Trust in The European Union in Challenging Times - 2019 PDF

TRUST IN THE
EUROPEAN UNION
IN CHALLENGING
TIMES
Interdisciplinary European Studies
EDITED BY
ANTONINA BAKARDJIEVA ENGELBREKT, NIKLAS BREMBERG,
ANNA MICHALSKI AND LARS OXELHEIM
Trust in the European Union in Challenging Times
Antonina Bakardjieva Engelbrekt
Niklas Bremberg
Anna Michalski
Lars Oxelheim
Editors
Trust in the
European Union in
Challenging Times
Interdisciplinary European Studies
Editors
Antonina Bakardjieva Engelbrekt Niklas Bremberg
Department of Law Uppsala University
Stockholm University Uppsala, Sweden
Stockholm, Sweden
The Swedish Institute of International
Anna Michalski Affairs
Department of Government Stockholm, Sweden
Uppsala University
Uppsala, Sweden Lars Oxelheim
University of Agder
Kristiansand, Norway
Research Institute of Industrial
Economics
Stockholm, Sweden
ISBN 978-3-319-73856-7 ISBN 978-3-319-73857-4 (eBook)

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Contents
rust in the European Union: What Is It and How Does It

T
Matter? 1
Antonina Bakardjieva Engelbrekt, Niklas Bremberg, Anna
Michalski, and Lars Oxelheim
hat Explains the Lack of Trust in the EU Among Its

W
Member States? A Constitutional Analysis of the EU’s ‘Value
Crisis’ 23
Joakim Nergelius
erspective on the Eastern Enlargement: Triumph of the EU

P
or Seed of Its Destruction? 41
Bo Petersson
itizens’ Trust in the EU as a Political System 65

C
Linda Berg
I s Migration Threatening Social Trust in Europe? 91

Andreas Bergh
v
vi CONTENTS
rust in the Euro and the EU’s Banking Union After

T
the Financial Crisis 111
Clas Wihlborg and Sarkis J. Khoury
he Question of Trust in EU Criminal Law Cooperation:

T
A Constitutional Perspective 139
Ester Herlin-Karnell
utual Trust in Civil Justice Cooperation in the EU 159

M
Eva Storskrubb
he Importance of Trust in a Digital Europe: Reflections

T
on the Sharing Economy and Blockchains 181
Robin Teigland, Håkan Holmberg, and Anna Felländer
rust and Crises in the EU: Exit, Voice and Loyalty 211

T
Göran von Sydow
Index 235
Notes on Contributors
Antonina Bakardjieva Engelbrekt is Professor of European Law and

Torsten och Ragnar Söderberg Professor of Legal Science (2015–2018) at
the Faculty of Law of Stockholm University. She chairs the Swedish Network
for European Legal Studies. Her research interests are directed at processes
of Europeanization and globalization and their influence on national law
and institutions, as well at interactions between legal systems (legal trans-
plants). She has been Fernand Braudel Fellow at the EUI, Florence, Global
Research Fellow at NYU Law School, and Visiting Professor at Bond
University, Chicago Kent College of Law and Keio University, Tokyo.
Linda Berg is Senior Lecturer in the Department of Political Science and
Director of the Centre for European Research (CERGU) at the University
of Gothenburg. Her main research interests are European parliament elec-
tions, political attitudes (specifically towards the EU) as well as identity
and policy in a multi-level setting.
Andreas Bergh is Associate Professor at the Department of Economics,
Lund University, and a researcher at the Research Institute of Industrial
Economics in Stockholm. His main research interests are public and insti-
tutional economics, trust, corruption, sharing economy and development
economics.
Niklas Bremberg (PhD in Political Science) is research coordinator for
the Swedish Network of European Studies in Political Science (Department
of Government, Uppsala University) and senior research fellow at the
Swedish Institute of International Affairs. His research focuses on interna-
vii
viii NOTES ON CONTRIBUTORS
tional practice theory, security communities, and EU foreign and security

policy. He has been visiting researcher at the University of Toronto, the
University of Liverpool, and Universitat Autònoma de Barcelona.
Anna Felländer is Digital Economist with extensive experience in analysing
how digitalisation is affecting organisations, society and the economy. She is
affiliated to the Swedish Royal Institute of Technology and advisor to the
Swedish Minister of Digitalisation. Felländer has a Master of Science degree
in International Economics from the Stockholm School of Economics.
Ester Herlin-Karnell is Professor of EU Constitutional Law and Justice
and University Research Chair at VU University Amsterdam. She is also
the co-director and founder of the VU Centre for European Legal Studies.
Her main research interest is European criminal law and she is working on
a monograph on EU Justice and Home Affairs.
Håkan Holmberg is Data Scientist specialising in the fields of psycho-
metrics and blockchain technology. He is presently involved in projects at
Uppsala University as well as the National Board of Health and Welfare.
Holmberg holds a master’s degree in Mathematics from the Stockholm
University.
Sarkis J. Khoury is retired from the University of California at Riverside.
During his academic career, his works on issues related to banking and
finance had been published extensively. Khoury holds a doctoral degree in
International Business from the Wharton School, University of Pennsylvania.
Anna Michalski is Associate Professor of Political Science and at the
Department of Government, Uppsala University, and associate research
fellow at the Swedish Institute of International Affairs. She is Chair for the
Swedish Network for European Studies in Political Science (SNES) and
member of the Swedish Foreign Policy Society. Her research focuses on
European foreign policy, EU-China relations, strategic partnerships and
socialization in international organizations. She has held academic posi-
tions at Fudan University, Shanghai, and The Europe Institute, Auckland
University, New Zealand, as well as at several European policy research
institutes and the European Commission.
Joakim Nergelius is Professor of Law at Örebro University. He has
served on numerous occasions as expert and legal advisor to, inter alia, the
European Commission and the Swedish government. His research inter-
ests include EU law and constitutional law.
NOTES ON CONTRIBUTORS
ix
Lars Oxelheim is Professor of International Business and Finance at the

University of Agder, Kristiansand, Norway, and professor emeritus at Lund
University, Lund, Sweden. He is affiliated with the Research Institute of
Industrial Economics (Institutet för Näringslivsforskning), Stockholm,
Sweden, and is honorary professor at the Fudan University, Shanghai,
China. Oxelheim’s research interests are in the area of the interplay between
the firm and its macroeconomic environment encompassing economic and
financial integration as well as managerial aspects, corporate governance,
and risk management. He is a delegate of the Royal Swedish Academy of
Engineering Sciences (IVA), the Royal Society of Letters at Lund and is
elected fellow of the European International Business Academy (EIBA).
Bo Petersson is Professor of Political Science and IMER (International
Migration and Ethnic Relations) at Malmö University. He is also
Director of the research platform Russia and the Caucasus Regional
Research (RUCARR). His special areas of interest include nationalism,
legitimacy, and political myth.
Eva Storskrubb is Associate Professor of Procedural Law and a researcher
at Uppsala University. She also works as a practising lawyer at Roschier in
Stockholm. Her research interests include EU procedural law, civil justice
and transnational dispute resolution on civil and commercial matters
including private international law.
Robin Teigland is Professor of Business Administration and
Co-director of the Centre for Strategy and Competitiveness at the
Stockholm School of Economics (SSE). She is Fellow of the KIN
Centre for Digital Innovation at VU University Amsterdam. Her
research interests reside at the intersection of strategy, technology,
innovation, and entrepreneurship.
Göran von Sydow is Deputy Director and Senior Researcher in Political
Science at the Swedish Institute for European Policy Studies (SIEPS). His
main research interests are political parties, Euroscepticism, European
integration, and constitutional change. He holds a doctoral degree in
Political Science from the Stockholm University.
Clas Wihlborg is the Fletcher Jones Chair in International Business at
Chapman University and a visiting professor at the University West,
Sweden. He is a member of the Royal Swedish Academy of Engineering
Sciences. His research interests include financial institutions, and interna-
tional and corporate finance.
List of Figures
Citizens’ Trust in the EU as a Political System

Fig. 1 Positive, negative or neutral image of the EU 2002–2016 (per
cent, weighted average all EU) 71
Fig. 2 Trust in the European Parliament 1993–2016 (per cent, weighted
average all EU) 72
Fig. 3 For or against Swedish membership of the EU 1991–2016 (per
cent)74
Fig. 4 Swedes’ trust in EU institutions and satisfaction with democracy
in the EU, 1999–2015 (per cent) 75
Fig. 5 Positive, negative or neutral image of the EU 2015 (opinion
balance)77
Fig. 6 Trust in the European Parliament 2015 (opinion balance) 78
Is Migration Threatening Social Trust in Europe?
Fig. 1 Trust in selected European countries 94
Fig. 2 Share with high trust in selected European cities 95
Fig. 3 Trust among different migrant groups in Denmark compared to
home country trust and native Danes 99
Fig. 4 The effect on trust of length of stay in countries with different
degrees of perceived corruption depending on age at arrival
(cut-offs ≤30, >30) 102
xi
List of Tables
The Importance of Trust in a Digital Europe: Reflections

on the Sharing Economy and Blockchains
Table 1 Examples on how transport services are organized within the
sharing economy 189
Table 2 Overview of current legal framework regarding transportation
services in the sharing economy 190
Table 3 Overview of different blockchain actors based on platform access
and transactions processed by the platform 198
xiii
Trust in the European Union: What Is It
and How Does It Matter?
Antonina Bakardjieva Engelbrekt, Niklas Bremberg,
Anna Michalski, and Lars Oxelheim
Trust is an elusive concept. We can have it without being able to see or

touch it. It takes a long time to build up, but it can be demolished in an
instant. The paradoxical thing about trust is that it can be said to be pres-
ent as long as we take it for granted, but as soon as we need to demon-
strate its existence, it tends to disappear. The motto of President Ronald
Reagan regarding relations between the US and the Soviet Union during
the Cold War—that they ought to be based on the principle of ‘trust, but
A. Bakardjieva Engelbrekt
Stockholm University, Stockholm, Sweden
N. Bremberg
Uppsala University, Uppsala, Sweden
The Swedish Institute of International Affairs, Stockholm, Sweden
A. Michalski (*)
L. Oxelheim
University of Agder, Kristiansand, Norway
Research Institute of Industrial Economics, Stockholm, Sweden
© The Author(s) 2019 1

A. Bakardjieva Engelbrekt et al. (eds.), Trust in the European Union in
Challenging Times, https://doi.org/10.1007/978-3-319-73857-4_1
2 A. BAKARDJIEVA ENGELBREKT ET AL.
verify’—illustrates this paradox rather well. Yet many of the institutions of

society—not least the judiciary, the market, and the welfare state—cannot
function without a certain measure of ‘unverified trust’.1 This means that
trust is one of the main ingredients of a system of democratic majority
rule, wherein representatives are chosen from a set of political parties in
general elections to form a government and lead the country and in that
capacity rule in the name of all.
Not least for its role in facilitating collective action has trust figured
centrally in the European project, often as an unspoken but virtually
unattainable precondition for integrating different states, political sys-
tems, and peoples in Europe (cf. Haas, 1958). One scholar who took an
interest in European integration early on, political scientist Karl
W. Deutsch, envisaged that trust would play a decisive role in the pro-
cess. He believed that if citizens of the different member states started to
see themselves as belonging to the same community, and came to trust
and understand the citizens of the other member states to essentially the
same degree that they trust and understand the citizens of their own
country, the prospects for successful integration would be greatly
enhanced (Deutsch et al., 1957).
This is the first book in the Interdisciplinary European Studies series. It
is published at a time when the project of European integration is facing
many serious crises. The unity of Europe is put under stress by the migrant
and refugee crisis, the lingering euro crisis, a multitude of security crises, and
not least ‘Brexit’. It must also be acknowledged that the US administration
under President Donald Trump has taken a much more critical stance
towards the European Union than under any of his predecessors and the
level of trust in transatlantic relations is at a record low. Recent studies on
euroscepticism and populism in Europe have highlighted the role of popular
distrust of elites in order to explain the high level of social contestation of
the EU in many member states (see e.g. Abts, Heerwegh, & Swyngedouw,
2009; Harteveld, Meer & Vries, 2013; Hobolt & Tilley, 2016; Kriesi, 2014;
Scharpf, 2014). In contrast, transnational trust among political leaders, civil
servants, and officials is often assumed to be of great importance for the
EU’s ability to respond to current challenges. Despite the importance of
trust in complex political and social systems, there are few works in the field
of EU studies that address comprehensively the issue of trust in the light of
recent developments. This book, therefore, contributes to fill this void by
investigating through an interdisciplinary perspective the importance of
trust for the EU in meeting the internal and external challenges it is facing.
TRUST IN THE EUROPEAN UNION: WHAT IS IT AND HOW DOES IT MATTER? 3
When EU leaders must find solutions to difficult problems, trust among

them is central in their capacity to reach an agreement and make decisions.
This can be seen when the Union’s ability to act must be strengthened to
improve the implementation of common policies; trust between officials
in different national and European agencies is invaluable. This is because
trust and consensus, particularly between the member states and their rep-
resentatives in the EU’s institutions, is in many ways the glue that enables
the EU to hold together and its policy processes to work. Similarly, democ-
racy in the Union will remain incomplete, unless and until the question of
solidarity among the peoples of Europe is addressed which in itself is
dependent on a degree of mutual trust among the citizens of different EU
member states taking hold as this is a basic precondition for common
democratic processes.
Scholars have described how trust and the ability to solve problems
have grown at the elite level in the EU as a result of years of more or less
constant negotiation (see e.g. Checkel & Katzenstein, 2009; Favell, 2011;
Fligstein, 2008). However, it is also clear that nothing similar has taken
place among the broader population, whose sense of European identity is
often weak. Undoubtedly, the ongoing crises and myriad challenges are
eroding, rather than building up, trust among the EU’s member states,
public agencies, economic and social actors, and populations. Therefore,
the importance of trust seen from different perspectives urgently needs to
be discussed in depth in relation to the EU as well as European coopera-
tion more broadly.
Trust, as noted above, is an elusive concept, and this is reflected also in
the research that focuses on the matter. In part this has to do with how
trust is conceptualized: as a condition among actors; as a notion held by
one person about the behaviour and actions of another; or as an indepen-
dent factor facilitating collaboration, exchange, and joint decision-making.
It also has in part to do with where we look to find trust: at the interper-
sonal level; within institutions, systems, and procedures; or at the inter-
change between peoples and states. The contributors to this book analyse
the prevalence of trust from the vantage point of law, economic, and politi-
cal science, and they consider the consequences for the EU at both the
national and European levels when trust is lacking. In this introduction,
therefore, we set out to discuss the importance of trust within the EU as a
constantly evolving political system and to shed light on where and when
trust plays a critical role in managing this multi-level system with an uneven
distribution of competences and without a sense of self-evident legitimacy.
Trust Within the EU in Historical Perspective

In light of the ongoing crises in the EU, it is worth emphasizing that,
historically, the emergence of European integration and the creation of
the EU’s predecessors in the 1950s were something remarkable from the
standpoint of trust.2 The European Coal and Steel Community (ECSC)
was founded in 1952, followed by the European Economic Community
(EEC) in 1958. This begs the questions how six West European states
were able to create these institutions so soon after the Second World War,
when trust between political elites must have been at an absolute low in
Europe? The literature on European integration often highlights the
heroic efforts of far-sighted political leaders, working together with high-
level civil servants. To be sure, the convictions of leading politicians, based
on their personal experience of one or often two world wars, were critical
in this context. Central figures here included Robert Schuman, French
Foreign Minister; Konrad Adenauer, German Chancellor; Jean Monnet,
President of the High Authority of the ECSC; Paul-Henri Spaak, Belgian
Prime Minister; and Altiero Spinelli, prominent leader of European feder-
alism. Still more important for the integration effort was the capacity of
these individuals to see beyond selfish nationalism and destructive compe-
tition between neighbouring countries. It is clear, however, that such
qualities would never have sufficed had a number of background condi-
tions not been present at the time the EEC was created. These conditions
played a decisive role in enabling trust to be created among political elites,
and in making it possible for a broad albeit vague support among the
peoples of the member states to be mobilized.
Among these external conditions, American hegemony was extraordi-
narily important. The US aided economic reconstruction and supported
the democratic consolidation of weak political regimes in Western Europe
that were threatened by communist takeover and revanchist forces. A fur-
ther factor, and at least as important, was the overarching security umbrella
which the Americans provided through the North Atlantic Treaty
Organization (NATO), which furnished protection against external powers
and embedded the remilitarization of (West) Germany in joint structures.
The emerging liberal order and US support for reconstruction laid the
foundation for intra-European free trade. The rules governing the disburse-
ment of Marshall Plan aid forced the Western Europeans to trade with each
other without erecting undue trade barriers. In various ways, then, the eco-
nomic interchange among the countries in question, together with the mili-
tary and security cooperation in NATO, made it possible to create a security
community in Western Europe.3 The different political elites learned to

work together to overcome real barriers through negotiation and compro-
mise, rather than by issuing threats or resorting to coercion. Furthermore,
the opportunities for mobility and exchange which the internal market
afforded to economic actors (companies, investors, and workers) reinforced
the feeling of belonging to a security community. The ground rules estab-
lished for interaction among the member states, and the perception that
war was henceforth impossible between them, strengthened trust and pro-
moted confidence, ensuring development along democratic and market-
based lines.
A further precondition for the West European experiment in building a
political order based on voluntary integration was the long period of eco-
nomic growth following the Second World War. Without rising prosperity
in the West, it would have been much more difficult to carry out the struc-
tural changes required for modernization of the economy and it would not
have been possible to gain widespread acceptance for far-reaching free
trade. The association of the EEC, in the minds of people in most of the
member states, with social and economic progress and with greater material
wealth laid a foundation for trust and helped to ensure popular support.
The internal conditions for European integration were based on the
arrangements that political elites in the original six member states laid
down for the EEC. These regulated relations of power between the par-
ticipating states on the institutional, economic, and political level. It was
established early on that, despite their differences in terms of geographic
area, economic scale, and population size, the member states would be
regarded as functionally equal in the treaties. Later, after decision-making
by majority vote was introduced through the adoption of a weighted sys-
tem for voting in the EU, the smaller member states still held a dispropor-
tionately large share of the votes. In addition, a supranational body, the
European Commission, was set up and tasked with presenting legislative
proposals, further protecting the smaller countries from dominance by the
larger ones. These arrangements helped endow the EU, in comparison
with other international organizations, with a stronger capacity for action
but without jeopardizing the interests of its smaller members.
Where economic integration was concerned, necessary structural
reforms were embedded in an agreement between the member states on
shared costs, in exchange for free trade and the dismantling of non-tariff
barriers to trade. The EEC thus promoted economic modernization,
helped to equalize the costs entailed, and held out the promise of prosper-
ity based on market integration (without, however, establishing a common
economic policy). It was in this context of close cooperation and rising

trust among political, economic, and bureaucratic elites that the term
‘permissive consensus’ was coined, to describe the confidence felt by the
peoples of the member states in the efforts of the European elite to achieve
integration (cf. Hooghe & Marks, 2009).
The State of Trust in the EU at Challenging Times

A great deal has happened, of course, in Europe and the world since the
second half of the twentieth century. The conditions reviewed above,
however, long remained the linchpin for dealings between the Union’s
member states and between them and the EU’s institutions. Nonetheless,
it cannot be denied that the situation in the Union 2018 is different and
that the habitual patterns of cooperation have changed. The crises of
recent years serve to highlight several ways in which trust within the EU
has eroded. In September 2016, in his annual address to the European
Parliament in Strasbourg, the President of the European Commission,
Jean-Claude Juncker, vented his frustration:
I have witnessed several decades of EU integration. There were many strong

moments. Of course, there were many difficult times too, and times of crisis.
But never before have I seen such little common ground between our
Member States. So few areas where they agree to work together. (Juncker,
2016)
The President of the European Council, Donald Tusk, spoke along

similar lines in May 2016, on the 40th anniversary of the founding of the
Conservative Party group (the European People’s Party) in the EP:
Obsessed with the idea of instant and total integration, we failed to notice
that ordinary people, the citizens of Europe do not share our Euro-
enthusiasm. Disillusioned with the great visions of the future, they demand
that we cope with the present reality better than we have been doing until
now… [t]he spectre of a break-up is haunting Europe and a vision of a fed-
eration doesn’t seem to me like the best answer to it. (Tusk, 2016)
Between the two of them, Junker and Tusk paint a picture of a serious
shortage of mutual trust between the elites of the different member states
as well as of public trust in the EU today. The euro crisis, especially the
way the Greek debt crisis was handled, offers a particularly illustrative
example. The eurozone debt crisis is often thought to encapsulate an

insurmountable ideological conflict between North and South, between
lenders and borrowers, and between German ‘ordoliberalism’ and Greek
‘neo-Marxism’. But as Christopher Bickerton points out, the ideological
conflicts in this case are easily exaggerated. There was and is in fact a far-
reaching consensus, in terms of both objectives (keeping Greece in the
euro) and means (loans plus de facto debt forgiveness, in exchange for
tough economic reforms). What was seen as unacceptable, however, was
the way in which Yanis Varoufakis, the Greek Finance Minister, openly
criticized his peers, thereby breaking the informal norms and rules by
which the Eurogroup operates (Bickerton, 2015). This highlights the cru-
cial role that expectations of proper behaviour still play among elites in the
EU. At the same time, it lays bare the problems to which an approach of
this kind gives rise when the legitimacy of decisions is being challenged by
significant parts of the population.
The refugee situation in Europe and its neighbourhood is another indi-
cator of the lack of trust among EU elites today. In 2015, as the number
of refugees arriving in Europe was sharply increasing, the European
Commission proposed a quota system for the number of refugees that
each member state would take in, based on a range of indicators such as
the size, population, and economy of the country in question (European
Commission, 2015). On this basis, in September, a majority on the
Council of Ministers decided—in the face of opposition from several
Central and East European states—to reassign 120,000 refugees who had
come to Italy and Greece and to other member states. Among others,
Viktor Orbán, the Prime Minister of Hungary, refused to accept the deci-
sion which had been taken by the majority. This demonstrated the pro-
found differences in views between the member states and showed how
collective decisions within the Union are undermined when portions of
the political elite fail to respect the common rules of the game. When
member states act in a self-willed fashion and call into question decisions
made to address common problems, it is a very serious matter. Such
behaviour is more to be regretted if the historian Hartmut Kaelble is cor-
rect in his contention that EU citizens, while displaying but a weak
European identity, increasingly expect the Union to find solutions to com-
mon challenges in regard to, for example, security policy, foreign affairs,
and climate change (Kaelble, 2009).
‘Brexit’ too has sharply posed the issue of trust between member
states, as has the question of the terms for the UK’s withdrawal. Negative
perceptions of EU membership have been a regular feature in British

debate for a number of years. They were accentuated during the govern-
ment of David Cameron, culminating among other things in a symbolic
but substantively meaningless renegotiation of British participation in the
EU’s arrangement for the free movement of labour and the role of
national parliaments. Harsh and uncompromising rhetoric filled the air as
the referendum of June 2016 approached, further undermining prospects
for an objective examination of the merits and drawbacks of British mem-
bership of the EU. The debate also demonstrated, with salutary clarity,
the belief among advocates of British withdrawal in the possibility of
securing an agreement on unhindered access to the internal market, coin-
cident with an end to the free movement of labour (notwithstanding
repeated declarations by European political leaders that such a settlement
will never be allowed).
Over one year into the negotiations between Britain and the remaining
27 member states, it is something of a truism to state that trust between
the two sides has reached a record low. The negotiations have been severely
delayed due to a lack of common appreciation of the ground rules for a
member state leaving the EU. With the British government being under
the illusion that the terms of ‘Brexit’ are negotiable and the remaining 27
refusing to give any ground before the British accept the principles on
financial compensation, the UK-Irish border, and the status of EU nation-
als in the UK, the talks are stalling. This does not bode well for the EU
and the UK to move on to discussions about the future relationship
between them. Various extreme scenarios, such as the UK crashing out of
the EU, are obviously to the detriment of both sides, but with the
Brexiteers refusing to fully understand the implications for the UK and the
EU of Britain leaving the Union without working arrangements, there is
virtually no fertile ground in the circumstances of early 2018 to build
fruitful future relations between the two.
How Does Trust Matter Within the EU?

Political scientists have long taken an interest in situations where sovereign
states voluntarily relinquish formal decision-making power to a political
union, wherein decisions are made together with other states with the help
of independent institutions (see e.g. Milward, 1992; Rosamund, 2000;
Tallberg, 2004). In particular, the issue of the autonomy of the member
states and their need to protect their national interest have stood at centre.
Several explanations have been advanced: that the states of Europe, due to
their vulnerability and small size, have had no other choice than to seek
out common solutions to challenges and cross-border threats; that recur-
rent negotiations give rise to a logic of give and take, because ‘the shadow
of the future’ rewards those who play by common rules and who look to
more than just their self-interest; and that the EU’s supranational institu-
tions have served to even out the informational asymmetry that normally
besets efforts at international cooperation. Social-psychological theories
have also been cited to explain such outcomes (Haas, 1992). These fasten
on the tendency among officials and experts not only to form knowledge
communities on the premise that threats and challenges are best con-
fronted jointly but also to form common conceptions on appropriate solu-
tions. Consensus thus arises, and new forms of trust and loyalty emerge—as
do common notions of appropriate behaviour and shared ideas about how
political problems ought to be addressed (Lewis, 2005).
Predictability, a shared worldview, and a knowledge of national condi-
tions create the kind of trust the EU needs to be able to make necessary
decisions on a daily basis. This dimension, which encompasses the
executive direction of the Union, is important, but it can no longer con-
tain the tensions which the EU’s deepening and enlargement have entailed.
Efforts to democratize the EU have enhanced the position of the European
Parliament, but without strengthening either the parliamentary or the
party-political dimension of the Union. Political parties are still mainly
anchored in national arenas, and transnational ties between them are rela-
tively weak. National parliaments show no interest in cooperating more
closely with the EP within the framework of a multi-level parliamentary
system. The diversity of political values and experiences has increased as a
result of the EU’s enlargement to the east. Increased politicization has
taken place, but the multi-level political system that distinguishes the
Union has not put down robust roots. The executive direction of the
member states at the Union level has been strengthened, but stronger
bonds have not been established either with national parliaments or with
the various national populations. At the popular level, finally, the permis-
sive consensus, a kind of passive confidence in the Union among the pub-
lic, has given way to a growing mistrust of the exercise of power at
European level, nourishing a rising populism both nationally and
centrally.
One key dimension of trust in the Union is the assumption that its legal
order is based on the rule of law. Under the treaties, the member states are
obliged to grant EU law precedence in the event of a conflict with national

law. This does not alter the fact, however, that the EU system is based
essentially on international law. In the end, therefore, it is up to the gov-
ernment of each member state to choose a posture towards the Union and
up to the national courts to interpret national law in conformity with EU
law. This underscores the vulnerability of the Union from the standpoint
of the rule of law. A member state may decide, namely, not to apply EU
legislation, either on account of political considerations or because it
opposes the precedence of EU law in principle. In either case, trust in the
Union is undermined. If political considerations are allowed to trump soli-
darity with the other member states, the effect will be to destroy the trust
upon which effective EU action is based: trust that agreements will be
followed, that EU law will be respected, and that the member states will
act together to uphold the Union’s legal order. A strict adherence to prin-
ciples of national sovereignty, self-determination, and defence of the
national interest comes at the expense of the common interest. Trust must
therefore be seen by all member states as a common asset, which each of
them has the responsibility to maintain.
The principle of ‘sincere cooperation’ has been enshrined in the EU
treaties since 2009, when the Treaty of Lisbon entered into force (Article
4(3) TEU). Principles for the conduct of state administration are often
regarded as a national competence, although there are relatively well-
developed common legal principles of good administration which are
applied by the European Court of Justice. But a lack of trust between
national agencies undermines prospects for cooperation, reduces the inter-
est of member states in agreeing on common policies, and ultimately
erodes the confidence of the larger population in the Union as a collective
actor. Trust between the member states at the administrative level is there-
fore of crucial importance for the EU. The underlying reason for this is
that, notwithstanding its adoption of a great many laws and regulations,
the Union as an organization has virtually no administrative resources to
implement and enforce them. In a vast number of policy areas, the imple-
mentation of EU laws and regulations is therefore directly dependent on
the expertise of national agencies, their financial and human resources,
and their willingness to implement the provisions in question. Yet uniform
implementation would seem to be a fundamental condition for the main-
tenance of fair competition on the internal market and ultimately a prereq-
uisite for the rule of law within the Union. The problem is accentuated by
the fact that there are relatively few guidelines for cooperation between
agencies in the different member states. This despite the fact that coordi-
nation between national policies, for example, in the economic field, is
being recommended more and more.
Different Dimension of Trust and How to Achieve It

The following chapters in this book consider the importance of trust for
the EU in a variety of ways. How, for example, is trust in the Union as a
political system affected by the fundamental conflict of values expressed in
the debate over the EU’s handling of the refugee crisis? How has confi-
dence in the Union’s institutions evolved over time in the different mem-
ber states? How has interpersonal trust been affected by migration within
the Union and by the influx of people from outside its bounds? What sort
of regulatory framework for economic affairs promotes confidence in
European cooperation in currency and banking? Can we presume that
national bodies in the area of civil and criminal law have confidence in
their counterparts in other EU countries? These are some of the issues
addressed in this book.
In the second chapter, Joakim Nergelius considers various crises and
challenges facing the Union: the refugee crisis, Britain’s imminent with-
drawal, the risk of state bankruptcy in Greece, and the lack of clarity over
sanctions against Russia. These crises ought not to be seen, Nergelius
argues, as just political in nature: they are eminently constitutional as well.
This is evident not least from the conflict of values which has been exacer-
bated of late by the actions of the Hungarian and Polish governments.
Why have these problems and crises emerged in recent years? One reason
emphatically stressed by the author is that the Union has taken its require-
ments for membership, and its criteria for admission to various cooperative
arrangements, too lightly. States which are already members of the Union
need closer oversight as well, particularly where the protection of rights is
concerned. Another basic cause highlighted by the author is the distrust of
the entire EU project evinced by large portions of the population in sev-
eral member countries.
In large parts of the Union, we may now speak of an ongoing conflict
of values between a liberal model of society and various conservative,
authoritarian, and nationalist ideals that were long thought to be obsolete.
Nationalist parties in a number of European countries are exploiting the
lack of trust in the EU within broad sections of the population. Here,
Nergelius contends, we can identify both a popular suspicion of political
elites in general and a distrust of the essentially supranational, cosmopoli-

tan, and rule of law-based EU project as such. This conflict of values was
exacerbated by the refugee crisis in 2015, which opened up a gulf between
(North)Western Europe and most of the Eastern member states, which
have refused to accept refugees from Africa and the Middle East. Moreover,
the EU’s agreement with Turkey in March 2016—on returning refugees
from Greece—is problematic in several ways, both juridically and politi-
cally. As of 2017, however, a fundamentally liberal majority of the EU’s
member states are calling continuously—as are the European Commission
and the European Parliament—for a continued acceptance of refugees,
assuming the question of their distribution can be solved. The more liberal
states, the author argues, should make use of the mechanisms set out in
the treaties to force recalcitrant states to adopt more liberal policies on
refugees, on rights and freedoms, and on matters of tolerance generally.
In the third chapter, Bo Petersson looks back at the great eastward
enlargement of 2004. Ten countries joined the Union in that year, eight
of them located in Central and Eastern Europe. Enlargement was seen at
the time as a huge gain for Western liberalism and democracy, even if cer-
tain problems were anticipated, primarily in connection with labour mar-
kets and social safety nets. It has since become clear, however, that
enlargement has led to tensions within the Union—and in a way that few
predicted. The EU incorporated states whose political life and civil society
were marked by the experience of the Cold War and of long-term mem-
bership in the Soviet-dominated Eastern bloc. This has given rise to seri-
ous tensions. Over the course of the last decade, governments have taken
power in Central Europe which have their own notions of what the core
values of the Union consist of. These governments, particularly those of
Hungary and Poland, seem most inclined to heed the siren call of authori-
tarian powers outside the Union. A serious challenge has been mounted to
the interpretation of the Copenhagen criteria (regarding democracy,
human rights, and the rule of law) which had earlier been taken for
granted. This has badly undermined trust and confidence in the Union.
The growing public support for populist parties across the Union poses
another serious challenge to the EU’s core values, Petersson points out. A
good many voters find simple solutions to complex problems attractive.
This is taking place as the EU shows increasing signs of weakness on both
economic and identity-related issues. The repeated and long-standing eco-
nomic crises from 2007 onwards is testimony to this, as is the imminent
withdrawal of Britain from the Union. A unifying vision and a common
identity are needed to give the member states and their populations the
motivation to keep moving forward together. A common identity based
on shared values is essential for trust within the Union and for the EU’s
influence and reputation in the world. For such a thing to be possible,
there must be internal unity on the interpretation and implementation of
core values. Democracy, human rights, and the rule of law must never
become beautiful phrases without concrete content.
In the fourth chapter, Linda Berg looks at trust between citizens on the
one hand and the EU’s political system on the other. Her chapter deals in
part with people’s general attitude towards the EU and in part with their
trust and confidence in the Union’s institutions. She discusses various
models for explaining the variation in levels of trust between countries and
between people. On the one hand, the results show relative stability over
time in people’s general attitude towards the Union or in their views on
the desirability of their country’s membership therein. The years of crisis
have seen a certain decline in this regard, but public opinion is still
supportive overall. On the other hand, trust in the EU’s institutions more
specifically has fallen sharply during the crisis years. This accords with what
we might expect, that is, that attitudes of a more specific type (e.g. regard-
ing EU institutions) will change more rapidly than attitudes of a more
general kind (e.g. regarding the EU as a whole).
A closer look at variations between countries and over time reveals a
similar pattern. A majority of citizens in most member states remain well
disposed to the Union, even after the years of crisis. The exceptions here
are Greece, Cyprus, and Austria. When it comes to confidence in the EU’s
institutions, on the other hand, the variation between countries is greater.
Confidence is greatest in countries that are politically and economically
stable or where the comparison with domestic political institutions comes
out in the Union’s favour. Variations of this kind, according to Berg, can
be understood on the basis of such factors as the following: self-interest;
the influence of different national political actors; political and economic
developments (both in the EU and in the country in question); and per-
ceptions of how EU membership has affected the country and its identity.
While feelings of affiliation with Europe remain important for trust in the
EU, Berg’s chapter shows that such feelings today—in the wake of the
recent crises—are not able to the same extent as before to offset opposing
views and feelings of dissatisfaction. In light of this, Berg argues, basic
civics training in all member states must be devoted to deepening the
public’s understanding of how the Union works as a multi-level system,
how decisions within it are made, and how citizens can influence the poli-
cies pursued.
In the fifth chapter, Andreas Bergh discusses the relationship between
migration and interpersonal trust in the Union. Interpersonal trust, Bergh
avers, is an important foundation for a well-functioning society. A society
where people trust each other works better—economically, politically, and
socially. The research shows, moreover, that variations in trust are great
within the EU, both between different member states and within the same
country. Trust between people is high in the Nordic member states and low
in such countries as Poland, Portugal, and Hungary. But no clear trend up
or down is apparent; the proclivity to trust people (or not to) seems in
general to be stable over time. The challenge for Europe in coming years
will be to make the most of the opportunities arising from increased migra-
tion, both between member states and from outside the Union.
One central issue in this context is how interpersonal trust is affected by
increased migration between countries with differing levels of trust. New
research shows that migrants from low-trust countries who move to high-
trust ones tend to show higher trust than those who remain in the former
lands. Their trust is not as high, however, as that displayed by persons who
have always lived in countries with higher trust. Bergh also considers the
reverse question: what happens to the trust shown by emigrants from a
high-trust country when they have lived for several years in a low-trust one
(with high levels of corruption, for instance)? Reviewing research on trust
shown by Swedish expatriates, Bergh notes that the high-trust level seems
very robust, except to some degree in the case of persons who were younger
than 30 when they moved to a low-trust country. Trust is an attitude,
research shows, which is largely shaped by the influence of parents and the
impact of events during youth and which remains very stable throughout
the later stages of life. Thus, while corruption and defects in the rule of law
in Europe need not have an immediate negative impact on trust, today’s
crises in the EU can nonetheless—by affecting trust in the younger genera-
tions adversely—cause damage in this area which will be very difficult to
repair later. It is therefore of utmost importance, Bergh contends, that the
Union continue to act to strengthen the rule of law and that it makes
greater efforts to combat economic and social inequality as well.
The sixth chapter, authored by Clas Wihlborg, concerns the EU’s
common currency and banking union. The question here is whether
greater institutional flexibility would strengthen confidence in the Union’s
common efforts in these areas. In the matter of currency, Wihlborg notes,
EU member states which are outside the Economic and Monetary Union
(EMU) already enjoy considerable flexibility; by contrast, the states tak-
ing part in the common currency have no discretion in monetary matters.
As for banking, the regulatory framework for it was flexible and nationally
oriented until the debt crisis broke out in the eurozone in 2010. Banks
were allowed to operate throughout the Union with a ‘single licence’,
while supervision and regulation were mainly the responsibility of national
agencies. This, Wihlborg claims, made for institutional competition,
which was reinforced by the mobility of services, capital, and labour. The
EU’s banking union was created in order to strengthen confidence in the
monetary union. The idea was that harmonizing supervision, crisis man-
agement, and deposit insurance would break the link between the sover-
eign debt crisis and the banking crisis. Other financial activities in the EU
would still be carried out on the basis of a ‘single licence’. This is the
background to the controversial question of whether British financial
firms will be able to continue operating in the EU on the same terms after
‘Brexit’.
In his chapter, Wihlborg highlights the costs and benefits of harmoni-
zation as compared with those arising in a system of competing national
regulatory frameworks. He attaches particular importance to analysing the
conditions under which institutional competition would result in an
improvement in member states’ regulatory systems over time. One con-
clusion highlighted in his chapter is that greater trust requires either that
a number of EU member states abandon the euro as their currency or that
they affect far-reaching structural reforms. For political reasons, the author
believes, it may be advantageous to divide up the eurozone into two dif-
ferent currency areas. As to the EU’s banking union, Wihlborg contends
that a high degree of market discipline with regard to banks’ risk-taking
will be necessary if institutional competition is to produce an improve-
ment in national regulatory frameworks over time. Mutual recognition
between different national supervisory authorities thus requires a degree
of harmonization in terms of effective rules for dealing with troubled
banks. Finally, Wihlborg argues, harmonization on such a basis will be
necessary if conditions for increased flexibility are to be created for other
aspects of banking regulation and supervision as well.
In the seventh chapter, Ester Herlin-Karnell discusses the importance
of trust for cooperation within the Union in the area of criminal justice.
The Treaty of Lisbon, she points out, holds out the creation of an area
of ‘freedom, security and justice’ in Europe. What, she asks, does this
commitment really mean? Due to cooperation in connection with

Schengen, Europe’s passport-free zone, freedom of movement on the
one hand, and the fight against crime and terrorism on the other hand
sometimes end up in conflict with one another, since greater security for
one person can mean less freedom for another. This area of law and
policy may thus be described as one of Europe’s most dynamic but also
as one of its most sensitive of late.
However, due to the tough political climate in the EU in recent years,
it is first and foremost mutual recognition—whereby member states rec-
ognize judgements and decisions deriving from other member states—
that figures in criminal-justice cooperation within the Union today, rather
than harmonization of national laws and regulations. This form of coop-
eration is also thought to accord well with the EU’s principle of subsidiar-
ity: that is, the view that national laws and regulations can be maintained
to a great extent, inasmuch as decision-making is supposed to take place at
the lowest possible level within the EU’s multi-level system. In Herlin-
Karnell’s view, the challenge for the EU is to increase trust between its
member states. This can be difficult, however, when it comes to criminal
law. This is because criminal-justice systems, notwithstanding influence
from both international law and EU law, have remained nationally
anchored—in theories that set out the obligations of the state and the
rights of the individual. The author accordingly recommends, on the basis
of reasoning presented in her chapter, that the EU give greater weight to
the proportionality principle within its system for cooperation in the area
of criminal justice. She calls as well on the European Court of Justice to
apply a proportionality test in its interpretation of the concept of mutual
recognition, thereby making it clear to the member states that the EU
Charter of Fundamental Rights and the European Convention on Human
Rights always represent the minimum requirements for legislation in this
area.
The eighth chapter, by Eva Storskrubb, looks at trust and confidence
between the different national legal systems in light of the EU’s scheme
for judicial cooperation in civil matters. She focuses particularly on how
such trust finds expression when judgements in this area cross national
borders. The question of how the principle of mutual trust is to be inter-
preted, and what it de facto means, has emerged in recent years as one of
the most important challenges for judicial cooperation within the Union
in civil matters and for the EU’s project of creating an area of ‘freedom,
security and justice’. The overarching question raised by this principle is
whether legal protection for individual parties can be sacrificed in order to

sustain (in some cases no more than) a presumption of mutual trust. The
answer to that question, as the author sees it, has implications for the
legitimacy of the Union in a broader perspective. The chapter deals with a
part of the judicial system—that deals with civil matters—which affects an
extremely broad group of actors in society and which is fundamental for
the functioning of the EU’s internal market.
Storskrubb stresses that it takes time for legal cultures to meet and for
confidence to arise between institutions and actors. If, as a method for
driving developments forward, confidence is simply presumed to exist, the
effect will be to corrode trust in the EU and to undermine the Union’s
legitimacy. Paving the way for real trust requires taking supportive mea-
sures, in the form of education, collaboration, and e-justice. Legal actors
in the member states must also be involved to a greater extent. Patience is
needed, as are resources and systems for evaluation. Critical safeguards
must be retained in the rules governing the cross-border circulation of
judgements. It is true, Storskrubb grants, that the member states are not
yet ready for a thoroughgoing harmonization of legal procedures.
Nevertheless, she contends, it is critical that a dialogue be started at EU
level about how effective legal systems can be established that will contrib-
ute to mutual trust.
In the ninth chapter, Håkan Holmberg, Anna Felländer, and Robin
Teigland discuss the challenges and opportunities that digitalization and
the sharing economy involve for the Union and its member states. The
Union ought, the authors argue, to engage more intensively in issues
relating to digitalization of European societies. It can promote economic
growth in the EU thereby and help to enhance the member states’ capac-
ity for innovation. They also deem it essential that the Union develop a
‘digital presence’, in order to prevent the European perspective on issues
dealing with democracy and freedom of expression from being lost in a
technological trend which is greatly influenced by actors elsewhere in the
world. It is therefore important that the EU work to strengthen public
trust in digital environments.
As the authors see it, the spread of the sharing economy in the EU and
other parts of the world offers people new opportunities for value cre-
ation. With the help of so-called digital platforms, participants in the shar-
ing economy are able to cut out traditional intermediaries—something
which may be assumed to make a cheaper exchange of goods and services
possible. Digitalization enables more people to produce and consume
more cheaply and to use existing resources more efficiently. At the same
time, a vacuum of responsibility tends to arise in the wake of digitalization,
which makes it difficult to uphold the provisions of labour law and con-
sumer law in a variety of industries. Creating trust in the digital environ-
ment is thus one of the sharing economy’s biggest challenges. The authors
believe that the technology of so-called blockchains—digital ledgers where
all actors have access to an identical copy of the transactional history—can
provide part of the solution to the problem of inadequate accountability
that attends digitization. They propose among other things that the EU’s
‘Horizontal Task Force’ be made into a laboratory where different block-
chain actors are given space to develop, so as to answer the question of
whether a standardized blockchain should apply in all of the member
states or whether different countries and industries should develop their
own instead.
In the final chapter of the book, Göran von Sydow depicts an EU in
crisis, wherein trust between the member states themselves, on the one
hand, and between the member states and the Union, on the other hand,
is under heavy strain. Are the problems with trust linked to the question
of loyalty between the member states and the Union? The basic problem,
according to von Sydow, is that the EU is a system which profoundly
affects its member states, at the same time that the legitimacy of its central
organs is in dispute. The absence of full-scale democracy at the level of the
Union means that the EU still acquires its legitimacy largely from the will-
ingness of its member states to show loyalty to the joint project. The ques-
tion is what happens when such loyalty falls short. With the aid of Albert
O. Hirschman’s classic concepts of ‘exit’, ‘voice’, and ‘loyalty’, von Sydow
identifies three different systemic crises the Union is now undergoing.
These are ‘Brexit’, the euro crisis, and the conflict between EU member
states over the refugee situation. All three crises turn on highly conten-
tious issues.
The author calls our attention to research which shows that, as the
process of integration becomes more and more politicized, new demands
are placed on the legitimacy of the Union. The requirement that the
member states behave loyally towards the Union becomes more palpable
when the issues are of a politically sensitive nature. As a result, national
resistance to the Union is plainly growing in many parts of Europe.
Eurosceptic parties, usually on the populist right, are becoming stronger.
This undermines trust in the system still further. The author analyses such
disaffection in light of the lack of arenas within which representative
democracy can address conflicts and disagreements over European policy.

