When the clock struck midnight to bring in 2021, the United Kingdom left the European Union’s Single Market. The future of the United Kingdom is increasingly uncertain with a slow economic outlook and the popularity of nationalist parties in Scotland and Northern Ireland threatening the union itself [1].  In contrast, much of the conversation about the EU’s future is optimistic, especially around the prospect of further integration.

Two twin crises–Brexit and the coronavirus–have forced the EU to self-assess its status and its place in the world. For the last decades the EU has grown steadily while remaining a loose coalition of states. Nations in the EU cooperate up to a point; they attempt to maintain national sovereignty for fear of giving up too much power to a central European authority. But the UK’s exit exacerbated by the coronavirus pandemic is a moment of truth for the EU. Change might be on the horizon. Many pundits, prognosticators, and government officials have predicted the EU will pursue a more unified and strategic bloc [2].

For years, the UK was an “awkward” member of the EU: it sat out the Eurozone, vetoed treaties, refused to meet mandated refugee quotas, and opted out of continent wide initiatives on everything from security to social policy [3]. The country was the bloc’s second largest contributor in economy and population and a consistent anti-integration bulwark. Now that one of the noisiest and most influential obstacles is gone, proponents of a more unified Europe have an opportunity to push for closer ties.

The UK’s exit has realigned power and allegiances among the member states [4]. Germany and France are now at the center of the EU.

French President Emmanuel Macron has spent his years in office pushing for a “sovereign Europe” with “strategic autonomy” [5]. With increasing support from German Chancellor Angela Merkel, Macron has put forward bold proposals for the bloc: military autonomy, fiscal union, and more expansive European institutions [6].

But recent challenges have shown that further integration is not certain and that the other 25 member states will have a decisive role in determining the future. On issues fiscal, social, and military the bloc faces divisions and challenges.

Geographic coalitions of states within the EU have formed to advocate for their interests. Northern states, such as Sweden, Denmark, and the Netherlands, advocate a more conservative approach to economic and international political issues; Central European states including Poland, Hungary, and the Czech Republic are concerned with their political and social autonomy; and the southern states including Spain, Italy, and Greece encourage further EU economic integration and spending. In the past year, these differing factions have tugged and pulled the EU in divergent directions, and they will continue to do so into the future.

Europe is at a crossroads. It can either continue as it has been, with weaker fiscal and social ties, or it can integrate into a more united continent. These factions will decide which direction is chosen.

The Debt Squabble

Northern European states have continuously aligned with British priorities. In general, these countries are against further fiscal integration and have opposed such measures in the past. Denmark and Sweden are, not coincidentally, outside of the Eurozone. These are all small countries and large exporters and therefore favor open trade [7]. They oppose efforts such as the ones advocated by Macron to create a more protectionist Europe and fret about the growth of EU spending [8]. There is also a feeling within the northern states that they pay disproportionately for the cost of the EU and bear the burden for the perceived irresponsibility of the less well off southern countries [9]. While the truth of that sentiment is dubious, it is true that politicians are sensitive to these citizen’s concerns and act accordingly.

For the purposes of alliteration the news media has dubbed some of these nations–Austria, Denmark, the Netherlands, and Sweden–as the “Frugal Four,” though Finland often falls into this group as well (perhaps “Frugal Five” didn’t have the same ring to it) [10].

Opposition came to a head in May of 2020, with the coronavirus raging in Europe and the economy in crisis. In a momentous proposal that would shape the future of the bloc, the European Commission (the EU’s executive branch that is also responsible for proposing legislation) brought forward a plan to issue common debt and give grants, not loans, to struggling EU countries [11].

The $906 billion proposal was remarkable not just because it is the closest thing to a federal system the EU has ever contemplated but because Germany, traditionally protective of its autonomy and reluctant to bail out EU countries during the Eurozone crisis, was fully supportive [12]. By backing the plan, Germany put the interests of the EU ahead of its own self-interests and confirmed that a stronger EU is a long term goal.

But northern countries were sceptical and the EU needed the approval of all 27 states. The “Frugal Four,” spurred on by resistance at home and the rise of Eurosceptic parties, demanded rebates and for the proposed grants (likely to benefit southern and eastern EU countries the most) to be loans instead [13]. In an open letter, Austrian Chancellor Sebastian Kurz cited his country's disproportionate contribution to the EU budget [14]. “The financial burden of the union is increasingly being put on the shoulders of a small number of member states, including ours,” he wrote, adding: “We are ready to pay significantly more to the EU than we get back...However, there are limits” [15].

Public opinion in “Frugal Four” states has been a driving impediment to the prospect of monetary integration in the EU. Only 29% of the Dutch public supported the European Commission’s proposal [16]. This is in contrast to the usually conservative Germany, where 51% of the public were in favor [17]. As long as the electorates of northern countries remain attached to monetary sovereignty, their leaders will continue to protest efforts such as the debt plan.

At the heart of the “Frugal Four” is a fundamental question about autonomy in the future of Europe. Should the people of Denmark pay for the wellbeing of people in Spain or Italy? For now, at least, the northern coalition of Europe says “no.” Sharing fiscal responsibility across the continent is a step too far.

Over long, protracted negotiations the “Frugals” eventually agreed to the grants in exchange for larger and extensive rebates and a commitment by all nations to submit plans on how the money will be spent [18]. But the conflict is just beginning. The northern countries will continue to be an obstacle to the vision of a united and fully integrated EU. With the loss of an anti-integration ally in the UK, the northern coalition will band together and use whatever leverage available to them. In doing so, they threaten the unity of the bloc going forward.

