In a difficult period for the European Union, Dieter Ruloff offers an unhurried appreciation of the developments. In his exclusive essay for finews.first, he gives reasons why the union of states to a certain extent is the victim of its own success.

This feature by our guest author Dieter Ruloff is the sixth contribution to our section finews.first. It is a forum for renowned authors specialized on economic and financial topics. The texts will be published both in German and English. The contributions appear in cooperation with Pictet, the Geneva-based private bank. The publishers of finews.ch are responsible for the selection. Previous contributions: Rudi Bogni, Adriano B. Lucatelli, Peter Kurer, Oliver Berger and Rolf Banz.

2015 wasn't a good year for the European Union. The first half was very much about the conflict between the euro group and Greece, and the conditions under which the ailing member state could remain with the currency system; in the second half, the refugee crisis brought about a strain on Schengen and the Dublin agreement, right up to a partial suspension.

Further, important challenges await the EU, the most important being the comprehensive reform of the union, which will influence the outcome of the referendum in the United Kingdom (UK).

If you think about the future of the EU, you first need to understand it. The union is a complicated structure, a entity sui generis as political scientist never tire of saying. Due to the supranational elements – important in the areas of the common market and the economy – the EU is more than just a mere federation. But not even close to a confederation such as Switzerland or the United States.

«The EU is heterogenous, multi-voiced and with divergent interests»

All things considered, the EU has been very successful. But it is also a victim of its own success. The predecessors of the EU, the European Coal and Steel Community, the European Economic Community, the European Atomic Energy Community were founded from 1952 to 1956 by six nations, three large ones (France, Germany and Italy) and three small ones (the benelux countries).

In the meantime, the EU has grown to include 28 nations, it is heterogenous, multi-voiced and with divergent interests. Which is why not all members want to participate in all projects of the union. To reach progress, comprise and agreement based on the lowest common denominator have always been the rule within the union.

And progress has only ever been achieved in politically and economically quiet times. The fair weather union is always bound to get into trouble in times of crises and has to quickly patch up.

«The Brits in their majority were never truly convinced Europeans»

Two countries and two EU projects may serve as examples to test this hypothesis: The UK and Greece; the currency union and Schengen. Great Britain became a member of the union in 1973 after much soul-searching, following a sense of opportunism as the then government of Ted Heath impressed on the electorate. To take part in the common market was a matter of trade and jobs, voters were told.

The Brits in their majority were never truly convinced Europeans. They stayed outside the euro region and Schengen. The control over the money and over the borders were never up for negotiation. And still, the UK is a proper member state. The populists in the country always sought to gain a bigger share of the vote by calling for an exit from the union. Two years after joining the Brits already held intense discussions about leaving union, but a majority of 67 per cent rejected the proposition to do so in a referendum.

«To accept Greece into the EU in 1981 was necessary and right»

The outcome of the referendum of 2017 will likely be closer, even if the union will accommodate David Cameron more than his predecessor Margaret Thatcher («I want my money back») in the 1980s. An exit from the union would create big problems, more so though for the UK than for the union.

To accept Greece into the EU in 1981 was necessary and right. It was important to stabilize the young democratic state. However, to let the fragile, small country into the currency union and Schengen was obviously a big mistake.

The risks were known, but the hope was for a rapid economic recovery and far-reaching political change in Athens. The growing wealth in Greece was achieved by piling on debt and with the access to the cheap euro, corruption and clientelism in Greek politics was fostered.

«An exit of Greece obviously wouldn't have been too much of a problem»

Herbert Stein once said that what cannot go on forever won't. Applied to Greece, this came to a head in 2010. Guarding the difficult union border in the Aegean was always too much to ask, but with migration increasing that has become all too obvious.

In the first half of 2015, German Chancellor Angela Merkel was heard saying that «if the euro fails, so will Europe». An exit of Greece obviously wouldn't have been too much of a problem. Indeed, a Grexit would have helped keeping discipline in the currency union. The high opportunity costs in the end had decision makers opt for the compromise: the Greeks have to save and reform, the Euro member states have to pay.

Even the end of the euro system by mutual agreement, a thought harbored by many politicians and economists ever since the beginning of the debt crisis, wouldn't affect the core of the EU, the single market – if we disregard eventual economic collateral damage for a moment. Great Britain isn't a member of the euro system and yet member of the union.

Without the euro, the members of the currency union would merely fall back to the state of integration of the UK – regrettable as it may be, but acceptable in the long run.

«Even the free movement of people within the union wouldn't be banned»

And if the free passage across borders, which applies in parts of the EU and with Switzerland, partially, temporarily or even completely has to be abandoned, because the protection of the external borders of the union doesn't work in the south?

Then, Schengen will have failed, but not Europe, even if the deputy commissioner of the union, the Dutchman Frans Timmermans, likes to put it that way. Three of the four freedoms of the common market, the free trade of goods, services and capital wouldn't be affected.

Even the free movement of people within the union wouldn't be banned. Every member of the union can enter non-Schengen Britain, as long as he can present a means of identification. Only the duty to have a visa would change the game fundamentally and that far not even the Brits are thinking, pro- or anti-EU.

The European Union is currently undergoing a crisis – like it has happened before. But it is not an existential crisis.

Dieter Ruloff is professor emeritus of International Relations at the University of Zurich. The citizen of Germany studied History, Political Science and Economics at the Universities of Frankfurt, Konstanz and Zurich. In 1971 he took a Master of Arts in History and Political Science in Konstanz, followed by a PhD at the University of Zurich in 1974. Six years later, he finished his postdoctoral thesis at the Department of Philosophy at the University of Zurich. In 1987 he was appointed professor in Zurich.

Ruloff was a member of the senior management at Swiss bank UBS from 1990 through 1993 and in charge of the unit assessing the country risks. In 1993 he returned to the University of Zurich as professor for International Relations. He also assumed the lead at the Swiss Institute of International Studies (until 2008). Ruloff is a founding member of the Center for Comparative and International Studies at the ETH Zurich and University of Zurich and acted as director of the Department of Political Science at the University of Zurich (until 2012).