Finally, he argues, the faltering trust in the Union requires that a wide-
ranging debate now be joined on a fundamental question: Should the EU
take a stride towards a strictly federal system? Or ought it instead to return
to a more intergovernmental form of legitimation, where EU member
states can choose more freely which cooperative schemes they wish to take
part in?
The Way Ahead

What, then, can the Union do to remedy the lack of trust in its institutions
felt by many citizens across the member states? How can trust and confi-
dence between the member states be strengthened in the wake of ‘Brexit’,
the euro crisis, and the refugee crisis? How can confidence between
different national agencies be sustained and deepened, so as to ensure the
EU’s ability to implement joint decisions? Judging from the contributions
to this book, which span over the disciplines of law, economics, and politi-
cal science, the Union must above all stand up for basic principles of
democracy and the rule of law. Many of the crises the EU has recently
faced involve more than just conflicting economic and political interests;
increasingly, they have taken on the character of a challenge to the Union’s
community of values. Regaining the confidence of citizens in the Union
and its institutions requires not just that the EU ‘deliver’ concrete out-
comes in terms of economic growth or a functioning European policy on
asylum and migration; it is just as much a question of defending the idea
that open, democratic, and at the same time integrated societies and econ-
omies are what best serve the mass of citizens.
It is also abundantly clear, however, that confidence in the EU is some-
thing of a double-edged sword. On the one hand, the EU’s development
into the multi-level political system that exists today—one with signifi-
cantly greater economic and juridical powers than any other international
organization—would not have been possible without a relatively high
degree of trust and confidence between its member states. On the other
hand, this trust has not been so great as to prevent the Union from being
characterized by apparently contradictory arrangements in several policy
areas. Two examples are particularly striking in this regard: the EU has a
common currency but no common fiscal policy and it has a common secu-
rity and defence policy but no mutual-defence guarantees or common
army.
Future crises are likely to be exacerbated rather than solved if we act

as if a higher degree of mutual confidence prevails between different
member states and national agencies than it actually does. It takes time
to reconcile the economic and legal systems of different states—systems
that in turn rest on institutions and practices which have evolved over
long periods. The Union must constantly strive to achieve the right bal-
ance between harmonization at European level and respect for distinc-
tive national characteristics. It is not impossible that the EU, as a
consequence of the crises it is now undergoing, will have to do less in a
range of areas in future if it is to recover the confidence of both member
states and citizens. On the other hand, it may need to do more in areas
where citizens expect it to play a role, such as foreign affairs, security
policy, and climate change. Indicating clearly where the limits of the
Union go may prove to be, paradoxically enough, an effective way to
strengthen trust in it.
Notes
1. The academic literature on social and political trust is vast and it spans sev-
eral fields ranging from sociology, economics, political science, and psychol-
ogy; see, inter alia, Easton (1965), Norris (1999), Mishler and Roses
(2001), Tinggaard Svendsen and Lind Haase Svendsen (2009), Algan and
Cahuc (2010), and Schlössers, Fetchenhauers and Dunning (2016).
2. For a comprehensive historical overview of European integration, see Urwin
(2014).
3. On the concept of security community and European integration, see
Deutsch et al. (1957), Adler and Barnett (1998), Bremberg (2018).
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since 1945. London: Routledge.
What Explains the Lack of Trust in the EU
Among Its Member States? A Constitutional
Analysis of the EU’s ‘Value Crisis’
Joakim Nergelius
Over the last few years, the European Union has been shaken by a great
crisis which is political in character but could to a certain extent also be
described as constitutional, at least in the broad sense of the word. This
crisis has several different underlying causes and has expressed itself in
many different ways, for instance, through the refugee crisis in 2015, the
problems related to Brexit, the risk of a Greek bankruptcy and Greece’s
forced withdrawal from the euro zone (‘Grexit’) and, not least, the crisis
of values related to authoritarian and illiberal tendencies in certain EU
member states, chiefly, but not exclusively, Hungary and Poland.
This begs the crucial question why all these various crises occurred,
possibly peaked more or less at the same time between 2015 and 2016.
One important, general reason is probably that the EU was not strict enough
concerning the conditions for entry into different parts of the integration
process. This is, for instance, an obvious fact as far as the Greek membership
of the euro zone is concerned, but it is probably also a fair assessment
of the somewhat forced, probably premature, accession of Bulgaria
J. Nergelius (*)
Örebro University, Örebro, Sweden

24 J. NERGELIUS
and Romania as members to the EU in 2007, which took place despite

doubts that these two states most likely did not meet the necessary require-
ments in relation to the rule of law and the fight against corruption and
organized crime.
Furthermore, as will be discussed below, the supervision of existing EU
member states, which met in principle all the relevant criteria for member-
ship at the time of joining the EU (the so-called Copenhagen criteria,
which include among other aspects, issues relating to democracy, rule of
law and human rights), may need to be strengthened. The member states’
continued fulfilment of the criteria for EU membership seems to be among
the most important prerequisites for the future development of the
EU. When Hungary, Poland and eight other states joined the EU as mem-
bers on 1 May 2004, no one could anticipate that these states which had
suffered many decades under communist dictatorships would once again
be tempted to regress into authoritarian forms of government (see e.g.
von Bogdandy & Sonnevend, 2015). Thus, the backslide into authoritari-
anism which began in Hungary in 2010, spread to Poland in 2015 and
was accompanied by similar tendencies in many other EU member states,
mainly in Central and Eastern Europe took the EU by complete surprise.
The ensuing situation, in which we now find ourselves, is exacerbated by
a lack of legal as well as other measures in the hands of the EU leaders and
does not bode well for the Union’s future (see e.g. Habermas, 2012,
2015).
Another, quite different reason for the crisis, which without doubt
influences the assessment of various governments of the range of possible
political measures, is the widespread lack of confidence and trust vis-à-vis
the EU project as a whole expressed by substantial parts of the population
in many EU member states. The events leading to the ‘Brexit’ referendum
in June 2016 and their aftermath constitute perhaps the most obvious
example of this. At the same time, we may also point to the fact that newly
elected governments sometimes try, through nationalistic rhetoric, to
explore national sentiments in the population. In such a context, criticism
towards the EU project as a whole and its deep-seated aims and purposes
may then easily become part of authoritarian and populist political pro-
grammes. This tendency has been especially striking in Hungary and
Poland and has engendered particular problems related to constitutional
reforms in these countries aiming, for instance, at curtailing the indepen-
dence of the judicial system.
WHAT EXPLAINS THE LACK OF TRUST IN THE EU AMONG ITS MEMBER… 25
Against this background, it is today appropriate to say that a wide-

spread, general conflict of values, between a liberal model of society and
conservative, authoritarian and national ideals, which most observers
thought were part of a bygone era, is now playing out in the EU, and
indeed perhaps in the whole Western world. Nationalist parties have
encountered unexpected success in Austria, France and Sweden in the sec-
ond half of the 2010s, to give but a few examples. In September 2017, an
extreme right-wing party, Alternative für Deutschland, became the third
biggest party in a general election in Germany and is now holding a sub-
stantial number of seats in the Bundestag for the first time since the Second
World War. Such parties try to explore the general, popular lack of trust
towards the EU. It is clear that the popular distrust of political elites in
general, at the national level as well as vis-a-vis the EU, seems to be merg-
ing with a conservative and nationalistic inclined distrust of the suprana-
tional, liberal and cosmopolitan EU project as such. Populist parties seem
to know how to explore both these sentiments.
This rather deep conflict of values, forming the core of this chapter, is
centred on but not limited to Eastern Europe. The refugee crisis escalating
rapidly during 2015 has contributed to a deep feeling of malaise and has
led to a clear division between Northern and Western EU member states,
on the one hand, and a majority of the Eastern European member states,
on the other hand, who simply refused to accept or host refugees from
Africa and the Middle East. In 2015, Hungary and Slovakia brought a case
to the European Court of Justice (ECJ) to this effect, questioning the
legality of an EU decision on the redistribution of refugees according to a
quota system which was eventually struck down by the court in a ruling in
September 2017 (cases C-643/15 and 647/15). Pending the outcome of
these cases, the EU was not able to advance in this area. The relative calm
and order that has characterized the refugee situation since 2016, com-
pared to the chaos of late 2015, is entirely due to the rather peculiar agree-
ment between EU and Turkey signed in March 2016, which itself is highly
controversial. Thus, the situation is complicated, to say the least.
Nevertheless, a majority of the member states, along with the European
Commission and the European Parliament (both of which passed a vote
reconfirming their stance on this matter as recently as 19 October 2017),
still advocate receiving refugees into the EU, provided that adequate
mechanisms for redistribution may be found. This same majority of states,
led by Germany, is, incidentally, also critical towards the authoritarian
26 J. NERGELIUS
tendencies in other member states, chiefly Hungary and Poland. A crucial

question for the future, then, is whether they should use the existing
mechanisms of the EU treaties, such as qualified majority voting (QMV)
in the Council and increased control of member states, to enforce more
liberal values on these reluctant states which seem to ignore the rule of law
and prefer an authoritarian model of society. And should authoritarian
states even remain members of the EU under the current treaties?
Thus, this chapter addresses the following questions: What possibilities
do the EU treaties offer for a qualified majority of EU member states to
‘curb’ a minority of reluctant member states who seems to question and
openly challenge the basic democratic ideals of the Union? And what mea-
sures will, in the long run, strengthen the trust between member states, as
well as between them, the citizens and the EU institutions? In the follow-
ing section, the existing rules and agreements concerning human rights
and treatment of refugees, including the granting of asylum, are described.
Following that, the reasons behind the current crisis are further explored.
At the end of the chapter, some solutions are presented, based on the
assumption that in the long run, it will be better for the EU to stick to its
basic idea(l)s of democracy, rule of law and human rights than to yield to
populist temptations and allow member states a wide discretion in such
crucial matters.
The Current Legal Framework in the EU

One undeniable aspect of the crisis in values that distinguishes it from
other current crises besetting the EU, not least the refugee crisis, is its
highly legal nature. This prompts us to clarify some legal issues before
moving on. Moreover, the toxic mix of legal and political measures in this
area became clear when Hungary announced in 2015 that it would refuse
to take part in the common asylum policy and then brought a case to the
ECJ together with Slovakia, a move which was reinforced by a referendum
in October 2016, itself called for on legally dubious grounds.
Thus, in order to understand this complex situation, it is necessary to
look closer at some of the important decisions, rules and documents that
are at the origin of this situation and which will have a decisive impact on
its outcome. In a way, then, the first formal document of importance is the
decision of the Council of the EU of 22 September 2015, establishing
provisional measures in the area of international protection. This decision,
with a legal basis in Article 78(3) of the Treaty on the Functioning of the
EU (TFEU), was enacted on the basis of QMV on a proposal from the

Commission and with support from the European Parliament and should
be seen as a response of the EU member states to the urgent refugee crisis
that had been escalating in the late summer of 2015, due primarily to the
civil war in Syria. It was also this decision, encompassing a total number of
120,000 refugees, that was formally approved by the ECJ in September
2017 (C-643 and 647/15). More specifically, the decision states that
66,000 persons out of the total number of refugees who had arrived in
Europe at the time were to be redistributed immediately to other EU
states, from the two most severely affected Mediterranean member states,
Italy and Greece, subsequently followed within a year by another 54,000
persons. The refugees would be resettled with the assistance of a special
mechanism of redistribution (which also includes a financial compensation
of no less than €6000 for each relocated person to be paid from the com-
mon EU budget to the receiving state).
However, despite the financial generosity of this decision, it turned out
to be surprisingly difficult to implement, due to resistance of a number of
member states, which included not only the notoriously difficult ones in
Central and Eastern Europe but also, for example, Denmark and the
UK. The degree of reluctance to accept and host refugees was in effect
much stronger in many member states than their sense of loyalty to assist
in finding a common solution to a serious problem notwithstanding the
prospect of a substantial financial compensation.
This situation must, when viewed in conjunction with the thwarted
legal action against the decision of the European Council brought by
Hungary and Slovakia and the shift towards a more restrictive refugee
policy which swiftly followed in other EU states, be considered to amount
to a basic challenge against the supremacy of EU law and against the prin-
ciple of solidarity and loyalty that follows from Article 4(3) of the Treaty
of the European Union (TEU). It also revealed a fundamental lack of trust
between the EU member states, as well as between at least some of them
and the EU institutions. How can we today, approximately three years
later, understand the consequences of this unpredicted, unforeseen and
deeply problematic situation?
To begin with, we note that this sudden crisis led to the controversial
agreement between the EU and Turkey of 18 March 2016, according to
which Turkey undertook to take back a huge number of refugees from
Greece and prevent continued mass migration to the same country,
through the means of a restored border control at the Aegean Sea.
28 J. NERGELIUS
Simultaneously, the EU offered to pay Turkey no less than €3 billion and

to receive refugees currently in Turkey, through a scheme that would
guarantee that the overall number of refugees residing in Turkey remain
constant. However, apart from the financial compensation that Turkey has
enjoyed since early 2016 for strengthening the control of its border(s)
with Greece, other aspects of the agreement have not been fulfilled, which
could in a paradoxical way explain why it is formally still in force. However,
that issue is not further dealt with here.
In April 2016, the European Commission (2016) presented a proposal
for a new EU asylum system, that outlines a new common asylum policy
for the whole EU, to be realized through a reform of the so-called Dublin
Regulation (604/2013), further strengthened by a new regulation gov-
erning the whole asylum process, with the aim of clarifying which indi-
vidual member state in any given situation is responsible for specific,
individual requests for asylum. In the wake of this proposal, which has yet
to be enacted, a discussion ensued on the economic responsibilities for EU
member states which refuse to accept refugees. Discussions on these, and
a host of related matters, have taken place since then, and have for obvious
reasons become increasingly vivid.
The Refugee Crisis as Part of the Greater Conflict

of Values Within the EU and the Western World
If we view the situation in a somewhat wider context, however, it is obvi-

ous that what is here centred on the refugee crisis is in fact a part of a much
wider crisis, one which may be referred to as a crisis of values, character-
ized by fundamental conflicts of values between EU member states and,
even more, between different ideologies and ideological camps in the EU
along with the whole of the Western world. In this wider conflict reigns a
general distrust of the EU and its institutions, which many actors may
believe to be in their interest and therefore promote further.
The crisis or clash of values within the EU started probably as early as
2010 on the back of the electoral victory of the Fidesz party in Hungary,
which came to power through a landslide that saw it win a two-thirds
majority of the members in Parliament. Once in power, the party immedi-
ately made use of its huge majority in Parliament in order to appoint new
judges and chief executives to various public bodies. These moves were
followed by a new media law as well as a new constitution in 2011 and
subsequently a decision to force all judges of 62 years of age and above
into retirement.
These (and other assaults on the rule of law and other fundamental
values stated in Articles 6–7 TEU) gave rise to a number of reactions on
behalf of the EU. Among the more noteworthy actions initiated by the
EU is the case brought by the Commission against Hungary to the ECJ
concerning the forced retirement of judges older than 62 years. The Court
ruled in 2012 that the actions of the Hungarian government amounted to
unlawful discrimination on the grounds of age (C-286/12). However, it
seems that the Commission deliberately chose a technical approach, claim-
ing an alleged treaty violation according to Article 258 TFEU rather than
arguing that a basic, fundamental principle of the rule of law was violated.
In fact, the EU refrained until very recently from invoking Articles 6–7
TEU, according to which a member state that does not respect the rule of
law and/or other fundamental values of the EU (such as democracy,
human rights, human dignity, freedom and equality as stipulated in Article
2 TEU) may temporarily lose some of its rights as a member, including the
right to vote in the Council of the EU. Metering out such a harsh measure
against a member state, upon the decision by all the other member states,
would of course be controversial for a number of reasons, but in the long
run it may be hard to avoid, should one or more member states continue
to repeatedly, almost provocatively—as has been the case in recent years—
demonstrate that they do not want, and have in fact no wish whatsoever,
to respect the EU’s fundamental values.
In this context, it may be added that a widespread discussion on the
application of Article 7 TEU (previously Article 6 TEU) already took
place in 2000, when a majority of EU member states was willing to intro-
duce informal sanctions of a mild and in reality informal sort against
Austria, as a consequence of the right-wing populist party, Freedom Party
Austria (FPÖ), joining the Austrian government (as it did again after the
general election in October 2017). For a number of reasons though—the
most important of which being that Austria had in fact not violated any of
the fundamental values—the rather bizarre measures thus initiated, such
as the refusal to shake the hands of Austrian ministers or let them join
common photo sessions, were quickly abandoned.
However, the discussions that have occurred since 2010 concerning the
situation in Hungary, at times also in regard to Romania and since early
2016 not least in relation to Poland, have taken place against a somewhat
bleaker and more sinister background. In these EU member states, and in
others, such as Slovakia, ruling governments have expressed profound
doubts concerning the very validity of the EU’s fundamental values.
Probably the most noted statement to this effect was made by the
30 J. NERGELIUS
Hungarian Prime Minister, Viktor Orbán, who in 2014 advocated in

favour of ‘illiberal democracy’, a political system that would in his view
better respond to contemporary challenges, such as migration and terror-
ism, than liberal democracy and pluralism (see also Bo Petersson’s chapter
in this volume).
It is thus no wonder, that, ever since 2010, Hungary has been the focal
point of this conflict or crisis, which has been steadily escalating since
2011, in parallel to but with less media coverage in comparison to the
euro crisis. At the same time, an intense legal debate has taken place
regarding the accession of the EU to the European Convention on Human
Rights, further fuelled by the Opinion of the ECJ in December 2014 that
such an accession is not possible on legal grounds (Opinion 2/13). Still,
when the majority of the EU member states would wish to react against
one or more members which blatantly violate fundamental rights is a wider
and more dramatic question, and probably is also a more urgent one.
Should a decision to react against a failing member state eventually be
forthcoming, it would, according to Article 7 TEU, have to be carried out
in two steps. First, the Council of the EU must establish, with a majority
of four-fifths of its member states (the failing state not counted), that a
clear risk exists that this member state is violating the basic values of Article
2 TEU. Upon the confirmation of such a risk of violation, the Council
may unanimously (the failing state in question is again not allowed to
participate) declare that the member state in question is found in serious
and systematic breach of these values.
Ever since 2011, legal experts have been discussing when the threshold,
in respect to the violation, will have been considered broken in Hungary
or, in other words, that, when Article 7 should be activated if it is to have
any real significance at all (see e.g. Hillion, 2016). Since 2015, the resis-
tance of Hungary and a few other members in regard to both the pro-
posed and the existing EU policy on refugees has added fuel to the fire, at
a time when the conservative government of Poland seems bent on repeat-
ing what happened in Hungary a few years earlier. In hindsight, the EU
certainly took its time before reacting sharply to what happened in
Hungary. Today, the Union may regret having reacted (too) slowly.
Concerning Poland, on the other hand, the European Commission already
initiated a dialogue in January 2016. This dialogue is still going on, as will
be further explained below.
Since March 2014, the European Commission has at its disposal a new
instrument for its dialogues with member states at risk of breaching the
EU fundamental values, namely the so-called Rule of Law Framework

(COM 2014/158). The main purpose of this instrument is to make it
possible for the European Commission to engage in dialogue with EU
member states, based on a careful observation of an unfolding negative
development in the country in question, without having immediately to
resort to the controversial and politically difficult procedure envisaged in
Article 7 TEU. In fact, the practical use of Article 7 now seems more
remote than ever, since Hungary has promised to use its veto in case of a
vote against Poland and Poland has made a similar declaration concerning
a vote in regard to Hungary.
The surveillance mechanism envisaged in the Rule of Law Framework
states that the European Commission shall assess the situation in a mem-
ber state where problems in relation to the rule of law have been observed,
which in turn shall be followed by recommendations to redress the situa-
tion as well as a follow-up in the form of an evaluation of the measures
taken by the state in question. It is hard to say whether the rather speedily
use of this mechanism in regard to Poland, as opposed to the quite passive
attitude initially shown towards Hungary, is due to the simple fact that this
framework did not exist in 2011 or if the Commission in fact believes that
the Polish government will be more inclined towards constructive dia-
logue than the Hungarian government. However, in the latter case, there
seems to be a risk for disappointment, as discussed below.
Once again, it may be wise to underline that these conflicts are in fact
part of a very serious international clash between liberalism and conserva-
tism that became evident in 2016 with ‘Brexit’ and the election of Donald
Trump as US President, and which is likely to prevail and possibly domi-
nate the Western world for many years to come. In the field of political
science, this situation is often referred to as a new ideological conflict
between GAL (i.e. Greens, Alternatives and Liberals) and TAN (i.e.
Traditionalists, Authoritarians and Nationalists) which is replacing the old
cleavage of right-left ideologies in Western politics in general, with a clear
focus on cultural values rather than economic interests (Hooghe, Marks,
& Wilson, 2002). This may of course be a true depiction, but it is equally
possible to view the current crisis as merely the latest outburst of the long-
standing conflict between liberalism and conservatism, which dates all the
way back to the debates between Thomas Paine and Edward Burke in the
1790s on the long-term consequences of the French Revolution and
whether it is at all possible to proclaim such a thing as universal human
rights.
32 J. NERGELIUS
What can we learn from this, then, except the fact that many political or
ideological phenomena are not quite as new as we sometimes tend to
believe? In the remaining discussion, I make the argument that although
fewer things than we tend to believe are in fact really new, we must take
into account that the current discussion occurs in a totally different con-
text than the corresponding ones in 1793, when of course no political
union such as the EU existed. The global development is not entirely
cyclical after all. This also means that the response(s) of the EU to this
specific crisis must be adequate and apt to address the problem we are cur-
rently facing today. Against this background, I intend to discuss more in
detail what has caused the crisis on the one hand and how to solve it on
the other hand, with a focus on the rule of law and human rights, but
perhaps with more far-reaching repercussions.
How to Explain the Clash of Values in the EU?

A basic condition when recommending certain measures in order to pre-
vent or stop a crisis is to be able to identify the factors that led to the crisis
in the first place. Here, I stress two reasons in particular that seem to have
caused the value crisis in the EU. The general lack of trust from EU citi-
zens towards the EU and its institutions constitutes one of these factors
(see also Linda Berg’s chapter in this volume). Societal phenomena and
attitudes of this kind, which tend to shift over time, are usually explained
by experts as depending on whether the EU will ‘deliver’ in terms, for
instance, of economic growth and a well-functioning internal market.
Now, at this moment of time, there are clear signs that the current distrust
held by large sways of citizens throughout Europe is aimed equally—per-
haps even more intensively—at national politicians and domestic political
institutions than towards the EU, a circumstance that populist parties in a
number of countries have exploited skilfully. Thus, this tendency can
hardly be seen as a purely EU problem, although the distance between
voters and decision-makers may be perceived as wider in relation to the
EU institutions than in relation to the national political institutions. Still,
as such this problem is not new and it has, as far as the EU is concerned,
hardly grown worse in recent years, barring a possible reservation for the
euro crisis, when the so-called troika, consisting of civil servants from the
European Commission, the European Central Bank (ECB) and the
International Monetary Fund (IMF), played a decisive, but strongly con-

tested, role.
Another factor, however, that seems to be somewhat underestimated
when discussing the roots of the crisis, is the tendency to view the perfor-
mances and prospects of (new) EU member states with a somewhat exag-
gerated optimism, as mentioned above. As far as the euro crisis and its
roots in Greece is concerned, this phenomenon is quite obvious. It is clear
that Greece overestimated its future economic prospects while it under-
reported dire figures in the national accounts during the 1990s in order to
qualify for membership of the euro zone. However, it would hardly have
been able to get away with the cosmetic gilding had the EU bodies in
charge, notably ECB and the European Commission, carried out a more
thorough control and review.
Nevertheless, the general problem of excessive optimism concerning
the development in individual EU member states has also contributed to
the exacerbation of the value crisis, though in a quite different way. Here,
the problem is rather the opposite, since the European Commission does
in fact carry out a rather strict survey of the progress that candidate states
to EU membership have achieved in areas such as democracy, the rule of
law and the protection of minorities, as well as in the fight against corrup-
tion and organized crime. In addition, the candidate state’s national
administration and the legal system must possess the capacity to imple-
ment, enforce and correctly apply EU law. The European Commission’s
assessments are carried out in accordance with the so-called Copenhagen
criteria of 1993. It should therefore be realistic to assume that the ten new
member states who joined the EU in 2004 actually did meet these require-
ments at that time of accession (whereas doubts in this respect linger con-
cerning the state of preparedness of Romania and Bulgaria at the time of
their accession to the EU in 2007).
The real problem, however, is that once a state has joined the EU, this
control ceases to exist (which incidentally is not the case as concerns finan-
cial controls). Here, the EU seems to rely on the assumption that states
will continue, once they have acquired the status of EU member, to behave
in a decent manner, according to general conventions of civilized behav-
iour. Now, with hindsight, this has simply turned out to be too optimistic,
a fact that provides a lot of food for thought in relation to the future for
the EU.
34 J. NERGELIUS
Ever since the developments in Hungary began to seriously worry the

EU in early 2011, the main attention has been drawn to the ever more
authoritarian tendencies of the Hungarian government, which were fol-
lowed in late 2015 by a very similar development in Poland. Still, this is
only one side of the coin. Tendencies to allow corruption continue
unabated as well as the persistence of authoritarian attitudes in general
among politicians and civil servants seem to have been totally underesti-
mated by the EU. Examples from countries such as Bulgaria, Romania,
Slovakia, Slovenia and the Czech Republic are too numerous to be ignored
and this makes the situation for the whole EU quite puzzling. On top of
this, the refugee crisis has provoked an unexpected degree of xenophobia
in several of these countries that will not be easily dealt with. Other divi-
sive issues concern the attitudes towards homosexuals and authoritarian
regimes in the neighbourhood of the EU, for instance, Russia, contrasted
with the general necessity of pluralism in today’s societies. The question is
how will the EU manage to overcome the conundrum of addressing all
these issues?
The EU Must Protect Its Core Values

The main concrete lesson that the EU needs to draw from the value crisis
is of course to avoid making similar mistakes in the future. Thus, the EU
needs to be much more cautious in its negotiations with the current can-
didate states Albania, Serbia and, possibly, Turkey than was the case in the
run-up to the accessions in 2004 and 2007, also with a view to somehow
ensure a continued surveillance once membership has been achieved. In
the case of Croatia, which joined the EU in 2013, it is probably too early
to make a comprehensive evaluation of the situation.
Now, it seems clear that a very tough position from the EU during the
membership negotiations, in relation not least to the Copenhagen crite-
ria, will not be enough to prevent problems of this kind from occurring in
the future. Therefore, the EU badly needs some kind of surveillance
mechanism for existing members—old and new. One such possibility,
should the Rule of Law Framework not prove to be enough, is to lower
the threshold for deciding on punitive measures against failing EU mem-
ber states in Article 7 TEU, perhaps by enabling other member states,
minus two or three, to initiate such sanctions. Should such a future treaty
reform turn out to be impossible, other measures will definitely have to be

discussed.
In a future discussion on new measures, the need for the EU to uphold
its basic values, such as those stated in Article 2 TEU, but also other val-
ues such as free trade, free movement of people, services and capital,
prohibition against state aid and an effective European competition law,
is crucial for a number of reasons (see e.g. Müller, 2015). To a certain
extent, it is understandable that the EU refrains from getting entangled
immediately in disputes with a newly elected government in a democratic
member state which has expressed more or less controversial views on
democracy, pluralism, human rights or refugees in the preceding electoral
campaign. But, at the same time, the EU needs to show that there are
clear limits for unacceptable behaviour or, put in legal terms, for what the
treaties will allow. A government, such as the Orbán government in
Hungary, which has gradually and purposefully torn down the rule of law
in the classical sense of the word over a period of five years, must be aware
that the EU will, in the end, reach a point where decisive action is neces-
sary to the effect that the country in question will end up losing its right
to vote in the Council of the EU (not to mention some of the many eco-
nomic subsidies that it has enjoyed for so long). This should be the con-
sequence not only because the rule of law and human rights count among
the EU’s core values but also, more importantly, to safeguard the general
legal culture and traditions of the EU, whose evolution has always been
characterized by a great respect for written rules in general and treaties in
particular.
The fact that these core values are enshrined in the Treaties is therefore
crucial. The same can be said about the decisions of the Council on the
EU’s refugee policy, which have their legal base in Article 16 TEU, regard-
less whether the decisions were taken unanimously or by QMV. Signals
from a number of member states which simply do not wish to be part of
EU policy in this area stand in clear contrast to everything that EU mem-
bership signifies as it cannot solely be a matter of receiving benefits but
also involves contributing to and working for the interests of the Union,
as stipulated in Article 4(3) TEU. Other treaty-based rules, such as those
stated in Article 80 TFEU, also stress the need for solidarity and loyalty
between the EU member states. Hungary, Slovakia and some other mem-
ber states which do not wish to be part of this community of rules and
36 J. NERGELIUS
values have through their actions, to put it mildly, challenged some very
crucial pillars of European integration.
Against this background, my advice to the EU and its leaders is as fol-
lows: in order to solve the value crisis, the EU must stick to its core values,
not least in relation to those member states which do perhaps not wish to
adhere to them. This must be the way forward even though being tough
to certain member states may in the short run increase the risk for internal
division. The Union should take this course of action despite the fact that
it may challenge, even provoke, a large number of voters in many member
states, not only in Central and Eastern Europe. At least as long as a quali-
fied majority of the member states—amounting to no less than 55 per cent
of the states of the EU, representing at least 65 per cent of its population,
as stipulated in Article 16(4) TEU—still believes in upholding in the
Union’s core values, it is in my view, a good idea for the EU to protect and
promote these values in an ever more turbulent world in spite of the short-
term costs involved. In the long run, a steady and consistent stand in
regard to reigning value conflicts will pay off and lead not only to greater
respect worldwide but also to the EU finding itself—its own soul so to
speak—which will make it easier for the Union to deal with future conflicts
of the same kind.
The EU will quite simply be stronger and enjoy more ‘soft power’ in
the world if it does not lose sight of its core values. Such a stand is also
likely to promote unity among those member states which will now find
strength not to back down in this crucial conflict. And, finally, this
majority of states may also reflect upon the fact that it may now be the
moment to make extended use of the QMV mechanism, in order to
stand up for what is right and thus, eventually, achieve greater global
success.
On a more practical level, the forthcoming negotiations on a new long-
term budget of the EU, running from 2020 onwards, may offer a good
opportunity for the until now rather ‘silent majority’ of EU member states
to put pressure on those members that refuse to host refugees and/or
refuse to follow EU decisions taken within the common asylum policy. As
stated above, the co-operation among member states is and must be based
on solidarity and loyalty (cf. Article 4(3) TEU). Member states, which
obstruct EU decisions, and in the process act according to a spirit contrary
to the Union values, simply cannot expect to receive benefits, subsidies
and contributions from the cohesion and regional funds or from the agri-
cultural funds indefinitely. It is hardly a coincidence that politicians in
many of the ‘net contributing’ member states are now increasingly stress-
ing this linkage, for which there are both financial and moral reasons.
Cutting down on the subsidies to member states which refuse to take part
in the quite costly refugee policy is also an effective sanction that may be
imposed without any treaty change, which is of course a huge advantage
in a situation where treaty changes seem very difficult to bring about as
they must be approved by all member states (cf. Articles 48–49 TEU).
Politically, it is an issue that is logically connected to the ‘Brexit’ negotia-
tions and that needs to be discussed soon in any event. Thus, this is an area
where some developments can be expected, quite separate from what hap-
pens in the sometimes complicated legal arena.
Concluding Remarks
These reflections, along with the string of suggestions made above, do
not, of course, give the full picture of the value crisis within the EU. Nor
is it possible to anticipate here the possible developments in all key mem-
ber states, which are all more or less likely to become affected by the crisis.
For instance, who knows where Austria and the Czech Republic will be
heading after their respective parliamentary elections in the fall of 2017,
which in both cases led to considerable successes for populist parties. Will
Austria once again cause controversy in the EU in the same way as in
2000—but this time for more ‘real’ reasons? And which consequences
may then follow for the rest of the EU? Once again, Austria may turn out
be a key player in the area of human rights and for the rule of law regime
of the EU.
What we do know, however, is that the European Commission declared in
July 2017, after having sent a Rule of Law Recommendation to Poland in line
with the Rule of Law Framework, that it is ready to ‘trigger’ the procedure
under Article 7(1) against Poland should the country refuse to improve the
conditions in the judicial system and go ahead with certain proposed reforms
in that area. Poland replied to that letter in October 2017 but the Commission
has gone on to suggest a so-called reasoned proposal for a Council Decision
under Art. 7(1) TEU in December 2017. It should of course also be stressed
that the final decision concerning sanctions against a member state is made by
38 J. NERGELIUS
the other states—which, should it come to that, will have to take the opinion
of the Commission into account when considering their response.
At the same time, there are a number of infringement cases pending
before the ECJ concerning Hungary and Poland. The outcome of those
proceedings will of course be interesting to follow, but at the same time it
remains to be seen what consequence a ruling of the Court in these mat-
ters will actually have. In 2012, Hungary repealed its retirement scheme
for judges as a direct consequence of the Court’s ruling, but there are no
guarantees that Hungary, Poland, Slovakia or other EU member state
might be as obedient this time, about six years later. It is thus likely that
other punitive measures on behalf of the EU will have to be added to the
traditional infringement procedures in order for any real change to come
about.
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third-country national or a stateless person (recast), Brussels, 26 June 2013.
Council of the European Union. (2015). Council decision (EU) 2015/1601
establishing provisional measures in the area of international protection for the
benefit of Italy and Greece, Brussels, 22 September 2015.
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Perspective on the Eastern Enlargement:
Triumph of the EU or Seed of Its
Destruction?
Bo Petersson
The Eastern enlargement of the European Union in 2004, when ten

countries joined the Union at one go, was in many ways the peak of the
euphoria that had prevailed in Europe since the end of the Cold War.
Although there had been fundamental setbacks, especially in relation to
the Balkan Wars in the early 1990s, this Big Bang of EU enlargement
evinced the belief that Europe was finally united, or at least well on the
way. Most of the new member states belonged to the former Eastern Bloc.
Now they would be embedded in a structure that, once and for all, would
heal the old antagonisms generated or exacerbated by the Cold War. All of
them would now be part of a community informed by adherence to the
central values of the EU: democracy, human rights and the rule of law, as
formulated in the European Council’s Copenhagen criteria of 1993
(European Council Conclusions, 1993–2003). Poland, Hungary, Czech
Republic, Slovakia, Slovenia, Estonia, Latvia, Lithuania, Cyprus and Malta
became full members of the EU family. This was the great triumph of the
B. Petersson (*)
Malmö University, Malmö, Sweden

42 B. PETERSSON
EU. Or was it really? As this is written, well into the second decade after
the Eastern enlargement, there is an opportunity to discuss the issue
with distance and perspective. Was the enlargement the EU’s shining
moment, or was it the beginning of the end of its success story? How did
it actually affect the development of a common identity and trust within
the Union?
These questions are the subject of this chapter, which is arranged as
follows. After a background discussion of the dilemma of the Eastern
enlargement, the issue of a common identity for the EU and where this
might reside is addressed. The argument is that the existence of a common
identity based on shared values is critical to trust within the Union, as well
as to its influence and standing in the world. The discussion then turns to
the challenges now being directed at the shared fundamental values of the
EU: from the ‘illiberal democracies’ of Hungary and Poland; from author-
itarian states outside the EU, such as Russia and Turkey; and from populist
currents across the entire EU and outside it. The chapter ends with a sum-
mation and recommended action to safeguard shared values, common
identity and trust within the Union.
The Dilemma of the Eastern Enlargement

Ahead of the Eastern enlargement of the EU in 2004, there was certainly
awareness in some quarters that fundamental problems remained unsolved.
The main worry among the old EU countries was that far too many citi-
zens of the new member states would take advantage of the free move-
ment allowed by the EU to seek better lives in their countries. There were
serious concerns that the social security systems in the established EU
countries would be overused. It was also feared that low-wage competi-
tion from the new member states would distort labour markets in the old
ones. By way of example, an intense and poisonous debate was sparked in
France about the invasion of the ‘Polish plumbers’, spreading anxiety that
cheap labour from the new EU countries would push the people in their
own country out of jobs at home.
There were, however, others who pointed out problems of a different
magnitude that might eventually ensue. Among those who expressed
themselves most presciently was former Czech President Václav Havel. In
an address to the European Parliament in Strasbourg, a good four years
before the Eastern enlargement, he expressed apprehensions about the
PERSPECTIVE ON THE EASTERN ENLARGEMENT: TRIUMPH OF THE EU OR… 43
consequences of the inadequately developed civil societies in the new pro-

spective member states:
If the European Union is shortly to open its doors to new democracies and,
in my view, it is in its vital interest to do so, it is extremely important, if not
of capital importance, that it help to reconstruct and develop the civil soci-
ety in these countries (…). The way in which society structures itself cannot,
of course, be imposed from on high. But the climate and the conditions
which are conducive to its development can be put in place. In this sense,
aid for new democracies should be given in the wider context of sustainable
development and reinforcement of the civil society at pan-European level.
The more varied, differentiated and interlinked the various civil European
structures, the more willing the new democracies will be to join them and
the faster the principle of trust in the citizens and subsidiarity will apply in
them, thereby reinforcing their stability. But that is not all: the foundations
of the European Union as a supranational community will grow all the
stronger. (Havel, 2000)
In other words, Havel argued that it was necessary to stimulate and

consolidate support for shared values in the new member states to achieve
greater trust in the EU as a whole. In 2018, we seem to find ourselves in
a situation where the interpretation of the fundamental values that have
long been considered obvious focal points in the EU—democracy, human
rights and the rule of law—no longer seem self-evident. In the autumn of
2016, President of the European Commission Jean-Claude Juncker
(2016) went so far as to say that the EU is in an existential crisis. In such
a context, questions naturally arise about the common identity of the EU,
the ideological and emotional cement that ultimately holds the Union
together.
Identity, Core Values and Normative Power

The relationship between identity and trust may not be entirely straight-
forward, but according to socio-psychological research, a common iden-
tity encourages the growth of trust within the in-group or collective
(Turner, 2000). Trust, whose synonyms include confidence, belief and
faith, can be described in somewhat dry language as a dependent variable
created in contacts between individuals or groups who believe they have
something in common and feel a sense of affinity with each other. If such
44 B. PETERSSON
identity-based trust exists, individuals are more likely to engage in or take

risks on behalf of shared projects or relatively abstract goals, even though
the prize is anything but a sure thing. The connection can be intuitively
understood: as individuals, we prefer to trust those whom we believe we
have something in common with rather than those who seem utterly for-
eign or indifferent to us. Trust can also be extended upwards, to political
leaders, for example, who enjoy legitimacy because they are thought to
promote, safeguard and preserve central shared values and sentiments of
affinity.
Why and whether a common EU identity should be pursued is end-
lessly debatable and the answer depends on one’s general political beliefs.
The European Commission has been engaged in an effort to evoke and
reinforce some kind of common identity within the EU since the 1970s,
but the work has often been criticised for excessive focus on superficial
attributes, such as an EU flag, an anthem, or the symbols on notes and
coins in a currency common to most member states (Bottici & Challand,
2013; Shore, 2013). For those who consider the long-term effectiveness
and durability of the EU as positive things, it is clear that these character-
istics are predicated upon a shared vision of some kind or at least a shared
understanding of the values that the peoples and their political leaders are
willing to stand up for and defend (Petersson & Hellström, 2003). If these
conditions exist, the growth of trust within the Union will also be
fostered.
In the 1990s, many analysts predicted that national identities were on
their way out and the era of the nation state was coming to an end.
Economic transactions, cultural expressions, online communications, pan-
demics and natural disasters were all forces that did not respect national
borders but moved freely across them. At the same time, and as a reaction
to the pressure across the national borders, local identities and communi-
ties were reinforced. The term ‘glocalisation’ referred to precisely the
cross-pressure in which global and local identities became increasingly
important at the expense of national identities. Common regional identi-
ties, such as those represented by the EU, however, were thought to be
more in keeping with the times than the old national variety.
The national identities, however, proved resilient. This has been espe-
cially apparent in times of crisis, whether involving terrorist attacks, finan-
cial crises in the eurozone area or the migration crisis that put the borders
of EU states under pressure in 2015 in connection with record-high arriv-
als of refugees and asylum seekers from the Middle East, Africa and Asia.
The tendency in times of turbulence to gather around the ingrained values

that the nation states are believed to represent is a known phenomenon.
This seems to be a way to maintain the personal sense of security as far as
possible. The EU identity, however, is not as entrenched and is instead
often perceived by many as nothing more than words on paper.
As of today, a common EU identity therefore seems a very long way
away from replacing or supplanting the national identities within the
member states. However, the problem remains that some shared intellec-
tual goods need to be there to motivate the individual member states and
their populations to remain in the Union and even make certain sacrifices
to achieve common goals. Widely shared beliefs in the good that can be
achieved together must exist to give the political leaders of the member
states legitimacy in the eyes of the electorate, especially in times when the
engines of economic growth are sputtering. Ultimately, it is a matter of
trust: between the governments of the countries and the people they
elected to represent. The question has gained renewed currency after the
‘Brexit’ referendum in June 2016, when a plurality voted in favour of leav-
ing the EU. There is risk that other countries may do likewise if there are
no clear and present incentives to remain. If there is no shared vision for
what people want to achieve and the economic advantages are not imme-
diately discernible, what reason is there to stay? When, as previously men-
tioned, Juncker in the autumn of 2016 expressed that the EU was in an
existential crisis, he put into words the lack of a sense of affinity that
seemed to dominate after a year of discord in relation to the migration
crisis and ‘Brexit’.
What, then, can persuade popular majorities to think being part of the
Union is worthwhile? Benedict Anderson (1983) emphasised in his time
that nationalism has an unusually strong motivating power that can induce
otherwise rational individuals to sacrifice their lives in times of armed con-
flict and war for the abstract principle, that is, nationalism. In Anderson’s
words, it is a matter of an imagined community, but this perception is so
strong that it becomes profoundly real in its consequences. The EU can-
not generate any such emotionally mobilising force, nor would it be desir-
able. Former European Commission President Jacques Delors (1989)
once sighed, in an oft-quoted statement, that you cannot fall in love with
a single market. Another former President of the Commission, Romano
Prodi (2000), pointed to Europe’s Judeo-Christian roots and common
cultural heritage in the broad sense, with roots in the ninth century of
Charlemagne, as the foundation stones of a common identity in the
46 B. PETERSSON
EU. The history, however, seems too remote and rather too controversial
to seriously mobilise popular feeling in a positive and constructive way.
More recent history, however, can be unifying through the deterrent
effects of twentieth-century disasters in Europe, with two world wars,
Nazism and the Holocaust, but this remains a negative definition, a com-
mon identity defined based on the joint determination to never allow the
horrors of the past to be repeated. If, however, one wants to build a com-
munity of identity in the EU based on a positive definition of what unites
in the present, apart from the endeavour to prevent a repetition of old
evils, the inevitable conclusion is that the natural foundation of the EU’s
continued development must be shared values in relation to current politi-
cal and social reality. After all, there is no common ethnicity, religion or
culture in a broad sense to build upon.
In the words of Roxana Barbulescu (2016), the EU is a political union
of democracies which protects human rights and presents itself as a beacon
of human rights on the global scene. That is a summary as good as any.
Support for democracy, human rights and the rule of law has long been
considered a self-evident normative basis for the activities of the EU. These
norms are written into the previously mentioned Copenhagen criteria,
established by the European Council in 1993. They have subsequently
been said to constitute an absolute requirement for negotiations with new
states on membership to even commence. The more precise formulation of
the introductory gateway criterion—which states the conditions for open-
ing membership talks—is that new candidate countries must have ‘stable
institutions guaranteeing democracy, the rule of law, human rights and
respect for and protection of minorities’ (European Commission, 2017).
If the interpretations of these maxims begin to waver, this criterion is
not quite as imperative and commanding of respect. The impact is dead-
ened when different views are represented within the EU regarding which
interpretations are correct. Another dilemma is that even if meeting the
Copenhagen criteria constitutes a prerequisite for beginning membership
talks with the EU, existing member states that fail to fully comply with the
criteria are at no risk of exclusion. Once a country has become a member,
control practically ceases. While there are mechanisms to temporarily
deprive erring members of certain rights, including voting rights in the
European Council following the ‘nuclear option’ of Article 7 of the Treaty
on European Union, these are blunt instruments and seldom used (see
also Joakim Nergelius’ chapter in this volume). Herein lies an undeniable
weakness, not least on the moral level.
In the wake of Joseph Nye (2004), it has become popular to talk about
‘soft power’. Without a doubt, it was the norm dimension based on what
was expressed in the Copenhagen criteria that, along with a strong econ-
omy, constituted the basis of the EU’s international influence and stand-
ing after the end of the Cold War. To use the expression coined by Ian
Manners (2002), the EU had ‘normative power’. According to him, there
were five influential core norms and four minor norms propounded by the
EU. All of these were ultimately based on the Copenhagen criteria.
Following Manners, the EU’s normative power was, in the final
instance, a matter of its opportunities to gain support for its interpreta-
tions of what the core norms mean and what can be considered normal
and recommendable to do in a given situation, in both domestic and for-
eign relations. It was a matter of conviction and presumptions that cannot
be compelled but which evolved through the power of good example.
Convictions lead the way, not sanctions and coercion. How relevant is the
notion of the EU’s normative power today, more than halfway through
the 2010s? Is the positive picture still justified?
Four Developmental Paths for the EU