The Rule of Law

While financial concerns are the largest worry in the north, the central European countries of Hungary, Poland, the Czech Republic, Slovenia, and Slovakia are largely concerned with social and nationalistic issues. Like the north, “Viségrad” countries (named after an important summit amongst the nations in the 14th century and frankly a much cooler name than its northern counterpart) are by and large opposed to further integration, except that they are motivated by fear of EU meddling in national affairs [19].

Nationalist and far-right parties now dominate Hungary and Poland, which has led to opposition to EU immigration and refugee policies. Both countries have passed domestic laws that violate the EU’s democratic standards, liberal values, and judicial independence [20]. In Poland, reforms put in place by the dominant right wing party enable the executive powers to have undue and potentially corrupt control over the judiciary [21]. Viktor Orban, the Hungarian Prime Minister now in power “indefinitely,” has used the EU’s unanimous vote requirement to his advantage by blocking any attempts to curtail Hungary’s undemocratic regime [22].

For the populist leaders, EU integration is a threat to their power and their increasingly undemocratic administration. For the people in the “Viségrad” countries, EU integration is a threat to their views on sovereignty [23]. Nationalist politicians have stoked distrust in Europe; there is a lack of commitment to the united European experiment.

These central European countries present a conundrum for the EU. Their entrance into the Union was predicated on their democratic credentials. The Union did not foresee that nations could backslide into undemocratic and illiberal regimes. Faced with this, the bloc is grappling with its responsibilities. Is it the place of the EU to interfere in domestic affairs? Those in “Viségrad” countries argue that the EU is basically a voluntary trade agreement and therefore has no place in their domestic politics. But other EU leaders disagree and have begun to push back.

EU leaders tried to curtail central Europe’s backwards democratic slide in its seven year budget–the Mutual Financial Framework (MFF). The MFF (which included the coronavirus aid the “Frugal Four” consternated over) contained a clause that allowed the EU to cut off funding for nations who violated the rule of law [24]. Under the draft proposal, 15 of the 27 states would have to vote to cut funding, a large ask for an already fractious body.

Nevertheless, there was immediate pushback. Slovenian Prime Minister Janez Jansa declared that the provision violated national sovereignty. “We need EU institutions that will not be involved in Member States’ internal political conflicts” Jansa said in a letter to the EU Council President [25]. At a meeting in November, Hungary and Poland vetoed the entire budget in protest of the clause [26]. This set up a showdown with most of the other member states; the “Viségrad” group was alone in calling for the clause to be removed.

In the end, the clause stayed in the budget in a narrowed scope–the EU will still have the power to cut off funding of the offending state as long as explicit rules are followed and the Court of Justice approves [27]. What prevented the “Viségrad” states from getting their way was the sheer number of member states (including the north and south as well as France and Germany) who strongly supported the clause.

The unified front signals support for liberal principles and a willingness to enforce those principles if necessary. The “Viségrad” group’s isolation from other member states may diminish their influence somewhat. But the powers they possess within the EU, including veto powers on budgetary matters, will remain a source of conflict and any steps the EU takes to further its influence in domestic affairs will be met with opposition.

Both the “Viségrad” countries and the “Frugal Four” are groups of smaller member states who will try to maintain the status quo within the bloc. Though they may not be wholly successful, their efforts could seriously impede the momentum of the push for integration.

Everyone Get in Club Med

The most ardent supporters of EU cohesion and integration are the southern states that border the Medditeranean Sea. “Club Med” (made up of Cyprus, Greece, Italy, Malta, Portugal, and Spain and led by its most influential member France) have since the Brexit referendum set up summits and meetings in order to promote their agenda and present a united front [28].

The hardest hit by the Eurozone and refugee crises, “Club Med” have actively pushed for a larger EU budget, Eurozone integration and fiscal union. The coronavirus pandemic has increased concerns for the most affected countries and accelerated demands. In March, Spanish Prime Minister Pedro Sanchez called for debt mutualisation and grants in order to survive the economic depression and for the EU to administer a budget akin to the Marshall Plan [29].

For southern countries, EU integration offers a lifeline for long struggling economies and political turmoil. Italy, the bloc’s debt-ridden third largest economy, has been frustrated by the EU’s conservatism and austerity.  The grants in the recovery fund are an opportunity for the country to reinvest in itself [30]. “This is the moment to reinvent Italy,” Italian Prime Minister Giuseppe Conte said in September [31]. “The country is bound to face complex challenges, but we have an unprecedented opportunity” [32].

The key to the groups’ success in getting its agenda passed has been the unprecedented crisis the coronavirus poses to the whole of the EU. Aware of the devastation a botched recovery could have on the bloc (especially one where many countries share a currency), EU leaders previously opposed to tying themselves closer to the economically troubled south have, for the most part, acquiesced [31]. The question now is whether the budget and emergency aid is a hallmark of the future or a temporary blip.

“Club Med,” led by an ambitious Macron, will certainly try to make the change permanent. In the battle over EU integration, the southern states have the most to gain–and to lose. For now Germany and France appear to be in support of the southern states and their integration agenda. But it will face continued opposition from all other corners of Europe and the coalitions that have formed in the wake of Brexit will be active in the years to come.

Conflict in the EU is unavoidable. The EU experiment, a belief that a continent with so much acrimonious history could work together both socially and economically, will accommodate differing factions. But the next few years promise to be tumultuous ones. With change now possible, those who strive to create a more integrated EU will push their objectives and be met with fierce opposition by those who want to maintain a looser union. It remains to be seen which direction the bloc will go down.