (even negative) benefits of ‘inappropriate’ types of EPGs suffered by each Member state.

The last condition would become easier to achieve if the EU fragile countries managed to get closer to the technological frontier, thus increasingly reaping the benefits from EPG-I. In this regard, two aspects should be considered. On the one hand, National Recovery and Resilience Plans matter. An efficient implementation of each Plan is the responsibility of national governments, but it also depends on the 'deep' sharing of the objectives of this Plan by intermediate institutions and bodies.

On the other hand, the EU should ensure the dissemination of innovative results achieved via the central production of EPGs. As the OECD has long pointed out, the set of European companies at the technological frontier is often poorly connected to the rest of the EU economy. As a result, technological breakthroughs do not trigger waves of imitation. This negative feature is due not only to a lack of competition, but also to the fragmentation of economic and social relations in the EU.

IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.

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