In a fairly recent book (co-written with Hans-Åke Persson and Cecilie
Stokholm Banke), I discuss four contending visions of Europe’s future
development (Persson, Petersson, & Stokholm Banke, 2015). These four
visions were Europe as a promised land, as a bogeyman, as an anachronism
and as a contested ideal.
The first scenario referred to the persistent appeal of Europe in the world,
among the candidate countries in the Western Balkans or countries like
Georgia that aspire to be candidate countries, and on the individual level
among migrants who make their way to the EU from other parts of the
world. Here, the vision of EU-Europe as a promised land has hardly faded
in recent years. This is still painfully clear. According to the International
Organization of Migration (IOM), more than 1.3 million of refugees and
migrants crossed the Mediterranean Sea in 2015 and 2016 alone on their
way to EU-Europe in search of a better life (IOM, 2015, 2016).
The diametrically opposed vision of the EU as bogeyman refers to the
risk of repetitions in the EU of parts of Europe’s sombre past, its dreadful
twentieth century with two world wars and the Holocaust, as well as, lest
we forget, Europe’s dark colonial history. It was the Stygian experiences of
the twentieth century that inspired far-sighted statesmen in Europe to join
48 B. PETERSSON
together in the early 1950s laying the foundations of today’s EU. Their

rationale was that a repeat of the disasters of the past must be prevented at
any cost. This pioneering endeavour has certainly been successful for a
long while and was symbolically recognised when the EU was awarded the
Nobel Peace Prize in 2012 for its work with peace, reconciliation, democ-
racy and human rights in Europe. But things are not perfect, by any means.
Extrapolations of elements in the present are found in the bogeyman
vision, where many people seem not the least bit wary of the errors of the
past. On the contrary, there are deeply troubling tendencies. These include
aspects such as an increase in ‘Us vs Them’ thinking within the individual
member states, rising xenophobia, higher numbers of hate crimes and the
growing influence of extreme right-wing nationalist movements. From
having been a promised land, the EU or parts of it might be degenerating
into a cold and inhospitable place where it is dangerous for those identi-
fied as foreigners to be.
The outlook that the EU should appear to be an anachronism is a pre-
diction of stagnation. Its argument is that Europe’s influence is past its
prime. EU-Europe, in its ingrained self-confidence, is resting on former
laurels. Based on several economic indicators, the EU is at risk of being
outstripped by the so-called BRICS countries (Brazil, Russia, India, China
and South Africa), for example, and is therefore increasingly relegated to
playing second fiddle to these countries and the US. The long-lasting
peace among the core countries of the EU since the end of World War II
is taken for granted and no longer inspires as it once did. When the EU
was hit by the consequences of the global financial crisis in 2007 and the
eurozone crisis in 2008 and onwards, much of the economic basis for the
Union’s global influence collapsed. Even though growth has also withered
in the BRICS countries, the EU was unable to respond to the economic
challenge presented by these more dynamic parts of the world. In 2016,
Brexit brought the problem of the EU as a possible anachronism to a
head. One of the top countries in the EU is leaving: what’s next?
The last scenario, finally, is the EU as contested ideal. This refers to
what this chapter discusses more specifically: the risk that the core values
of the EU will be undermined when dissonant voices join the European
chorus about what are the central values, or even try to drown it out.
There has been an increasingly strong tendency in recent years for coun-
tries both within and outside the EU to lay claim to speaking for Europe.
Richard Sakwa (2014) has discussed this development in relation to the
concept of Greater Europe, which thus encompasses considerably more
than the EU. In this context, the EU is no longer even the obvious hub.
The interpretation of the EU’s ingrained fundamental values as expressed
in the Copenhagen criteria are being challenged by outsider countries like
Russia and Turkey. At the same time, increasingly vociferous challenges
are coming from inside the EU itself. Which way development should go
is no longer obvious. The likely consequences are that trust within the
Union will diminish as the member states diverge on questions of values
and the EU’s standing outside its borders will decline. Its normative power
will palpably weaken in relation to the rest of the world.
Whether we like it or not, the cohesion of the EU ultimately depends
upon boundaries, both physical and psychological. All collective identities
are based on what the in-group is and, perhaps above all, what it is not.
The EU’s influence as a normative power largely depends on its capacity
to draw clear lines of demarcation between it and other parts of the world
that do not embrace the principles expressed in the Copenhagen criteria.
The core values of democracy shine brightest when set against the dark-
ness of authoritarianism. Expressed somewhat more brutally, the EU iden-
tity, as an identity to be proud of in positive terms, is based on the fact that
the EU is not Russia, with its authoritarian development and lack of
respect for borders acknowledged under international law. It is also based
on the fact that the EU is not Turkey, with its mass arrests, purges and
threats to reinstate capital punishment in the wake of the failed military
coup in 2016. The core values of the Copenhagen criteria, the goodness
of the open society, also shine brightly in relation to the challenges of the
Islamic State’s terrorism and religious fanaticism. This is a pitched battle.
And yet, the lustre of the normative power may be dulled if EU member
states go too far in their efforts to respond to threats from the outside. It
is vital to the common identity, and thus to trust, that the non-democratic
traits we otherwise claim distinguish ‘Them’ do not tarnish ‘Us’.
A Kidnapped West Redux: Or Turning Fish Soup

Into an Aquarium?
Today, in the late 2010s, the challenges to the EU’s core values from the
inside are coming not least from Central Europe. As Iver B. Neumann
(1999) noted, use of the term ‘Central Europe’ at the end of the Cold War
was fraught with tension. Representations of Central Europe took on three
major forms. The most common use of the term ‘Central Europe’ referred
to three countries in the geographical centre of Europe: Czechoslovakia
50 B. PETERSSON
(which still existed), Hungary and Poland. These made up the ‘Visegrad
bloc’. The second use of the term ‘Central Europe’ was propagated by a
number of states, from Estonia, Latvia and Lithuania in the north to Bulgaria
and Romania and the countries of the former Yugoslavia in the south, which
also claimed to fit within the political-geographical frame of reference indi-
cated by the designation of Central Europe. Thirdly, the term ‘Central
Europe’ was found in a state of tension with the term ‘Mitteleuropa’ where
Germany, rather than the Visegrad bloc, was clearly the centre. Neumann’s
interpretation is that the first-mentioned usage gained the greatest currency,
which had important effects. The discourse on a Central Europe comprising
mainly the Czech Republic, Slovakia, Hungary and Poland was so influential
that it seemed self-evident that these states should be prioritised for member-
ship in the EU as well as the NATO military alliance. That they were consid-
ered to be at the head of the line was connected to the assumption that they
had the shortest route to reshaping their states in line with the demands of
democracy and the market economy.
The Czech author Milan Kundera’s (1984) essay A Kidnapped West
had tremendous impact among Western European politicians and the
public at the time. He argued that Western Europe was represented by the
EU, while Central Europe had been kidnapped by the Soviet Union.
Culturally, however, it was freethinking and potentially dynamic, and thus
essentially different from the stagnant and static Eastern Europe. Central
Europe therefore was and remained something completely other than
Russia and the Soviet Union. The argument became an important aspect
of the self-representation of Central European leaders and was also
embraced by influential political leaders in Western Europe.
Reincorporating Central Europe with the rest of Europe in the EU
became a symbolically important endeavour. By making the term ‘Central
Europe’ accepted in the vernacular, along with the interpretation that the
region consisted of the Czech Republic, Slovakia, Poland and Hungary,
the political leaders in the Visegrad bloc garnered sympathy for the idea
that their countries constituted a vital part of the European project. They
were participants in a larger European identity, which was in turn defined
to a significant extent based upon the involvement of the Central European
states. The great and important mission in connection with the Eastern
enlargement of the EU in 2004 was therefore to finally make EU-Europe
whole again, to give Central Europe full access to the European legacy and
the European community to which it had for so long been denied entry.
As Neumann (2015) reminds us, however, it was not necessarily so that
Central Europe must be interpreted as the centre of EU-Europe. Logically,

Central Europe is instead the place where influences from the European
‘West’ and the European ‘East’ meet and clash. It was therefore an errone-
ous conclusion from the outset that the EU would remain the same in
terms of values after the Eastern enlargement as it was before. Apropos the
unification of Europe, a popular joke at the time of the end of the Cold
War had it that while it is easy to turn an aquarium into a fish soup, it is
much harder to turn a fish soup back into an aquarium. Developments
have shown that his evocative description was not necessarily off the mark.
About ten years after the big enlargement, certain governments of
Central Europe started to break the consensus on how the EU’s core val-
ues should be interpreted. This may be seen as an irony of fate, since the
EU put so much political prestige on the line to bring these states into the
EU-European project in the first place. Perhaps the transformation to a
working market economy was so arduous for the new democratic leaders
that developing a new political culture was put on the back burner. If so,
Havel’s warning was indeed justified.
Illiberal Democracy
The term ‘illiberal democracy’ is usually ascribed to Fareed Zakaria (1997).
He used the term to describe regimes that indeed held elections but gave
short shrift to the rule of law and loosely interpreted what the country’s
constitution had to say about checks and balances between branches of
government. Above all, the term suggested that the liberal element of
democracy, as regards the rights of minorities and individual liberty, was
ascribed less importance by the regimes in question.
The emergence of illiberal democracy in the EU is of relatively recent
vintage, with Hungary on the forefront. The country’s populist-
influenced leader, Prime Minister Viktor Orbán, came to power after the
national elections in 2010, at the head of a coalition government led by
his national conservative party Fidesz. After the elections, this govern-
ment could rely on a two-thirds majority in parliament, which made it
possible to amend the constitution. A number of restrictive changes to
judicial independence have since occurred. Freedom of the press has been
curtailed in pace with increases in state political control over the media
and the initiation of c onstitutional amendments. Laws have been enacted
that make insulting or disparaging national symbols a crime punishable
with imprisonment.
52 B. PETERSSON
Orbán even goes so far as to advocate reinstatement of capital punish-

ment in Hungary (The Guardian, 2015). To seriously broach this subject
is symbolically as far as one can go if one is aiming to distance oneself from
the EU’s core values. When Turkish President Recep Tayyip Erdogan,
after the failed military coup in 2016, indicated that the death penalty
might be reinstated in Turkey because, as he put it, the people demanded
it, leading politicians in the EU including the German Minister of Foreign
Affairs, Sigmar Gabriel (Swedish Radio, 2017), emphasised that if this
were to happen, the country’s membership talks had reached the end of
the road. Capital punishment was a Rubicon, a red line, which could not
be crossed under any circumstances. Here again, there is an obvious dif-
ference between EU member states and candidate countries. As men-
tioned, opportunities to impose sanctions on existing members are heavily
restricted.
As the negative reactions from outside Hungary pile up, the Orbán
government seems to become only more intent upon being the bête noire
of the EU. A referendum on refugee reception was held in Hungary in
2016. The main question asked was whether the voters would allow the
EU to be able to mandate the obligatory resettlement of ‘non-Hungarian
citizens’ in the country. The referendum was initiated by reason of the
EU’s proposed quota system for the allocation of refugee reception within
the Union, a principle that the Hungarian government, together with the
Slovakian, strongly opposed. A stunning 98 per cent of those who voted
sided with the government’s position in the polls, but the referendum was
nevertheless declared invalid due to the voter turnout being below the
required 50 per cent.
In his nationalist rhetoric, Prime Minister Orbán identifies enemies,
foreign and domestic, that wish Hungary ill. It is the threats from these
forces that, according to him, justify the authoritarian elements of his gov-
ernment’s policies. His speeches during the migration crisis of 2015 and
leading up to the referendum in 2016, where he links migration with ter-
rorism, are glaring examples of this. Orbán is thus responsible for what is
called in the literature securitisation of migration issues in political debate
(Huysmans, 2000), where he seeks to legitimise the forceful pushback
against migrants that he considers necessary to protect the country from
threats inside and outside its borders. He advocates a zero vision in the
migration area: Hungary should not accept any refugees, period, regardless
of what is happening in the world. Those who do not agree with the Prime
Minister’s policy are not real Hungarians, according to the rhetoric.
The hard line is supported in popular opinion, which thus seems to favour
a very restrictive stance on the refugee issue. Orbán also tries to strike a
balance against the right-wing extremist party Jobbik, which usually goes
further than his own party Fidesz in rhetoric and policy proposals.
If anything, Orbán seems proud of the challenge he is lobbing at the
EU’s normative, fundamental values. In a platform speech in the summer
of 2014, he urged his audience to understand ‘systems that are not west-
ern, are not liberal, are not liberal democracies, perhaps are not even
democracies, and yet manage to make their nations successful’ (Orbán,
2014). The gist of his argument was that Hungary is now exploring how
the country can liberate itself from ‘Western dogmas’ and optimally orga-
nise a society that is competitive in the world arena. He suggested that
countries like Russia, China, India, Turkey and Singapore are states wor-
thy of serving as models for Hungary’s political and economic develop-
ment. This is a far cry from what happened at the end of the Cold War,
when Hungarian leaders were the first in the Eastern Bloc to cut holes in
the fence that demarcated the Iron Curtain and thus open the country in
earnest to democratic values and other influences from the West.
It should perhaps be stressed that Orbán never actually defined what
illiberal democracy entails in his platform speech. Illiberalism was pre-
sented only as the negation of liberalism, which Orbán argued incorpo-
rates ‘corruption, sex and violence’, but the Prime Minister did not delve
more concretely into which liberal rights and freedoms should be cur-
tailed. He did emphasise, however, that ‘values of Christianity, freedom
and human rights’ would still be respected in an illiberal Hungary,
although he did not put much emphasis on the EU’s core values of democ-
racy and the rule of law in this context. This might have been a harbinger
of the future direction of Hungarian policy. In any case, the reference to
Christian values is likely to have given Muslims in the country reason to
feel stigmatised.
Hungary is no longer alone in appearing to be an illiberal democracy
within the EU. The parliamentary elections in Poland in 2015 brought
the national conservative party Prawo i Sprawiedliwość (PiS, Law and
Justice) then headed by Prime Minister Beata Szydło, and endorsed by
Party Chairman Jarosław Kaczyński, to power with the backing of an abso-
lute majority in the Parliament. In many ways, Kaczyński seems to be the
real leader of the Polish movement towards illiberal democracy. As early as
2011, he expressed his wish to create a ‘Budapest in Warsaw’ (The
Financial Times, 2016).
54 B. PETERSSON
After the change of government in 2015, a new media law that empow-
ered the government to appoint about 20 senior positions in state-owned
radio and television channels constricted freedom of the press and free-
dom of expression. One move in particular that garnered much outside
attention was the attempt by the new culture minister to ban the produc-
tion of a play by the Nobel laureate Elfriede Jelinek on the grounds that
the opening scene was pornographic. State censorship, which had been
lifted from Polish arts and culture with the liberation from the Eastern
Bloc, seemed to be on the way back.
Most crucially, however, on the strength of the election results in 2015,
the government was able, as in Hungary, to amend the constitution. It
quickly pushed through a restriction of the powers of the constitutional
court. Extraordinary judicial appointments were made in violation of
existing regulations and the government decreed that decisions by the
Constitutional Tribunal would henceforth require a two-thirds majority.
As the Polish government moved in 2017 to initiate laws giving itself the
power to dismiss Supreme Court judges and give veto power to
government-appointed members of the National Council of the Judiciary,
which selects judicial candidates, the European Commission reacted very
strongly. It warned that the EU was on the brink, for the first time ever, of
triggering the ‘nuclear option’ of Article 7 TEU, under which the Polish
government could lose its voting rights in the EU institutions. Under the
influence of strong domestic protest rallies and the negative international
reactions, the Polish President, Andrzej Duda, decided however to block
the two most controversial laws, and the threat was not carried out at the
time (The Guardian, 2017).
Islands of the East in the West

Until Hungary and Poland became the standard bearers for illiberal democ-
racy in the EU, the challenges to the EU’s interpretive monopoly in the
matter of what constitutes European values came from the outside, primar-
ily from Russia. The idea of Russia’s ‘sovereign democracy’ was launched
soon after Vladimir Putin’s first term as President began in the early 2000s,
where the main message was that no outside state had any right to interfere
in how Russia chose to interpret and apply the concept of democracy and
what it entails (Chen, 2016; Makarychev, 2008). It was the great power’s
sovereign right to choose its interpretations and chart its own course,
which need not at all harmonise with that of the US or the EU.
Ever since he came into power in the late 1990s, Putin has consistently
managed to maintain his popularity among the Russian electorate
(Petersson, 2017). The four times he has run for president so far, in 2000,
2004, 2012 and 2018, he was elected in the first round. His approval rat-
ings are astoundingly high and have only rarely dropped below 65 per
cent, a rating that his political colleagues in the West can only achieve in
their dreams. Putin’s heavy-handed emphasis on the idea of Russia as a
predestined great power seems to appeal to Russian voters, along with his
imposition and maintenance of law and order after the political chaos and
economic weakness of the 1990s. The hosting of the 2014 Winter
Olympics in Sochi became a symbolic manifestation of Russia’s resurgence
as a global power. Actions such as the annexation of Crimea that same year
and the intervention in the civil conflicts in Ukraine and the war in Syria
have also been highly popular among the voters (Hutcheson & Petersson,
2016). In connection with these events, Putin’s approval curve shot up
and stayed there. In the monthly surveys taken in the autumn of 2017 by
Moscow-based Levada Center, 83 per cent of respondents still expressed
their approval of the president’s policies (Levada Center, 2017).
The popularity Putin enjoys among the populist right wing in the West
is, on the face of it, highly surprising. This development is particularly
disquieting when it is put in relation to the discussion on European core
values. With his harsh rhetoric, his macho ideal and his authoritarian image
and policy, Putin has become something of an idol among European
right-wing populists (Klapsis, 2015). The leaders of the Hungarian Jobbik
party have described him as a guarantor of European values, as opposed to
a putatively degenerate EU. Politicians like Marine Le Pen in France and
Nigel Farage in the UK have repeatedly expressed their admiration for his
politics and style. On their website, the Greek ultranationalist Golden
Dawn are looking forward to a Russian-Greek alliance between the two
Orthodox states in the areas of trade, energy and national security (Golden
Dawn, 2016).
Considering these somewhat unexpected expressions of sympathy, as
the previously mentioned Neumann (2015) has so vividly put it, the polit-
ical East may pop up anywhere on the European political map in the
future, and even off the same. This very much includes the formerly
acknowledged bastion of Western liberal democracy—the US. During the
election campaign in 2016, the populist Donald Trump expressed his
admiration in several speeches for his Russian counterpart Putin (and vice
versa), and has since becoming US President indicated what seems to be
56 B. PETERSSON
a very muddled view of democracy. More than one year into its political
lifespan, the political course of the Trump administration is volatile and
erratic. Even if it is clear that the candidate preferred by Moscow emerged
victorious from the US presidential election, it is still too early to tell the
extent to which the political East has truly reached all the way to
Washington, DC. Even so, the effects of the Trump administration on the
political climate in Europe and the rest of the world may be as profound
as they are unpredictable.
As if Europe’s own problems were not enough. The antipathy towards
refugees and asylum seekers is making itself felt across the entire European
political map. Right-wing populist parties across the entire EU are casti-
gating these groups, in alignment with the views represented by Orbán
and Kaczyński in their illiberal democracies in the Visegrad bloc. Migrants
are depicted by default as a threat to national security, a serious burden on
social welfare systems and a general threat to putative national cultures
and values. In several countries, such as Denmark and Austria, the estab-
lished parties have moved closer to the perspectives and views of the popu-
list factions in a bid to win over their voters and opinion support. This is
yet another manifestation of the increasingly patchy backing of the EU’s
core values. It seems clear that the migration crisis has put trust within the
EU and, especially, between EU residents and recently arrived migrants to
a serious test.
A somewhat different challenge to the European core values is coming
from the official EU candidate country Turkey. When President Erdogan
responded to criticism of Turkey’s inadequate respect for democracy,
human rights and the rule of law in March 2016 (four months before the
failed military coup in the country), he was quoted as saying, ‘Democracy,
freedom and the rule of law…for us, these words have absolutely no value
any longer’ (The Independent, 2016). After the failed coup, things got far
worse. Tens of thousands of people were dismissed from their positions in
public administration, the military, media and education. Fifteen private
universities were closed, putatively due to connections to the oppositional
Gülen movement. Turkey is ruled by emergency laws, mass arrests have
taken place, copious reports of torture are being made and reinstatement
of capital punishment is under discussion. In spite of such actions, the EU
is so far maintaining its ambition to continue membership talks with
Turkey, even though German Chancellor Angela Merkel in the early
autumn of 2017 vowed to seek to end the talks (Reuters, 2017). Under the
present circumstances, the EU clearly seems to put its core values at stake
by continuing talks with Turkey.
Illiberalism, Canaries and Legitimacy

Using Hungary as an example, Jan-Werner Müller (2016) cautions against
widespread and accepted use of the term ‘illiberal democracy’, which can
help solidify and legitimise the power of authoritarian regimes. He argues
that the concept can be misleading and that an unwarrantedly positive
impression may be given that these regimes are primarily opposed to the
materialism and selfish individualism of the market economy. This would
obscure the fact that they are also attempting to limit protection of minor-
ities, freedom of speech and assembly, as well as media pluralism, all of
which are at the heart of democracy. The political orientation is not so
much illiberal as it is undemocratic: things should be called what they
really are.
It is bad enough that countries like Hungary and Poland seem to have
made illiberal and undemocratic ideas their own. The line of thinking
expressed by Abby Innes (2015) is even more alarming: developments in
Hungary and Poland might be a memento mori for Europe at large. She
argues that the pressure on democracy in Hungary can be compared to the
canaries in the coal mines of yesteryear. When toxic gases began billowing
through the mine shafts, the canaries were the first to die, thus giving an
early warning to the miners, who could take themselves to safety. What
Innes is suggesting is that Hungary, with the economic stresses it has
endured during its transition to democracy, the market economy and sus-
tainable social welfare systems, has in many ways, and in magnified form,
been ahead of the rest of the EU when it comes to the urgency and means
of getting out of a deep economic crisis. For Hungary, the need arose after
the end of the Cold War, while the euro countries did not have their crisis
to overcome until 2007-2008 and later. There is thus reason, according to
Innes, to study the Hungarian warning signs carefully: democracy in
Hungary may be the EU’s canary. Populism, national conservatism and
illiberal currents may easily arise in countries closer to the core of Europe,
she argues, and the essence of democracy may be the first to die. Hardly
subtle strategies to maintain the goodwill of voters may be tempting and
easy ways for political elites to achieve the legitimacy they need to stay in
power. Identifying scapegoats, such as refugees, is a classic recipe.
58 B. PETERSSON
In the late nineteenth and early twentieth century, the famous German
sociologist Max Weber (1978) determined that there are various ways for
the political elites to acquire more long-term and enduring support, legiti-
macy, from the electorate. A common definition of legitimacy is the exis-
tence of widespread beliefs that the power of leaders is lawful, rightful and
in accordance with the will of the people. Weber differentiated three ideal
types: charismatic authority (based on the charisma and personal qualities
of the leader), traditional authority (when power is vested in a person,
group or family who have held power for so long that it seems as if there
is no longer any alternative) and rational-legal authority (the mature,
Western type, in which public trust is gained through conscientious obser-
vance of existing laws and rules). The dilemma that the illiberal leaders in
the EU are actualising is that there seems to be a movement in various
places in the member states away from rational-legal legitimacy and
towards charismatic legitimacy. Instead of careful observation of the letter
and the spirit of existing laws and constitutions, leaders influenced by pop-
ulism are using charismatic addresses and oversimplified solutions—such
as stopping all refugee immigration—to address complex social problems.
As the charismatic style of leadership generally prefers black-and-white
descriptions of reality in which an ‘Us’ is contrasted with a threatening
‘Them’, this is a trend that certainly does not encourage the development
of trust within the EU.
Protect the Core Values and Secure Their

Interpretation
The Eastern enlargement in 2004 included ten countries, eight of them in
the former Eastern Europe. When it was implemented, it was considered
a major advance for Western liberal order and democracy, although some
problems were foreseen, primarily in relation to labour markets and social
safety nets. The kidnapped Central Europe would now be fully liberated
and Europe made whole again. But the enlargement led to tensions within
the Union in a way that few people other than the prescient Václav Havel
could predict. It included states whose political systems and civil societies
were still scarred by their experiences of the Cold War and their prolonged
affiliation with the Soviet-dominated Eastern Bloc. The integration of
Central Europe thus did not entail a simple enlargement of the core of the
EU: instead it seems to have involved a partial redefinition of the core.
In Hungary and Poland, new governments came to power in the 2010s,

supported by discontented electoral majorities and with a somewhat diver-
gent view of what constitutes the core values of the EU. The accepted
interpretations of what the democracy, human rights and rule of law of the
Copenhagen criteria are, and what they mean, were challenged. These
governments seemed most inclined to listen to the Siren song of authori-
tarian forces in Russia and perhaps Turkey. As this is written, it seems by
no means self-evident that the democratic and liberal model represented
by the old EU will be competitive in the long run or that its normative,
preferential rights of interpretation vis-à-vis the rest of the world can be
maintained. The EU seems to be moving into a phase where the only
instrument available to play is second fiddle. The Golden Age of the EU
may already have passed; the Union may seem to be an anachronism, as
‘Brexit’ perhaps suggests.
The trials of the EU’s fundamental values are thus emanating from
authoritarian states outside its borders and from illiberal member states at
its centre but not only from there. This has to do not only with a political
East that is spreading here and there across the entire EU territory, it is
rather an illiberal patchwork quilt being sewn under the influence of a
protracted economic crisis. The growing support of the populist parties in
public opinion in recent years is a serious concern and seems, if anything,
to be a challenge to the core values of the EU. The pushing of simple solu-
tions to complex problems is gaining widespread support in public opin-
ion in the member states. The knee-jerk characterisation of refugees and
other migrants as threats to national security, terrorists and general bur-
dens on national resources and values is happening all over the EU. Perhaps
the populist challenge is actually the toxic gas pouring out of the EU’s
political mine?
A unifying vision for the EU member states and their people is needed
to continue moving forward together, regardless of the economic crises
and Brexit. There must be consensus as to how the core values should be
interpreted and implemented. The Copenhagen criteria should therefore
be extended with an authoritative and shared interpretation of what its
maxims entail. In this way, the criteria can be protected from attempts to
set up competing or conflicting interpretations, whether these are pur-
ported to be of a sovereign or illiberal nature. Democracy, human rights
and the rule of law must never be allowed to become beautiful words
devoid of concrete content; the EU must remain a beacon. In turn, this
means that concern for democracy, the rule of law and human rights must
60 B. PETERSSON
also imbue the relationships among people who reside in the Union’s ter-
ritory but are not her citizens.
Impactful sanctions against existing member states that breach the
accepted interpretation of the core values must be considered in the future.
What should be done in relation to candidate countries that claim the
maxims are of no value at all is another problem that must be addressed.
One is forced to conclude that continued membership talks with Turkey,
which for all intents and purposes is breaching the EU’s core values under
the mantle of emergency legislation, are in the current circumstances a
contravention of the Copenhagen criteria. The EU would certainly be
enlarged, but it would most likely have to sell its soul along the way.
A common identity would foster trust between EU member states and
their populations to be further developed and consolidated. Such an iden-
tity must, however, grow organically and support for the common values
would be the most fertile soil. Unconditional unity around the interpreta-
tion of the Copenhagen criteria is essential to promoting a sustainable
common identity and trust within the EU.
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Citizens’ Trust in the EU as a Political
System
Linda Berg
When the British citizens voted for the UK to leave the European Union
on 23 June 2016, there were astonished reactions across Europe. Even
though the campaign had been criticized for a lack of objectivity on both
sides, the outcome can be seen as one of many indications that citizens’
trust in the EU as a political system has weakened in the light of recent
economic and political crises, as well as concern over immigration (Hobolt,
2016). Moreover, ‘Brexit’ can be seen as merely the latest of several major
crises for the EU in recent years. The long-term economic crisis and an
inability to deal with the extensive refugee flows across the Mediterranean
are other examples of when the EU and its member states have been criti-
cized for its incapacity to reach joint solutions. The European integration
project has thus been said to be facing difficult, almost existential chal-
lenges (Tosun, Wetzel, & Zapryanova, 2015).
In the wake of these crises, there have been many examples of popular
dissatisfaction and protest. There is pertinent civic criticism of what is per-
ceived to be an inadequate ability to cope with growing social, economic
and cultural divisions in Europe (Hobolt & Tilley, 2014; Hobolt & de
Vries, 2016; Serricchio, Tsakatika, & Quaglia, 2013). At the same time,
L. Berg (*)
University of Gothenburg, Gothenburg, Sweden

66 L. BERG
EU member states have very different views on how to handle global and
European challenges, leading to a lack of support for joint actions and dif-
ficult European leadership (Aggestam & Johansson, 2017). Moreover,
many EU member states continue to have persistent economic difficulties.
Consequences of public sector retrenchments have led to major chal-
lenges, protests and distrust among the most affected citizens. In addition
to mass demonstrations, we have also seen increased opinion support and
election successes for political parties challenging the existing elite, often
with a strong EU-sceptic agenda (Hobolt & Tilley, 2016).
In the light of dissatisfaction and insecurity, politics have been radical-
ized. Tensions and contradictions between different groups have increased
and the tone of conversation tends to be heated. The sense of cohesion
between countries, and groups within countries, is questioned and raised
as arguments in discussions about the value of the membership in the
EU. In other words, the popular trust in the EU is questioned, especially
by those most negatively affected by the economic and other crises and the
EU’s perceived inability to handle them (Hobolt & de Vries, 2016).
Nevertheless, it should of course also be noted that this trend of decreas-
ing political trust is not unique to the EU. There is a long-term trend of a
generally reduced trust in political institutions and actors, globally and
nationally, in most countries (Dalton, 2013).
This chapter focuses on the citizens’ perspective and investigates how
citizens’ trust in the EU as a political system and its institutions has
changed over time, as well as how trust vary between different member
states and social groups. The chapter is based on theory and previous
research on European integration, political legitimacy and trust, using
European and Swedish survey studies for the empirical analyses of expla-
nations to differences in perceptions about the EU.
Citizens’ Trust, Identification and the European

Integration Process
Trust is an important but elusive concept within social science research, as
it can be defined and interpreted in different ways (Warren, 1999). In this
chapter, the focus is on citizens’ own perceptions. Somewhat simplified,
we can distinguish between two main forms of citizens’ trust: inter-
personal trust and trust in the political system. Inter-personal trust is also
referred to as social or generalized trust and can be described as a horizon-
tal relationship between different individuals in a society, who do not
CITIZENS’ TRUST IN THE EU AS A POLITICAL SYSTEM 67
know each other but still display trust in other persons. Inter-personal
trust is perceived to be at the core of a well-functioning society as it is
expected to reduce costs of transaction and allows people to spend more
time and energy on productive cooperation (see also Andreas Bergh’s
chapter in this volume). Contrastingly, trust in the political system, also
referred to as political trust, can be seen as a vertical relationship between
citizens and the institutions of the political system (Zmerli & van der
Meer, 2017). This chapter focuses on the vertical version of citizens’ trust,
and more specifically the trust citizens may—or may not—have in the
European integration and the political institutions of the EU.
Despite the theoretical distinction between these two types of trust, it
is important to consider their interconnectedness. Studies show that peo-
ple who tend to trust other people in general also tend to display trust in
the political system and its institutions. In connection to the EU, early
integration theorists like Karl W. Deutsch and Ernst Haas have argued in
a similar manner that increased cooperation and contact between persons
in different European countries would over time increase the sense of
community, a European identity, which in turn would contribute to
increase the trust and support for the European integration project as such
(see e.g. Deutsch, 1966). David Easton (1965) put it this way ‘Underlying
the functioning of all systems, there must be some cohesive cement—a
sense of feeling of community amongst the members. Unless such senti-
ment emerges, the political system itself may never take shape or if it does,
it may not survive’ (Easton, 1965, p. 176).
Citizens’ political trust can be based on rational as well as emotional
aspects, and these can interact in variable ways. The basic principle is that all
form of political governance has two aims: to deliver political goods (out-
come) and to function as an expression of social community. In relation to
this, Lisbeth Hooghe and Gary Marks have launched what they call a post-
functional theory of European integration (Hooghe & Marks, 2009). They
argue that identity is a key aspect in order to understand multilevel gover-
nance in general, and particularly European integration. Moreover, people
do care about who governs, but the problem is that the political level which
is the most effective to make decisions rarely correspond to the territorial
divisions people identify with. This mismatch of efficacy and political struc-
ture can lead to political conflicts, which in turn can be triggered feelings of
identity and attachment. Strong identifications can both increase and
decrease support for European integration. What matters the most is
whether or not identifications are exclusive, and whether or not
68 L. BERG
these sentiments are fuelled by EU-sceptical political parties. The impor-

tance of identity is expected to matter the most when debated EU issues
not only relate to economy but also connect to political values. National
identities are shaped by national pressure and socialization, which European
integration process lacks. European integration can therefore be seen as an
experiment in identity formation, without the historically most important
force to shape identifications.
Who Trusts the EU as a Political System?

Broadly defined, explanations of variations in attitudes to the EU can be
divided into two main groups: explanations based on self-interest (utility)
and explanations focusing on cultural factors, mainly identity. These two
main groups are usually referred back to the ground-breaking research by
David Easton (Easton, 1965, 1975) about political system support. Easton
clarified the difference between what he called specific and diffuse support.
The former is based on self-interest and expects citizens’ support for the
political authorities to be related to the authorities’ efficacy, the political
outcome. The latter is a form of diffuse, emotional political system sup-
port, which can be seen as a ‘reservoir of goodwill’ that contributes to citi-
zens’ continuous support, even during (at least shorter) periods of
dissatisfaction with policy or political leadership.
Easton moreover distinguished between what he called the different
‘objects’ of the political system. He argued that in order to fully under-
stand political system support (and trust), we need to understand that it is
a multidimensional phenomenon, and that the support can be directed
towards three different objects: the political society, the political regime
and the political authorities.
Following Easton, many other researchers (Dalton, 2004; Norris,
1999) have elaborated Easton’s model and differentiate between five dif-
ferent ‘objects’, or ‘components’, which can also be argued to represent
more or less of diffused or specific support, subsequently from the first
(highest) to the fifth (lowest):
1. The Political community is mainly related to support for the political

system as such and is perceived as the most diffuse form of
support;
2. The Political regime—principles focuses on the citizens’ principle
support for democracy and democratic values;
3. The Political regime—effectiveness concerns the citizens’ evaluations

of how well the democratic political system functions in practice;
4. The Political regime—institutions focuses on the more specific sup-
port for the institutions of the political system, e.g. government and
parliament;
5. The Political actors component is the most specific, mainly involving
support for individual authorities, parties and politicians.
Applying this division to the question of this chapter, citizens’ trust in

the EU, the first component relates to overall attitudes to the EU as such,
or the attitude to one’s country’s membership of the EU. The second
component deals with the principal support for democracy, whereas the
third focuses on evaluations of the functioning of democracy in the EU
specifically. The fourth component captures the direct trust in the various
institutions of the EU, whereas the trust in the individual members of
European Parliament can be seen as examples of the fifth component. The
idea is that all of these components can vary independently of one another,
and that attitudes placed further down in the scale are expected to be
more volatile, whereas the upper form of support is expected to be more
stable over time. However, Easton argued that there is also a relationship
and a potential ‘spillover’ from one object to another. The previously
mentioned idea of a reservoir of goodwill illustrates such a relation between
the various objects. On the other hand, Easton was also clear about the
fact that long-term problems of support for the lower objects could under-
mine the support for the political system at large. It is in other words
important to study both higher and lower level objects, or components, of
political system support.
In correspondence to other research analysing the vertical form of trust
using survey data, the main concept used in this chapter is political trust.
Trust is also closer to how the questions are formulated in the survey stud-
ies used for the empirical analyses. Two main components are analysed
here: the more specific form of trust in the political institutions of the EU
and the wider, and more diffuse, issue of overall attitude to the EU (or
one’s country’s membership).
Focusing on these two components facilitates the comparison and dis-
cussion of differences between, on the one hand, a form of political trust
placed ‘further down’ in the scale of political system support, expected to
be more volatile, and, on the other hand, a more diffuse form of trust
concerning general attitudes to the EU as a political system. A comparison
70 L. BERG
between them provides a better ground to assess the seriousness of citi-

zens’ trust in the EU. The following section provides an overview of citi-
zen attitudes to the EU over time, as well as how the trust in EU institutions
has developed over time. Variations across countries follow, including a
discussion about the theoretical explanations of variations across coun-
tries. The chapter continues with an overview of explanations of variation
in attitudes at the individual level, that is, between different groups within
the same country and end with a concluding discussion including some
recommendations.
Citizens’ Trust in the EU Over Time

There is a large variation in public opinion about the EU, not least depend-
ing on how questions in surveys are posed. Some questions focus on gen-
eral attitudes or perceptions about whether one’s country’s membership is
a good or bad thing; other questions are more detailed inquiries about
specific EU institutions or policies. Questions like these are regularly asked
in large-scale European survey studies. The longest yearly time series can
be found in the Eurobarometer data. The standard Eurobarometer sur-
veys are normally carried out as face-to-face interviews with about 1000
citizens in each EU member state. Apart from a variation of questions
about current affairs, there are yearly questions about trust for EU institu-
tions and general EU attitudes, as well as a large number of background
questions. The interviews are made by national institutions on behalf of
the European Commission. The combined datasets are later made avail-
able for scientific research.
When citizens of EU member states are asked whether they perceive
their country’s membership of the EU to be a good thing, a bad thing or
neither, the trend in opinion over time is quite stable. Since the 1980s, the
tendency has been for a majority of people to answer that they perceive
their country’s membership to be ‘a good thing’. Usually, the share of
positive responses have been around 45–55 per cent, whereas the share of
respondents answering ‘a bad thing’ has been around 15–20 per cent, and
the share of those answering ‘neither good nor bad’ around 25–30 per
cent. At the time of the economic and euro crisis, there is a drop among
the share of positive attitudes and somewhat of an increase among those
with a negative view (or neither), but these changes are fairly limited. It is
usually not more than a few percentage points, and the positive views
remain in majority. In other words, regarding a more general perception
of overall membership in the EU, the changes over time are relatively
small, and especially when displayed as averages across all EU member
states.
A somewhat more visible change during the years of crisis can be found
when analysing the question of whether the EU ‘conjure up for you a very
positive, fairly positive, neutral, fairly negative or very negative image’.
Figure 1 shows that since the early 2000s, the largest share (among 40 per
cent) has answered that they have a fairly positive view of the EU, but this
share is declining to below 30 per cent during several years around the
peak of the economic and euro crisis. Since 2010, the share of respondents
with a neutral view of the EU is the largest, with around 40 per cent.
Moreover, the fairly negative group has increased from around 10 per cent
during the 2000s to around 20 per cent during the 2010s.
Even if we can see a decline in the positive image of the EU since the
beginning of the economic and euro crisis, this trend is not necessarily too
serious. Controversially, it can be argued to be seen as a sign of health that
45
40
35
30
25
20
15
10
5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Very positive Fairly positive Neutral
Fairly negative Very negative Don't know
Fig. 1 Positive, negative or neutral image of the EU 2002–2016 (per cent,

weighted average all EU). Source: The Eurobarometer. The question posed is ‘In
general, does the EU conjure up for you a very positive, fairly positive, neutral,
fairly negative or very negative image?’ The response options are mentioned in the
questions, plus the ‘don’t know’ option. The percentages are based on those who
have answered the survey question, weighted according to population size in the
EU member states
72 L. BERG
most respondents have a neutral image of the EU as such, as the focus of

debate rather should be to discuss and hold varying perceptions about
what policies that should be promoted. This is a very reasonable argu-
ment. However, to be satisfied by such reasoning and come to the conclu-
sion that there is no need to further investigate the citizens’ attitudes to
the EU would come at a risk.
Most of all, there is a risk of missing the much more pertinent issue of
the declining trust in the decision-making institutions of the EU. Since
2010, the trust in the three most important EU institutions—the European
Commission, the Council of the European Union (the Council of
Ministers) and the European Parliament—has decreased significantly.
Only around 35 per cent of respondents claim to have trust in the
Commission and the Council. The trust in the European Parliament has
had a somewhat higher level of trust ever since the Eurobarometer started
asking about it, but even so, the trust has decreased from around 55 per
cent during most parts of the 2000s to around 40 per cent in the last years.
As can be seen in Fig. 2, the share of people answering that they tend not
to trust the European Parliament has instead increased noticeably, and
45
40
35
30
25
20
15
10
5
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Very posive Fairly posive Neutral
Fairly negave Very negave Don't know
Fig. 2 Trust in the European Parliament 1993–2016 (per cent, weighted aver-
age all EU). Source: The Eurobarometer. The same question is posed for several
EU institutions and asks for each of them whether or not the respondent tend to
trust or not tend to trust it. The three response options are visible in the figure.
The percentages are based on those who have answered the survey question,
weighted according to population size in the EU member states
now hovers close to the 50 per cent mark. Although the levels of trust
have been somewhat lower for the Commission and the Council during
the same time, the tendency and pattern is very similar.
Combining the insights from these different ways of measuring citi-
zen’s attitudes, the overall image is that most citizens remain positive
about their countries’ membership; that the previous overall fairly positive
image of the EU has begun to be a bit eroded since the beginning of the
crisis; and that the trust in the EU institutions has declined severely. It is
potentially even more serious that the European Parliament has lost so
much of public trust, around 15 percentage points, since it is the EU insti-
tution often referred to as the voice of the public. Being the only directly
elected EU institution, with a clearly expanded decision-making power
the last years, makes the signs of decreasing citizen trust particularly
ominous.
A Closer Look at the Citizen Trust Over Time

in One Country: The Case of Sweden
A closer look of the development of citizen attitudes over time in one

country can increase our understanding of the problems in terms of citi-
zens’ trust that the EU faces. Sweden is a particularly interesting country
in this regard, as the country became a member of the EU in 1995, fol-
lowing a referendum about the membership the year before, where the
‘yes side’ won by a small margin, leaving the country hugely divided for
many years and often referred to as one of the most hesitant EU member
states (second to the UK). In contrast to the UK, however, the attitudes
in Sweden do display a different pattern over time. There are also some
similarities, and some differences, compared to the previously shown aver-
ages of the EU as a whole.
In Fig. 3, the Swedish opinion on EU membership over time is shown.
The data used comes from the Swedish SOM Institute (Society, Opinion
and Media), which have measured attitudes to Swedish membership of
the EU every year since 1991. Throughout the 1990s, the opponents of
membership were constantly larger than the supporters, apart from at
the referendum in 1994. It was not until the early 2000s, following the
first Swedish EU presidency in 2001, that support for the EU member-
ship started to increase. Since then, the share of supporters has been
continuously larger than the opponents, albeit the clear opinion shifts at
times.
74 L. BERG
60
50 49
46
40
34
30
28
23
20 20
10
For Swedish membership Against Swedish membership Don't know
Fig. 3 For or against Swedish membership of the EU 1991–2016 (per cent).

Source: The National SOM study 1991–2016. The question posed is ‘What is
your opinion of the Swedish membership of the EU?’ The response alternatives are
‘Generally for Swedish membership of the EU; Generally opposed Swedish mem-
bership of the EU; Have no specific opinion’. The percentages are based on those
who have answered the survey question
In 2009 and 2010, the Swedish support for EU membership was at its
all-time high, exceeding 50 per cent. However, this support decreased
drastically the following years, as the consequences of the economic and
euro crisis became more noticeable also in Sweden (and in the media cov-
erage). The downward trend ended in 2013, followed by an increase of
the support again. The last years the opinion has been stable, with a sup-
port for membership around 50 per cent, that is, similar levels of support
as before the peak of the crisis. Interestingly, there is no sign of a clear
decrease of support even after the so-called refugee crisis in 2015 or the
‘Brexit’ referendum in 2016.
Similarly, to the development of attitudes to the EU over time in the
entire EU, Fig. 3 does not indicate any severe decrease in political system
trust in Sweden. Although the share of people supporting EU member-
ship decreased somewhat during some years in the beginning of this
decade, the percentages are now back to similar levels as before the peak
of the euro crisis. However, when we turn to the issue of trust in EU insti-
tutions, the pattern is different, similarly to the public average of the entire
EU.
Since 2010, Swedes’ trust in the European Commission and the
European Parliament has been relatively low. Overall, around 15–20 per
cent have answered that they trust these institutions very much or to
some degree. Another pattern is that the level of trust is almost always
identical for these two institutions, which differs from the EU-wide
opinion in which the parliament usually gets somewhat higher levels of
trust. As can be seen in Fig. 4, in the Swedish data there is also no
increase of trust in the last years, in comparison to the increase in sup-
port for EU membership as such. In fact, the share of respondents that
tends to trust the EU institutions very much or to some degree has
decreased somewhat again in 2015 and 2016. The image of a somewhat
erosion of trust is even more apparent when we at the same time (in
Fig. 4) can see that the satisfaction with democracy in the EU has
decreased again since 2015. However, looking at the long-term trend,
the levels of satisfaction and trust are still higher than that at the turn of
the century.
It is also worth to remember that survey questions are posed in differ-
ent ways and with different response options. Even a comparison of the
question of trust in the EU institutions is difficult as in the Eurobarometer
only offers two response alternatives (tend or tend not to trust), whereas
60
50
40
30
20
10
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Very/fairly sasfied with EU democracy Very/fairly much trust in the Commission

Very/fairly much trust in the Parliament
Fig. 4 Swedes’ trust in EU institutions and satisfaction with democracy in the

EU, 1999–2015 (per cent). Source: The National SOM study 1999–2016. The
questions posed are ‘How satisfied are you with the way democracy works in the
EU?’; ‘How much trust do you have for the way work is done in: the EU
Commission; the European Parliament’. The response options are ‘very/fairly sat-
isfied; neither; not very/not at all satisfied’ and ‘very/fairly much trust; neither;
fairly/very little trust’. The percentages are based on those who have answered the
survey question
76 L. BERG
the response alternatives are more fine graded in the Swedish SOM-data,
including a middle option (neither trusting nor not trusting) which tends
to be the most common response, around 40–45 per cent.
Even if there are signs of decreased political trust in Sweden, especially
in the form of trust in the EU institutions, the changes are not too dra-
matic. Nevertheless, if this is still a pattern in Sweden, it can be expected
to be much more pronounced in countries where the effects of the eco-
nomic and euro crisis were much more severe. The EU averages of public
opinion can hide a large variation across countries, which is covered in the
next section.
Trust in the EU in Different Member States

The trend over time is an important part of the discussion of citizens’
trust in its own right. However, the averages across all EU member states
do hide a lot of inter-country variation (as well as intra-country variation
across different individuals and groups). This section starts with an over-
view of theoretical explanations of variations in (aggregated) levels of
trust across countries, sometimes referred to as macro factors. These
explanations usually concern differences in countries’ economic situa-
tion, democratic stability, levels of corruption, functioning political
authorities and political culture (Dalton, 2004; McLaren, 2017; Mishler
& Rose, 2001).
Two broad main categories of explanations can be distinguished also at
the macro level: factors relating to self-interest and factors relating to cul-
ture and identity. Applied to the issue of trust in the EU as a political sys-
tem, we can thus examine explanations such as to what extent a country
benefits from the membership in the EU (directly as well as to what extent
the citizens perceive it to be beneficial), how long the country has been a
member state and to what extent there is a European identity among the
citizens.
Figure 5 displays the difference between those respondents with a posi-
tive image minus those with a negative image of the EU (the so-called
opinion balance) in each country. Similar to Fig. 1 regarding the opinion
trend over time, the main pattern in Fig. 5 also indicates a predominantly
positive image of the EU in most countries. Nevertheless, the variation
across countries is large, and the predominantly negative image can be
found in countries where the economic and refugee crises have been most
evident, such as Cyprus and Greece. More dominating negative image can
RO
LT
PL
IE
MT
EE
BG
LU
HR
HU
LV
DE
PT
DK
BE
EU28
FI
NL
SI
SE
SK
ES
CZ
FR
IT
UK
AT
EL
CY
–30 –20 –10 0 10 20 30 40 50 60
Fig. 5 Positive, negative or neutral image of the EU 2015 (opinion balance).

Source: The Eurobarometer 2015. The question posed is ‘In general, does the EU
conjure up for you a very positive, fairly positive, neutral, fairly negative or very
negative image?’ The opinion balance is calculated by subtracting the share of
respondents answering that they have a rather or very negative image from those
answering that they have a fairly or very positive image
also be found in Austria, and in the UK, the 2015 opinion balance only
had a few percentage points overweight to a positive image.
The largest shares of positive images can be found in a mix of EU mem-
ber states. These positive images can, on the one hand, be found among
large shares of the population in economically comparatively wealthy
countries, such as Luxembourg and the Nordic countries, but, on the
other hand, also in newer and more economically challenged member
states such as Romania. To some extent this can be understood in terms of
self-interest and rational factors in support for European integration
(Hobolt & de Vries, 2016), but, for example, in Luxembourg, there is
also a well-known prevailing European identification among the citizens,
which also contributes to a higher share of positive attitudes to European
integration (Kuhn, 2015). The overall impression regarding the cross-
78 L. BERG
country variation thus corresponds to the pattern of the development over

time previously shown; regarding the more diffuse support for the highest
‘object’, in the form of positive or negative image of the EU, the public
opinion does not present too much of concern. However, as is seen in
Fig. 6, the pattern again changes when we shift the attention to a more
specific ‘object’ of political trust, that is, the European Parliament.
Trust in the European Parliament is much more varied across the mem-
ber states of the EU. The opinion balance (i.e. the share of citizens answer-
ing they tend to trust the European Parliament subtracted by those
answering that they do not tend to trust it) shows an almost half-split
across the countries. Figure 6 illustrates several of the factors highlighted
in previous research to be important in order to explain variation across
LU
LT
RO
MT
SE
DK
FI
EE
HR
HU
PL
BG
BE
NL
IE
LV
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EU28
SK
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DE
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CZ
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ES
UK
EL
–60 –50 –40 –30 –20 –10 0 10 20 30 40
Fig. 6 Trust in the European Parliament 2015 (opinion balance). Source: The
Eurobarometer. The same question is posed for several EU institutions and asks
for each of them whether or not the respondent tend to trust or not tend to trust
it. The opinion balance is calculated by subtracting the share of respondents
answering that they tend not to trust from those answering that they tend to trust
the European Parliament
countries. Starting at the top of the figure, we find among the countries
with a positive opinion balance a number of stable countries with com-
paratively good economy and well-functioning political institutions, such
as the Nordic countries. The top position is held by Luxembourg, which
in addition to these factors also is one of the original founding member
states and a very high share of citizens who feel as Europeans, a factor also
known to affect trust in political institutions (Berg, 2007). But there are
also a number of countries with a positive opinion balance which divert
from this pattern, including Romania, Croatia and Hungary. This may
seem counter-intuitive at first glance, but studies show that the compari-
son to the trust in national political institutions may end up favourably for
the trust in European institutions. In countries where democratization is
fairly recent and where problems with democracy, governance and corrup-
tion prevail, the EU institutions may be perceived as better governed and
more well-functioning. Moreover, there is another factor that should be
mentioned. The question of rational self-interest is not only in relation to
overall economic development but also in relation to net gains of EU
membership. According to this argument, citizens in countries that get
more money back, mainly in the form of structural funds, from their EU
membership compared to what they contribute, may be expected to have
a generally more positive view on the EU in general as well as specific EU
institutions.
In the lower half of Fig. 6, we find the countries where the opinion bal-
ance is negative, meaning that there is a higher share of citizens that tend
to not trust the European Parliament than those who tend to trust it. In the
very bottom we find on the one hand countries that have suffered exten-
sively from the economic and financial crisis and the ensuing euro crisis,
and the subsequent public retrenchments. Not too surprisingly, Greece is
in the very bottom but also Spain and Cyprus show markedly large negative
opinion balances. Dissatisfaction with national public service has been
shown to have a clear negative effect on EU trust (Kumlin, 2009). The UK
negative opinion balance can shed light on some of the other explanatory
factors, that is, a lack of European identity and an overall scepticism to
supra-state decision-making. In light of these figures, the outcome in the
‘Brexit’ referendum in June 2016 seems somewhat less surprising.
More problematic from a legitimacy perspective is that the opinion bal-
ance is negative in several of the oldest EU member states. Even in large
core countries, such as Germany and France, we find more citizens respond-
ing that they tend not to trust the European Parliament than those who
80 L. BERG
tend to trust it. This is a clear warning signal regarding the public trust in
the EU decision-making institution which traditionally tends to have most
trust among the EU institutions. It is furthermore problematic that this
decreasing trust is so discernible considering the increased political powers
the European Parliament has gained following the entry into force of the
Lisbon Treaty in 2009.
Who Trusts the EU? Variations in Attitudes

Across Individuals
In addition to the large variation in EU trust across countries, there is of
course also a large variation across different individuals and groups within
each country. The explanations of such variations among individuals are
sometimes referred to as micro-level factors. Yet again the basic division in
two main groups of explanations of trust and attitudes to the EU is useful.
Also at the individual level, we can distinguish between explanations that
mainly concern self-interest or economic rationality on the one hand and
cultural factors relating to socialization and identification on the other
hand (Berg, 2007; Mishler & Rose, 2001). In addition, cue taking and the
importance of the national political context have also been shown to
impact the individual-level variation in attitudes towards the EU (Hobolt
& de Vries, 2016).
From a utilitarian, rational and self-interest perspective, those citizens
who may have the most to gain from a membership in the EU can be
expected to hold the most positive attitudes. These are factors relating to
such aspects as high level of education, high income, youth, health, full
employment associated with high-status persons living in bigger cities,
whose working life benefits from European integration. Some scholars
even argue that attitudes towards mass immigration and resistance to
European integration have shifted the traditional focus of political debate,
to be reinterpreted in terms of a new political cleavage, relating to the
‘winners’ and ‘losers’ of globalization (Kriesi et al., 2006).
Closely related are ideas that persons with a so-called high degree of
political mobilization should find it easier to grasp such a highly complex
political structure as the EU, and thus having fewer reasons to fear it.
Several studies have confirmed that socioeconomic factors do matter for
attitudes towards the EU, regardless of country, but it is far from the
whole explanations and the importance of such factors tend to vary over
time. One example of such a shift over time is that during the early days of
Swedish EU membership, men and older citizens tended to hold the most
positive views, whereas, today, it is mainly the younger generation who
tend to be most positive and the gender difference is no longer statistically
significant (Berg & Bové, 2016). These changes over time illustrate
another explanation, namely socialization. The EU membership may be
perceived more natural to persons who have no memory of living in a
country not being a member state. On the other hand, the younger gen-
eration can on average be thought to also perceive the EU membership
from a self-interest point of view, regarding the potential of living, work-
ing or studying abroad in the near future.
Some other patterns associated with a utilitarian perspective have been
more stable over time. It is more common for highly educated, white-
collar workers living in big cities to be more positive towards the EU. But
as Hooghe and Marks (2005) point out, even if rational self-interest argu-
ments do play a role, it is not the full picture. The national debate regard-
ing the EU is also very important. Many voters take cues from the political
elite, political party, which they normally like or even identify with. The
way the EU issues are politicized matter for the public’s attitudes, and
when the issues debated concern other aspects than economy, the chances
are that other aspects, such as identity, will affect the EU attitude (Hooghe
& Marks, 2005).
Among the more cultural aspects, it is thought to matter whether peo-
ple have grown up (or if their parents have grown up) in other European
countries. If so, they are expected to hold more positive views of the EU
due to a socialization perspective. There are also some indications that
people who have lived and worked in other EU states tend to be more
positive to the European integration (Kuhn, 2015). This is usually related
to the issue of individuals’ identification with Europe. The question of a
European identity is debated and can be understood and defined in differ-
ent ways. Even when focusing only on the feelings individuals have, there
are different views on how such feelings can and should be understood.
From a more primordial view on identity, the national identification will
always be strongest, or maybe even perceived as the only ‘real’ territorial
identification. Contrastingly, from a constructivist view on identity as
created, or an ‘imagined’ community, there is nothing strange about the
potential of people identifying with several different territorial levels. Just
as one person may identify with Munich, Bayern and Germany, another
may identify with Scania, Sweden and Europe (Berg, 2007). In some parts
of Europe, it is not even necessary that the state level is included among
82 L. BERG
the levels of identification. As the recent events in Catalonia illustrate,

there are definitely some people who identify with Barcelona, Catalonia
and Europe—but not Spain. Most studies of identification and EU atti-
tudes show that persons who identify only with their state—an exclusive
national identification—tend to be the most negative towards the EU and
European integration. People with a strong European identification on
the other hand tend to have more positive attitudes to the EU, even in
analyses controlling for rational, self-interest factors (Hooghe & Marks,
2004).
Who Trusts EU Institutions?

The overview of individual-level explanatory factors above has so far
focused on variations in citizens’ general EU attitudes and their countries’
membership of the union. Using Easton’s terminology, the focus has been
the community ‘object’ of the trust in the EU as a political system. In this
section, the emphasis is rather on the more specific trust in the EU institu-
tions, which adds a few extra aspects. Given the fact that the ‘object’ of
political trust—the political authorities—is placed further down and con-
sidered a more specific type of trust, there is an added expectation of spe-
cific factors to also be of higher importance. This is however not to say
that diffuse aspects, such as European identity, are unimportant. As has
been mentioned above, Easton argued that diffuse aspects of political trust
could function as a reservoir of goodwill to sustain the overall system sup-
port through shorter periods of crises and citizen dissatisfaction (Easton,
1975).
Similar to studies on general attitudes towards the EU, a number of
scholarly works have shown that persons who identify with Europe are
more likely to also express trust in EU institutions to a higher degree than
others, even under control for other explanatory factors (see below). The
importance of a European identification tends to decrease but remains
significant (Berg, 2007). However, in later years, the impact of European
identification has been weaker, which potentially could be interpreted as a
lack of strength of the idea of European identification as a reservoir of
goodwill now, compared to the mid-2000s. Some other studies have espe-
cially focused on those individuals who identify equally strongly with all
levels, from local levels (town or village) to Europe. In a study based on
data from 2004, this group stood out as having the strongest level of trust
in political institutions at all levels. It was even stronger than the trust in
political institutions at one level (e.g. state) that individuals had who only
identified with this level (e.g. an exclusive national identification). This
relationship appeared in cross-section European data as well as national
data (in Sweden). However, in 2015, those correlations are to a large
degree lost when other factors are added to the analyses. This is again a
signal of the importance to take the changing citizen attitudes towards the
European Parliament seriously. The potential to lean back and rely on an
expected reservoir of goodwill based on European identification is not
really feasible anymore.
Turning to the difference in explanatory factors between general EU
attitude and trust in EU institutions, one aspect is the expected impor-
tance of socioeconomic factors. One example concerns gender. While men
in general have tended to be somewhat more positive to European inte-
gration at large, women tend to have a higher degree of trust in political
institutions than men. Otherwise, most socioeconomic factors tend to
have a somewhat lesser explanatory factor. While highly educated persons
are mostly more pro-EU than those with a lower degree of education, this
is not the case concerning institutional trust. Some scholars argue that this
is due to the increased ability to understand and analyse decisions and
policy outputs from EU institutions, and therefore also a higher likelihood
to be critical.
While the general EU attitude may be supported by an idea of long-
term gains, the trust in EU institutions is much closer connected to short-
term evaluations of policy output. This brings us to the third form of
explanatory factors, that is, the importance of the perceived economic and
political development in one’s own country, and to what extent that might
spill over on to the trust in the EU institutions. This is often found in the
so-called Blaming Europe approach (Hobolt & Tilley, 2014; Kumlin,
2009). The empirical analyses typically include survey items asking respon-
dents about their perceptions of the national economy. These types of
perceptions tend to have a fairly strong explanatory power regarding
national political institutions (Mishler & Rose, 2001), but some scholars
argue that such negative national evaluations of the economy also hit the
trust for the EU institutions. This has also been more visible during
stronger focus on the economic crises of the EU (Dotti Sani & Magistro,
2016).
In a fourth category of explanations, national politics is highlighted.
Empirically, this usually entails adding questions about citizen evaluations
of national government performance, as well as personal ideological
84 L. BERG
preference. Ideological left-right preferences tend to affect incumbent

evaluations. Citizens are more likely to make positive evaluations of incum-
bent governments they are ideologically close to. National party prefer-
ences also matter in another way. Voters tend to take cues from their party
representatives regarding policy issues they feel less informed about
(Armingeon & Ceka, 2013; Hooghe & Marks, 2005). Hence, the exis-
tence of political parties that actively politicize dissatisfaction with the EU
institutions also increase the likelihood of partisans expressing similar
views.
If we are to take seriously the theoretical expectation that actual politics
matter for political trust, we must also investigate political outcome, for
example, by analysing the expected impact of European decision-making
within a number of policy areas (Hobolt & Tilley, 2013). This can be seen
as a fifth factor. We already know that there is a large variation in percep-
tions of the impact of EU membership, depending on which policy issues
are at stake. Some examples of this include that Swedish citizens tend to
have fairly positive views regarding the impact of the EU membership on
issues such as the conditions for enterprises, or research and innovation,
whereas the views are much more negative regarding issues relating to
crime, immigration and national self-determination. These forms of evalu-
ations of different policy areas also tend to have a large and significant
explanatory power in statistical analyses. People who think that EU mem-
bership has had a positive impact on most policy areas are, quite naturally,
more likely to also express a higher degree of trust in the EU institutions.
Reversely, dissatisfaction with the EU’s influence in several policy areas
tends to correlate with much lower degrees of trust in the political institu-
tions of the EU (Berg & Bové, 2016; Bové, 2015).
The Citizens’ Trust in the EU Decreases Most

Where the Crises Have Been Most Salient
This chapter focuses on the vertical form of trust, that is, the trust citizens
may have (or not) for the political system. Two aspects have been high-
lighted: first a more general attitude towards the EU, as well as the atti-
tude towards one’s countries membership, and secondly trust in the EU
institutions, especially the European Parliament. The choice of these two
aspects is based on the well-known political system support model by
Easton (1965, 1975) and his argument about the importance of distin-
guishing between the different objects, or components, of political
support. The first aspect corresponds to Easton’s support for ‘the political
community’ and the second to support for ‘the political authorities’.
Whereas the former is expected to be more closely connected to diffuse,
affective emotions, the latter is expected to be more closely connected to
specific, rational attitudes.
The analyses of survey data over time and across EU member states in
this chapter show firstly that long-term political trust concerning the gen-
eral EU attitude (as well as for one’s countries EU membership) is declin-
ing. It is however a fairly slow decrease. It is, since 2010, most common
for respondents (just under 40 per cent) to have a neutral image of the
EU, in contrast to the previously most common ‘fairly positive’ image,
which is now second. The share of respondents with a ‘fairly negative’
image is around 20 per cent. There are in other words no drastic shifts
over time, not even during the height of the economic and financial crisis
and euro crises, and the negative views are not dominating.
Nonetheless, there is a much more pronounced decline in the specific
trust in the European Parliament and other EU institutions. This is espe-
cially noticeable from 2011 and onwards, when the majority of respon-
dents (45–50 per cent) in EU28 have answered that they tend not to trust
the European Parliament. Even in a country like Sweden, which has been
comparatively less affected by the crises, it is apparent that the trust in the
European Parliament decreased significantly from 2010. Regarding the
more diffuse form of political system support, the Swedish public opinion
has been in favour of the EU membership since 2001, with a dip around
2012, but a return to around 50 per cent the last three years. There is,
however, no similar bounce back in trust in the EU institutions during the
last years.
Aggregated data over time naturally subdues a lot of country variations.
A closer look at variations across the EU member states reinforces the
overall image. Regarding the issue of a general attitude of the EU, more
people tend to be positive than negative in most countries, with the excep-
tion of Greece, Cyprus and Austria. But the country variation is much
larger concerning the issue of trust in the European Parliament. Countries
where more citizens tend to trust the Parliament can usually be described
as being comparatively politically and economically stable, or contrast-
ingly, as countries where the citizens’ trust in the national political institu-
tions tends to be even lower. The trust in the European Parliament can
thus be expected to be larger if the citizens consider the Parliament as a
higher political level of an overall well-functioning political system—or
86 L. BERG
where it can be seen as the less problematic level in countries where the
national political system is seen as flawed.
Variations in attitudes across individuals can to a large extent be under-
stood in relation to the two main groups of explanations discussed in the
chapter; rationality (self-interest) and cultural factors such as identity. The
former often relates to who benefits or not from European integration,
which also connects to the issue of ‘winners’ and ‘losers’ of globalization
more broadly. Young, healthy and well-educated people living in cities are
more likely to hold positive attitudes. Territorial identifications matter
too. Especially the correlation between having a strong, excluding national
identification and a negative image of the EU (or disliking one’s country’s
membership of the EU) has increased lately.
Regarding the more specific trust in the EU institutions, there are also
other aspects that matter, such as the importance of political cues from the
national elite, and the relevance of perceptions of national and EU perfor-
mance. One noteworthy change over time concerns the influence of iden-
tification with Europe on trust for the EU institutions. While a relationship
still exists in analyses on newer survey data, it is noticeable that it is weak,
and that the ability to counterweight other attitudes and dissatisfaction is
limited. In the light of the slowly decreasing diffuse support for the EU as
a political community, this highlights the importance of Easton’s thinking.
He stated that the diffuse form of political system support could function
as a ‘reservoir of goodwill’ during shorter periods of turmoil and crises,
but that after a while this diffuse form of system support could also be
affected, which would reduce this function. A loss of this more diffuse
support is also more difficult to restore.
Can Citizens’ Trust in the EU Increase?

Despite that the citizens’ trust in the EU as a political system is decreasing,
it is important to remember that the development is not unambiguous.
There is a large variation across countries and individuals depending on
what form of trust we focus on, what objects (or components) of the total
political system support. In addition, declining trust is part of a global
trend, also affecting national communities, regimes and authorities.
Nevertheless, some aspects merit further attention. National political
parties and actors have an important role to play in order to respond to
and direct dissatisfaction in different directions. It is not unusual to see
national political actors frame an issue as ‘dictated by Brussels’ to avoid
criticism for unpopular decisions or claim national credit for popular

results of common EU decisions. In a complex multilevel governance
structure, it can be beneficial in the short term to avoid criticism in this
way, but it is a perilous strategy that can backfire, as in the case of ‘Brexit’,
and gradually contribute to erode the overall political system support. For
political decision-makers who do after all consider the EU to be overall
beneficial, it is important to not allow simplified images to dominate but
rather to trust that most citizens are both able and willing to better under-
stand how political decisions are made, and why. Honesty about the often
difficult balance between effectiveness and influence, and proper argu-
ments as to why certain decisions were made, as well as why the European
cooperation is considered beneficial, would be a more long-term sustain-
able strategy.
The question of the citizens’ trust in the EU as a political system is
about so much more than merely one organization and a few institutions.
The austerity measures imposed on countries heavily affected by the eco-
nomic and financial crisis and the euro crises have illuminated how deeply
interconnected the European economies are, and that especially in the
eurozone there are limitations for national policy decisions. This in turn
also affects the trust for the national political institutions. Trust in national
parliaments decreased dramatically during the height of the crisis, and citi-
zens have noticed that actors such as the EU, but also the IMF, put
restraints on what political decisions are possible. And the support for
democracy has also decreased.
In this chapter, it has been noted that the so-called reservoir of good-
will seems to no longer be enough to support trust in the EU in general.
The years of crises have started to erode the identification with Europe,
and the overall image of the EU, in countries such as Italy and Spain,
which used to be on top in survey studies of these issues. Recommendations
for EU in addressing these problems concern the immanent importance of
listening and understanding citizens’ concerns, knowledge and prefer-
ences. More nuanced knowledge of what issues and what solutions are
preferred by the citizens is needed, as well as information on the EU
directed to the general public and schools. We also need to better under-
stand how public opinion swings occur, who is driving these forces and
with what techniques and purpose, especially in an EU context. Some
scholars argue that people can have conflicting attitudes regarding the EU
at the same time. Others emphasize the multidimensionality aspect that it
is one thing to analyse citizens’ attitudes towards the EU as it looks today
and quite another thing to analyse whether citizens prefer the EU to
88 L. BERG
develop in a certain direction in the future. Many who are overall positive
to the EU are at the same time negative to further European integration.
They basically accept status quo, but nothing more. This is another aspect
to consider for future EU reforms. The timing is probably not right to
move forward with deepened—or widening—integration. Handling the
consequences of ‘Brexit’ as well as possible for all parties involved and
focusing on preserving the remaining EU27 will probably be an ambitious
enough agenda for the coming years.
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Is Migration Threatening Social Trust
in Europe?
Andreas Bergh
A salient challenge for Europe is to make the most of the possibilities and
to minimize the problems created by migration between countries. This
applies to both migration within the EU and migration between the EU
and other countries. According to estimates from the World Bank, slightly
more than 3 percent of the world’s population is residing in a country that
is not their country of birth. The share is expected to increase to 5 percent
over the next generation. Considering that the world’s population is
growing rapidly, these are large numbers. In a European context, the
enlargements of the EU in 2004 and 2007 meant that many citizens from
Poland have migrated to Ireland and the UK, and many from Bulgaria and
Romania have migrated to Italy and Spain. More recently, refugee migra-
tion from Syria mainly to Lebanon, Jordan and Turkey, and also to EU
member states, has put migration even higher on the agenda.
It bears noting that migration is often a highly effective way for people
to improve their own lives. Clemens (2011) famously suggested that con-
straints on migration from poor to richer countries may be the greatest
single distortion in the global economy. Hamilton and Whalley (1984)
used data from 1977 to argue that the annual gains from free labor
A. Bergh (*)
Lund University, Lund, Sweden

92 A. BERGH
mobility might significantly exceed global GNP. More recent estimates

have revised the gains from free movement of labor substantially upwards
(Docquier, Rapoport, & Salomone, 2012; Moses & Letnes, 2004). It is
also clear, however, that migration can lead to frictions and social conflicts,
possibly more so when people move to a place where complex social struc-
tures and institutions are already in place. This is especially true when
people migrate to countries with fairly generous welfare arrangements
(Storesletten, 2003).
This chapter discusses one specific challenge associated with migration:
the relationship between migration and social trust. As will be shown,
social trust is a key factor for both economic development and welfare
state sustainability. It is thus important to ask if there are reasons to assume
that migration and social trust are difficult to combine. The crucial impor-
tance of social trust comes from the fact that a society where people trust
each other will work better in several ways. Large migration flows and
ethnic diversity could potentially adversely affect social trust. Knowledge
about the association between trust and migration is especially important
considering the fact that migration flows often begin in countries with
dysfunctional social institutions such as countries with high levels of cor-
ruption and end in countries with higher institutional quality. In addition
to the example of Syria, a case in point for Europe recently is migration
from Greece, which is often triggered by discontent with high levels of
corruption (New Diaspore, 2016).
If social trust turns out to be highly fragile with respect to migration
and diversity, the policy implications are difficult and need to be discussed
thoroughly. If, on the other hand, social trust is relatively robust, migra-
tion may be one of the most efficient ways of helping those who are unfor-
tunate enough to be born in countries with inferior institutions and low
standards of living. This chapter summarizes research on the relationship
between migration and social trust. First, social trust and its consequences
are explained and discussed. Then, three ways in which social trust could
be affected by migration are described. Finally, an attempt is made to
address the question on how to strengthen social trust in contexts with
high migration flows.
What Is Social Trust?

Social (or generalized) trust is the individual attitude that most people can
be trusted. More specifically, it is the prior belief that other people will act
honestly and trustworthy in situations where they also have the option to
IS MIGRATION THREATENING SOCIAL TRUST IN EUROPE? 93
benefit themselves by not behaving trustworthy. People with high social

trust are more prone to believing that anonymous others will act honestly
and trustworthy, whereas people with lower trust are more prone to think-
ing that you cannot be too careful when dealing with other people.
The importance of trust can be analyzed in a game-theoretic setting. In
the well-known trust game (Berg, Dickhaut, & McCabe, 1995), the first
player (called the trustor) can make an investment that increases the payoff
of the second player (called the trustee). The trustee can reciprocate by
sending at least something back to the trustor. Because the investment is
multiplied when it reaches the trustee, the total payoff will be higher. The
investment would be maximized if and only if the trustor invests the full
endowment. The catch is that a selfish trustee will not reciprocate and
should thus not be trusted.
As noted by Arrow (1972), trust is a crucial element in most economic
transactions. The seller of a good or a service must trust that the buyer will
pay the price agreed upon, and the buyer must trust the seller regarding
the nature of the good or the service. When buyers and sellers are already
familiar with each other, the necessary mutual trust can more easily be
achieved. The attitude that ‘most people’ can be trusted simplifies transac-
tions also among people who do not know each other and perhaps have
never even met. It is in that specific sense that social trust is fundamentally
different from particularized trust, that is, trust in specific persons or
organizations.
The simplest and also the most common way to measure social trust is
to ask people to what extent they agree with the proposition that ‘most
people can be trusted’. The question can be asked as a yes/no question,
but respondents can also be asked to answer on a numerical scale, where
the extremes are the propositions ‘most people can be trusted’ and ‘you
can’t be too careful when dealing with other people’ (or similar state-
ments). Questions regarding ‘other people’ or ‘most people’ may seem
vague and difficult to answer. In fact, these questions are typically per-
ceived to be easy to answer, and they are also easy to translate to different
languages. Most importantly, the way an individual answers the question
about whether ‘most people’ can be trusted has been shown to correlate
with behavior in precisely the type of situations where trust theoretically
should matter, that is, so-called social dilemmas, both experimentally and
in real life (Acedo & Gomila, 2013; Sønderskov, 2011; Thöni, Tyran, &
Wengström, 2012).
Figure 1 illustrates the share of the population with high social trust in
19 European countries according to European social survey in 2014 com-
94 A. BERGH
70
60
50
40
30
20
10
2004 2014
Fig. 1 Trust in selected European countries. Source: European Social Survey

(2004) and (2014). The numbers in the figure represent the percentage of respon-
dents with high social trust
pared to 2004. Two facts are worth noting here. First, that social trust
seems to be highly stable over time. Second, that there are large differ-
ences between different countries. Among the few noteworthy changes,
we see a decrease in social trust in Ireland and small increases in Estonia
and Poland. The pattern—small changes over time, large differences
between countries—is the same in other surveys and holds also for other
time periods.
Using Eurostat’s Urban Audit, Fig. 2 illustrates social trust in 14
European cities, by summing those who fully or partly agree that most
people can be trusted. Trust is very high in Helsinki, Copenhagen and
Stockholm. The fact that Sweden’s third biggest city, Malmö, is somewhat
lower highlights the fact that there are often important differences within
countries. Istanbul and Athens are among the cities where trust is lowest
according to data from Eurostat.
As can be seen in both Figs. 1 and 2, the differences in social trust
within Europe are large. The same is true within the EU, where the differ-
ence between the highest and the lowest average trust levels are almost as
the difference between the highest and lowest levels of trust globally. The
90
80
70
60
50
40
30
20
10
2009 2015
Fig. 2 Share with high trust in selected European cities. Source: Eurostat Urban
Audit (2009) and (2015). The numbers in the figure represent the percentage of
respondents with high social trust
EU includes Denmark which is probably the country with the highest

trust level among all countries in the world, and the countries with the
lowest average trust in the EU have only slightly higher average trust levels
than Belize and Cambodia, which are both typically found at the bottom
in global surveys. Increasing migration within the EU thus means migra-
tion between countries with very different levels of social trust.
Why Is Trust Important?

It is not known for sure how people interpret the trust question about
‘other people’. One possibility is that when we answer questions about
other people, we implicitly reveal something about ourselves. There are
also indications that the social trust question is interpreted as referring to
people with whom the respondent does not identify, that is, the so-called
outgroup (Delhey, Newton, & Welzel, 2011). Bjørnskov (2010) notes
that in the long run, trust and trustworthiness cannot logically differ sys-
tematically at the macro level unless individuals fully ignore their experi-
ence with other people. The implication is that when social trust is
96 A. BERGH
constantly high, it is an indication of high average trustworthiness. That

interpretation is also supported by experimental evidence (Sapienza,
Toldra-Simats, & Zingales, 2013).
A hands-on indication that the standard social trust question captures
something important is the ‘lost wallet’ experiment. When the Reader’s
Digest Magazine lost 192 wallets in 16 cities across the world, the share of
wallets that were returned to the owner is positively correlated with the
social trust measured in surveys. In all, it is perhaps not surprising that the
share of the population that agrees that most people can be trusted on a
country level correlates with a number of desirable outcomes. Social trust
is also related to state capacity, in the sense that it is easier to initiate and
implement political projects and reforms such as social insurance institu-
tions and universal welfare when social trust is high. The combination of
trust and trustworthiness also means that systems such as these are less
likely to be exposed to fraud or misuse. Empirically, the positive correla-
tion between historical trust levels and welfare state size is strong, also
when controlling for other factors that explain welfare state size (Bergh &
Bjørnskov, 2011; Bjørnskov & Svendsen, 2013).
Trust has also been shown to be positively correlated with macroeco-
nomic stability (Sangnier, 2013), and trust plays an important part in
explaining economic reforms: trust facilitates liberalizing reforms and
makes deliberalizing them more difficult (Berggren & Bjørnskov, 2017).
For central bank independence reforms, the need for reform is greater, the
lower social trust is, and the ability to undertake reform is greater, the
higher social trust is (Berggren, Daunfeldt, & Hellström, 2016). It has
also been shown that interest rates and credit ratings are more sensitive to
inflation and growth problems in low-trust countries compared to high-
trust countries (Bergh & Bjørnskov, 2018).
Countries with higher social trust are also characterized by lower levels
of regulation (Aghion, Algan, Cahuc, & Shleifer, 2010). A plausible inter-
pretation of that finding is that trust toward people in general means a
higher trust in business owners to make decisions without interfering laws
and regulations. Perhaps most importantly, there is also a causal associa-
tion between country-level trust and economic growth (Algan & Cahuc,
2013). To summarize, social trust is a crucial factor for understanding
economic development and why some countries are able to combine high
taxes with a strong economic development.
Countries with high average social trust also tend to have high institu-
tional quality (Bjørnskov, 2007). This means that they are characterized
by rule of law, low corruption, independent courts and a relatively efficient

public bureaucracy. It is difficult, however, to establish if these associations
reflect a causality from trust to institutions, from institutions to trust or
from something else to both trust and institutions (Berggren & Jordahl,
2006). In any case, the strength of the cross-country correlation means
that countries with low average social trust are almost exclusively countries
with high levels of corruption and inferior institutions, regardless of which
way causality runs.
At the individual level, there are also benefits from having high social
trust. On average, it is beneficial to put trust in others. People with
higher trust in others are more successful economically and also rate
their health as being better (Ljunge, 2014a). Partially, this is likely to be
a psychological effect, but there is also a very real economic effect: in
many cases, beneficial economic outcomes require putting trust in oth-
ers—which is a risky decision. By abstaining from many interactions, the
low-trusting person will minimize losses and also miss many opportuni-
ties. When people on average are more likely to be trustworthy, the
trusting will in most cases be rewarded. There is a catch, however: hav-
ing too much trust in low-trust environments may result in other people
taking advantage of you. The right amount of trust thus seems to be
high, but one should be careful not to be naïve (Butler, Giuliano, &
Guiso, 2016).
Trust and Migration: Three Reasons to Worry

Why would high levels of social trust be affected by migration? There are
three ways in which migration may affect trust, that all have been sub-
jected to research, albeit to different degrees:
1. Migrants from countries with low average trust levels who move to
high-trust countries may bring lower trust to the new country,
thereby lowering the average level of social trust in the new
country;
2. Migrants from high-trust countries to low-trust countries with infe-
rior institutions may lower their trust as a result of experiences in the
new country;
3. Migration (of all kinds) may lead to higher ethnic diversity, which
may adversely impact social trust.
98 A. BERGH
Ultimately, it is an empirical question whether there indeed exists a

trade-off between trust and migration. If low average trust levels in some
countries is a result of these countries having inferior institutions, it is pos-
sible (and perhaps even plausible) that migrating to a country with better
institutions means that the individual belief about other people changes
for the better. Knowing that a functioning, non-corrupt legal system is in
place might prompt people to infer that illegal, dishonest and cheating
behavior is being punished and therefore that most people can be trusted.
The same reasoning would however apply in the reverse, that is, that
migrants from high-trust countries to countries with inferior institutions
will not bring their high-trust levels with them.
When it comes to the effect that ethnic heterogeneity has on social
trust, there are competing claims. According to the contact hypothesis,
more contacts between different groups will decrease social frictions and
promote mutual understanding. According to the conflict hypothesis, the
effect is the opposite: more contacts between groups with different nation-
alities or ethnicities strengthen the feelings of solidarity within each group
but increase distrust and competition between them. The effect of ethnic
heterogeneity on social trust has been studied intensively empirically.
Migration from Countries with Low Trust

What happens when a person migrates from a low-trust country to a high-
trust country? Theoretically, several factors are likely to be relevant. To a
certain degree, social trust is a part of a person’s personality and thus
something that is constant over different contexts. On the other hand,
trust is also likely to be influenced by experiences of other peoples’ behav-
ior, as well as by expectations about the behavior of others. In that sense,
it is rational to be not so trusting in a country where distrust is the prevail-
ing norm and more trusting in a country where trust and trustworthiness
prevail. If institutions matter, as described above, one would also expect
the same person to have higher trust in an environment with higher insti-
tutional quality.
A number of studies have examined social trust among migrants from
low-trust countries to high-trust countries, for example, by studying
migration from Turkey to Denmark. Ideally, trust would be observed both
in the country of origin and in the destination country, but such data have
not been analyzed. By comparing, for example, Turks residing in Turkey
to Turks who have migrated to Denmark, and by making the comparisons
Fig. 3 Trust among different migrant groups in Denmark compared to home

country trust and native Danes. Source: Nannestad, Tinggaard Svendsen, Thisted
Dinesen and Mannemar Sønderskov (2014) and World Values Survey.1
between people with similar characteristics, it has been shown that Turks
who have migrated to Denmark are more trusting than those who remain
in Turkey. As indicated in Fig. 3, the same pattern holds also for other
countries of origin with lower trust than Denmark.
Because trust varies with factors such as age, education and income, the
comparisons illustrated in Fig. 3 are made between Turks in Denmark and
Turks in Turkey that are as similar as possible when it comes to these indi-
vidual characteristics. Doing so minimizes the risk that differences in trust
are a result of selection bias that will exist if Turks who decide to migrate
to Denmark tend to be more highly trusting than those who stay in
Turkey. It is still possible, however, that the comparison is influenced by
selection of some personal trait that is not observed and captured by the
data. For example, it has been shown that people with higher trust tend to
have better health. That means it is possible that the higher trust among
Turks in Denmark compared to Turks in Turkey is not a result of Danish
institutions but rather a result driven by Turks with good health being
100 A. BERGH
more common among those who migrate (either in general or to

Denmark).
It is also worth noting that while trust among Turks in Denmark is
higher than among Turks in Turkey, it is still only roughly half of the trust
among Danes in Denmark. That pattern holds for all immigrant groups
studied. There are also no signs in the study by Nannestad and colleagues
(2014) that trust increases with the time spent in Denmark. Other studies
have found that social trust is inherited over generations, and especially so
from the mother’s side (Ljunge, 2014b). In all, while immigrants from
low-trust countries typically have higher trust than those who remain in
the home country, it is still not clear to what extent that is a result of
migrants being more trusting or a result of migration to countries with
better institutions.
Migration from Countries with High Trust

Several studies have analyzed trust in the context of migration from low-
trust countries to high-trust countries. Much less has been done regarding
the opposite direction of migration flows, that is, when people migrate
from a high-trust country to a low-trust country. When people migrate
from the Nordic countries, most destination countries will be countries
with lower trust and inferior institutions.
Trust among migrants from a high-trust country was first analyzed by
Dinesen (2016) using answers from a special survey conducted by the
Swedish Society, Opinion and Media (SOM) institute directed toward
Swedish expatriates in 2014. The data clearly show that Swedish expatri-
ates are a highly trusting subsample of the already highly trusting Swedish
population. Using the same survey data, Bergh and Öhrvall (2016)
showed that these differences remain when controlling for several indi-
vidual characteristics such as age, sex, education and political orientation.
Even more interesting is that one factor explains the entire difference in
trust between Swedes in Sweden and migrants from Sweden, namely self-
rated health. Swedish expatriates perceive their health to be better than
the average Swedish person, and that difference explains why trust is
higher among Swedish expatriates compared to the Swedish population.
What has happened to social trust among Swedish expatriates who have
lived a long time in countries with inferior institutions? Bergh and Öhrvall
(2016) show that the answer depends on the age at which the person
arrived in the new country. Among those who were older than 30 years
when they arrived, trust is independent of length of stay even in the most
corrupt countries. On the other hand, expatriates who were 30 or less

when they arrived to highly corrupt countries and to countries with infe-
rior rule of law are likely to adjust their trust levels downwards. This find-
ing thus confirms the hypothesis that institutions affect trust.
The finding that age at emigration matters supports the so-called
impressionable years hypothesis in psychological research (Krosnick &
Alwin, 1989). As can be seen in Fig. 4, the adjustment of social trust
seems to take place during the first ten years, and there are no signs of
further decrease. In fact, because the trust levels in this group is very high
among those who have recently arrived in their new country, the level that
appears to be stable among those who have spent ten or more years in
their new country is very close to the level of trust among Swedes in
Sweden (which has been roughly constant for several decades).
In countries where corruption is low, there is no correlation between
trust and time spent in the new country—regardless of age at arrival. In
short, the findings support the idea that institutions and experiences mat-
ter for trust, but institutions seem to be detrimental for trust only when
people are in their impressionable years. It is also worth emphasizing that
while many of the effects are statistically significant at traditional levels, the
decrease in trust is not huge. Young Swedish expatriates are initially highly
trusting (around 8 on the 0–10 scale), but those who have lived longer
than five years in the most corrupt countries have average trust, some-
where between six and seven, with no signs of a further decrease. These
results also fit well with the fact that US citizens with Swedish ancestry are
still today more likely to agree that most people can be trusted.
Migration, Ethnic Heterogeneity and Trust

In addition to how trust among migrants themselves may change as a
result of migrating to another country, increasing migration may lead to
increasing ethnic heterogeneity, which may in itself affect social trust, also
among those who were born in the destination country. The relationship
between ethnic heterogeneity and social trust has been studied intensively
by sociologists, political scientists and economists (for a recent survey, see
Dinesen & Sønderskov, 2018). Several studies in the US suggest that
states with more ethnic heterogeneity also have lower trust. Studies done
in Europe show more varying results, and a recent Swedish study indi-
cated a negative effect from ethnic heterogeneity on trust toward the local
community but not for trust toward people in general (Lundstedt &
Nissling, 2016).
102
A. BERGH
Fig. 4 The effect on trust of length of stay in countries with different degrees of perceived corruption depending on age
at arrival (cut-offs ≤30, >30). Source: Bergh and Öhrvall (2016). The graphs show trust controlling for individual charac-
teristics including self-rated health
The cross-country association between social trust and ethnic hetero-

geneity is negative, but the size of the effect is small and statistical signifi-
cance is low. In comparison, when it comes to significance, size and
robustness to controlling for other factors that matter for trust, ethnic
heterogeneity is much less important for trust than, for example, country-
level income inequality (Bjørnskov, 2008; Jordahl, 2008). There are also
studies that suggest that individuals who regularly talk with their neigh-
bors are less influenced by the racial and ethnic character of their sur-
roundings than people who lack such social interaction (Stolle, Soroka, &
Johnston, 2008).
In a detailed Danish study, Dinesen and Sønderskov (2015) identified
effects of ethnic heterogeneity on social trust levels of native Danes. They
argue that people use the local cues available to them when evaluating the
overall trustworthiness of others. One such cue is the ethnic background
of others in one’s social environment. By examining the relationship
between ethnic diversity and social trust in small geographical areas down
to a radius of 80 meters of the place of residence, they find a negative
effect of ethnic diversity in small areas, what they call micro-contexts. The
relationship becomes insignificant in more aggregate contexts and ceases
to exist in the most aggregate context they examine, which is a circle with
a radius of 2500 meters (roughly a third of the size of Manhattan).
Studies have also examined if the relationship is moderated by other
factors. For example, one might expect the trust of people with higher
education to be less sensitive to ethnic diversity. The effect of local diver-
sity, however, seems to be independent of not only education but also
length of residence in neighborhood, gender, income and unemployment
(see e.g. Putnam, 2007). It is worth noting that while the effect found by
Dinesen and Sønderskov is very robust, it is also relatively small. A one
standard deviation increase in ethnic diversity leads to a predicted reduc-
tion in trust of 0.06 points on the scale running between 0 and 10. The
size is similar to the partial effect of around one year of education.
However, the findings by Dinesen and Sønderskov have interesting impli-
cations that merit further attention, both by researchers and in the politi-
cal debate. First of all, they suggest that studies that do not find an effect
of ethnic diversity on trust may have focused on too high levels of
aggregation. Second, the results suggest that if segregation means that few
natives in high-trust countries will live in micro-contexts with high ethnic
diversity, it might mitigate adverse effects on social trust that would oth-
erwise arise.
104 A. BERGH
A Psychological Perspective on Trust

Is it surprising that social trust seems to be a sticky personal trait? One
possible answer to that question is hinted at by research in psychology.
Economists and political scientists often see trust attitude in a rational
choice context, where the decision to put trust in others can be under-
stood by thinking about the consequences of doing so: that is, if others are
expected to be trustworthy, trusting them is the rational thing to do and
will ultimately benefit the trusting person. Another possibility is that peo-
ple choose to be trusting as a way to be nice toward other people. In that
case, trust is not driven by selfish concerns but still consequentialist, in
that the trusting person expects the consequences of putting trust in
someone to be beneficial for him or her.
Recent research in psychology suggests that trust cannot be understood
by looking at the expected consequences of trust. It has been shown that
when people act trustingly, they do not do so because they expect trusting
behavior to have certain consequences (Dunning, Fetchenhauer, &
Schlösser, 2012; Schlösser, Fetchenhauer, & Dunning, 2016). They do so
because trusting acts feel right for them in the moment. It has also been
shown that people are more prone to taking risks when it involves trusting
another person compared to taking risks in general. While these results are
highly interesting, they also make it more difficult to design policies that
promote trust: if trust is best explained by feelings, there are not many
choices available for policy makers that matter.
Promoting Trust in the EU by Strengthening

the Rule of Law
Research on trust and migration is advancing rapidly and new studies con-
tinue to add a lot to our knowledge about these topics. A few results and
patterns, however, seem to be robust and appear in several studies of high
quality. For example, it is sometimes said that trust takes a life-time to
build but can be destroyed in a few seconds. When it comes to social trust,
however, this is probably not true. There are studies that identify factors
that have adverse effects on trust, but rather than destroying trust, the
effects are typically relatively small. For social trust, research rather sug-
gests that it is difficult to build, but once you have it, it is relatively robust.
It is important to keep in mind that social trust is conceptually different
from trust in specific institutions such as the political system in the EU
(see the chapter by Linda Berg in this volume). If trust in political institu-
tions spills over on trust toward people in general, it is important that the
EU system is characterized by high levels of institutional quality. The
direction of causality between different types of trust is, however, difficult
to identify. People who tend to have high trust in other people also tend
to be more trusting toward political institutions. But that does not mean
that institutional trust explains social trust, though that mechanism is
plausible. It is also plausible, however, that trust toward people in general
affects trust in political institutions. A third possibility, finally, is that both
types of trust are driven by feelings as suggested by psychological research.
If that is the case, it is probably wrong to speak of trust in one dimension
as being the cause of trust in another dimension. Instead, trust in different
dimensions are actually parts of everyone’s personality.
Turning to the issue of whether trust and migration is compatible or
not, the stickiness of trust is a mixed blessing. When people move from a
high-trust country to a low-trust country, there is no or only a small drop
in trust levels. For migration in the opposite direction, there is some but
incomplete adjustment upwards. A possible, perhaps overly optimistic
interpretation of previous research is that migration may cause a ratchet
effect for global trust levels: when people from high-trust countries move
to countries with lower trust, the migrants tend to remain highly trusting,
especially if they are older than 30 at the age of emigration. On the other
hand, the findings in Dinesen (2012) and Nannestad and colleagues
(2014) suggest that the trust among migrants from low-trust countries
will increase when they migrate to high-trust countries. These results
combined suggest the possibility of a ratchet effect such that global migra-
tion will tend to increase average trust among all countries. The ratchet
hypothesis is admittedly speculative but merits further investigation, espe-
cially by looking closer at social trust among second-generation immi-
grants in both high- and low-trust countries.
When it comes to the effect of ethnic diversity on social trust, several
studies find a negative effect. Again, the size of the effects found is not
very large and it also probably occurs only in a very local context. Finally,
it is worth stressing that two results appear to be both robust and useful
for policy implications: (i) corruption and inferior rule of law are both
detrimental for social trust and (ii) income inequality and social trust is
strongly negatively associated. These two patterns may very well be con-
nected. Countries with low corruption also tend to have lower income
inequality. As discussed by Bergh and Bjørnskov (2014), we should prob-
106 A. BERGH
ably not expect that all policies that increase redistribution also simultane-
ously increase trust. Educational reforms may have such desirable
consequences if they contribute to a more equal distribution of human
capital and thus promote a more egalitarian distribution of income before
taxes and transfers.
The current trend toward higher within-country inequality is most
likely a warning sign, especially if paired with corruption and deteriorating
institutional quality. If there are problems associated with institutional
quality and increasing inequality in Europe, there is a risk that social trust
among young Europeans will be negatively affected even though the trust
among most adults remains constant. If that is the case, the effect on social
trust will be visible only after some time has passed. By the time we see
falling trust levels in the survey data, it may be more difficult to do much
about it. Promoting trust by strengthening the rule of law in most EU
member states is perhaps not seen as the most acute challenge that Europe
is facing in relation to last years’ economic and migration crises, but it may
well be one of the most important ones.
Notes
1. Comment: Social trust refers to the share who agrees that most people can
be trusted, according to survey results presented in Nannestad et al. (2014).
The estimate regarding Danes in Denmark is an average over estimates from
different waves of the European Values Study and a number of similar sur-
veys, taken from Berggren and Bjørnskov (2011). The comparison is made
controlling for differences in age, sex, education and religiosity.
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Trust in the Euro and the EU’s Banking
Union After the Financial Crisis
Clas Wihlborg and Sarkis J. Khoury
Popular referenda have become the Achilles heel of the European integra-
tion process in the twenty-first century. Before the ‘Brexit’ vote in 2016,
French and Dutch voters voted against the EU’s proposal for a new con-
stitution in 2005. The Irish voted against the Lisbon Treaty (a watered-
down version of the constitutional proposal) in 2009, although they
supported the Treaty in a second referendum. The voters in Denmark
voted against participation in the European Monetary Union (EMU) in
2000 and the Swedish voters followed the Danish example in 2003. But
the ‘Brexit’ vote is the heaviest blow so far to the majority of the citizens’
political representatives in the UK and elsewhere in the EU, including the
European Commission, as they generally support the idea of ‘ever deeper
integration’ as envisioned by the founders of the EU. The results of these
referenda can be interpreted as lack of trust or confidence among citizens
in many EU member states that the European integration process will
deliver general benefits on the national level. This lack of confidence in the
C. Wihlborg (*)
Chapman University, Orange, CA, USA
S. J. Khoury
University of California at Riverside, Riverside, CA, USA

112 C. WIHLBORG AND S. J. KHOURY
integration process revealed itself first in Western and Northern Europe,

but after the debt crisis in the euro zone erupted in 2010, the support for
the process has diminished in Southern and, not least, Eastern Europe as
well. The wave of immigrants into Europe in 2015 and 2016 weakened
support further in the latter group of member states, in particular (see
Linda Berg’s and Andreas Bergh’s chapters in this volume).
There are many aspects to the European integration process. The focus
in this chapter lies on the harmonization of laws and regulation with
respect to banking and of the institutional framework for monetary policy.
Other aspects of financial and policy integration in the EU are discussed as
well, albeit not as thoroughly. ‘Trust’ and ‘confidence’ vis-à-vis the inte-
gration process are used interchangeably throughout the chapter. In other
words, trust within a country is interpreted as citizens’ confidence that the
integration process will deliver net benefits on the national level in some
form. Peoples’ trust or confidence in institutions cannot easily, however,
be measured on a scale. In this chapter, it is assumed that citizens’ confi-
dence in the European integration process in a particular EU policy area
increases with stronger beliefs or perceptions that the reform process con-
tributes to economic welfare and with an increasing proportion of citizens
with such perceptions. This is not to deny that political attitudes to various
EU institutions and reforms may be based on a number of non-economic
factors such as nationalism, and highly visible effects may have a dispro-
portionately strong impact on trust at the expense of more subtle effects
that cannot be directly observed. There is also a possibility that attitudes
may be skewed in favor of short-run effects at the expense of longer-term
costs and benefits. However, in the longer term, it is reasonable to assume
that perceptions are grounded in reality. Confidence in harmonization of
law, regulation and other institutions within the EU therefore requires
that most citizens of each EU member state experience economic benefits
from this harmonization.
The main question addressed in this chapter is whether a more flexible
integration process with a greater role for institutional competition among
EU member states could increase the economic benefits and/or reduce
the economic costs associated with harmonization of monetary policy and
harmonization of laws and regulation of financial institutions, with an
emphasis on banks. If so, the trust and confidence in the integration pro-
cess should also be strengthened. A more flexible integration process
implies that subgroups of member states within the EU can harmonize
institutions at different speeds and in different dimensions. In other words,
TRUST IN THE EURO AND THE EU’S BANKING UNION… 113
institutional harmonization would occur with different speeds over long

periods. The end point of harmonization need not be complete similarity,
but differences may remain reflecting preferences revealed through politi-
cal processes in the individual member states. Flexible integration implies
a ‘multi-speed Europe’ for the foreseeable future. Leading representatives
of the EU have long refused to accept this type of integration process
although it has to some extent become a reality in many areas. The EMU
and the euro zone are the most obvious examples of a degree of flexibility
in the harmonization of institutions since EU members can opt out of the
currency union.1
The chapter runs as follows. In the next section, the economic criteria
for countries to benefit from irrevocably fixed exchange rates among them
are reviewed as prerequisites for benefits from, and thereby for trust in, a
monetary union. The EU and EMU approach to the financial and debt
crisis after 2007 are discussed thereafter as evidence of lacking prerequi-
sites for several EU counties’ participation in the euro zone. One EU
response to the crises was to propose the formation of a banking union to
strengthen the economic foundations for the EMU. The following section
focuses on changes in transaction costs resulting from harmonization
imposed on all EU member states while the section thereafter discusses
harmonization over time through a process of institutional competition.
Next, the EU’s approach to banking law and regulation before the crises is
reviewed. Costs and benefits of the harmonization within the proposed
and partially implemented banking union are then discussed in the sev-
enth section. Finally, the concluding addresses reforms that may enhance
trust in both the monetary and the banking union in the EU. In particu-
lar, we discuss whether increased flexibility along with stronger institu-
tional competition has the potential to strengthen trust in the EMU and
the regulatory framework for banking. We argue that there are potential
benefits from increased flexibility but, to derive them, increased flexibility
must be combined with a degree of harmonization in specific areas to
avoid a ‘race to the bottom’ in the quality of regulation of banking.
Foundations for Trust in the European Monetary

Union
The economic benefits of monetary integration and harmonization were
conceptualized in the Delors report titled One Union, One Money, pub-
lished by the European Commission (1990). It built on the Werner
report of 1970 and elaborated on the economic arguments in favor of a

monetary union. Microeconomic benefits in the form of reduced transac-
tions and information costs, as well as reduced exchange rate risk, were
emphasized. Furthermore, the Delors report emphasized that free capital
flows make any exchange rate regime along the spectrum between irrevo-
cably fixed rates in a monetary union and freely floating rates unstable and
crisis-prone. Credibility of fixed rates would be obtained only in a mone-
tary union where exit would not be an option.
It is well known that monetary harmonization has costs as well as ben-
efits. Wyplosz (2006) points out that the potential disadvantages of a
monetary union were passed over rather lightly in the Delors report. He
takes the view that the omission of important elements of the Optimum
Currency Area (OCA) theory in the Commission’s argumentation for a
common currency ‘is the Monetary Union’s original sin’. The OCA the-
ory spells out criteria for a country’s choice of exchange rate regime. This
literature was rich already in the late 1970s (see e.g. Tower & Willett,
1976) and it was revisited frequently in the early 1990s around the time
when the Maastricht Treaty was negotiated (see e.g. Wihlborg & Willett,
1991).
The most well-known and widely accepted criterion for a currency area
is labor market flexibility in the form of either mobility within the area or
flexibility of relative real wages across industries as well as countries. A
second criterion is fiscal policy cooperation enabling transfers in case
member states are in different phases of the business cycle. The general
thrust of these criteria for fixed exchange rates between regions is that
when asymmetric shocks hit the two regions and relative cost and price
levels cannot be affected by exchange rate changes, alternative mecha-
nisms for adjustment must exist to make full employment possible. There
is general agreement that the EMU is indeed not an OCA in terms of
labor market flexibility and fiscal policy. However, several economists have
pointed out that the costs of the EMU in terms of macroeconomic adjust-
ment would be mitigated and even eliminated to the extent OCA criteria
for fixed exchange rates are endogenous. This would mean that labor
market institutions adjust to achieve the required flexibility once exchange
rates are irrevocably and credibly fixed in a monetary union (Frankel &
Rose, 1998). Similarly, fiscal policy authorities would adjust to the circum-
stances of a monetary union.
Evidence on endogenous institutional development enhancing wage
flexibility and mobility in labor markets, in particular, has been reviewed
and discussed by De Grauwe and Mongelli (2005) and Willett, Permpoon

and Wihlborg (2010). They concluded that the labor market criteria for a
currency union had not been achieved endogenously even a decade after
the formation of the EMU. The inability of Greece, Portugal, Spain and
Italy to adjust their relative cost levels within the EMU without facing
very high levels of unemployment offers a stark illustration of the macro-
economic adjustment costs associated with rigidities in labor and product
markets within a currency union. The fiscal policy criterion for an OCA
stating that fiscal transfers should be possible within a currency union has
encountered resistance within the EMU since government tax and reve-
nue policies have been recognized as national concerns. The incentives of
national governments to run fiscal deficits when interest rates converged
among members of the EMU were recognized at an early stage in the
EMU. The EU’s Growth and Stability Pact with limitations on fiscal defi-
cits (i.e. 3 percent of GDP annually) was motivated by these concerns.
Fiscal policy coordination would recognize that differences in eco-
nomic conditions require differences in fiscal stance and transfers among
different parts of a currency area. Large-scale transfers within the EU are
constrained by EU treaties except in the areas of agricultural policy and
some types of funding for structural adjustment. Lacking fiscal coordina-
tion, the limited harmonization implied by the Growth and Stability Pact
was supposed to prevent EU member states from running up deficits that
would threaten the ability of the European Central Bank (ECB) to attain
its inflation target. However, the ineffectiveness of the Pact has been
widely recognized with Germany and France violating its rules already
before the financial and debt crises.
The need for fiscal integration implied by the Growth and Stability Pact
has been widely debated. One argument is that sufficient incentives to
constrain deficit and debt creation could be created by increased interest
rates on bonds issued by EU member states lacking fiscal discipline. The
counter-argument is that the fiscal policy-making process does not respond
strongly to changes in the interest rate on national debt. The interest dif-
ferentials between euro-denominated bonds issued by different EU
governments in the euro zone were negligible or small before the global
financial crisis erupted in 2008. Even then, interest rate differentials did
not increase dramatically during the period leading up to the Greek debt
crisis in early 2010. It seems that market actors believed in the existence of
an implicit insurance of sovereign debts before 2010 in spite of a no-bail-
out clause in EU treaties.
The perceived insurance of sovereign debt risk in combination with lack

of fiscal policy coordination within the framework of a weak Growth and
Stability Pact had the consequence that EU member states with weak
mechanisms for fiscal discipline were able to run deficits and to increase
their debt to GDP ratios without having to face market penalties until the
debt crisis was a fact. Already at the time when the EMU was formed,
there was widespread skepticism about the long-term prospects of the cur-
rency union among economists, in particular, labor markets in the EU
countries were considered rigid in comparison to labor markets in the US,
and no mechanism for fiscal transfers among member states had been set
up. The Maastricht criteria for membership in the EMU were not enforced.
In particular, the criterion that the national debt to GDP ratio must not
exceed 60 percent was violated by Belgium and Italy, in particular, but
several other EU member states were very close to this ratio. Other criteria
with respect to each member country’s interest rate and inflation differen-
tial relative to an average among member states had been achieved as a
result of convergence during the 1990s. The decline in inflation rates in
several countries was achieved at a cost in terms of unemployment,
however.
The discussion so far refers to the original OCA criteria. During the
1970s, inflation became an important policy objective and one aspect of
exchange rate regime choice.2 Countries with low credibility with respect
to anti-inflation policy could avoid the costs of a prolonged effort to gain
credibility by joining the monetary union where the ECB was tasked to
monitor price stability as its only objective. The ECB was given strong
independence to prevent short-term policy preferences in euro zone mem-
bers from influencing its policies. Several members of the EMU had long
been unable to achieve such a low inflation rate with their own currencies
without sacrificing employment. For these countries in the southern parts
of euro zone, in particular, membership in the EMU implied a kind of
insurance that domestic inflationary pressures would not translate into
high inflation expectations. Thus, it would become feasible for these coun-
tries to reduce inflation rapidly without high costs in the form of
unemployment.
In spite of the high trust in the ECB’s anti-inflation policy and the low
inflation expectations across the euro zone, the danger facing individual
member states was that they would not be able to keep their general cost
levels in production from increasing at a higher rate than the average infla-
tion rate. Such increases in a country’s cost levels relative to other members
in the euro zone would lead to declining competitiveness in the form of a

real exchange rate appreciation. Wihlborg, Willett and Zhang (2010) show
that the real exchange rates of Greece, Portugal, Spain and Italy appreci-
ated almost continuously from the time they adopted the euro until 2009.
The only period of inflation convergence occurred during the years before
the EMU was formed in 1999. Thus, it seems as if the cheap route to
monetary policy credibility through EMU membership may actually have
reduced the urgency to implement structural reforms in several countries.
The current sovereign debt crisis in Greece, Portugal, Spain and Italy may
be partly blamed on the lack of institutional reform in these countries
affecting wage and price flexibility and the mobility of people between
regions and industries in spite of ten years with the euro. The relative situ-
ation for southern euro zone countries may have been worsened by suc-
cessful reforms in the northern euro zone in, for example, Germany and
the Netherlands.
Debt Crisis and Crisis Management in the EMU

Falling GDP in most EU member states during the financial crisis in 2008
and 2009, expansionary fiscal policies, bank bailouts and large current
account deficits associated with lack of competitiveness combined to make
debt to GDP ratios unsustainable in Greece to begin with, followed by
Ireland and Portugal, and then Spain and Italy. In Ireland, the enormous
costs of bank bailouts contributed to an explosive rise in the debt to GDP
ratio. Interest rates on ten-year sovereign bonds rose in 2010 to a level as
high as 15 percent for Greece, 11 percent for Ireland and 7–8 percent for
Portugal (Cabo-Valverde, Benink, Berglund, & Wihlborg, 2015). The
EU’s approach to the Greek debt crisis was initially to impose fiscal auster-
ity as a condition for bilateral loans from other EU countries to manage
short-term payment problems. These loans proved to be insufficient even
for Greece alone, but the situation worsened when the debt crisis spread
to Ireland and Portugal. Loan defaults and renegotiations of loan condi-
tions were considered unacceptable by EU decision makers, as was exit
from the monetary union.
After the spread of the crisis to Ireland and Portugal, the European
Financial Stability Mechanism (EFSM) was created but its capacity was
insufficient when Italy and Spain were drawn into the crisis. The European
Financial Stability Facility (EFSF) was agreed by the Council of the EU in
2010 and was set up with capacity to lend EUR 440 billion to crisis
c ountries. The International Monetary Fund (IMF) participated in rescue

operations as well, but national interest rates remained stubbornly high,
indicating a lack of trust in the ability to avoid debt default in one or more
of the crisis countries. By mid-2011, the interest rate on Greek ten-year
bonds remained at 15 percent while the rates for Ireland and Portugal
were 12 percent. The rate on Spanish and Italian debt was between 5 and
6 percent while the more or less risk-free German bond rate was 2
percent.
The focus of the EU’s crisis management in 2011 was still based on the
perception that the path out of the debt crisis was fiscal austerity sup-
ported by loans to avert payment problems on debt and aid to countries
where the banking system required support. EU ministers also debated
and agreed on a new fiscal pact involving increased supervision of and
control over the fiscal stance of EU member states. In 2011, the European
Stability Mechanism (ESM) was formed with the objective to strengthen
the capacity and the coordination of crisis management. In December
2011, a fiscal pact was announced wherein some budget responsibility
would be centralized to the EU level. EU countries that violated budget
agreements would be automatically penalized. But these efforts to miti-
gate the debt crisis had little impact on the interest rate levels in the south-
ern euro zone countries, indicating that market actors had little trust in
the EU’s approach to the crisis. In January 2012, the Italian ten-year bond
rate reached 7 percent.
The ECB contributed during 2011 and early 2012 to alleviate the crisis
in euro zone members by buying government bonds and accepting these
bonds as collateral for loans to banks. In March 2012, the president of the
ECB, Mario Draghi, announced that the ECB had done enough, and that
it would be up to individual governments to take responsibility for the
costs of crisis management. In May 2012, the Spanish government
announced that its banks were in need of support amounting to between
30 and 130 billion euro. The Spanish government would need aid to
avoid a banking crisis. Only when Draghi, in July 2012, made a 180-degree
turn, and stated that the ECB would do ‘whatever it takes’ to buy sover-
eign debt and save the euro zone in its current configuration, did interest
rate levels start to come down substantially.
The stress on the banking systems in the crisis countries in the euro
zone also led to calls for a banking union as an additional criterion for an
Optimum Currency Area. The common monetary policy was predicated
on the even transmission of monetary policy to different parts of the EMU,
but the transmission mechanism had been fragmented by the crises in the
banking systems of several euro zone countries. This fragmentation was
the result of the strong linkage between sovereign and banking system risk.
The high costs of bailing out distressed banks contribute to sovereign risk,
and sovereign risk weakens banks with a high proportion of domestic gov-
ernment bonds in their portfolios. The fiscal situation in many EMU
countries was too weak for the national governments to rescue weak banks
without worsening the debt crisis. The EU’s response to this situation was
to propose the formation of a banking union with strongly harmonized
regulation, centralized supervision and centralized crisis management.
Thus, monetary harmonization had spilled over into demands for harmo-
nization of the banking systems and their regulation.
An agreement with respect to the formation of a banking union was
reached in 2014. The responsibility for supervision and bank crisis man-
agement would be centralized. To reduce the potential common costs of
crisis management, the plans for the banking union included greater par-
ticipation of the private sector in the rescue and recapitalization of failing
banks. These issues are discussed in more detail below. All the reforms and
policy measures described above had the objective to strengthen trust in
the euro zone as a permanent entity that could be expanded to include
new members but not be broken up by having existing members leave.
There is little doubt that the single most effective measure to strengthen
trust in this regard was Draghi’s statement that the ECB would do what-
ever it takes to prevent a breakup of the euro zone. The benefits of the
fiscal pact and the banking union can possibly be realized only in the long
term.
Even if trust in the EMU as a permanent currency union was strength-
ened by the actions of the ECB, it is not clear that confidence in the ben-
efits of the EMU for all its members was strengthened. On the contrary,
the fundamental problems caused by rigidities in labor and product mar-
kets, and lack of convergence of cost levels remained a serious drag on the
economic recovery in the crisis countries within the euro zone. One
important lesson from the years of crisis management within the euro
zone is that the ECB can alleviate liquidity problems for countries and
banks, but it does not have the power to address fundamental issues of
solvency, which for euro zone countries involve issues of competitiveness
and productivity. Attempts by the ECB to support counties within the
euro zone with solvency problems led it to take a partially fiscal role out-
side the scope of its original mandate and, thereby, accepting risk on behalf
of taxpayers across the whole euro zone. It can be argued that these poli-
cies were necessary for the survival of the EMU in a situation when politi-
cal processes in the individual member states were unable to deal with the
underlying causes of the crisis in the southern euro zone. However, the
long-term effects on trust in the benefits of the EMU for all its members
are still uncertain since the required fundamental reforms in the crisis
countries have still not been implemented.
Harmonization, Transactions Costs and Obstacles

to Mobility
The cornerstone of the EU from an economic point of view is the Internal

Market based on the ‘four freedoms’ for goods, labor, capital and services.
Initially, the Internal Market aimed at reducing or eliminating discrimina-
tory barriers to trade. These barriers may be explicit such as tariffs or they
may be more subtle, taking the form of, for example, particularly costly
testing requirements for imported goods, delays in licensing procedures
for foreign financial institutions and domestic bias in public procurement.
Formal discriminatory barriers within the EU have been almost com-
pletely removed in the markets for goods. Capital is also generally mobile
although there are sector-specific exceptions (see below). Some backtrack-
ing has occurred, for example, by the designation of eleven industries in
France as ‘strategic’ and off limits to foreign acquisitions. Substantial bar-
riers remain in the Internal Markets relating to labor and services. An
agreement on a new Services Directive was reached in 2006 after years of
negotiations. The agreement is considered a failure by those aiming for
completely open markets within the EU while others consider it an
important step toward free trade in services like media, postal services,
water, gas, electricity, health and insurance.
It was soon discovered that differences in standards, regulation, legisla-
tion and business practices across EU countries generate barriers to trade
as well. Such barriers tend to increase the costs of trading with another EU
country relative to trading domestically. This kind of trade barrier is not
discriminatory if all economic actors are treated equally within each coun-
try. Instead, it is a source of difference in information and transactions
costs for firms and individuals between trading on a domestic and European
level. Language and cultural differences might also be sources of such bar-
riers as well. ‘Institutional harmonization’ within the EU has the objective
of reducing barriers in the form of differences in standards, regulation and
law. Common rules with respect to, for example, product liability, health
standards, financial regulation, corporate law, bankruptcy law and labor
law would clearly reduce transactions costs in intra-EU trade. The trade
creating effects of internal harmonization has made it attractive on the EU
agenda for increasing integration. However, there are potentially substan-
tial costs associated with internal harmonization if it is imposed across all
EU member states. These costs are often neglected in the debate.
Taking the case of language harmonization as an illustration, it is obvi-
ous that there are both costs and benefits from requiring all economic
transactions to be prepared and concluded in, say, French. Certainly,
working in the same language across the EU might entail great benefits,
but there would also be substantial costs for those who must learn the
common language, and who may never learn the nuances of it.
Furthermore, the agreed-upon language need not be the least cost lan-
guage to learn and use if the political process leading to the language deci-
sion is biased in favor of a specific country. Much work goes on within the
EU on harmonization of rules and regulation in the areas of environment
and health, financial services, corporate law, accounting, and so on.
Benefits of harmonization in a particular area are obvious in cross-border
transactions, but there are costs as a result of differences between
EU-mandated rules and the most efficient rules for a country, given its
legal and regulatory system, legal history, conventions and business prac-
tices. Furthermore, there is no guarantee that the political process leads to
the most efficient harmonized rule or regulation. Some EU member states
will certainly be able to enjoy benefits of institutional harmonization if an
EU directive mandates rules that are similar to these members’ old rules.
In other member states, the harmonized rules are instead likely to be asso-
ciated with substantial costs.
Sykes (2000) points out that differences in, for example, preferences
and income between national jurisdictions imply that their optimal regula-
tory policies are likely to differ as well. He also point out that optimal
regulatory policies are often unknown. The complexity of social systems
implies that in a number of areas we simply do not know how institutions
should be designed optimally. This means that costs and benefits of har-
monization across jurisdictions with different initial legal and regulatory
conditions are not easily observed or understood (see Eva Storskrubb’s
and Ester Herlin-Kernell’s chapters in this volume on harmonization in
civil and criminal law within the EU). If a number of experts would be
asked how they would want to legislate in order to develop the optimal
financial and corporate governance system, each expert would probably

come up with a different solution even if they were referring to the same
country. For example, corporate governance systems and mechanisms,
that differ substantially across the EU, are the result of a set of laws in the
areas of company law, investor and creditor protection law, financial sector
regulation and, not least, conventions that have developed over decades in
different cultural and legal environments (Schmidt & Spindler, 2002).
When costs and benefits of harmonization and approaches to harmoni-
zation in the EU and elsewhere are discussed, both differences in prefer-
ences and the complexity of social systems must be taken into account.
The case for mandatory harmonization of particular laws and regulatory
approaches seems to be based on the presumption that a ‘best practice’
can be identified and applied in all EU member states. In the financial sec-
tor capital, requirements for banks offer an interesting illustration of the
issues, since the Basel Committee has long been striving to harmonize
these requirements worldwide. The EU implements the international
agreements through EU directives. One stated objective of capital require-
ments is to create a ‘level playing field’ for banks with different home
countries. However, the risk associated with a certain type of loan differs
across countries with different competitive conditions, accounting rules,
deposit insurance schemes, bankruptcy law and corporate governance.
Unless all these aspects of the banking environment are harmonized, equal
capital requirements for similar types of loans establish a de facto ‘un-level
playing field’.
Prerequisites for Effective Institutional

Competition in the EU
Harmonization or a substantial degree of harmonization within the EU
can be achieved in many areas through other means than EU directives
that must be implemented similarly and EU regulations that apply as writ-
ten across all EU member states (see Göran von Sydow’s chapter in this
volume). While complete harmonization is one extreme, the reliance on
‘institutional competition’ among countries setting their own laws, regu-
lations and standards represents another. Institutional competition implies
that laws or regulation developed successfully in one country can be
adopted fully or partially in another country in order to improve its eco-
nomic performance. The conditions for such competition can be weak
or strong. It requires that the political process is responsive to the eco-

nomic interests of citizens. Also, the removal of discriminatory trade bar-
riers in markets for goods, services, capital and labor strengthen institutional
competition since domestic firms and individuals become exposed to com-
petition from abroad.
Free trade in goods and services is sufficient to create a degree of insti-
tutional competition with respect to law and regulation affecting supply
conditions in each country since comparative advantages in the produc-
tion of various products and services are affected by law and regulation in
each country. Regulatory differences would remain among countries to
the extent preferences with respect to regulation affecting supply condi-
tions differ. Examples of such regulation are labor safety standards and
regulation of emission of pollutants. The country with high tolerance for
pollution would obtain a comparative advantage in products generating
pollution in production. Free trade in goods and services cannot be imple-
mented without mutual recognition of regulation and other factors affect-
ing differences in supply conditions. However, free trade does not require
mutual recognition of regulation with respect to product characteristics
affecting demand. Countries would be able to implement laws and regula-
tion affecting demand conditions as they see fit. The international trade
regime under the World Trade Organization (WTO) was originally based
on the presumption that countries would remain sovereign with respect to
non-discriminatory regulation affecting both supply conditions and char-
acteristics of products and services. This trade regime, also called free
trade with ‘territoriality-based national treatment’ by Trachtman (2000),
limits institutional competition and the need for mutual recognition to
regulation and law affecting supply conditions in different countries.
In the situation described above, harmonization of regulation and law
affecting supply conditions has costs to the extent harmonizing countries
have different preferences with respect to regulation. Harmonization of
characteristics of products and services also has costs if preferences differ
with respect to the quality of products and services. If we assume that free
trade is combined with mutual recognition in quality characteristics of
products and services, then free trade would occur in all products and
services as long as they satisfy regulation and standards in at least one of
the countries practicing mutual recognition. Trachtman (2000) calls this
regime ‘rootless jurisdiction’ and he notes that mutual recognition, as well
as harmonization, in this case would be associated with a loss of sovereignty
for the countries with respect to regulation affecting product characteris-

tics. However, informed individuals would be able to choose among prod-
ucts or services from countries with different regulation with respect to
quality.
Free trade with mutual recognition in this sense would introduce insti-
tutional competition with respect to regulation affecting consumers. The
outcome of this institutional competition with respect to characteristics of
goods and services could lead to ‘race to the bottom’, ‘race to the top’ or
to differentiated regulation with exporters in different countries supplying
differentiated products and services to different consumer groups in
importing countries. The last alternative may be considered an acceptable
and even efficient outcome with respect to product characteristics for
which social values do not differ from private values. ‘Race to the bottom’
would occur under mutual recognition for quality characteristics of prod-
ucts and services, which are valued higher socially than privately. Examples
of such qualities could be cigarettes generating relatively low medical
costs, low alcohol content in wine and low transfat products. ‘Race to the
top’ would occur if the social valuation of (costly) qualities of products
and services is lower than the private valuation. For example, if the regula-
tors enforce some requirement on product safety but consumers generally
value product safety higher than the regulator, exporters in a country with
strict regulation would gain a competitive advantage. The aviation indus-
try may be an example since airlines from countries known to be strict with
respect to safety standards may gain a competitive advantage because the
private value of safety standards is likely to be very high. Below, we discuss
if banking is to be considered as being a ‘race to the top’ sector.
A comparison of costs and benefits of institutional competition with
mutual recognition relative to costs and benefits of harmonization favors
the latter when harmonization reduces transactions costs in international
trade substantially, when there are strong economies of scale in production
and when conditions exist for a ‘race to the bottom’. Institutional compe-
tition with mutual recognition is favored when preferences with respect to
regulation differ substantially, when economies of scale are relatively
unimportant, when conditions for a ‘race to the top’ exist and when there
is uncertainty about the optimal design of regulation. If private and social
preferences are similar, costs of harmonization would be relatively high
when preferences differ substantially across countries, and there is uncer-
tainty about the design of regulation.
One of the most studied cases of institutional competition is the area of

corporate law in the US where each state has its own legislation. Romano
describes how corporate law has developed and become increasingly har-
monized while remaining dynamic. She considers US states as ‘laborato-
ries’ and argues that ‘the law-making pattern we observe indicates a
dynamic process in which legal innovations originate from several sources,
creating a period of legal experimentation that tends to identify a principal
statutory formulation that is thereafter adopted by a majority of states. It
is difficult to imagine that such dynamism could be generated by the cen-
tralized lawmaking that exists at the national level’ (Romano, 2006,
p. 210). The main benefit of institutional competition in this case arises as
a result of uncertainty about the privately and socially most efficient cor-
porate law, as also noted by Sykes (2000).
Vaubel (2009) argues that an information asymmetry between govern-
ments and voters favors competition among governments, basically
because providers of public goods are more effectively controlled by insti-
tutional competition than by their poorly informed voters (Vaubel, 2009).
Similarly, Kerber (2000) argues that inter-jurisdictional competition may
be a superior way of supplying public goods and services. Kerber also
points out that only a competitive system of jurisdictions can be compati-
ble with both decentralization and mobility, and that inter-jurisdictional
competition is largely ignored within the EU in contradiction to the EU
Treaty, wherein decentralization (subsidiarity) and mobility are prominent
principles (ibid.). Both Sykes (2000) and Trachtman (2000) note that the
choice in any particular area of law and regulation is not necessarily
between complete harmonization through EU Directives that must be
implemented identically in all member states and pure institutional com-
petition with mutual recognition.
Trachtman (2000) compares three jurisdictional structures with differ-
ent degrees of institutional competition. One, denoted ‘rootless jurisdic-
tion’, is characterized by far-reaching mutual recognition. The second
jurisdictional structure is ‘territoriality-based national treatment’. As noted
above, this structure constitutes the basic rule governing international
trade outside the EU today. Within the EU, this structure describes the
allocation of jurisdictional responsibility for law and regulation in areas
wherein member states retain sovereignty. The third jurisdictional struc-
ture is called ‘managed recognition with essential harmonization’.
Trachtman notes that the EU applies this structure in many areas as a
constraint on institutional competition. ‘Essential harmonization’ should

reduce the likelihood of ‘race to the bottom’ (see below).
Costs and benefits of institutional competition relative to harmoniza-
tion of institutions must be evaluated on a case-by-case basis taking the
scope of free trade and mutual recognition into account. Free trade in
services combined with full mutual recognition of regulation of service
providers in their home country would create institutional competition
with respect to such regulation. Home country regulation of the behavior
and qualifications of the service providers would be recognized by the host
country. ‘Race to the top’ would occur in this case if the private valuation
of the qualifications of the services exceeds the social valuation. ‘Race to
the bottom’ would occur if the social valuation of these services incorpo-
rates the concern that investors must be protected against their own lack
of concern. Free trade with national treatment would imply that domestic
and foreign service providers operating in a host country are subject to
this country’s regulation. In the insurance industry, free trade in insurance
services with national treatment implies only that there is no discrimina-
tion between insurance companies in different jurisdictions while mutual
recognition would imply that insurance services accepted by authorities in
one jurisdiction can be offered in other jurisdictions. Corporate gover-
nance mechanisms are closely linked to rules and regulation within the
financial sector. Harmonization of one aspect of the complex maze of
explicit and implicit rules that define corporate governance can have very
different effects in different countries with substantial differences in legis-
lation, conventions and business practices. Corporate governance is also
an area where ‘best practice’ is almost impossible to determine. Hertig and
McCahery (2003) have suggested that institutional competition in the
EU in complex legal areas could be enhanced by the implementation
across the EU of one nonmandatory legislative solution (e.g. EU com-
pany law) that is made available in each country in competition with exist-
ing national law.
Harmonization and Institutional Competition

in Banking Before the Debt Crisis
On the face of it, banking regulation seems to satisfy many of the criteria
for effectiveness of institutional competition, which have been identified
above. First, there is little agreement on what is the most effective regula-
tory structure in banking taking into account both efficiency and
stability objectives. Second, the great differences within the EU with

respect to corporate governance, bankruptcy law and business practices
are likely to cause differences in efficient banking regulation and supervi-
sion. Third, banking is an area where regulatory capture of national regu-
lators and rent-seeking of banks can distort the regulation and supervision
in favor of national banks.3 Fourth, the financial sector in general seems
particularly suitable for institutional competition generating ‘race to the
top’ since consumers of financial services put a high value on trust in
advice and the ability of managers of their wealth to live up to
commitments.
The EU adopted early on the principle of mutual recognition in the
regulation of a wide range of financial services including banking. The EU
Banking Directive was one part of the 1992 program to create the Internal
Market with free mobility of products, services, labor and capital. The EU
Directive provided the right for any EU bank to set up branches across the
EU under a single license issued by the home country. These branches
would all be subject to home country regulation and supervision for safety
and soundness. Deposit insurance for branches would also be the respon-
sibility of the home country. There was less attention to crisis management
with the implication that the allocation of the costs of managing a crisis in
a cross-border bank became a potential source of conflict. The Banking
Directive in combination with free mobility of capital established condi-
tions for institutional competition with respect to safety and soundness
regulation and supervision in the EU for banks operating across the EU
under a single license.
In spite of the opportunity to establish branches across the EU, only a
small part of cross-border banking within the EU has taken place in branches.
Instead, most cross-border banking in the EU has developed through sub-
sidiaries under the formal jurisdiction of host country regulators and super-
visors. One reason for the preference for subsidiaries could be that subsidiary
organizations generally enjoy greater financial synergies than branch organi-
zations.4 This is particularly important if bankruptcy costs are high and the
likelihood of bailout in a crisis situation is also high. At the same time, sub-
sidiary organizations have not had a disadvantage with respect to opera-
tional synergies because they have been able to integrate operations and
functions across subsidiaries in spite of the legal separation.5 Another and
possible more important explanation for cross-border banking in subsidiary
organizations is that both home and host country supervisors objected
to large cross-border operations in branches. Host country authorities
have not accepted the idea of having large retail banks in their jurisdictions
under foreign control and home-county authorities have been uncomfort-
able with deposit insurance responsibility for depositors in foreign branches.
In other words, supervisors have not accepted the principle of mutual rec-
ognition in spite of its formulation in the EU’s Banking Directive. Although
the Directive states that banks have the right to set up cross-border branches,
they are unlikely to do so without the approval of supervisors in both home
and host countries in the EU.
The lack of acceptance of the principle of mutual recognition among
European bank supervisors weakened institutional competition in supervi-
sion and safety and soundness regulation. Supervisors were able to favor
domestic banks as ‘national champions’ without having to fear that depos-
itors would flee the domestic banks. The likelihood of bailouts in case the
domestic banks became insolvent contributed further to lack of i nstitutional
competition with respect to the quality of regulation with respect to risk-
taking. The banking system that developed during the 1990s and the first
years of the 2000s was characterized by increasing concentration on the
national level and cross-border operations in strongly integrated subsidiar-
ies that could not be separated in times of crises. For this reason, bank-
ruptcy costs for large banks became very high. The transparency of the
regulatory jurisdiction over banks’ assets in a crisis, in particular, suffered.
To make the situation worse, only few countries had established legal
frameworks for resolving banks in distress (Wihlborg, 2012). Crisis man-
agement and resolution became a complex procedure involving authori-
ties in home and host countries with conflicting interests. All these factors
strengthened the perception that many banks were both ‘too big to fail’
and ‘too complex to fail’. The only available option for managing crisis in
an important bank was to bail out the bank’s creditors by issuing guaran-
tees for their claims. Competition among banks to become particularly
skilled at risk management thus became severely undermined.
In spite of the early acceptance of mutual recognition as a principle and,
therefore, of institutional competition, the regulatory framework within
the EU failed to produce a safe and sound banking system in Europe. We
argue that the failure of mutual recognition and institutional competition
was caused by the strong implicit protection of banks’ creditors.
Misdirected private sector competition in banking had the effect of turn-
ing institutional competition into a possible ‘race to the bottom’ instead
of ‘race to the top’. Current reforms and proposals in the EU to harmo-
nize regulation and supervision can be viewed as responses to this failure
of mutual recognition.
The Development of the Banking Union

Within the EU
A high degree of explicit and implicit protection of banks’ depositors and
other creditors has the consequence that banks do not compete for fund-
ing by promoting their skills in risk evaluation and management. Depositors
and other creditors ‘undervalue’ trust in the banks when they choose
which bank to deposit and invest in. In particular, relatively large, systemi-
cally important banks seem to enjoy relatively high implicit creditor pro-
tection, providing them with a competitive advantage in terms of funding
costs. An IMF report presents estimates of the value of the implicit subsidy
relatively large banks enjoy (IMF, 2014).6 There is also an academic litera-
ture providing evidence that banks respond to explicit and implicit protec-
tion of creditors by increasing their default risk (see e.g. Prabha &
Wihlborg, 2014).
Since 2008, the European Commission has proposed a large number of
new rules to better regulate, supervise and govern the financial sector.
Most of these rules are now in force or being finalized (European
Commission, 2014). An important objective is to achieve that ‘tax payers
will not foot the bill when banks make mistakes’. Another is to ‘break the
vicious circle between banks and national finances’ in the euro zone. The
EU banking union should allow for centralized application of EU-wide
rules for banks in the euro area (and in any non-euro member states that
would want to join). Therefore, the supervision should not be prone to
protection of national interests. The new regulatory framework establishes
common rules for banks in all 28 EU member states, set out in a ‘single
rulebook’. The Capital Requirements Directive and Regulation (Memo
13/690) aims at preventing banking crises in the first place. If banks fail,
the Directive on Bank Recovery and Resolution (BRRD) (Memo 14/297)
sets up a common framework to manage the process of winding down the
banks with a minimum of systemic consequences. All EU savers are guar-
anteed that deposits up to euro 100,000 euro are protected (Directive on
Deposit Guarantee Scheme (DGS) Memo/14/296).
The banking union for the euro zone goes further and includes a Single
Supervisory Mechanism (SSM), a Single Resolution Mechanism (SRM)
and a Single Deposit Insurance. The first two pillars have been imple-
mented while the common deposit insurance system for the euro zone
remains under debate as of early 2018. As of November 2014, the ECB
became the supervisor for 120 significant banks in the euro zone, together
holding about 82 percent of the bank assets in the euro zone. The SSM
sets out the framework for supervision that should ensure that all banks
abide by the ‘single rulebook’ (Memo/13/780). Daniele Nouy, the Chair
of the Supervisory Board of the SSM, stated in 2014 that ‘the goals are to
perform supervision with a truly European view, to ensure the effective-
ness of the Supervisory Board, to foster convergence of supervisory prac-
tices and to integrate local supervisory practices to the benefit of all SSM
members’ (Nouy, 2014). A Supervisory Manual covering issues such as
‘methodology for the Supervisory Review and Evaluation Process (SREP),
off-site and on-site reviews, risk assessments, and model validations’
should ensure that ‘the same supervisory standards will be applied across
Banking Union’.
This description of the EU banking union along with the quotes from
an important Chief Supervisor shows clearly that the ambition with respect
to harmonization of regulation of banks is very high. This regulatory
framework leaves little room for institutional competition among regula-
tors and it seems intended to ensure that banks in all EU member states
follow the same rulebook enforced by the Single Supervisor. The SRM
(Memo/14/295) entered into force on 1 January 2015. It establishes a
Single Resolution Board (SRB) and a Single Resolution Fund (SRF) to
manage and fund the resolution process even for cross-border banks.
Rules for ‘bail-ins’ of bank creditors and resolution functions apply from 1
January 2016. The common deposit insurance has the objective of creat-
ing competitive neutrality between banks across the euro area. The diffi-
culty of coming to an agreement on this aspect of the banking union is
that some euro members are unwilling to provide a fiscal backstop to
banks in countries with weak banking systems and large non-performing
loans. Even if banks pay insurance premiums to build up a deposit insur-
ance fund for the whole euro zone, European taxpayers must ultimately
stand behind the deposit insurance.
There are costs and benefits of the envisioned banking union of the
EU. The main cost is likely to be associated with the common rulebook
for banks and the application of the same ‘European’ supervisory model
and methodology. It seems unlikely that the common rulebook and the
supervision can accommodate the great variety in corporate governance,
insolvency law, enforcement and business culture across EU member
states. Contracts for various types of credit differ substantially explicitly
and implicitly. Thus, identical looking contracts are likely to be associated
with very different risk levels.7 A second cost is associated with the dynam-
ics of lending and supervisory practices. Increased centralization reduces
the ability to innovate and learn. Best practices in different countries are
supposed to be incorporated in the common rulebook and supervisory
mechanism but, once practices are the same, experimentation and innova-
tion are likely to decline relative to a pluralistic system.
There are important benefits as well associated with the common super-
visory mechanism. In particular, the ‘regulatory capture’ of each national
regulator by the major banks in its jurisdiction is bound to decline or be
eliminated. There is little doubt that such regulatory capture is an impor-
tant problem that weakens supervision of risk-taking and strengthens the
tendency of national regulators and governments to bail out ‘national
champions’. Over time, the regulatory capture could move up to the
EMU level instead so that the largest banks in the euro zone, rather than
the largest national banks, would have the strongest leverage in their deal-
ings with the supervisor. It is hard to predict the speed of the consolida-
tion process in the banking sector in the euro zone, which is likely to occur
when there are incentives to create ‘too big to fail’ banks with great politi-
cal clout within the EU banking union.
The implementation of the SRM is the most important piece in the
banking union. If it becomes sufficiently strong and eliminates ‘too big to
fail’ banks and other sources of implicit protection of banks’ creditors, the
banking industry is most likely in for enormous adjustment and restruc-
turing under stronger market discipline. Banks will restructure based on
true economies of scale and scope and not based on implicit subsidies. It
will also reduce the need for detailed supervision of risk-taking and,
thereby, reduce the regulatory burden that is likely to accompany the
common rulebook. The SRM took effect in January 2016. It incorporates
bail-in rules that expose banks’ non-insured creditors to losses of failing
banks. Banks’ bondholders must take losses in the form of ‘haircuts’ before
authorities can add capital from other sources. Since the prospect of losses
for creditors can be a source of runs on a bank and contagion to other
banks, the SRM includes measures to mitigate potential contagion effects
of bank failures. Experiences with bail-ins under the resolution procedures
are still lacking. We may have to wait and see an important European bank
resolved by a resolution board before the effectiveness of the procedures
can be fully evaluated. There is some evidence that the costs of debt for
UK banks increased after the Special Resolution Regime was implemented
in 2009 (Brierley, 2016). The largest Danish bank, Danske Bank, com-
plained that their costs of funding increased after Denmark’s implementation
of bank resolution procedures in 2010.8 Furthermore, ratings agencies
like Fitch have started to take into account reduced likelihood of state sup-
port in their government support ratings.
There are still doubts that market discipline on large and complex inter-
national banks has increased to such an extent that their funding cost advan-
tage has declined. One reason is that the systemic risk exception from
placing a bank under a resolution board can be attractive for politically
sensitive authorities (European Shadow Financial Regulatory Committee,
2014). Another reason is that the large complex banks often operate with
subsidiaries in several countries. There is uncertainty about contractual rec-
ognition of cross-border claims in resolution proceedings and conflicts
between countries may arise with respect to burden sharing. The Italian
authorities’ approach to the crisis in the Banco Monte del Paschi in 2016 has
also undermined the confidence in the SRM. The government managed to
protect a large share of the bank’s bondholders through a recapitalization
scheme in spite of the EU’s prohibition of state support (European Shadow
Financial Regulatory Committee, 2017). This case illustrates the difficulty
of imposing a harmonized set of rules for dealing with problem banks in
countries with very different levels of non-performing loans and very differ-
ent traditions with respect to relations between banks and their customers.
One potential area of tension within the EU banking union arises as a
result of national responsibility for fiscal affairs and supranational respon-
sibility for supervision and crisis management. As noted above, European
taxpayers are ultimately the stakeholders in efficient supervision. Thus,
incentives of supervisors and crisis managers should be aligned with inter-
ests of these taxpayers. There is no European fiscal authority, however. A
resolution authority requires access to fiscal resources as a source of fund-
ing and is ultimately accountable to taxpayers. Thus, a far-reaching bank-
ing union is inconsistent with national responsibility for fiscal policy unless
the losses of failing banks can be shifted to their creditors. The buildup of
resolution and deposit insurance funds should reduce the reliance on
national taxpayers, but the ultimate responsibility for funding must lie
with them. If the fiscal burden associated with resolution of banks can be
allocated among EU member states, then the banking union has the
advantage of having very large fiscal resources behind it. This would also
contribute to the credibility of delinking banking risk and sovereign risk
within the euro zone.
We conclude this section by noting that confidence that the banking
union will achieve its objectives of breaking the link between sovereign
risk and bank risk, reducing the fragmentation of the monetary transmission
mechanism, within the euro zone, as well as in the regulatory framework

for the EU as a whole, requires confidence in all three pillars of the frame-
work: (i) effective supervision, (ii) bank crisis management and (iii) com-
mon deposit insurance. There is little doubt that the expanded role of the
ECB in both supervision and crisis management has contributed to
increased confidence in the banking union and the viability of the euro
zone as a currency area. This expanded role that includes fiscal responsibil-
ity may turn out to be controversial since the ECB is a purely technocratic
institution without democratic accountability. The common deposit insur-
ance cannot be implemented without agreement of the allocation of fiscal
costs of bank failures. Several EU countries are unwilling to take on the
fiscal burden associated with a common fiscal backstop in the EU to deal
with banking crises. The key pillar is the bank resolution mechanism that,
if credible, will strengthen market discipline on banks’ risk-taking, and
reduce the need for both stronger supervision and the fiscal burden of
bank failures. Confidence that the resolution mechanism will be strong
enough to come to grips with the ‘too big to fail’ problem is still lacking.
Institutional competition has potential advantages in banking as well as
other financial services, but the strong protection of banks’ creditors has
created conditions for ‘race to the bottom’. It has taken a harmonized
approach to banking regulation after several years of crisis in the euro zone
to generate momentum toward reform of bank resolution mechanisms
with the objective of reducing the implicit protection of banks’ creditors.
Thus, it has taken a harmonized approach to generate reforms that, if suc-
cessful, may eliminate ‘race to the bottom’ and, thereby, generate favor-
able conditions for institutional competition.
Can Trust in Monetary and Banking Unions

Be Strengthened with Greater Flexibility
in Harmonization?
Six years after the beginning of the so-called debt crisis in the southern
parts of the EMU, confidence in the long-term survival of the euro zone
in its current configuration is still lacking. The ECB’s actions have no
doubt strengthened confidence in the ability of Greece and the other crisis
countries to remain within the currency union. At the same time, these
countries would benefit from abandoning the euro if they do not imple-
ment fundamental labor and product market reforms, as well as other
reforms that could strengthen these countries’ ability to adjust to eco-

nomic shocks. The political systems in these countries seem to prevent
necessary reforms, however. As a result, they suffer the costs of remaining
within the euro zone in terms of low growth rates and high unemploy-
ment levels.
Flexibility of monetary harmonization, which would allow countries to
switch exchange rate systems according to circumstances, is contradictory
to the idea of the EMU as an irrevocable currency regime. The question is
whether a one-time reconfiguration of the euro zone would damage the
long-term credibility of the euro zone as a permanent currency union for
the remaining members and future additions. It can be argued that a cur-
rency union wherein all members truly satisfy the criteria for irrevocably
fixed exchange rates and benefit from adopting the common currency
could gain more trust. At the time the EMU was formed, the ambition
within the EU was to maximize the number of members that would adopt
the euro. There was little regard for the longer-term ability of each coun-
try to satisfy the well-accepted criteria for an irrevocably fixed exchange
rate. Alternatively, it was believed that each country, once a member of the
EMU, would implement the necessary institutional reforms that would
make them thrive within the currency union. However, the rigidities of
the political processes in several countries were underestimated.
The EU has over time recognized that flexibility is needed in the pro-
cess of monetary harmonization. EU member states that do not consider
adopting the euro are able to keep their own currencies and central banks
without penalty. Sweden and Denmark are cases in point here. At the same
time, several countries have been denied EMU membership or their mem-
berships have been delayed on the grounds that they do not satisfy the
Maastricht criteria. The case of Lithuania, which was denied membership
in 2006, is a case in point. Membership can also be denied on the grounds
that EU member states do not have mechanisms and institutions in place
to sustain competitiveness within the EMU. Thus, in the monetary policy
sphere, there is, de facto, multi-speed integration although the flexibility
of the integration process is one-directional.
The creation of the EU banking union for the euro zone, if fully imple-
mented, may strengthen the trust in the euro since it would shift the fiscal
burden of banking crises from individual countries to taxpayers across the
whole euro zone. Several EMU members are unwilling to accept this bur-
den sharing, which weakens trust in both the euro and the banking union.
If the bank resolution procedures, that allocate some of the burden of

bank failures to banks’ creditors, become credible for large as well as small
banks, the fiscal burden of bank failures would be reduced. Thus, the cred-
ibility of bank resolution procedures are most likely critical for member
countries to accept fiscal burden sharing and, therefore, critical for trust in
the banking union as well as the euro zone.
Perhaps ironically, the credibility of the bank resolution procedures,
with substantial participation of banks’ creditors in losses of both small
and large banks, would reduce or even eliminate the need for fiscal bur-
den sharing, and harmonized regulation and supervision. Instead, insti-
tutional competition could enhance the efficiency of the banking sector
as well as of regulation and supervision because ‘race to the top’ would
be possible with credible resolution procedures. A prerequisite is that
the resolution procedures are sufficiently harmonized for mutual rec-
ognition to be a reality.9 The benefits of institutional competition could
then outweigh any benefits from harmonized practices of financial reg-
ulators and supervisors. The benefits of harmonized rules are primarily
derived from reduced transactions costs in cross-border activity while
costs may arise as a result of differences between the ‘best practice’ in
the institutional environment of a country and the practice required by
the EU. These costs can be avoided with flexible integration and insti-
tutional competition. Another longer-term benefit of institutional
competition is that it provides incentives for a search for ‘best prac-
tices’. Such a search is hindered by standardized and relatively static
regulation and law. On the other hand, the benefits of institutional
competition cannot be obtained unless conditions for ‘race to the top’
are satisfied.
We conclude with a note on ‘Brexit’. In spite of the costs and complica-
tions that ‘Brexit’ entail, there is a potential benefit for the financial sector
if the EU and the UK can agree on conditions that will strengthen institu-
tional competition for financial regulation. This requires that financial ser-
vices firms in the two jurisdictions will be able to supply services in both
the EU and the UK with a single license as many firms do now. As long as
the UK is a member of the EU, the single license requires far-reaching
harmonization in financial regulation. Institutional competition could
therefore potentially be strengthened post-Brexit if mutual recognition of
financial regulation between the EU and the UK can be achieved with less
stringent requirements for harmonization.
Notes
1. As of January 2018, the euro zone consists of Austria, Belgium, Cyprus,
Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and
Spain. Other EU member states (except for Denmark and the UK) are for-
mally obliged to join once they meet the criteria but, de facto, no EU mem-
ber state can be forced to adopt the euro. Andorra, Monaco, San Marino
and the Vatican have formal agreements with the EU to use the euro as their
official currency and issue their own coins. Kosovo and Montenegro have
adopted the euro unilaterally, but these countries do not officially form part
of the euro zone and do not have representation in the ECB.
2. The theory of monetary policy began to incorporate the game theoretic
concepts of time-inconsistency, monetary policy rules and credibility (see
e.g. Kydland & Prescott, 1977; Barro & Gordon, 1983).
3. Sykes (2000) noted that institutional competition among regulators can
reduce the scope for regulatory capture. Barth et al. (2012) provide evi-
dence from the 2007–2009 financial crisis, supporting the view that regula-
tory capture is an important problem in the banking sector.
4. Luciano and Wihlborg (2018) show that a subsidiary organization can
economize on bankruptcy costs since individual subsidiaries are able to enter
bankruptcy.
5. Sweeney, Goldberg and Wihlborg (2007) analyze the case of the pan-Nor-
dic bank Nordea. This bank is the result of the merger of four major banks
in four Nordic countries. It operated subsidiaries in the four countries while
having the strategic objective of integrating functions across the subsidiaries
strongly. In 2004, the bank developed plans to reorganize as a branch orga-
nization, but the plan fell through as a result of objections from supervisors
as well as for internal reasons. The plan was recently revived in 2017 with
plans to create a bank with Finland as home country.
6. The IMF Global Financial Stability Report estimates that the funding subsi-
dies for large banks in 2013 amounted to 15 basis points in the US, 20–60
basis points in Japan and the UK, and 60–90 basis points in the euro zone
(IMF, 2014).
7. The great differences in non-performing loans in member states’ banking
systems are indicators of the differences in law and regulation that affect the
credit risks banks are facing (European Shadow Financial Regulatory
Committee, 2017).
8. For example, on 20 February 2012, the spread on interbank loans to the
Danske Bank relative to Euribor was 7.05 basis points according to Wihlborg
(2012).
9. The Bank Recovery and Resolution Directive (BRRD) for all EU members
specifies requirements for procedures for closing and resolving insolvent
banks at the national level. These procedures took effect on 1 January 2016.
But their credibility has the same weakness as the SRM for the euro zone
(Wihlborg, 2017).
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The Question of Trust in EU Criminal Law
Cooperation: A Constitutional Perspective
Ester Herlin-Karnell
The European Union is currently facing a number of crises: from the

migration and euro crises to the increased threat of terrorism throughout
Europe and the political uncertainty regarding the impact of ‘Brexit’.
According to the Lisbon Treaty, the EU is bound to establish an area of
freedom, security and justice for the citizens of Europe. The question is
what this promise actually entails? Is the EU really able to ensure the free-
dom of movement and guarantee that human rights are not violated at the
same time as the EU sets out to combat organised crime and security
threats such as terrorism? The concept of ‘freedom’ within the scope of
this policy area undoubtedly brings this issue to a head. Due to the pass-
port free zone in Europe (Schengen), the objectives regarding, on the one
hand, the freedom of movement and, on the other hand, the fight against
crime and terrorism are sometimes in conflict. In other words, the safety
and security of one person may entail less freedom for another.
The area of freedom, security and justice has developed into one of the
most dynamic legal and policy areas of the EU in recent times. Due to the
tough political climate in the EU in the wake of the crises of recent years,
E. Herlin-Karnell (*)
The VU University Amsterdam, Amsterdam, Netherlands

140 E. HERLIN-KARNELL
one of the core principles of EU free movement based on mutual recogni-

tion and thereby trust in other EU member states’ judicial systems, that is,
that the member states accept judgments and decisions made in other
member states, has come under serious strain. The idea of mutual trust can
be regarded as an expression of the principle of subsidiary in the EU, that
is, that national laws and rules are maintained and that legislation is cre-
ated at the lowest possible level in the EU without reducing effectiveness
(Weatherill, 2016). In this light, it is self-evident that trust between the
EU member states is of decisive importance in this area, but it has none-
theless proved difficult to achieve within judicial cooperation since national
judicial systems are so firmly based in well-established theories on the
rights and obligations of the state and the individual.
It should, however, be stressed that since the Lisbon Treaty came into
effect in 2009, judicial cooperation in criminal matters has come closer to
other areas of cooperation in the EU and principles established by the
Court of Justice of the European Union (CJEU) such as that of direct
effect of EU directives and of precedence of EU law over national law.
Since criminal law has been one of the policy areas most closely linked to
national sovereignty in the member states and since the EU has not been
regarded as having a mature system of legal safeguards, this has often con-
stituted an obstacle to the emergence of trust among national authorities
of different EU member states. For example, the European Arrest Warrant
(EAW) (OJEC, 2002) was often mentioned in terms of an unacceptable
EU initiative during the British debate in the run up to the ‘Brexit’ refer-
endum. The ‘no side’ claimed, for instance, that British citizens could not
be guaranteed a fair trial in other member states.
The aim of this chapter is to explain what is meant by judicial coopera-
tion in criminal matters in the EU and in particular to highlight the impor-
tance of trust in the case law of the CJEU (the importance of trust in
judicial cooperation in civil matters is analysed in Eva Storskrubb’s chapter
in this volume). The terms ‘trust’ and ‘mutual recognition’ must, however,
be understood in their specific contexts, which is why this chapter begins
with an explanation of what we as legal scholars have in mind when we use
these terms here and why the issue of trust is both important and difficult
to interpret (trust in political institutions and trust between people is dis-
cussed in Linda Berg’s and Andreas Bergh’s chapters in this volume). In
addition, the chapter discusses the constitutional principles that EU law is
based on and that are of crucial importance for judicial cooperation in
THE QUESTION OF TRUST IN EU CRIMINAL LAW COOPERATION… 141
criminal matters within the EU as well as for the area of freedom, security
and justice. This is in turn followed by a discussion on proportionality, soli-
darity and trust since they hold important functions for the c reation of this
law and policy area. The chapter does not only include an analysis of crimi-
nal law, it also takes examples from asylum and migration law. Finally, there
are recommendations for action to be taken by the EU in, for example,
describing the potential for using the principle of proportionality in the
EU as a constitutional ‘right’ when mutual recognition fails. This is impor-
tant not least because Europol and Eurojust (the EU bodies for police and
prosecutor cooperation) have decision-making functions all whilst lacking
clear guidelines for how individuals can appeal decisions.
EU Judicial Cooperation in Criminal Matters

and the Emergence of the Area of Freedom, Security
and Justice
The EU area of freedom, security and justice is a relatively new legal and
policy area even if judicial cooperation has taken different forms in the EU
since the Maastricht Treaty came into effect in 1993 (within the frame-
work of the third—intergovernmental—pillar for Justice and Home Affairs
(JHA)1 as it was known at the time). It was, however, only with the entry
into force of the Lisbon Treaty that the idea of creating an area of free-
dom, security and justice, and extending cooperation in criminal law,
became a central issue for the EU. At the same time, the UK and Denmark
were quick to set limits to how far the EU could be allowed to impact
national law in this area. Denmark, for example, chose not to be included
in the cooperation at all, while the UK managed before the ‘Brexit’ refer-
endum to negotiate an opt-out where the UK itself could decide when
and how much it wished to participate in EU cooperation in the area of
criminal law and migration-related issues.
The reason why security issues have become core issues in Europe is
due to the threats and risks linked to terrorism, cross-border organised
crime and the freedom of movement within the EU. 9/11 in 2001 in
particular contributed to the rapid development of judicial cooperation in
criminal matters within the EU. One of the first EU legal acts adopted in
this new wave of judicial cooperation in criminal matters was the EU
Framework Decision on the EAW (OJEC, 2002). In practice, with this
Framework Decision, the right of decision-making regarding these issues
was transferred from the politicians to the courts. The EAW did away with
the requirement of double criminality (i.e. that an action must be an
offence in both countries in question for it to constitute a crime) for 32
named offences. The EAW also introduced the principle of mutual recog-
nition for prosecutions based on the concept of ‘trust’ between EU mem-
ber states. However, for a long time the problem with this was the lack of
fundamental common understanding, due to the fact that the member
states have comparatively different legislation covering the area in ques-
tion. It is perhaps self-evident that the mutual recognition of legal deci-
sions in EU member states requires a certain amount of trust between the
law enforcement agencies. Yet, this has been rather difficult to achieve in
such a sensitive area as criminal law (see e.g. European Commission,
2014a).
Dependence on trust in ‘ordinary’ EU law is, on the other hand, far
from new. After all, it was the classic ruling in the Cassis de Dijon case
(Case C-120/78), which introduced the principle of mutual recognition
into EU law, initially for the free movement of goods, to be later on
extended to other areas of freedom of movement. The principle implies
that when goods produced in one EU member state are released in the
Internal Market, they shall be allowed to circulate freely without cross-
border obstacles. The gist of it is that national provisions that limit this
freedom can only be maintained if proven to be absolutely necessary for
overriding reasons of general interest. Thus ‘trust’ became a key concept
in European integration law. In consequence, it is reasonable to presume
that the CJEU’s focus on trust in the framework of EU criminal law is to
a large extent affected by fundamental EU judge-made principles that
regulate the Internal Market.
• Example: imagine that member state A suspects that person X, a citi-

zen of another member state, has committed a crime in member
state A. This state issues an EAW to member state B where X is now
located. Previously, state B was obliged to extradite X only if the act
for which X was prosecuted in state A constituted a crime also in
state B. This principle of double criminality, one of the sacred prin-
ciples of international criminal law, has however been abolished with
the EAW and state B is instead requested to extradite X to state A
without looking into whether the deed X is suspected of having com-
mitted qualifies as a crime in its domestic legal system.
All EU citizens have the right to freedom, security and justice. Relevant
provisions can be found in Article 3(2) in the Treaty on the European
Union (TEU) that establishes that:
The Union shall offer its citizens an area of freedom, security and justice
without internal frontiers, in which the free movement of persons is
ensured in conjunction with appropriate measures with respect to external
border controls, asylum, immigration and the prevention and combating
of crime.
Article 4 in the Treaty on the Functioning of the European Union

(TFEU) confirms this by expressly recognising the EU’s competence in
this area and by clarifying that in order to achieve this aim, the EU shall
share decision-making competence in this area with the member states. As
regards the area of freedom, security and justice, Article 67 TFEU stipu-
lates EU competence as follows:
The Union shall endeavour to ensure a high level of security through mea-
sures to prevent and combat crime, racism and xenophobia, and through
measures for coordination and cooperation between police and judicial
authorities and other competent authorities, as well as through the mutual
recognition of judgments in criminal matters and, if necessary, through the
approximation of criminal laws.
Democratic support is vital as regards the issue of trust in this legal

and policy area since it touches upon public law, migration policy,
human rights in judicial cooperation in criminal matters as well as the
fight against terrorism and organised crime. Schengen cooperation is
under extreme pressure and the migration crisis still constitutes one of
the biggest challenges that the EU has ever faced. This leads us to ask
the fundamental question: what is the actual point of extending judicial
cooperation in criminal matters within the EU? Is it about safeguard-
ing security for EU citizens or is it also something above and beyond
that? In order to understand why and how EU competence is being
broadened to cover basically all traditionally national areas of compe-
tence, you have to take a step back and study the constitutional regula-
tions that govern EU law and how the policy areas of the EU are
integrated.
Constitutional Principles in the EU’s Area

of Freedom, Security and Justice
The question of trust in the area of criminal law and in EU law in general
is primarily an issue about the trust that exists between national authori-
ties, and between them and the EU institutions. Mutual recognition and
trust are strongly linked as the EU has few means of its own to monitor
the application of EU law in the member states, apart from, for example,
the possibility for the European Commission to fine the member states
that violate EU rules and regulations (see also Göran von Sydow’s chapter
in this volume). Thus the EU is ultimately dependent on its member states
fully respecting EU law and trusting each other in this regard. The prin-
ciple of mutual recognition emanates from the Internal Market and the
regulation primarily of goods and the freedom of movement for persons
(see also Clas Wihborg’s chapter on the EU’s banking union in this vol-
ume). The principle of mutual recognition entails, for example, that all
goods that are legally marketed in one member state can be marketed in
another, even if they do not fulfil all the technical provisions in that coun-
try—apart from under strictly defined circumstances. The difficulty has
been transferring this economic logic to criminal law and security-related
issues where human rights are often at stake.
Let me explain this problem by using examples of certain important
constitutional principles that represent the core of EU cooperation in this
field. If the EU is to have its own criminal law structure, a prerequisite is
that it has a developed legal system that guarantees human rights and con-
stitutional principles on legality and the rule of law. In EU law, the rule of
law is an overarching principle which captures both legality in a strict sense
and the due process of law. It is expressed as a constitutional principle in
the EU and is also recognised in Article 2 of the TEU. Accordingly, the
Union shall be
founded on the values of respect for human dignity, freedom, democracy,

equality, the rule of law and respect for human rights, including the rights of
persons belonging to minorities. These values are common to the Member
States in a society in which pluralism, non-discrimination, tolerance, justice,
solidarity and equality between women and men prevail.
Central to the rule of law is naturally the idea of the legislator being
limited by law so that it does not act beyond its powers. Legal certainty is
moreover of decisive importance, bearing in mind the public law nature of
the area of freedom, security and justice. Thus, the rule of law is funda-
mental in this context. However, it was not until the 1980s that the ECJ
explained in the familiar case Les Verts (Case C-294/83 Les Verts) that the
rule of law was a constitutional principle for the EU. In the much dis-
cussed Kadi case (Case C-414/05 P Kadi), about the right to judicial
review in the context of emergency legislation, the EU had frozen finan-
cial assets of suspected terrorists (and thereby implemented UN measures
regulating the area). The ECJ did not touch upon whether international
law took precedence over conflicting EU law on the right to judicial review
but instead established that the EU has its own legal system and referred
to ‘constitutional principles’ in the EU, including the right to a fair trial.
In short, the rule of law includes the principles on legality, predictability
and clarity. In other words, it must be possible for an individual to know
which laws and provisions apply to him or her.
Taking the rule of law and the principle of legality into consideration is
a necessary condition for the area of freedom, security and justice. Naturally,
the principle of legality constitutes the basis for whether the EU has legisla-
tive competence in a certain policy area (Articles 4 and 5 TEU, and 7
TFEU), which is also in line with the principle of conferral. The challenge
is to strike a balance between the different parameters for freedom, security
and justice all whilst upholding the rule of law. However, the question is to
what extent the concept of justice, which in itself is difficult to define, is a
constitutional EU axiom as such or rather, an objective for the EU (judg-
ing by Article 67 TEU it would seem to be an objective).
The European Commission (2014b) published a policy document on
the rule of law in 2014 and this document concludes that this principle is
the mainstay of every democracy and the entire workings of the EU. The
Commission points out that if the member states’ mechanisms for safe-
guarding the rule of law fail, this may jeopardise also the EU as a legal
system. This is because the EU needs to protect this principle as a com-
mon value for the Union. It can be said that the rule of law encompasses
a broader understanding of the concept of ‘justice’ or ‘fairness’ and is thus
the fundamental constitutional principle that other EU principles are
based on. Hence, the rule of law can be regarded as the foundation on
which the area of freedom, security and justice must be built.
As noted above, mutual recognition as a form of integration has devel-
oped chiefly through the case law of the CJEU. The reason for this
development lies in the fact that the EU has often lacked legislative com-
petence when the member states have not meant for the EU to have
legislative powers and have therefore preferred this ‘milder’ form of coop-
eration in criminal law. However, at the same time, the absence of a clear
definition for how the area of freedom, security and justice should be
constructed is a challenge for the prevalence of trust in Europe and what
can perhaps be called the constitutional system of the EU that shall guar-
antee human rights. The question is all the more urgent since the EU, as
is well known, has as yet not signed the European Convention on Human
Rights (ECHR) and Fundamental Freedoms due to the Opinion of the
Court in 2/13 (see Joakim Nergelius’ chapter in this volume). The Court
implied that if every individual EU member state were, for example, to
check whether an EAW also fulfilled the requirements in the ECHR that
would have a negative impact on the effectiveness of (and thus trust in)
EU law and its application in the member states (Herlin-Karnell, 2013).
The Lack of a Common Yardstick Undermines Trust

in Judicial Cooperation in Criminal Matters
in the EU
The function of trust is notably the assumption that EU member states

trust each other sufficiently not to require further legal guarantees or
checks to execute their commitments within the framework of judicial
cooperation in criminal matters. As mentioned above, the EAW is perhaps
the most well-known example of mutual recognition within the EU in a
criminal law context. The EAW system is based on the principle of mutual
recognition. This is in turn based on the mutual trust that exists between
member states as regards the ability of the national legal orders to ensure
an equal and effective protection of the fundamental rights that are recog-
nised in EU law and in particular in the Charter of Fundamental Rights of
the European Union. The ECJ has pointed this out on numerous occa-
sions, most recently in Aranyosi and Căldăraru (Case C-404/15
C-659/15 PPU):
Both the principle of mutual trust between the Member States and the prin-
ciple of mutual recognition are, in EU law, of fundamental importance given
that they allow an area without internal borders to be created and main-
tained. More specifically, the principle of mutual trust requires, particularly
with regard to the area of freedom, security and justice, each of those States,
save in exceptional circumstances, to consider all the other Member States
to be complying with EU law and particularly with the fundamental rights

recognised by EU law.
However, as the Advocate General of the ECJ, Paolo Mengozzi

expresses in the Da Silva Jorge ruling (Case C-42/11 Da Silva Jorge):
the principle of mutual recognition which lies at the heart of the mechanism
behind the European Arrest Warrant cannot conceivably be applied in the
same way as it is in the case of the recognition of a university qualification or
a driving licence issued by another Member State. […] The principle of
mutual recognition, more specifically where it is applied in relation to a
European Arrest Warrant issued for the purposes of executing a sentence, as
it is in the main proceedings, cannot be applied automatically but must, on
the contrary, be viewed in the light of the personal and human context of
the individual situation underlying each request for the execution of that
warrant.
As has already been emphasised, criminal law has traditionally consti-

tuted a national issue. In the EU, it has therefore for a long time been
managed within the framework of intergovernmental cooperation.
Criminal law made a first appearance in the EU when the Maastricht
Treaty came into effect in 1993. However, the design of the so-called
third pillar that encompassed JHA was criticised by the European
Parliament at an early stage for a lack of democratic control as well as the
very limited possibility for the ECJ to issue preliminary rulings. Thus,
several changes to the system were required, not least since proposed EU
legal acts rarely led to concrete results.
Why are trust and mutual recognition sometimes considered a problem
in this context? Naturally, there are several reasons for this. EU member
states have a great deal in common but there are also many differences. It
comes as no surprise that the principle of mutual recognition, irrespective
of the fact that it is inherently hard to define, has been popular among EU
political leaders, since it has been regarded as an effective way to maintain
national legislation despite increased European integration. The principle
of mutual recognition, where trust is a prerequisite, has long been preva-
lent within the Internal Market with the free movement of goods, services,
capital and people (Peers, 2015). It has gradually been broadened to also
apply to the EU’s judicial cooperation in criminal matters. The presumption
of trust has constituted a way to broaden the competence of the EU when
the EU has not had legislative power. The reason is simple: before the
Lisbon Treaty came into effect, the EU had very limited competence to
adopt legislation in the area of JHA. Therefore, it was the ECJ that intro-
duced the concept of ‘mutual trust’ in its case law (Mitsilegas, 2009).
It should be stressed that this concept has fulfilled an important func-
tion also in the area of civil law, as probably in all areas of EU law (see Eva
Storskrubb’s chapter in this volume). In the CJEU, there has often been a
presumption of trust and the view that trust must take precedence over
contradictory considerations. It is therefore possible to say that the pre-
sumption of trust in this area has constituted a quasi-constitutional stan-
dard with the purpose of justifying EU measures. The problem is that it
remains unclear how to measure and determine trust objectively. The con-
cept of trust has thus always been fairly vague (Jansson, 2013). This lack
of conceptual clarity has been regarded as an important deficiency in the
EU’s judicial cooperation in the area of criminal law.
What about the legitimacy of the issue of trust? How was it possible to
broaden the competence of the EU only through the presumption of
trust? Similarly, it is unclear whether trust as a legitimising factor in this
respect has ever been a part of either national or international criminal law.
It constitutes, in other words, a unique European strategy and, more
importantly, it seems to be a mechanical translation taken directly from the
model of the Internal Market without any underlying research into
whether it actually might lead to successful judicial cooperation in the area
of criminal law at all. The function of trust in EU criminal law is thus still
a mysterious issue. Even if it is important to question whether an integra-
tion model that is based on trust is as forceful as tangible legislation, the
concept of trust seems to have been used to justify the promotion of the
EU project, even if it, from the start, was much too far-reaching and
ambiguous. This explains why the CJEU to such a large extent focuses on
the effectiveness of the EU’s judicial cooperation in the area of criminal
law and why only very few cases have been allowed to break the presump-
tion of mutual trust between member states (e.g. as regards the risk of
inhumane treatment such as torture).
As has been mentioned previously, the EAW entails that the double
criminality for 32 listed crimes has been abolished and replaced by the
principle of mutual recognition. The issue is, however, the extent to which
mutual recognition can be limited by other legal principles, such as the
rules for a fair trial in accordance with ECHR as well as the EU Charter of
Fundamental Rights. In the IB ruling (Case C-306/09) on the application
of the EAW, the CJEU confirmed that mutual recognition is not absolute
and that there may be individual aspects hampering the effectiveness of

mutual recognition. Moreover, in Wolzenburg (Case C-123/08), the issue
of whether the possibility to serve the remainder of a sentence in another
EU member state was touched upon. In that case, the ECJ pronounced
that according to the European Directive (2004, p. 38) on EU Citizenship,
an EU citizen must have lived in another member state for five years before
being able to enjoy all benefits accorded by the Directive. The Court also
established that it lies in their very nature that the requirements regarding
the principles of proportionality and non-discrimination shall be observed
within the area of EU judicial cooperation in criminal law. The Directive
(2004, p. 38) does, however, mean that the five-year rule regarding the
right to serve a sentence in the host country resembles restrictions for
students receiving study grants.
A driving principle in the area of criminal law within the framework of
mutual recognition has been the principle of effectiveness (Herlin-Karnell,
2012). This has, however, entailed certain problems as regards striking the
right balance between effectiveness and the protection of human rights.
The issue came to the fore in the Melloni case (C-399/11) concerning
whether a member state may refuse to execute an EAW based on
Article 53 in the Charter of Fundamental Rights and the reasoning that the
fundamental rights of the person in question had been disregarded accord-
ing to the national constitution. The article stipulates the following:
Nothing in this Charter shall be interpreted as restricting or adversely affect-

ing human rights and fundamental freedoms as recognised, in their respec-
tive fields of application, by Union law and international law including the
European Convention for the Protection of Human Rights and Fundamental
Freedoms, and by the member states’ constitutions.
The constitutional issue in the Melloni case was therefore whether the
EU’s principle of effectiveness weighs heavier than the rights established
in a national constitution. It concerned the validity of a national constitu-
tional principle on the ban on extraditing a person convicted in absentia.
The ECJ ruled that the effectiveness of EU law takes precedence over
conflicting national constitutions. However, the fact of the matter remains
that criminal law is an area where the involvement of the EU may entail
drastic consequences for an individual primarily because there is a risk that
centralisation may interfere with the protective aspects of national consti-
tutions since these often include a more developed protection of rights for
the individual. The Court took the view that the executive legal authority
had to postpone its decision regarding extradition of the person in ques-
tion while awaiting the supplementary information that would make it
possible to disregard the existence of such a risk. The Court also stressed
that the executive legal authority had to respect the proportionality
requirement, as stipulated in Article 52(1) in the Charter, with regard to
the limitation of any right or freedom recognised in the Charter.
Still, in the recent Aranyosi and Căldăraru case (C-404/15 and
C-659/15 PPU) concerning the execution of an EAW, the ECJ ruled that
the prohibition of inhuman and degrading treatment as set out in Article 4
of the Charter of Fundamental Rights is absolute in that it is closely linked
to respect for human dignity. The Court held that the executing judicial
authority must postpone its decision on the surrender of the individual
concerned until it obtains the supplementary information that allows it to
exclude the existence of a risk of such treatment.
The risk entailed by the centralisation of judicial cooperation in the area
of criminal law is thus the loss of the protective mechanisms in procedural
law that are ensured through national law but which have been excluded
in EU cooperation due to the effectiveness requirement and conflicts
between member states. When one speaks of European criminal law, it is
easy to gain the impression that it is the result of the general success of the
European project. However, seen in a historical perspective, it is quite dif-
ficult to speak of Europeanisation of criminal law as a recent phenomenon,
bearing in mind that it already is European in so many respects, inspired as
it is by the Age of Enlightenment. There are still, however, substantial dif-
ferences between EU member states’ legal systems and traditions. It is
these cultural similarities and differences that also make the concept of
European criminal law so very complex.
In The European Agenda on Security, the European Commission
(2015a) notes that people are crossing national borders within the EU
more and more, and are becoming increasingly frustrated by the different
rules in the EU member states and the inconvenience of various proce-
dures. According to the Commission, this is mainly due to the economic
crisis as well as a lack of capacity in certain national legal systems, which in
turn undermine the trust the citizens have in the EU project as such. The
Commission also points out that the EU needs to develop a common feel-
ing of justice at the EU level that is linked to the broader issue of values
and the type of area of freedom, security and justice that the EU is actually
striving to build.
Due to a series of problems that have arisen in relation to the EAW, the
European Commission has revised the handbook on its implementation in
the member states. The Commission points out in the evaluation that an
effective implementation of the EAW has been undermined by the fact
that people are often wanted for less serious crimes. Thus, the Commission
notes that there is a need to apply a proportionality test for the Arrest
Warrant in order to avoid misuse. The Commission particularly empha-
sises that the handbook on the Arrest Warrant must be adapted to meet
the requirement regarding proportionality and is taking into consider-
ation the factors that are going to be assessed in conjunction with the
execution of an EAW and the possible alternatives before an arrest warrant
can be issued. In this way, the Commission hopes to prevent absurd con-
sequences and unreasonable costs.
The Relationship Between Asylum, Migration

and Trust in the EU
The questions concerning trust and mutual recognition and confidence in

the EU more generally are also central to the very important area of asy-
lum law. As mentioned above, migration law and asylum law are a part of
the EU policy area of freedom, security and justice. They are also central
to the understanding of criminal law. When the ECJ builds up its case law
on trust in this law and policy area, it perceives the different policy areas as
connected. In other words, legislation and case law in the area of asylum
and immigration are of direct relevance to criminal law as regards the
interpretation of the concept of trust in the area of freedom, security and
justice. Moreover, administrative sanctions are often used in the area of
migration law in relation to what is often referred to as the people who
‘stay behind’ (i.e. people who, for example, remain in an EU member state
after their visa has expired). The relationship with the criminal law system
is complicated since many of the procedures in the area of asylum are simi-
lar to criminal law and should thus entail the same protection of rights.
The El Dridi judgment (Case C-61/11) is particularly instructive in
this regard. In this judgment, the Court established that the principle of
proportionality shall be observed when EU member states decide to send
asylum seekers back to another state. This means that national courts must
try the legality of coercive measures, which, for example, include impris-
onment and subsequently deportation. Moreover, the national court has
the right to refuse to execute a custodial sentence for illegally staying in
the country in question when imprisonment is only a punishment before

a subsequent deportation.
In the NS case (Case C-411/10), also within the framework of asylum
law, the ECJ established that if there is reason to believe that there are
systematic deficiencies in the asylum procedure in an EU member state
(e.g. as regards the transfer of an asylum seeker to another territory), then
transferring an asylum seeker to that member state would be incompatible
with the EU Charter on Fundamental Rights. According to the Court,
there is no doubt that where there is a serious risk that the rights of an
asylum seeker may be violated, the member states should have a great deal
of discretion and the EU law presumption of trust may thus be broken.
This means that under certain circumstances the principle of effectiveness
of EU law is overridden and it enables the member state where the asylum
application was submitted to examine the application even if the strictly
formulated criteria in the Dublin III Regulation are not fulfilled. This is
important not least when a state that is supposedly responsible for the
asylum procedure is regarded as being less suitable due to the state not
taking sufficient consideration of human rights.
In the EU’s Agenda on Migration from the spring of 2015, the
European Commission (2015b) points out that of the deficiencies found
in the EU rules on asylum law and migration, it is the lack of mutual trust
between member states (in particular, as a consequence of the continued
fragmentation of the asylum system) that stands out. According to the
Commission, this has a direct impact on asylum seekers, not just for those
who ‘choose’ the host nation but also on public opinion in the EU. The
Commission notes that such a system where solidarity in the EU is broken
does not benefit trust in Europe but that it is hoped that the new Common
European Asylum System (Directive 2013/32/EU) will contribute to
increasing trust between the member states. The political agenda is thus
ready and prepared; the question is whether the citizens also have confi-
dence in it.
The Principle of Proportionality and Solidarity

and Their Role in EU Criminal Law
Even if trust in the EU member states is a rather vague concept, the idea
is that it should contribute to enhancing solidarity within the EU. If soli-
darity is to have any real meaning in a criminal law context, it must be
based on common sense of a kind. This is often mentioned in discussions
on proportionality. It is here that the idea of proportionality represents the

core of constitutional law (see e.g. Klatt & Meister, 2012). Proportionality
in an EU context means a line of reasoning based on common sense where
the idea of ‘suitability’ and ‘balance’ constitute the golden rule on which
decisions concerning the desirability of a certain piece of EU legislation
rest, determining whether the costs are higher than the actual gains (Craig,
2012).
When the CJEU or the legislator in the EU determines whether a law
is proportional, they examine whether the measure is suitable or appropri-
ate in order to achieve a desired result or whether the same can be achieved
through a less onerous measure. Proportionality is thus a general control
mechanism in EU legislation that is suitable for the assessment of the rea-
sonability of EU measures and the actions of member states when they
later fall within the area of application of the EU treaties. Moreover, the
idea of proportionality governs the extent to which the member states may
be exempt from their duties and obligations under EU law. The principle
of proportionality is also an important tool for making decisions concern-
ing whether exercising the legislative competence of the EU is justified. In
this respect, every legislative measure must be effective in order to achieve
the goal of the competence that has been granted. Finally, the negative
impact on other interests must be compensated by the positive impact of
EU action in a specific area.
The principle of proportionality has always played a central role in EU
law (both legislative and judicial). Naturally, the Lisbon Treaty stipulates
that the EU shall respect freedom and justice but also establishes a high
level of security within Europe. It is still unclear what this actually entails
in practice and how the right balance between these different values can be
achieved. The question is rather whether a correct application of the prin-
ciple of proportionality may function as a correction of the assumption
made previously that there was no, or at least very few, limits regarding the
principle of mutual recognition in the area of freedom, security and jus-
tice. Therefore, it is important that at least non-discrimination and
proportionality within the framework of EU criminal legislation are seen
as principles that are inextricably linked. The question of trust in EU crim-
inal law must be seen in a broader perspective. As has been explained
above, the EAW has played a central role in the emergence of criminal law
at the EU level, but as has also been mentioned above, the EU principle
of mutual recognition has never been a success due to the lack of trust
between EU member states.
The problem is that the area of freedom, security and justice is to a large
extent exempt from the rules of proportionality due to the focus on crisis
management that has characterised this area, largely shaped as a response
to threats and risks linked to terrorism. The EU has felt the need for
greater discretion to be able to act rapidly in the fight against crime and
terrorism. Hence, for a long time, a proportionality test was ruled out.
Now, however, the EAW has enforced such a requirement since this instru-
ment did not lead to the desired consequences. There was talk of absurd
cases that were not linked to terrorism but where the same rigid legal
examination was applied. This could result in deportation for the theft of
a chicken and other less serious offences (Case Ö-430-07, Biszak, the
Swedish Supreme Court).
In Article 49 of the EU Fundamental Rights Charter that became bind-
ing through the Lisbon Treaty, a guarantee was now stipulated for the
legality and proportionality of sanctions in a more all-encompassing man-
ner than in the ECHR. However, it is interesting to note that the principle
of proportionality can both broaden rights and limit them. Despite this,
Article 52(1) establishes certain important exceptions from the application
of the Charter in its entirety. This provision clearly stipulates that:
Any limitation on the exercise of the rights and freedoms recognised by this
Charter must be provided for by law and respect the essence of those rights
and freedoms. Subject to the principle of proportionality, limitations may be
made only if they are necessary and genuinely meet objectives of general
interest recognised by the Union or the need to protect the rights and free-
doms of others.
It is true, however, that such a limitation is not unique for the EU. Also
the ECHR Article 5 includes a similar possibility to subject fundamental
freedoms and rights to limitations if these are necessary in a democratic
society. The risk is that even if it is of utmost importance to maintain secu-
rity in a society, the security agenda can easily be manipulated to always
suit ‘what is deemed necessary in a democratic society’. That is why it is so
important that the principle of proportionality is used in a broader sense
as a part of the establishment of trust in the area of freedom, security and
justice. The explanatory notes also indicate that the reference to general
interests that are recognised by the EU includes both the goals mentioned
in Article 3 TEU as well as other interests that are protected through spe-
cial provisions in the EU treaties, given that these limitations actually
respond to a general EU interest.
The application of the principle of proportionality has recently been in

the limelight in conjunction with the Data Retention Directive, cyber-
related crime and the EU’s fight against terrorism. In 2014, the CJEU
declared the Data Retention Directive invalid in a judgment which received
a great deal of attention. The aim of the Directive was to make it possible
to collect data in the member states from individuals and subsequently
store it for two years, in order to fight crime and terrorism. This applied
even if there was no real suspicion of a crime in each separate case. In this
case, Digital Rights (Case C-293/12), the Court’s view was that such a
system was in breach of the principle of proportionality and thus also of
the fundamental right to data protection as it is proclaimed in the European
Charter on Fundamental Rights.
According to the Court, the Directive was far too sweeping and there-
fore violated, for example, the fundamental right to data protection as
stipulated in Article 8 of the Charter. The Court pointed out that the
Directive allowed the national authorities to trace data without any tan-
gible suspicion of a crime. Moreover, in Schrems (Case C-362/14), the
Court established that allowing US intelligence services, on the basis of
US law, to scrutinise Facebook pages in the EU in order to gain access to
the personal data of EU citizens violated the European Charter on
Fundamental Rights. This was against current EU legislation and the doc-
trine of adequate protection (2000/520), adopted in accordance with
Article 25 in Directive (95/46) on data protection. According to Directive
(95/46), the transfer of personal data outside the European Economic
Area (EEA) (which includes all the EU member states as well as Iceland,
Liechtenstein and Norway) to a third country is only permitted if the third
country provides an ‘adequate level of protection’. The European
Commission can establish that a third country meets this standard by con-
sidering this country’s national legislation or international commitments
taking all the circumstances surrounding the transfer of data into account.
In this case, the Court declared the Commission’s decision concerning
the adequate protection of information that had been transferred to the
US as invalid and not proportional (Fletcher & Herlin-Karnell, 2016).
Perhaps the theory of proportionality might be seen as a necessary step in
the fragmented EU where trust must be accepted at a sufficient level in
order to facilitate the application of the law in the national courts and
authorities. The idea here is also that it is necessary to take the holistic
approach and to see an integrated area of freedom, security and justice.
The EU machinery holds together since the different law and policy areas
are inextricably linked and in order to understand that, broad knowledge

of what the EU is and why enhanced cooperation is needed.
The Path to Enhanced Trust in the EU’s Area

of Freedom, Security and Justice
This chapter has highlighted the issue of mutual recognition and the con-
cept of trust in EU law and its consequences for the area of freedom,
security and justice. The main purpose has been to give a perspective on
trust which is used as a proxy for mutual recognition in criminal law and
how the principle of proportionality may contribute to an improved and
more balanced system in the EU. The chapter has also underlined the
danger of the ‘proportionality test’ as it may provide an opening to depart
from EU law depending on what proportionality is deemed to mean in an
EU context.
Judicial cooperation in the EU started as an experiment in crisis man-
agement at a high level and at the cost of adequate protection for the
individual. The EU has been under a great deal of pressure: enhanced
cooperation is necessary to handle risks and threats linked to terrorism and
cross-border organised crime but the member states have not been entirely
prepared to abandon their national competence in the area of criminal law.
It could be said that the ECJ and the European Commission, which are
the strongest drivers of developments in this area, have more recently per-
haps adopted a more mature position where mutual recognition is not
believed to be on a par with blind trust (see e.g. Nicolaïdis, 2007). It is
above all the principle of proportionality that has become increasingly
important even if there is a need for greater specification and a clearer
definition.
Judicial cooperation in the area of criminal law in the EU is currently in
an interim phase and its future in the area of freedom, security and justice
is uncertain. The many crises that dominate Europe call on us to take a
step back and critically discuss how cooperation should progress. A strong
commitment to the rule of law and the protection of human rights must
be the guiding principle throughout this law and policy area. Future EU
criminal law will therefore to a large extent not only depend on the politics
of the EU institutions but also on the level of commitment and under-
standing among all those who in some way work in this area.
It is therefore more important than ever that the EU and its member
states strive towards a coordination of their case law in the area of criminal
law bearing the EU Charter of Fundamental Rights in mind. Another
important aspect is that the ECJ now emphasises the importance of rea-
sonable trust as well as the importance of common EU values as regards
the full protection of human rights. Moreover, it is necessary to strike a
balance between the different components that together shape an area of
freedom, security and justice as well as EU law more generally. Perhaps
‘Brexit’, migration crisis, terrorist threats, financial crisis and all the other
crises currently affecting Europe will provide an opening for the EU to
reformulate its policy principles and to be more determined and robust
regarding the values that should guide the EU in its judicial cooperation
in criminal matters.
Against this background, I would propose the following brief recom-
mendations for action to the EU. First, the principle of proportionality
should be accorded a greater importance in the EU’s legislative process
and similarly, the ECJ should integrate a proportionality test in its inter-
pretation of the concept of trust as a way of assuring the member states
that the EU Charter on Fundamental Rights and the ECHR are the low-
est common denominator. Second, the EU must uphold the rule of law
even in emergency situations like the fight against terrorism and strive to
remedy the democratic deficit in the EU in general and more particularly
in the area of freedom, security and justice where the demand for effec-
tiveness often overshadows fundamental rights. Third, European universi-
ties offering courses on EU law, as well as bar associations in the EU,
should offer specialised courses on EU criminal law and its place in the EU
constitutional grid. It is vital that future legal experts and political scien-
tists have proper knowledge of this area as long as the EU remains a proj-
ect to be taken seriously. I would even claim that adequate knowledge on
the prospects and limits of EU cooperation in the field of criminal law is
fundamental for trust in the EU.
Notes
1. The second (also intergovernmental) pillar in the pre-Lisbon EU system was
the Common Foreign and Security Policy (CFSP) and the first (suprana-
tional) pillar was the Internal Market.
References
Craig, P. (2012). EU administrative law. Oxford: Oxford University Press.
Directive 2004:38 OJ, L158/77. On the right of citizens of the Union and their
family members.
European Commission. (2014a). The EU Justice Agenda for 2020—Strengthening
trust, mobility and growth within the Union. COM(2014) 144 final, Strasbourg,
11 March 2014.
European Commission. (2014b). A new EU framework to strengthen the rule of
law. COM(2014) 158 final, Brussels, 19 March 2014.
European Commission. (2015a). The European Agenda on Security. COM(2015)
185 final, Brussels, 28 April 2015.
European Commission. (2015b). A European Agenda on Migration. COM(2015)
240 final, Brussels, 13 May 2015.
Fletcher, M., & Herlin-Karnell, E. (2016). Is there a transatlantic security strat-
egy? Area of freedom, security and justice law and its global dimension. In
M. Fletcher, E. Herlin-Karnell, & C. Matera (Eds.), The European Union as an
area of freedom, security and justice. London: Routledge.
Herlin-Karnell, E. (2012). The constitutional dimension of European criminal law.
Oxford: Hart Publishing.
Herlin-Karnell, E. (2013). From mutual trust to the full effectiveness of EU law:
10 years of the European arrest warrant. European Law Review, 38(1), 79–91.
Jansson, C. (2013). Mutual recognition. Oxford: Oxford University Press.
Klatt, M., & Meister, M. (2012). The constitutional structure of proportionality.
Mitsilegas, M. (2009). EU criminal law. Oxford: Hart Publishing.
Nicolaïdis, K. (2007). Trusting the poles? Constructing Europe through mutual
recognition. Journal of European Public Policy, 14(5), 682–698.
Official Journal of the European Communities. (2002). Council Framework
Decision of 13 June 2002 on the European arrest warrant and the surrender
procedures between Member States (2002/584/JHA).
Peers, S. (2015). EU justice and home affairs: Vol. 1 & 2. Oxford: Oxford University
Press.
Weatherill, S. (2016). Law and values in the European Union. Oxford: Oxford
University Press.
Mutual Trust in Civil Justice Cooperation
in the EU
Eva Storskrubb
This chapter deals with trust in the context of judicial cooperation in civil
matters, which has been part of the broader European Union project of
creating an Area of Freedom, Security and Justice (AFSJ) since the
Amsterdam Treaty (Title IV and Article 81 in the Treaty on the Functioning
of the European Union (TFEU), see also Storskrubb, 2016a, 2016b).
Particular attention is here given to how trust operates when judgments
rendered in civil litigation cases move across borders.1 The principle of
mutual trust has emerged as a political goal in EU’s AFSJ but it has also
been given a normative understanding in the case law of the European
Court of Justice (ECJ) on free movement of judgments. How to under-
stand mutual trust and what it actually entails has in recent years become
one of the central and most critical issues in the development of the
AFSJ. The broader question that the principle raises is whether individual
rights can be sacrificed in some cases in order to uphold a fictitious pre-
sumption of trust. I argue that the answer to that question might affect the
legitimacy of the EU as a whole, beyond the context of the individual case.
E. Storskrubb (*)

160 E. STORSKRUBB
The political project to create the AFSJ was set in motion with the
Treaty of Amsterdam 1999 and entailed deeper integration in judicial
matters than its predecessor, Justice and Home Affairs cooperation that
had been launched in the Maastricht Treaty in 1993. A plethora of factors
provided the impetus for the political project at that point in time. Apart
from the desire to bring the EU closer to its citizens and the challenges of
the forthcoming enlargement of the Union, there were also perceived
threats such as organised crime and irregular migration. It is striking that
such threats were identified long before 9/11 or present-day terrorist
threats and immigration crisis of 2015. However, this chapter does not
deal with EU criminal justice cooperation or EU asylum and migration
policy that are addressed elsewhere in this book (see Esther Herlin-
Karnell’s chapter). Instead, it deals with the third branch of the AFSJ,
namely civil justice that pertains to cross-border civil litigation. Examples
of such cases are disputes regarding child custody and maintenance, as well
as disputes regarding family succession, consumer sales, large deliveries
between companies and employment relationships.
Civil justice cooperation in the EU has strong connection with the
EU’s Internal Market. Facilitating the resolution of cross-border disputes
and increased mutual trust among the legal systems of EU member states
are considered to enhance legal certainty and thereby to support cross-
border trade and growth. The political connection between trust in the
legal systems and economic growth is highlighted in the strategic guide-
lines of the European Council for the AFSJ for 2015–2019:
The smooth functioning of a true European area of justice with respect for
the different legal systems and traditions of the member states is vital for the
EU. In this regard, mutual trust in one another’s justice systems should be
further enhanced. A sound European justice policy will contribute to eco-
nomic growth by helping businesses and consumers to benefit from a reli-
able business environment within the internal market. (European Council,
2014)
Hence, this chapter addresses a question of fundamental importance

for the EU and not least for the creation of the Internal Market. If trust
fails in a context that is so crucial for the EU, this might be an indication
of a more deep-seated fragility of the European integration project. But at
the same time, it underlines how important it is to continue to nurture
trust in civil justice cooperation since it relates to such fundamental aspects
MUTUAL TRUST IN CIVIL JUSTICE COOPERATION IN THE EU 161
of the EU. In addition, it takes time for legal cultures to meet and for trust
to be gained. Therefore, if trust is simply presumed, it may be detrimental
for the legitimacy of the EU. The issue of mutual trust in civil justice
cooperation is hence of crucial importance for the EU today.
The Development of EU Civil Justice Cooperation

In civil justice, the question of mutual trust has been strongly linked to the
goal of implementing mutual recognition of judgments. Already the
Conclusions of the Tampere European Council in 1999, setting out the
first guidelines for the AFSJ, established that mutual recognition would be
the ‘cornerstone’ for EU cooperation in the field (European Council,
1999). In this context, mutual recognition implies that a judgment from
one EU member state shall be granted the same effect in other EU mem-
ber states. If the judgment does not have such an effect, there is a risk that
the winning party to a dispute ultimately is unable to realise its rights. In
practice, this entails a risk that the judgment creditor is not paid what it is
due based on a judgment or that it takes time and monetary resources for
the creditor to obtain payment in another EU member state. Mutual rec-
ognition is for this reason important for private citizens and corporate
actors.
After Tampere, the Council of the EU elaborated a programme for the
implementation of mutual recognition of decisions in civil matters (OJEC,
2001). The programme outlined a number of steps and measures to be
taken. With respect to measures aimed at supporting mutual recognition,
it noted that:
It will sometimes be necessary, or even essential, to lay down a number of

procedural rules at European level, which will constitute common minimum
guarantees intended to strengthen mutual trust between the member states’
legal systems. These guarantees will make it possible, inter alia, to ensure
that the requirements for a fair trial are strictly observed. (OJEC, 2001)
Thus, the underlying logic was that for mutual recognition (i.e. the free
movement of judgments in the EU) to be achieved, there needs to be
mutual trust between EU member states based on some level of common
procedural standards protecting fundamental procedural rights and fair
trial. Andersson (2005, p. 247) notes that ‘the big problem […] with the
principle of mutual recognition […] is that it requires mutual trust [and]
162 E. STORSKRUBB
requires in its extreme, that a domestic legal system allows for enforce-
ment of judgments based on procedural rules and ideological values over
which the member state has no influence and very little knowledge’. The
intermediary exequatur procedure including the possibility to refuse to
recognise a foreign judgment on limited grounds such as public policy has
traditionally and historically been a general safeguard against unwanted
effects of mutual recognition. Thus, recognition in a foreign jurisdiction
has always been predicated upon checks and balances, on balancing the
public policy of the forum against the rights of private parties (Paul,
2008).2 The current debate on mutual trust in civil justice in the EU has
been triggered by the aim of going further and removing such checks and
balances. At the centre of the debate are questions of whether and how far
certification procedures, safeguards and grounds for refusal can be
removed in cross-border recognition of judgments.
Mutual recognition was imported in the AFSJ from the Internal Market.
It has developed as a regulatory integration method over a number of
decades in the context of the four fundamental freedoms related to free
movement of goods, services, capital and persons (see Articles 5, 28, 45
and 63 TFEU). The free movement of judgments has therefore been
called the ‘fifth’ freedom. Integration of markets has three basic regula-
tory models: (i) national treatment (host-country rules), (ii) harmonisa-
tion (similar rules) and (iii) mutual recognition (home-state rules)
(Schmidt, 2007). Under the first alternative, national treatment, the bur-
den on the market participants is high because they have to adapt to dif-
ferent national rules, but the host country keeps its rules and does not
have to relinquish sovereignty. It only has to open its borders to partici-
pants willing to enter its market and follow its rules (non-discrimination).
With the second and opposite alternative (harmonisation) market, partici-
pants wanting to enter other markets do not face additional costs but the
states have to relinquish sovereignty vertically to the supranational level
and can face considerable negotiating costs. Finally, the third option,
mutual recognition, can be seen as an ostensibly benign and easy middle
ground. The countries do not need to face negotiation costs and compa-
nies do not have to face adaptation costs as home-state control means that
it suffices to fulfil only one set of national rules, those in the country of
origin (Schmidt, 2007).
What is sometimes overlooked is that mutual recognition as a mode of
governance does, nevertheless, mean that states relinquish sovereignty
albeit horizontally (Nicolaïdis, 2007). The national regulator can no longer
ensure the same level of regulation to users within its territory when new
and foreign participants enter the market based on their own (foreign)
home-state regulation. This means that although mutual recognition may
be a simple solution for states and market participants, the end-users, buy-
ers or consumers may face information and other costs due to the diversity.
In addition, diversity may fuel regulatory competition, even creating a risk
of so-called race to the bottom (see also Clas Whilborg’s and Sarkis
J. Khoury’s chapter in this volume). If diversity is perceived to cause
unwanted risks, the legitimacy of the system may be questioned by the
users and states held politically accountable (Schmidt, 2007).
Such a development has not been seen as desirable in the EU and,
therefore, the EU model of mutual recognition is not pure. It is of crucial
importance to note that mutual recognition in the Internal Market has
never been unconditional. Restrictions to protect important national
rights and values have always been present in the EU treaties and also
introduced in the case law, though only insofar as a limitation is deemed
to be proportionate. For example, this applied in the famous Cassis de
Dijon case (see also Snell, 2014). In addition, mutual recognition has not
been the sole regulatory method in the Internal Market, it has been used
in parallel with inter alia minimum harmonisation and other governance
techniques such as administrative cooperation and communication struc-
tures (Chalmers et al., 2014; see also Snell, 2016). Mutual recognition has
also therefore been called ‘managed’, meaning that it does not operate in
a void but is always related formally to other forms of integration and
informally to societal prerequisites such as acceptance and trust (Lavenex,
2007). Nicolaïdis notes that in implementing mutual recognition, a fine-
tuned balance must be struck between recognition and the constraints
that must be attached to it. Thus, there is an analogous difference between
‘blind’ and ‘binding trust’ (Nicolaïdis, 2007).
Notably, mutual trust has also been present as a normative and regula-
tory concept in the Internal Market. This has been the case in particular,
in cases related to the obligation of competent authorities to accept deci-
sions of authorities in other EU member states, inter alia in relation to
inspection of goods carried out by authorities in other member states or
decisions on social security made by authorities in other member states
(Cambien, 2017). However, also in specific mutual trust situations, it has
similar to mutual recognition not been an unconditional principle in the
Internal Market arena (Prechal, 2017). Rather, Cambien notes that mutual
trust or a lack thereof has also affected the regulatory strategy linked to
164 E. STORSKRUBB
mutual recognition. For example, in the case of provision of services, it

occasioned a debated legislation on the harmonisation of rules related to
services and in many other pieces of legislation it has been invoked in
order to emphasise to need to deepen administrative cooperation or
increase transparency (Cambien, 2017).
The major political driver for introducing mutual recognition as a regu-
latory strategy for the AFSJ at Tampere was the willingness of EU member
states to retain sovereignty in the policy fields of civil and criminal justice.
However, as the Internal Market example shows, and as EU leaders pre-
sumably knew, sovereignty was only superficially preserved because mutual
recognition actually entails relinquishing sovereignty—not vertically to
the supranational regulator but horizontally to the other national regula-
tors (Lavenex, 2007; Nicolaïdis, 2007). The question has therefore been
raised whether mutual recognition (and by implication mutual trust that is
considered necessary to support mutual recognition) is the most appropri-
ate regulatory strategy for the AFSJ. It has been asked whether an integra-
tion method originally adopted for goods and services is suitable for
judgments and justice systems (Schmidt, 2007; Storskrubb, 2016a). The
issue becomes more complex in the context of civil judgments because the
stated aim in the above-mentioned programme is to remove all barriers to
direct enforcement of judgments. This means that it is potentially difficult
to combine or calibrate the effects of mutual recognition with other regu-
latory strategies. The EU thus appears to have chosen to aim for a stricter
regulatory model in this context. This choice can cause problems in case
mutual trust is not at hand, and it becomes ever more important for the
EU to promote but arguably also support the development of mutual
trust. Before we turn to analyse the legislative and regulatory framework
closer, it is pertinent to provide some additional context and nuance to the
development of mutual trust in civil justice.
Mutual Recognition in a Broader International

Context
Importing the principle of mutual recognition from the Internal Market
arena to the AFSJ is, notwithstanding the critique mentioned above, not
entirely far-fetched seen in a broader international context. There are sev-
eral historical examples of states cooperating to recognise each other’s
judgments. The pressure to do so has come from international trade long
before today’s globalisation. The respect and trust, by Whytock (2014)
even called ‘faith’ (or ‘comity’), which states have been prepared to accord
each other historically in private international law has often been the most
far-reaching between closely situated states; geographically, legally, politi-
cally or even commercially. Examples of such close regional ties include
private international law conventions between the Nordic countries
(Jänterä-Jareborg, 2016). Within the EU (at the time the European
Community, EC), the then six member states started private international
law cooperation among themselves already in 1968, entering into the
Brussels Convention. The Convention was intended to support trade and
free movement within the EC. Even though there was a clear mutual
interest and proximity on many of the above-mentioned levels between
the member states, the Convention still included many of the traditional
safeguards for recognition and enforcement of judgments including the
exequatur procedure and specific grounds for refusal.
In Europe, we have also since 1953 had the European Convention on
Human Rights (ECHR). Although the ECHR has not been enacted
under the auspices of the EU, it can still be said to provide EU member
states with a common value basis with respect to human rights and funda-
mental freedoms. Hence, it can be seen as a potential basis for a nascent
mutual respect or trust amongst the legal systems of EU member states,
long before the EU signed its own Charter of Fundamental Rights.
Despite these mutually shared values, all EU member states occasionally
breach the ECHR. For example, in 2016, the European Court of Human
Rights (ECrtHR) found at least one violation in 385 cases related to EU
member states. Of course, not all human rights breaches in the EU reach
the Court. Thus, it is clear and uncontested that the legal systems of EU
member states do not always in practice manage to uphold human rights
and there may arise individual cases in which violations occur. In the con-
text of civil justice, the central right is the right to fair trial guaranteed in
Article 6 ECHR and also now Article 47 of the EU Charter of Fundamental
Rights. A classic example of a violation of the right to a fair trial in the case
law of the ECrtHR is when court proceedings are unreasonably long. For
instance, Italy has repeatedly been found in the past to breach Article 6 on
this basis due to notoriously slow proceedings in Italian courts (Silvestri,
2014).
An early example of presumed mutual trust in civil justice relates to the
mutual jurisdiction rules in the Brussels Convention and subsequent
Brussels I-Regulation. Among these rules, the so-called lis pendens rule
determines what happens in case of parallel proceedings in different mem-
166 E. STORSKRUBB
ber states in the same dispute matter. In the wordings of Article 21 of the
original Brussels Convention:
Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Contracting States, any
court other than the court first seised shall of its own motion decline juris-
diction in favour of that court. A court which would be required to decline
jurisdiction may stay its proceedings if the jurisdiction of the other court is
contested.
In case C-116/02 Gasser, the ECJ held that no exception could be

made to the lis pendens rule with reference to the mutual trust that EU
member states must accord each other’s courts. In this case, the national
court first seized was an Italian one, since one of the parties to the dis-
pute had filed a claim before a court in Italy despite the parties having
agreed in their contract that the relevant exclusive court to hear disputes
between them was to be in Austria. It was considered possible that the
proceedings in Italy were brought simply as a procedural tactic (a tactic
known as ‘Italian torpedo’) to delay the matter, since Italian proceedings
were notoriously slow and the Austrian court was according to the lis
pendens rule prohibited from hearing the matter as long as the Italian
proceedings were pending (cf. Bogdan, 2007). The Austrian court that
was seized second specifically asked the ECJ, whether the fact that Italy
was known to repeatedly breach Article 6 ECHR for excessively long
civil proceedings coupled with the parties’ choice of Austrian courts
could be taken into account. However, the ECJ responded negatively
with reference to the mutual trust between the judicial systems of the
EU member states.
In the most recent reform of the Brussels I regime, a specific exception
in the lis pendens rule now attempts to address the ‘torpedo problem’ and
protect choice-of-court agreements.3 Thus, if the same situation arose as
in Gasser today, the result would most likely not be the same. Nevertheless,
the case is still important as an early expression of presumed mutual trust.
In a later string of cases (also in the context of the jurisdiction rules of the
Brussels I regime), the ECJ has held that a court in a EU member state is
not entitled to prohibit a party from bringing a case in the court of another
member state (see e.g. cases C-159/02 Turner and C-185/07 West
Tankers). In other words, this means that national courts in EU member
states cannot issue anti-suit injunctions that can have an indirect impact on
the jurisdiction of courts in other member states.4 The ECJ emphasises in

these cases that the mutual jurisdiction rules of the Brussels I regime are
founded on the mutual trust that EU member states have for each other’s
legal systems. Thereby, the ECJ implicitly imposes on national courts in
EU member states an obligation to trust the courts of other member
states and their capacity to correctly follow the mutual jurisdiction rules
(Hartley, 2015).
Finally, the Brussels Convention already confirmed that national courts
of member states cannot review the judgments by courts in other member
states and check whether the court of origin has made a correct ruling.5
The court that has to enforce a judgment can review neither the substan-
tive ruling nor (as a main rule) the ruling on jurisdiction in the judgment
handed down in the court of origin in the cross-border enforcement pro-
cedure. This has been confirmed also in case law, inter alia in case C-38/98
Renault v Maxicar concerning a potential incorrect application of sub-
stantive EU law in the court of origin. Although not explicitly referring to
mutual trust in these cases but rather to the system and aim of the Brussels
regime, it may also be inferred that the system of the Brussels regime itself
is based on a certain level of presumptive trust in the courts of other EU
member states. The concept of comity in private international law and the
earlier case law of the ECJ should be remembered when mutual trust in
the context of recognition and enforcement of judgments is analysed
below.
The Civil Justice Framework in the EU

The legislative instruments enacted so far in civil justice in the EU imply
that achieving true cooperation in this policy area is a gradual process and
that intermediate procedures as well as other forms of checks and balances
still remain to be established. But before these are discussed, it is useful to
briefly reflect on the procedure and underlying interests in civil justice
cooperation in the EU. Traditionally, a judgment creditor has after obtain-
ing a judgment in the court of origin and needing to enforce the judg-
ment in another EU member state, for example, due to the fact that the
judgment debtor is domiciled in or has assets in another member state,
had to address an application for enforcement to a court in the member
state of enforcement. The judgment creditor has only been able to pro-
ceed to actual enforcement or execution, by applying to the relevant bai-
liffs or other relevant execution authorities or actors, after obtaining an
168 E. STORSKRUBB
enforcement order from a court in the member state of enforcement.6 The

application for enforcement, that is, the exequatur procedure, has had
certain formal requirements, including traditionally a translation of the
judgment to be enforced in an official language of the member state of
enforcement. Traditionally, the judgment debtor has at this stage been
able to oppose enforcement on limited grounds, so-called grounds of
refusal. The grounds for refusal have not changed fundamentally since the
Brussels Convention and encompass the following: (i) the judgment is
contrary to public policy, so-called ordre public, (ii) the judgment was
given in default and the defendant was not duly served in sufficient time
to enable him to arrange for his defence or (iii) the judgment is irreconcil-
able with a judgment given in a dispute between the same parties.
Underlying these rules are partly competing interests. The judgment
creditor’s right to get paid or otherwise realise the rights that it is entitled
based on the judgment is naturally a central interest. The creditor’s right
to an effective recognition and enforcement procedure is also important.
Thus, one can say the judgment creditor’s access to justice is an underlying
interest. But also the judgment debtor may have legitimate procedural
interests to protect, in particular, the judgment debtor’s right not to face
enforcement of a judgment if it was not made aware of the original trial
and did therefore not have an opportunity to participate in it. Hence, also
the judgment debtor’s right to be heard and access to justice is an underly-
ing interest. The recognition and enforcement system should ideally pro-
tect both and provide a suitable balance between the interests. In addition,
the EU member state of enforcement may have an interest of its own,
namely to protect its fundamental values and to not be forced to contrib-
ute to enforce a judgment that violates its public policy or is irreconcilable
with the prior judgment rendered by its courts. Thus, it is evident that
above-outlined grounds for refusal protect, support and balance these
competing interests and that the enforcement application procedure
allows the courts of the member state of enforcement to address these
issues if needed.
The ultimate aim according to the above-mentioned EU programme of
mutual recognition (OJEC, 2001) is to remove all intermediate steps in
cross-border enforcement of judgments between EU member states.
Consequently, the question arises whether the above-mentioned interests
are still to be protected and, if so, how. It is clear that the interests of the
judgment creditor are advanced in the simplification of cross-border
enforcement or institution of direct enforcement. However, there are also
benefits at the supranational system level, since the effective enforcement

of judgment debts supports the Internal Market. However, it is apparent
that the EU member states’ own values and protecting the procedural
rights of the judgment debtor are more at risk if direct enforcement is
implemented. In such a situation, it becomes important to ensure that the
court procedure in the original member state guarantees the defendant’s
right and that the justice systems of EU member states have mutually
shared values. If that is not the case, there is a risk of collision between
mutual recognition and the procedural rights of the defendant, alterna-
tively the values of the member state of enforcement. It is in that intersec-
tion that it becomes apparent that mutual trust is fundamental for mutual
recognition. If actual or binding mutual trust is not enhanced rather than
simply presumed, there is a risk that the legitimacy of civil justice coopera-
tion in the EU, or at least mutual recognition as a regulatory method for
integration, is put into question.
In addition to the flagship regulation of civil justice, that is, the Brussels
I-Regulation which pertains to civil and commercial matters generically
and has substituted the above-mentioned Convention, a number of other
measures including those in the family law field relate to the recognition
and enforcement of judgments. These measures, with more limited or
specific scope of application, constitute the first arena for the attempts of
the EU to further advance mutual recognition. The measures in this
group include the Enforcement Order Regulation and the Payment
Order Regulation that both concern debt collection of uncontested
claims, the Small Claims Regulation that concerns small claims and the
Account Preservation Order Regulation that concerns interim attach-
ment of bank accounts.7 In addition, the family law measures in this
group include the Brussels II-bis Regulation and the Maintenance
Regulation that respectively concern divorce, parental responsibility and
maintenance decisions.8
To further remove the intermediate procedures that exequatur tradi-
tionally encompasses, the specific solutions in each of these instruments
have been varied and this fragmented approach has been considered unsat-
isfactory from the perspective of the users as well as the credibility and
functioning of the AFSJ (Linton, 2016; Frackowiak-Adamska, 2015).
Some of the instruments abolish the exequatur procedure, others aim to
simplify or streamline it. In addition, when removing exequatur, the
instruments vary in the way they retain some residual safeguards such as
review mechanisms in the original member state with some limited and
170 E. STORSKRUBB
minimum grounds for refusal in the enforcement member state. Further,

some of the instruments include rules on minimum procedural guarantees
that are intended to ensure that there is no need to review a judgment in
the enforcement state. The most far-reaching instruments in terms of
automatic recognition without review mechanism in the EU member state
of enforcement is the Brussels II-bis Regulation and its rules for judg-
ments concerning the return of unlawfully removed children (Linton,
2016; Frackowiak-Adamska, 2015).
However, the presumption underlying all these instruments is that
there is mutual trust in the procedures and actual proceedings in the mem-
ber state that renders judgment.
The removal of exequatur has also been considered and debated in rela-
tion to the flagship Brussels I-Regulation and was one of the key issues in
the recent reform of the Regulation (European Commission, 2009,
2010). Two aims have been identified behind the proposal of the European
Commission to abolish exequatur in that context, the first aimed to fur-
ther simplify and reduce formal requirements and the second aimed to
remove safeguards and grounds for refusing recognition and enforcement
(Kramer, 2011). In the new recast Regulation, eventually, the formal exe-
quatur procedure has been removed. However, it is significant that EU
member states were not prepared to go as far as the original proposal of
the Commission and the grounds for refusal have been retained, including
public policy, as well as a safeguard review procedure in the enforcement
member state. The European Parliament rapporteur also noted:
A member state before which proceedings are brought is entitled to pre-

serve its fundamental values; therefore, equally, it must be the case for a
member state in which the enforcement of a judgment is sought (EP Report
A7-320/2012).
In addition, there are other civil justice measures including the later
adopted Succession Regulation that still require exequatur (Linton, 2016).
It is interesting to note that most far-reaching provisions in terms of
automatic recognition, that is, in terms of mutual trust, concern the
Brussels II-bis Regulation and the return of children decisions (Moraru,
2016). It is also notable that mutual trust appears most difficult to accept
and also most sensitive both legally and politically in respect of the guar-
antee of fundamental rights and potential breaches thereof (Kramer,
2011). If another EU member state does not guarantee the fundamental

procedural rights of the parties, should other member states be bound to
still accept that procedure? These issues are relevant when we now turn to
briefly review the case law.
In the context of criminal justice and immigration, the case law of the
ECJ originally emphasised the presumption of mutual trust (see e.g.
Lenaerts, 2015), which culminated in opinion 2/13 on the accession to
the ECHR which has been hailed as confirming the constitutional nature
of the principle (Marguery, 2017). This presumption has come under cri-
tique from the perspective of breaches of fundamental rights in individual
cases (Mitsilegas, 2012). The ECJ seemed to promote trust and recogni-
tion to the detriment of individual scrutiny’ (Düsterhaus, 2017, p. 27).
However, the ECJ also refers to the fact that control can be relevant in
exceptional cases. In addition, more recent case law in the other policy
fields have shown a more nuanced approach accepting limits to mutual
trust, in particular joined cases C-404/15 and C-659/15 Aranyosi and
Căldăraru related to criminal justice. More recently, commentators point
to the acceptance of limitations to mutual trust and to the ensuing ques-
tions that arise as to the scope of such limitations (Prechal, 2017; Lenaerts,
2015).
There are a few relevant rulings of the ECJ also in relation to civil jus-
tice. Cases C-292/10 G and C-300/14 Imtech Marine9 that concernt the
Enforcement Order Regulation have raised questions in relation to both
the safeguard procedures and the minimum procedural requirements
under the Regulation and demonstrate the sensitive nature of cross-border
automatic recognition of judgments. The strong emphasis given by the
ECJ to the safeguard mechanisms as a means to support the trust underly-
ing free movement of judgment shows that without such safeguards free
movement is not possible. The ruling in joined cases C-119/13 and
C-120/13 ecocosmetics and Raiffeisenbank regarding the European
Payment Order Regulation points in the same direction.
Thus, even if both the regulations have removed the exequatur proce-
dure both regulations in addition to safeguard procedures include mini-
mum procedural rules to be fulfilled in the original proceedings. Both the
safeguard procedures and the minimum procedural rules are intended to
protect the procedural rights of the parties. Hence, one can say that a
minimum level of harmonisation complements mutual recognition and
supports mutual trust.
172 E. STORSKRUBB
Mutual trust has also been dealt with by the ECJ in a string of cases
concerning the Brussels I Regulation enforcement regime (C-420/07
Apostolides, C-619/10 Trade Agency, C-302/13 flyLAL-Lithuanian
Airlines, C-681/13 Diageo Brands and C-559/14 Rūdolfs Meroni). The
rulings demonstrate that the ECJ places emphasis on that the aim of effi-
ciency behind simplified enforcement rules based on mutual trust.
However, the ECJ also holds that efficiency is balanced against the judg-
ment debtor’s right to be heard, which is guaranteed by the grounds for
refusal as well as the provisions of the EU Charter on Fundamental Rights
ensuring the right to a fair trial. The ECJ is careful to explain that
enforcement only can be refused on the limited grounds in the Regulation,
which are to be interpreted restrictively.10 The ECJ in addition explicitly
emphasises that the enforcement system of the Regulation requires that
EU member states trust each other’s courts and judicial systems.11
Importantly, the ECJ also holds that if the judgment debtor has not
been served and has not had the opportunity to prepare its defence in suf-
ficient time, or recourse to an effective remedy, enforcement may be
refused.12 The Court has also confirmed that the national court in the EU
member state of enforcement is entitled to carry out an independent
assessment of whether the procedure in the original member state has
fulfilled the requirements under the Regulation.13 This guidance remains
relevant under the recast of the Regulation, since the grounds for refusal
have all been retained. Thus, the ‘compromise’ result of the reform pro-
cess as explained above appears to promote continuity and ensure that
effective enforcement must be balanced against the rights of the defence.
The protection provided by the Regulation hence imposes requirements
on EU member states’ legal orders. The ECJ has also explicitly held that
in applying the enforcement rules, national courts must comply with
Article 47 of the EU Charter of Fundamental Rights.14
In contrast, a few cases related to recognition and enforcement of judg-
ments on wrongfully removed or retained children under the Brussels
II-bis Regulation have caused more debate in relation to mutual trust in
civil matters. The reason for this is the Regulation’s rules on automatic
recognition without any residual safeguards in the member state of
enforcement. The underlying policy choice in these cases is, in the interest
of the child, to give priority to the court and the authorities and courts in
the member state where the child was originally habitually resident before
being removed or retained. The debate has most recently centred on case
C-491/10 Zarraga.15 The court in the member state of enforcement

essentially asked the ECJ whether an exception could be made from the
automatic recognition rules in case the child had not been heard by the
original member state. Based on the Regulation, the hearing of the child
is a requirement for the original member state to be able to issue an
enforcement certificate. In addition, the enforcement court noted that to
hear the child constitutes a fundamental procedural right.
The ECJ emphasised the system and purpose behind the automatic
recognition as well as the mutual trust between EU member state
courts and judicial systems in relation to upholding fundamental rights
based on the EU Charter. The ECJ further held that it is only in the
court system of origin that any such potential problems can be addressed
and since measures of recourse were available in the original member
state, there was no possibility to refuse enforcement.16 The case demon-
strates that in certain cases of automatic recognition, the trust imposed
by the ECJ may be a fiction rather than based on actual trust in the
member state of enforcement, which may give rise to opposition against
the system itself. Thus, the legitimacy of mutual recognition may be put
into question (Requejo Isidro, 2016). At present, the Brussels II-bis
Regulation is undergoing legislative reform and the European
Commission’s proposal also seeks to reform the return of children pro-
cedures. Automatic recognition is retained, but the proposal introduces
a review procedure in the original member state similar to that in the
Enforcement Order Regulation (European Commission, 2016; see also
Hazelhurst, 2017).
Regulatory Pressures and the Way Forward

The above analysis suggests that the demands on EU member state courts
to presumptively trust each other in civil justice matters are high. However,
it also emerges that most of the civil justice legislative measures so far
include some safeguard mechanisms to mediate mutual recognition, and
in those where exequatur has been removed, these safeguards are coupled
with a minimum level of procedural harmonisation. Still, among the civil
justice measures, the automatic enforcement rules for return of children is
the exception and the Zarraga case points to the distrust that may arise
among national courts in the EU if one court considers that there may be
a breach of fundamental rights.
174 E. STORSKRUBB
I maintain that the presumption of mutual trust should be linked to

actual protection of fundamental rights in the EU. It should be rebuttable
not only when there is systematic failure but also in individual cases.
Otherwise, it can quickly serve to feed distrust and it is hard to imagine
trust enduring if it is only imposed from above ‘by decree’ (Storskrubb,
2016a; see also Blobel & Späth, 2005; Mitsilegas, 2012). The legislative
development in the field of EU civil justice supports the view that building
mutual trust is a gradual process. Logically, legislative safeguards uphold
trust in the whole system and are not as such a sign of distrust among EU
member states. It should only be necessary and possible to successfully
invoke safeguards in limited cases. Safeguards are retained to provide
redress when there is a failure in an actual case, similar to extraordinary
appeal mechanisms in domestic procedural law. A study on the public pol-
icy refusal ground in a number of EU civil justice instruments shows that
there are not many cases where it is successfully invoked (Hess & Pfeiffer,
2011). Some argue that this demonstrates that the grounds for refusal are
redundant; an alternative position is that the grounds for refusal work as
they should (Storskrubb, 2011). If a violation of fundamental rights has
occurred and not been corrected in the original procedure by no fault of
the relevant party, I would argue that it is important that enforcement of
the relevant judgment is not possible across the EU.
It is also true that Brussels I-Regulation and the case law of the ECJ
place a heavy burden on the judgment defendant (Emaus, 2017). Thus,
before removing further barriers to mutual recognition of judgments, it is
imperative to examine carefully whether and where limits are still war-
ranted and remain necessary. Such an endeavour should also take into
account practice at the local level and whether the safeguards are suffi-
cient, in the context of potential reform or amendment of the enacted civil
justice instruments (Requejo Isidro, 2016; Kramer, 2013). Logically, such
an analysis does not have to negate improvements to streamline proce-
dures and make enforcement of judgments more efficient. In addition, to
clarify and provide a more simplified legislative framework rather than a
multitude of measures may be useful (Frackowiak-Adamska, 2015). As
already identified in the programme (OJEC, 2001), another avenue for
future action is to analyse whether we need further minimum or common
procedural standards in the EU. Recently, several projects that could con-
tribute to such an analysis have been initiated by both European institu-
tions and independent actors.17
A third avenue is to consider the benefit and impact of additional support-
ing governance measures, such as judicial training, networks and e-justice
(see e.g. Hartnell, 2002; Blobel & Späth, 2005; Storskrubb, 2008). Already
in 2009, the European Council placed greater emphasis on such measures,
which shows a realisation that mutual trust needs to be supported and cannot
be presumed. A lot of work is being done with less visibility perhaps in the
academic debate than the legislative and case law development of EU civil
justice. It should be noted that the European Commission has set an ambi-
tious goal of enabling 700,000 legal practitioners, half of the legal practitio-
ners in the EU, to participate in European judicial training activities by 2020
through the use of available resources at local, national and European level.
In addition, efforts are being made in relation to e-justice coordination
among the member states since 2007 when the Council decided to establish
a Working Party on e-Justice. Further, since 2009 the EU has had a multi-
annual Action Plan for e-justice. The European e-Justice Portal, which is
hosted and operated by the Commission and was launched in July 2010, is
the main achievement so far. In addition, various member states have partici-
pated in and are involved in a number of pilot projects that relate to intercon-
necting their technical justice facilities.
The recent initiatives of the EU institutions on the strengthening of the
rule of law are an example of new and broader governance measures and
dialogue in the EU on values of our justice systems (Weller, 2015). In this
context, the Justice Scoreboards are a particularly interesting develop-
ment. Published since 2013 by the European Commission, the Scoreboards
are a means for the EU to collect information on the justice systems of the
member states and to evaluate certain indicators for key components
(quality, independence and efficiency) that are considered relevant to
achieve an efficient judicial system. The information is collected in the
context of the EU’s economic term and enables the EU to make country-
specific recommendations and have a dialogue with EU member states on
procedural reforms when allocating funds (European Commission, 2017;
see also Dori, 2015). Considerable critique can be levelled at the methods
of collection of information for the Scoreboards and also at the non-
transparent manner in which the data is presented (Storskrubb, 2017b).
However, two more fundamental criticisms are relevant here. Firstly, there
is no apparent dialogue on the components and indicators that the
Commission has decided to collect in the Scoreboards as relevant for ‘effi-
cient’ justice systems. It is regrettable that the Scoreboards have not yet
resulted in a transparent dialogue involving all member states on what we
perceived as the important components of an efficient justice system and
how to address challenges in civil justice at the domestic level. Such a dia-
logue would be crucial for promoting strategic learning across and between
176 E. STORSKRUBB
member states (Storskrubb, 2017b). Secondly, in light of the above dis-

cussion it would be useful if the Scoreboards could evaluate also the fun-
damental procedural rights important in the cross-border EU civil justice
measures. Efficient justice is important, but it is also important to calibrate
efficiency with quality and fundamental rights. The Scoreboards may be
considered a start, but a deeper comparative understanding will be neces-
sary to support the development of best practices in EU civil justice to
support mutual trust.
All the above suggested avenues can be compared to analogous strate-
gies that have evolved over time in the Internal Market to mediate the
consequences of and support for mutual recognition. It should be noted
that mutual recognition is in the Internal Market part of an ever-developing
multilayered regulatory strategy. The effectiveness of mutual recognition
as a governance strategy has its limits, and this has been understood in the
Internal Market, most recently in the context of financial regulation (Snell,
2016; Roth, 2017). Thus, the fourth and final avenue for future develop-
ment is to debate and develop an overall regulatory strategy for EU civil
justice. Some scholars, such as Düsterhaus (2015), focus on the avenues
that can be pursued by the ECJ. However, although both the ECJ and the
domestic courts are very important actors, there needs to be an awareness
of the fact that regulatory options, actors and tools interact, complement
and support each other. To find the correct mix of regulatory tools is rel-
evant to achieve mutual trust. In particular, it is important to focus on the
measures such as training and dialogue between relevant local actors that
can support and foster mutual trust.
Notes
1. The term ‘civil justice’ can also be held to encompass further and broader
civil procedural developments in the EU such as the procedural rules for
consumer or competition matters, but the focus in this chapter is directed
at cross-border civil litigation (Storskrubb, 2017a, 2017b).
2. See also Weller (2015) on the development of recognition of foreign judg-
ments and the tools for retaining control in traditional bilateral or multilat-
eral private international law cooperation.
3. See Article 31 of the Brussels I (recast) Regulation.
4. An anti-suit injunction is issued against the party in question, in personam
(Storskrubb, 2016c).
5. See Articles 29 and 34 in the Brussels Convention. In relation to jurisdic-
tion, the court of enforcement may only refuse enforcement if the judgment
of the court of origin conflicts with exclusive grounds of jurisdiction or spe-

cial protective grounds of jurisdiction has been applied correctly, according
to Article 28 of the Convention.
6. Under the system of the Regulation, recognition and enforcement are two
separate concepts. Recognition entails that a judgment can be directly
invoked before the authorities of another EU member state without any
special procedure of recognition being required. Nevertheless, for enforce-
ment, a separate procedure has formerly been required under the
Regulation. The grounds for refusal are the same for both. When the term
‘mutual recognition of judgments’ is used to denote a regulatory method,
it may be used in a more generic sense and both concepts may be included.
7. See regulations (EC) No 805/2004, [2004] OJ L 143/15; (EC) No
1896/2006, [2006] OJ L 399/1; (EC) No 861/2007, [2007] OJ L
199/1; and (EU) No 655/2014, [2014] OJ L 189/59.
8. See regulations (EC) No 2201/2003, [2001] OJ L 12/1; and (EC) No
4/2009, [2009] OJ L 7/1.
9. In addition, case Pebros Servizi Srl v Aston Martin Lagonda Ltd, C-511/14,
has confirmed that the notion of ‘uncontested’ in the Regulation is to be
assessed autonomously.
10. See, for example, case C-470/07.
11. See inter alia case C-681/13 and C-559/14.
12. See case C-470/07.
13. See case C-61/10.
14. See case C-559/14.
15. See also cases C-211/10 and C-195/08.
16. See case C-491/10.
17. The European Law Institute (ELI) and Unidroit commenced a project in
2014 on European Principles of Civil Procedure (see: http://www.euro-
peanlawinstitute.eu/projects/). The European Parliament’s Legal Affairs
Committee had, at the time of writing, decided to prepare its own report
on the project and has also issues an own initiative report on minimum
procedural standards. The European Commission has also initiated a study
on national procedural laws and practices.
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The Importance of Trust in a Digital Europe:
Reflections on the Sharing Economy
and Blockchains
Robin Teigland, Håkan Holmberg, and Anna Felländer
In its 2020 Strategy, the European Union describes the importance of

actively participating in the digital society. The global market for informa-
tion and communication technologies (ICT) is rapidly growing beyond
€2 trillion, yet only around 25 percent of this demand is fulfilled by
European firms (European Commission, 2010). The EU must actively
strengthen its role in the development and government of the internet so
that the European perspective on issues such as democracy and freedom of
expression continues to be ensured. However, in order to become a sig-
nificant digital player, the EU must establish trust in the digital environ-
ment while at the same time it must successfully contend with emerging
digital forces that are challenging not only established business models but
R. Teigland (*)
Stockholm School of Economics, Stockholm, Sweden
H. Holmberg
Uppsala, Sweden
A. Felländer
Stockholm, Sweden

182 R. TEIGLAND ET AL.
also the underlying European social model. Basic assumptions regarding

value creation and competitive situations along with current regulations
are being challenged by globalization, individualization and industry
transformations. When existing structures are questioned, new opportuni-
ties are also created for EU citizens. The EU has a clear desire to increase
value creation opportunities for its citizens, and the question of how digi-
talization enables this is central to the EU.
In times of change, we tend to stick to the familiar. However, maintain-
ing and protecting traditional industries against the transformative power
of digitalization is likely to only slow down economic growth and make
the creation of a digital EU difficult. This in turn would make the EU less
relevant for its citizens. As with all technological paradigm shifts, old jobs
are transformed or made obsolete while new jobs emerge. For example,
recent studies in Sweden have predicted that 36–60 percent of the current
jobs will be lost during the next 20 years as algorithms and robots are
employed to perform an increasing number of tasks (Fölster, 2014). At
the same time, new structures for value creation are developing and many
of these fall under the umbrella of the ‘sharing economy’.
Transactions within five sectors of the sharing economy—housing,
transport, household services, professional services and financial services
generated a value of €28 billion in Europe in 2015. Looking forward,
estimates have been made that the sharing economy can provide the EU
economy with an annual increase between €160 billion and €572 billion.
With the help of digitalization, the sharing economy enables the replace-
ment of traditional intermediaries with digital platforms that enable a
cheaper exchange of customized goods and services generally among
strangers.
Digitalization’s low transaction costs enable more individuals than ever
before to consume, produce and utilize existing resources more efficiently.
Furthermore, untapped skills that today are far from entering the labor
market can be identified and integrated in society. This elimination of
intermediaries also results in the risks that were previously incurred by the
intermediary to be transferred to the users of the platform. To mitigate
these risks, ‘trust’ has been designated as the currency of the sharing econ-
omy as trust is the critical factor enabling the transactions of goods and
services among strangers. What is trust and how can trust be digitized?
One solution receiving increasing attention and investment is the digital
technology, the blockchain. This technology is the underlying software for
THE IMPORTANCE OF TRUST IN A DIGITAL EUROPE: REFLECTIONS… 183
the cryptocurrency Bitcoin, and it has been estimated that around $1.5 bil-
lion had been invested globally in blockchain startups as of the end of
2016 (Frost & Sullivan, 2017). Furthermore, the total market capitaliza-
tion value of Bitcoin and other cryptocurrencies is around $170 billion as
of October 2017 with Bitcoin at $99 billion and Ether at $28 billion
(https://coinmarketcap.com/).1 This indicates that it is not only startups
and venture capitalists that care about the blockchain. This is not too sur-
prising given the fact that the blockchain reduces the need for trust in
individuals and institutions through increasing trust in system processes.
In a centralized system, the intermediary ensures that process-based trust
of the system is maintained. The blockchain allows groups to formalize
their processes to reach consensus without a central middle hand. When
groups can maintain process-based trust without a central middle hand,
new opportunities are created for adapting consensus processes to the
needs of different groups, which further enables the continued develop-
ment of the services the sharing economy can offer.
This chapter focuses on trust and whether blockchain technology can
act as a catalyst for the sharing economy in Europe and elsewhere through
enabling an increased level of trust among platform users. A sharing econ-
omy based on strong trust can create jobs and economic growth in Europe.
Below we discuss the development of the sharing economy within the EU
before we provide an overview of how trust has so far been digitized. After
that, we describe the blockchain and what opportunities it may offer in
terms of digitized trust and economic growth. Our goal is to illustrate
how the meeting between the blockchain and the sharing economy, two
phenomena created by digitalization, forge the conditions for a future
Europe.
What Is the Sharing Economy?

The sharing economy is a broad concept that lacks one distinct and com-
mon definition. It is sometimes used as a synonym for notions such as the
‘collaborative economy’ and the ‘on demand economy’. One commonly
used definition of the sharing economy is that suggested by Sundararajan
(2016) as a market where exchanges happen peer-to-peer in a decentralized
network. The European Commission states in their agenda from 2016 a
more comprehensive definition of the sharing economy, comprising three
parts:
It aims […] for business models where the business is enabled by sharing
platforms which creates an open marketplace for temporary use of goods or
services, often provided by individuals. It comprises three different catego-
ries of actors: 1) service providers who for instance share their assets, resources
or competences and can be individuals offering services on a temporary basis
or service providers who make it a part of their business; 2) users of services;
and 3) intermediaries who—through their digital sharing platform—con-
solidate suppliers and users, which enables transactions. The transactions
usually do not mean that the good or the service changes its owner, and they
can be executed either with or without a profit-making purpose. (European
Commission, 2016a)
The sharing economy is not a completely new phenomenon since peo-

ple always have shared their assets with others. However, during recent
decades, some factors have accelerated the development of a more modern
version of the sharing economy, such as internet penetration, IT improve-
ments, easier payment systems and the financial crisis (Felländer, Ingram,
& Teigland, 2015). The increase in internet usage together with increased
usage of new technologies, such as social media, has enabled individual
actors to organize themselves both more easily and faster. For example,
public groups on social media organize car rides between Stockholm and
Gothenburg on an individual basis. This means that the driver receives a
portion of their fuel expenses reimbursed while the traveler enjoys a
cheaper journey than through traditional commercial actors. Due to the
high number of users on social media, the relatively small market for rides
between Stockholm and Gothenburg is able to gather a high enough level
of supply and demand to function. IT improvements have also led to the
possibility of collecting data, which after statistical processing can be used
for recommendation algorithms or dynamic pricing that enables supply
and demand to determine the price for the good or service. New IT solu-
tions and decreasing costs for digital tools have also resulted in lower costs
for entrepreneurs and small- and medium-sized enterprises to initiate shar-
ing economy startups. Many startups today often do not require more
than a laptop and an internet connection in the initial stage.
Easier payment systems have also facilitated financial transactions. A
functioning payment system is important, and thanks to improved pay-
ment systems, the previously negative attitude against online payment has
decreased (Felländer et al., 2015). Users have accordingly been provided
with a flexible way to pay for the services consumed in the sharing econ-
omy. Thereby, more applications are created since the developer does
not have to take responsibility for payment but instead can use already
existing solutions and therefore focus on developing their own product.
Furthermore, the ability to receive income from alternative sources has
also been a driving factor in the sharing economy. Being able to rent out
one’s apartment during the day to startups in need of office space and
teaching Spanish on web-based services during evenings are only two
examples of how individuals can gain alternative sources of income thanks
to the sharing economy.
Possibilities and Challenges for the Sharing

Economy in the EU
Demographic and global changes will most likely demand that the popula-
tions of EU member states work both harder and longer but foremost
smarter. In its 2020 strategy, the EU is focusing on smart growth where
innovation and technology enable increased value creation in the Union.2
At the same time, more Europeans are gaining access to the internet,
which increases the possibility to use the sharing economy’s services. In
2015, 81 percent of households within the EU-28 had internet, compared
to 55 percent in 2007, according to Eurostat. Usage of mobile phones has
also increased during the last couple of years and, in 2014, every other
person in the EU had mobile internet. However, there are great differ-
ences between countries. In Luxembourg and the Netherlands, 98 per-
cent of the population has access to the internet while in Bulgaria only 57
percent have access. Mobile connections also differ within the EU; in
Denmark, Great Britain and Sweden, three out of four people have mobile
internet while only one out of four has mobile internet in Bulgaria, Italy
and Rumania, according to Eurostat.
A European sharing economy offers many benefits. The EU’s competi-
tiveness and growth can be strengthened through new sharing economy
business models and more flexible work forms. The sharing economy low-
ers thresholds to the labor market and could increase the matching of labor
supply with demand. The development of the sharing economy is most
advanced in the local service sector. New business opportunities as well as
new types of cooperation between traditional actors and actors in the shar-
ing economy are created. For consumers, the sharing economy leads to an
increased supply, reduced costs and new, even individualized, services. In
addition, it can result in a more sustainable community, thanks to a more
efficient use of resources. However, while the EU states in its European
Agenda for the sharing economy that 52 percent of the EU population in

2016 knew about the sharing economy’s services, only 17 percent had
used these services at some time (European Commission, 2016a).
To guarantee user rights, both in the role as a consumer and a pro-
ducer, actors within the sharing economy are attempting to create various
self-regulating functions, often through the form of online rating systems,
screenings and digital/physical interactions between the different actors
participating in the transaction. However, the question is whether this
self-regulation is sufficient to protect the users or if the EU and its mem-
ber states must create supplementary regulations. The sharing economy
has, for example, been criticized for flaws in the security consumers and
providers are being offered. Transactions take place peer-to-peer, so, for
example, how is a landlord supposed to trust that the guest will not destroy
their home, and how is the guest supposed to trust that the description
corresponds with the actual house or that the key even fits the lock?
Furthermore, a hotel has regulations regarding fire security that apart-
ments do not necessarily have. Who shall be responsible for the safety in
the digital transaction: the individual, the platform or the EU and its
member states? Questions regarding responsibility and integrity are fur-
ther complicated when sharing economy principles are combined with
what is called ‘the internet of things’. Who is responsible for a car accident
caused by a self-driving car shared by a group of people and controlled by
artificial intelligence? Shall the responsibility be put on the group of peo-
ple sharing the car, the person who programmed the car or the other cars
involved in the accident? Integrity can be threatened since the more peo-
ple share things, the greater is the risk of unauthorized persons gaining
access to sensitive information, a risk that will only increase as more things
are connected to the internet.
Regarding risk management, it is still unclear as of the beginning of
2018 as to whether it is the platforms or the users who are responsible for
the transaction and the associated transfer of information. Most of the
relevant regulations regarding contractual liability are regulated by the EU
member states. When a platform should take over the responsibility of a
transaction depends on multiple factors, among others its control over the
user’s transactions. This opens up for increasing responsibility being given
to the user. The new distribution of responsibility will not only affect the
relationship between user and company but also between user and legisla-
tor. Today’s consumer laws, which have been created to protect the con-
sumer at the expense of the company, no longer function in the sharing
economy of peer-to-peer transactions. How these risks shall be addressed

when the consumer undertakes more and more responsibility is to a great
extent an open question.
Platform owners see themselves as the middle hand between supply and
demand, not as an employer. This makes the lines between consumers and
suppliers, employees and self-employers, and professional suppliers of ser-
vices and private individuals being erased. Sharing economy activities
therefore often end up in a gray zone outside national welfare systems. For
example, salaries can be auctioned down to unreasonably low levels when
there is high unemployment due to the lack of income insurance for the
employees. At the same time, platforms make some limitations in their
user agreements, and, in some cases, they even determine the price of the
good or service being transacted. Management of the transactions is also
handled by the platform since there are some requirements a service sup-
plier must fulfill. For example, Uber, the internet-based service for orders
and payment of taxi rides and carpools, has detailed instruction videos on
how their drivers shall behave. Thereby, in some sharing economy ser-
vices, middle hands can be considered more similar to an employer than
only a matching service.
If one chooses to see the middle hands as an employer, then there are
several shortcomings for those supplying the goods or services to the plat-
forms. For instance, these individuals do not have the same means with
which to negotiate their rights as those within existing labor unions have.
On the other hand, the relationship between service supplier and middle
hand is not the same as an employer-employee relationship since a service
supplier can offer their services on many platforms at the same time. For
example, an individual can rent out their apartment as an office during the
day while they drive their car providing transportation or running small
errands for others before finishing the day cooking dinner for someone.
Having these many jobs on the side makes the relationship between the
employer and the employee even more complicated. Even immaterial
rights are affected by the sharing economy. When goods and services are
shared, so is information. This exchange of information not only includes
collaboration but also the creation of new companies, which demands new
requirements for the handling of immaterial rights. The software industry
has increasingly started using licenses such as the Creative Commons
license or the GNU General Public license that facilitates the handling of
immaterial rights in an economy where information is increasingly seen as
shared property.
Self-regulation within the sharing economy must also be studied in

terms of what consequences might arise if the self-regulating function
does not work. For example, at one end of the scale, if an ambulance ser-
vice were to be based on a sharing economy model, trust in the traditional
licensing of the ambulance service (e.g. equipment, education, etc.) would
be replaced by trust in the platform by the peers. In this example, the suit-
ability for being an actor in the sharing economy is low since the risk is
high that the service may not be provided at a satisfactory level. At the
other end of the scale, however, are services within the local service sector,
such as lawn mowing services, which are more appropriate for self-
regulation. Then there are numerous industries, such as the financial and
hotel industries, with a medium to high risk that the service does not work
appropriately, and, as a result, where clarity around insurance and a more
traditional regulatory framework are needed.
Taxation within the sharing economy has also been a hot topic for
debate. Who or what is taxable? How should taxation be performed on
platforms that create their own currency or enable bartering, such as when
someone is invited for dinner in exchange for the promise of two bottles
of wine? Taxation is also interrelated to the question whether a service is
professional or not. Within the EU it is not determined by legislation
when an individual exactly shall be considered as a professional supplier in
the sharing economy, that is, how does one separate professional services
from services provided by individuals for individuals? Different criteria are
used within EU member states, for example, how one defines the compen-
sation for the service or a threshold value for how much income one can
generate. The difficulties of control within the sharing economy and the
separation of taxation on business, service or capital leads to yet another
obstacle for effective taxation in Europe and elsewhere.
Within transportation, EU member states have tackled the legal frame-
work around, for example, Uber in different ways (see Tables 1 and 2).
The perception of maturity for self-regulation is likely to vary in different
member states, and in time, simultaneously as different types of insurance
solutions are introduced. The Swedish Taxi Inquiry is interesting in this
context since it stated that taxi identification is necessary as a control func-
tion for the taxi business (SOU, 2016, p. 86). At the same time, the inves-
tigation did not want to generalize the requirement of identification and
concluded that the formulation of a legal framework must be decided
from industry to industry. Estonia is one of the EU member states that has
most actively facilitated the development of the sharing economy. Various
Table 1 Examples on how transport services are organized within the sharing economy
Centralized Decentralized Non-commercial Decentralized Centralized transport
carpool carpool carpool transport networks networks
Example Car2go, Drivy, Gomore Blablacar UberBlack, Lyft, Taxi companies

Drive-Now (UperPOP)
Ownership Platform and Platform and Platform and Platform and vehicles Platform and vehicles
vehicles owned vehicles owned by vehicles owned by owned by different owned by same actor
by same actor different actors different actors actors
Operators’ profit Powered by All actors have Platform has a All actors have profit Business is run with a
interest profit possibility to profit profit interest but interests profit interest
not the owner of
the goods/services
Platform control over High Low Low High High
relationship vehicle
owners with
consumers
Communications Digital and Digital and physical Digital and physical Digital Physical (digital
environment physical communication occurs)
Advantages Integrated Already existing fleet Eludes regulations Already existing fleet Business is distinctly
in local transport of vehicles is used when driver does of vehicles is used and regulated
network: client and all actors can not have profit all actors can have
acts as driver have profit interest interest profit interest
Disadvantages Cost for fleet of Service ends up in Lack of profit High control of Legal framework
vehicles must be gray area regarding interest makes drivers and profit complicates possibility
carried by one current regulations platform less interest often leads to to find drivers. Central
central actor attractive for drivers direct conflict with actor must finance
legislature whole business
THE IMPORTANCE OF TRUST IN A DIGITAL EUROPE: REFLECTIONS…
Source: SOU (2016, p. 86)

189
Table 2 Overview of current legal framework regarding transportation services

in the sharing economy
Regulations directed toward Regulations directed toward the
the individual platform
Examples of tax – Manual declaration of – Chargeable information is sent

regulations business (Finland, 2018) directly from platform to tax
authority (proposal, Estonia,
Lithuania)
– Electronic tax receipt
(proposal, Estonia)
– Platform responsible for tax
payments (proposal, Belgium)
– Platforms’ legal person must
have a national registration
number (Finland, 2018)
Examples of – Access to photo of driver – Platform responsible for
regulations intended and vehicle registration background check and
to strengthen number before journey education of drivers
consumer safety begins (proposal, (Lithuania)
Estonia)
– Background check and
language test of driver
(Finland, 2018)
– Registration of driver’s
fingerprints (Austin,
Texas)
Examples of income – Great Britain allows tax
ceiling reduction of 2000 GBP
with exception of Uber
– Business exempted from
VAT and tax rate of 10
percent until €5000
(proposal, Belgium)
– Non-professional income
from sharing economy
businesses taxed with 10
percent until €10,000
(proposal, Italy)
Examples of – Both vehicle and driver – Unlimited amount of driver’s
registration must be registered licenses at company level
requirements (Finland, 2018) (Finland, 2018)
– Digital platforms must be
registered with tax authorities
(proposal, Belgium)
(continued)
Table 2 (continued)
Regulations directed toward Regulations directed toward the
the individual platform
Examples of other – Driver must be insured – Forbidden to raise prices

forms of limitations until USD one million during instances of temporary
(Massachusetts, USA) increases in demand
– Pre-order requirements (Massachusetts, USA)
of travel (New York, – Transparency on how prices
USA) are calculated (proposal,
– Forbidden to pick up Estonia; Finland, 2018)
passengers at airport
(Massachusetts, USA)
Examples of different – Individuals with income – No limitations on platform for
actions meant to beneath €5000 do not pricing (Finland, 2018)
simplify sharing have to register for VAT
economic activity taxes (proposal, Belgium)
– Taxi insurance not
necessary (Massachusetts,
USA)
Source: SOU (2016, p. 86)
actors within the sharing economy have been given support from the
Estonian government. Estonia’s Prime Minister, Taavi Rõivas, argued in
February 2016 that the business models that are prized within the sharing
economy not only lead to increased competition but also are well suited
for a sparsely populated country such as Estonia and create incentives for
people to become entrepreneurs.
The sharing economy is based on the fact that people can accomplish a
significantly higher number of transactions than before. A transaction cost
can be explained through the information, administration and follow-up
needed for a transaction to be conducted. Many platforms actively work
with multiple information services for its users to reduce transaction costs.
For instance, Swedish Blocket gives people living in Gothenburg who are
interested in purchasing a sofa access to qualitative information instead of
having to look for a second-hand advertisement or go to a flea market.
Other platforms use reviews and grading to enhance information for the
user of the services offered, all in order to reduce the cost for the user to
find the necessary information for the transaction.
Sharing economy platforms also work on lowering the transaction
administration costs. For example, Uber automated the payment process
and removed the need of the customer to manually inform the driver of his
position or destination, simultaneously as it provided the customer with

direct information on the estimated time of arrival. A technical solution that
reduced the number of steps in the transaction with decreased administra-
tive costs is the result. To make sure that all parties hold their promises is an
expensive and ceremonious process. Sometimes the parties have entered an
agreement without really understanding what is required by them, which
further complicates the follow-up. Follow-up is expensive, particularly in
complex transactions. The platforms also try to simplify the follow-ups with
the help of technical innovation. Finally, platforms are also trying to press
transaction costs by creating trust around the transaction moment.
Trust in a Digital Environment

Trust is one of the most complex concepts and has been researched exten-
sively across disciplines. Luhmann (1979) describes in his book, Trust and
Power, that trust is a collective attribute that emerges as different parties
interact while Bicchieri and colleagues develop the concept of trust at the
individual level and define it as ‘a disposition to engage in social exchanges
that involve uncertainty and vulnerability, but that are also potentially
rewarding’ (Bicchieri, Duffy, & Tolle, 2004, p. 286).
Trust can be seen as a measure of confidence or belief that the other
party will refrain from opportunistic behavior and behave in an expected
manner (Williamson, 1993), thereby fulfilling the trusting party’s expecta-
tions without exploiting its vulnerabilities (Pavlou & Gefen, 2002). Trust
enables relationships that one can neither completely predict nor control
(Luhmann, 1979), and without trust, uncertainty would lead to paralysis
among people and their society.
With the rise of digitalization, individuals are now able to interact and
engage in online social exchanges regardless of distance and any previous
relationships. For example, digitalization has enabled virtual teams and
organizations, crowdsourcing, e-commerce and, more recently, the topic
of this chapter—the sharing economy. However, these online exchanges
are generally characterized by a high degree of transaction complexity and
uncertainties, giving rise to the need for trust as an enabler (see e.g.
Friedman, Kahn, & Ho, 2000; Jarvenpaa, Tractinsky, & Saarinen, 1999;
Ratnasingham, 1998).
A considerable amount of research has been conducted on trust in
e-commerce transactions, in many ways a forerunner to the sharing econ-
omy. The lack of trust in web providers has been found to be one of the
main reasons individuals do not conduct online transactions (Hoffman,

Novak, & Peralta, 1999) while perceived risk negatively influences an indi-
vidual’s intention to purchase (Jarvenpaa et al., 1999). For one-time
transactions, the existence of trust between parties has been found to be
particularly important (Gefen & Straub, 2004) with antecedents to trust
being the individual’s disposition to trust, that is, a general propensity to
trust other parties that can influence an individual’s initial belief (Jarvenpaa
et al., 1999) and familiarity with the website (Gefen, 2000). Even aspects
such as nationality influence digital trust. A study of EU’s consumers
found that while 61 percent of consumers feel safe when purchasing online
from a retailer within their country, only 38 percent feel safe when they
purchase from a retailer from another EU country than their own
(Eurobarometer, 2014).
The research on e-commerce has further revealed that the concept of
trust is multidimensional. For example, auction sites such as eBay and
third-party aggregators such as Amazon marketplace have led researchers
to distinguish between trust in the individual sellers and buyers and trust
in the third-party platforms and intermediaries. One of the more interest-
ing findings of research by Hong and Cho (2011) is that consumer behav-
ior in an online marketplace is largely determined by their trust in the
well-established, trustworthy intermediary and not by their trust in the
individual sellers doing business in the marketplace, that is, trust in the
platforms and intermediaries is more important for users than trust in the
individual sellers on these platforms. Researchers suggest that this is
because intermediaries govern the entire transaction process through a set
of rules and structures—communication between buyers and sellers and
financial transactions (Hong & Cho, 2011; Pavlou & Gefen, 2002).
This trust in the intermediary platform is a form of institutional trust,
which may be the most important mode of trust in business environments
that lack familiarity (Pavlou & Gefen, 2002). Institutional trust can be
built through structural assurances, which can provide guarantees or safety
nets, for example, escrow services, credit card guarantees, legal recourses
and regulations (Pavlou & Gefen, 2002; Shapiro, 1987). Turning to the
sharing economy, researchers argue that building and sustaining trust in
online sharing economy transactions is more complex than in traditional
forms of e-commerce due to a number of factors (Hawlitschek, Teubner,
& Weinhardt, 2016; Möhlmann, 2016). Among them is the fact that a
large number of transactions tend to be one-off transactions among private
individuals who are merely coordinated through an intermediary platform,
thereby increasing the number of parties involved in all transactions

(Hawlitschek et al., 2016; Möhlmann, 2016). Second, even though the
matching occurs online, the transaction can occur offline in physical envi-
ronments, often leading to a social component that cannot be governed by
the platform since the transaction parties interact directly, for example, the
renting of a room (Möhlmann, 2016). Third, in many cases the object
being transacted differs, that is, merely accessed, used and returned and
not purchased—a shift from owning to accessing shared goods, leading to
the transaction being associated more with services than goods (Bardhi &
Eckhardt, 2012; Möhlmann, 2016) and to potentially more interactions
between the parties.
Due to these complexities, trust has even been labeled the sharing
economy’s ‘currency’ (Botsman, 2012). Hawlitschek et al. (2016) have
outlined a conceptual model that differentiates between three substantial
variants of trust: trust toward peers (interpersonal), trust toward the plat-
form (institutional trust) and trust toward the product/service underlying
the transaction.
Many platform providers in the sharing economy today have developed
extensive systems designed to build interpersonal trust, institutional trust
and product trust. For example, both suppliers and users are able to review
and rate one another and their products (e.g. Airbnb renters and owners)
while some platforms enable suppliers and users to gain different status
levels (e.g. Airbnb superhost status), as well as to verify themselves through
either uploading personal IDs or connecting their identities to social net-
work accounts such as Facebook or LinkedIn. Structural assurances in the
forms of escrow services, guarantees and insurance are also quite preva-
lent, as well as various measures to ensure privacy protection, transaction
security and transaction integrity, which have proven valuable in building
trust online (Wu, Hu, & Wu, 2010). These structural assurances can serve
to strengthen interpersonal trust due to trust transference, that is, when a
supplier does not provide any structural assurances but is associated with a
platform that builds trust through structural assurances, then trust in the
platform is transferred to the supplier (Stewart, 2003).
Despite these extensive measures, limitations to trust-building, such
as information reliability, have been found in online environments. For
example, users may artificially inflate the trustworthiness of others when
writing reviews or giving ratings because they may be friends or because
they may not be willing to write negative comments in fear of retribu-
tion due to the public nature of the platform (Lauterbach, Truong,
Shah, & Adamic, 2009). This need for trust in the sharing economy has
led to a search for new technological solutions. One such technology is
the blockchain, which is the underlying software behind the controver-
sial cryptocurrency Bitcoin.
The absence of physical interaction during a transaction makes the abil-
ity to build trust between strangers more difficult. The number of poten-
tial individuals involved in sharing economy transactions as well as the
individuals’ limited experience with the various sharing economy plat-
forms further makes the process of building institutional trust difficult.
The blockchain holds promise to resolve this situation as it goes beyond
the three forms of trust discussed here: interpersonal, institutional and
product to system-based trust in which individuals put their trust in the
strict formalized and transparent processes used to gain consensus in the
underlying system.
Can Blockchain Technology Increase Digital Trust?

In October 2008, an individual or group of individuals under the pseud-
onym of Satoshi Nakamoto published a white paper on the internet that
presented for the first time the idea behind a fully functioning block-
chain (Nakamoto, 2008). The paper describes a network of computers
wherein every computer has an identical copy of the network’s transac-
tion history, that is, a distributed ledger. In order to perform a transac-
tion, a user informs all computers in the network about the pending
transaction. The computers verify that the user is the rightful owner of
the assets that are to be transacted and, if verified, all copies of the net-
work’s transaction history are then updated to include the newly
accepted transaction. The true innovation of Nakamoto’s paper lies in
its solution to how a network of independent computers can reach con-
sensus with respect to its transaction history. Users of the network let
their computers compete in solving a very difficult cryptography prob-
lem. The first user to solve the problem enforces their version of the
transaction history onto the remaining members of the network. A
user’s possibility to change the transaction history is, therefore, propor-
tional to the amount of computer power that the user controls. However,
computer power is not free and in order to compensate users for their
work and expenses in reaching consensus, most blockchains are equipped
with a digital currency that is used to reward those who solve the cryp-
tography problem.
A shared transaction history also offers the possibility to implement

smart contracts on the blockchain, a concept developed by Szabo (1997).
Smart contracts offer networks a digital formalization of more complex
relationships as opposed to simple monetary transactions. The contract is
a set of instructions that enable a blockchain to execute certain actions
based on conditions specified in the contract. The fact that the contracts
are written in code means that, in theory, they can have the same function-
ality as other software applications. The fact that a contract has been veri-
fied by a blockchain means that the network has reached consensus
concerning the state of the contract. For example, in our traditional sys-
tem if a car is rented out, a contract is written. If needed, this contract can
be evaluated in a court of law. In this case, a judge performs the process of
reaching consensus on behalf of society. Whenever a medication is pre-
scribed, a doctor performs a consensus process of who is eligible for which
medicine. Blockchains offer a reliable way to reach consensus, which cre-
ates trust within a community and in its digital environment, which is a
major reason why blockchains are considered to be such a promising tech-
nology. However, the term ‘contract’ can be misleading, and it has been
pointed out that smart contracts primarily aim at enforcing contract rules
while not settling contract breaches (Werbach & Cornell, 2017).
In a blockchain network, all nodes have access to all information. This
architecture enables nodes to come and go without affecting the system.
Also, in order to eliminate the network, all nodes have to be eliminated.
However, the fact that all nodes have access to all information enforces the
need to encrypt sensitive user information. There are concerns about pri-
vacy protection in blockchain networks. For example, in the context of
Bitcoin, analyzing the transaction history has been shown to offer possi-
bilities of identification (Fleder, Kester, & Sudeep, 2014). The possibility
to identify users turns blockchain-stored data into personal data and, as
such, falls within the scope of the general data protection regulation
(GDPR) (European Parliament & the Council, 2016). This could cause
several problems since the GDPR enables users to demand that their data
be deleted. This, in turn, would bring into question the immutability of a
blockchain’s transaction history. Furthermore, the immutability of the
transaction history has not yet received a legal interpretation. This creates
uncertainty concerning blockchain-regulated ownership. The possibility
to edit the transaction history is often connected to the amount of com-
puter power that the user is able to offer the blockchain network.
There are three overarching types of blockchain protocols that have

been developed to achieve consensus: ‘proof-of-work’, ‘proof-of-stake’
and ‘proof-of-authority’. Consensus protocols that are based on computer
power are called proof-of-work protocols. The possibility to edit the trans-
action history can also be connected to a user’s exposure toward the net-
work’s digital currency, and these protocols are called proof-of-stake
protocols (BitFury Group, 2015). Proof-of-stake protocols create a more
cost-efficient consensus mechanism. However, it is easier to manipulate
the consensus process either by bribing or by simply being a large stake-
holder (Bentov, Gabizon, & Mizrahi, 2016). The third consensus proto-
col is proof-of-authority, where a predetermined number of members are
in charge of forming network consensus. These networks are called ‘pri-
vate blockchains’ and are considered easier to regulate due to the limited
number of users that can edit the transaction history. A common way to
compensate nodes that perform the work necessary to reach consensus are
transaction fees as well as the creation of a newly minted currency. Bitcoin
has a predetermined number of coins, which makes Bitcoin a deflationary
network. However, there are also inflationary networks as well as block-
chain networks without a cryptocurrency.
The architecture of a blockchain is of importance to the EU since it
affects both economic and regulatory activity. Is it possible to regulate a
completely open and distributed blockchain? Furthermore, how will the
economic activity be affected by a deflationary compensation mechanism?
Closed blockchains are considered easier to regulate; however, they could
also jeopardize democratic values as well as trust. Bitcoin is the oldest
blockchain and has an open architecture, wherein a user’s possibility to
edit the transaction history is weighted with respect to computer power.
Ethereum is also an open blockchain and has a similar architecture to
Bitcoin. However, Ethereum implements a more advanced programming
language than Bitcoin, which makes it more suitable for smart contracts.
There are several blockchains that are already being developed and Table 3
provides an overview of some larger blockchain initiatives.
Blockchains and the EU
At only nine years old, blockchains are a young phenomenon but are
being rapidly developed, often in sectors that are central to the EU. For
example, the technology could potentially improve healthcare systems
Table 3 Overview of different blockchain actors based on platform access and

transactions processed by the platform
Who do I trust to maintain a truthful record?
Central Group of Group of No one

authority known actors some
known
actors
What kind of Ownership of Central Bank, R3CEV Ripple Bitcoin

relations are on-platform Commercial
regulated by assets Bank
the platform? Ownership of Custodian Hyperledger Ripple Colored
off-platform Bank Coins,
assets Counterparty
Obligations Clearing Eris Ripple Ethereum
and rights House
arising from
agreement
Source: Richard Gendal Brown, R3CEV
due to its use of encrypted communication. Blockchains could also be

used to improve auditing as well as increase financial participation within
societies due to low entry barriers (European Parliament, 2016; UK
Government Office for Science, 2015). Transparency in public decision
processes can be improved and, as a consequence, increase citizen trust in
public institutions. Smart contracts are thought to improve the protec-
tion of critical infrastructure against cyberattacks. Also, reaching the
‘5 × 5’ goal of reducing global transaction costs to under 5 percent within
five years is expected to be improved through the blockchain technology.
The large gap between expected and actual sales tax revenues within the
EU could also potentially decrease with improved economic control
(European Parliament, 2016). One of the biggest challenges in reaching
the EU 2020 goal of further innovation is to improve as well as simplify
regulations relating to patent and copyright laws (European Parliament &
the Council, 2013). At the same time, blockchain-based companies are
offering customers the possibility to upload files on the blockchain in
order to get a time-stamped proof of ownership. This time-stamped doc-
ument can be used in future disputes concerning immaterial ownership.
Furthermore, organizations are offered a complete and unified transac-
tion history, resulting in new opportunities for improved auditing and
accounting. For example, the ‘Big Four’ professional consulting firms

Deloitte, EY, PwC and KPMG are all early adopters of the technology
(NEWSBTC, 2017). Blockchain technology is even used to improve digi-
tal identification by companies like Cambridge Blockchain LLC, which is
developing an identity software with several leading global financial insti-
tutions (Medium, 2017). The possibility to implement a European docu-
ment of identification would further strengthen the European digital
market. This single document could potentially replace many of the pass-
words that people use today and could potentially increase digital security
within the EU.
There are several blockchain companies actively seeking to further
develop the sharing economy. For example, some companies are develop-
ing solutions for the distributed storage of files, where ordinary persons
can rent out available disk space, offering a storage solution that is often
cheaper than their traditional equivalence. The distributed architecture
offers completely new ways of value creation for European citizens while
also offering consumers an alternative to established producers. There are
several examples of blockchain companies trying to increase trust in the
sharing economy. For example, one blockchain-based company is working
to solve the problem of insurance companies that are not insuring third-
party players in the sharing economy and another is developing digital
locks controlled by a blockchain with the goal of becoming the future
infrastructure of the sharing economy. Blockchains could also connect dif-
ferent services with each other, thereby making trust gained in one plat-
form accessible in another platform.
Allianz, one of Europe’s largest insurance companies, has already
started to use smart contracts to improve their settlement processes.
However, when smart contracts are implemented in more complex situa-
tions, the EU will have to deal with the ever increasing complexity prob-
lem. The increased digital trust that blockchains are believed to generate
can quickly disappear when smart contracts become more and more
dependent on organizations and experts outside the control of the block-
chain. This complexity problem is considered to be one of the biggest
challenges that blockchains face today and is further highlighted by the
smart contract’s lack of remediation. For example, Werbach and Cornell
(2017) point out that present legal systems will probably see an increase in
the demand for remediation due to an increased use of smart contracts.
This will require the EU to develop a deeper understanding as to how
blockchain technology is used and what functionality it fulfills.
While blockchain technology enables increased economic activity as

well as a more efficient bureaucracy, the technology also offers new
opportunities for money laundering and other forms of criminal activi-
ties such as financing terrorism. This has encouraged the Financial
Action Task Force (FATF) of the G7 group to recommend that all EU
member states put the same regulatory demands on currency exchanges
that deal with digital currencies as they do on those that deal with fiat
currencies (FATF, 2015). The European Commission also recommends
that virtual currencies be included in existing directives concerning
money laundering and the financing of terrorism. Those that control
access to digital currencies should be considered responsible and be
treated as existing financial institutions (European Commission, 2016b).
However, the European Banking Authority points out that including
digital currency exchanges in the present regulatory framework forces
those exchanges to obtain separate permission for each country where
their services are offered (European Banking Authority, 2016). This
would lead to large administrative costs since digital currency exchanges
are global actors. The European Parliament has noted in resolution
2016/2017 (INI) that too harsh a regulation could jeopardize the
development of blockchain technology. At the same time, regulation
could quickly become necessary since the technology is implemented in
critical infrastructure.
The EU sees several opportunities with blockchain technology. But how
active are the different member states and what role should the EU play in
this process? The UK and The Netherlands are the two countries that invest
the most in blockchain technology (Hilerman, 2016). Both countries have
a well-developed financial sector, which could explain their prominent posi-
tion. Since 2008, Estonia has been storing medical records with the help of
blockchain technology with over a million citizens now able to store their
medical history on a blockchain. This is considered to increase patient
safety as well as reduce medical fraud (Aru, 2016; Palmer, 2016). Estonia
has also shown interest in launching their own digital currency called estcoin
(Korjus, 2017). Poland has a national digitalization plan that describes a
willingness to improve financial security through blockchain technology
(Kastelein, 2016). The German-based company, BlockCharge, is working
on a blockchain-based solution for electricity distribution in the context of
electric cars (Tual, 2016). Sweden has explored the possibility of using
blockchain technology in registering land ownership in a collaboration
between the Swedish government and the companies Chromaway
and Kairos Future (Kempe, 2017). Bitcoin is highly volatile and the price
can often change between the time of order and the time of purchase, and
Safello, another Swedish company, is an example of a financial service that
enables their customers to lock the Bitcoin price at the time of ordering in
order to reduce the effect of Bitcoin’s volatility. However, if a user decides
to use Safello, they need to verify their identity before they can purchase
Bitcoins. This demand of identification is in line with the regulatory frame-
work proposed by the European Commission (European Commission,
2016a). However, legal demands in a digital context are often hard to
enforce and there are already various services, such as mixing services and
tumbler that offer users the possibility to not connect their identity with a
specific financial transaction.
Finally, outside of the EU, Russia has banned several cryptocurrency
websites in an attempt to make it more difficult for normal users to use
cryptocurrencies (Raza, 2016; Silver, 2017). China has banned Initial
Coin Offerings (ICO), which are a form of fund-raising often used by
blockchain startups (Acheson, 2017), and the US Securities and Exchange
Commission has ruled that, regardless of the form of currency being used
and regardless of a firm’s stateless status, if the product is offered to
American investors, it is bound to US security laws (U.S. Securities &
Exchange Commission, 2017). On the other hand, the Singapore
Monetary Authority has stated that they will not regulate cryptocurrencies
(Amin, 2017). Blockchain technology is a global phenomenon and when
the EU develops its position with respect to blockchain technology, it is
also developing its position within a global digital society.
A Future Digital Partnership for the EU

The European sharing economy can help create new jobs in several differ-
ent ways. Blockchain technology enables the development of a sharing
economy with increased levels of trust and security, a key factor in order to
create new jobs. A consequence of the sharing economy is that risk is
moved from the traditional middleman to the user. This means that the
more users a platform has, the more perceived trust it is able to generate.
Blockchains also enable networks to use formal consensus processes
instead of traditional middlemen. When the blockchain is used as the
underlying infrastructure for cryptocurrencies, traditional banks are being
replaced by a machinery of trust. This same technology can be used in
other areas. However, in order to create new business opportunities within
all areas of the sharing economy, blockchain technology needs to be fur-

ther developed as well as implemented.
By monitoring technical development, the EU can adjust regulatory
frameworks in order to enable economic growth. The EU has already cre-
ated an initiative called the European Observatory on Blockchain
Technologies in order to better understand the new technology (European
Commission, 2017). The EU has even started to develop a Financial
Transparency Gateway that, through blockchain technology, seeks to offer
reliable financial information about companies within the Union (Higgins,
2017). Implementing blockchain technology could lead to increased trust
in EU institutions and, at the same time, improve digital integrity given its
prevalent use of encrypted data. Access to anonymous systems does, how-
ever, create new opportunities for tax evasion and other criminal activities.
It also becomes harder to protect workers and consumer rights within the
sharing economy if more and more information is being encrypted. To
ensure that new technology is developed in a way that serves European
citizen, the EU needs to become a user, a financier and a developer of the
technology. The creation of a single digital market with new opportunities
for value creation is a necessity if European societies want to benefit from
the process of digitalization. The sharing economy and blockchain tech-
nology are being developed as a response to the lack of integrity, trust and
low transaction costs—all problems of the digital economy. EU officials
seem to share this view, which creates opportunities for the EU to enter
into new digital alliances.
To simply apply existing regulations on emerging digital phenomena
jeopardizes the creation of a single digital market. The integration of the
sharing economy into the European regulatory framework needs to be
achieved through cooperation. The EU and its member states need to
understand how regulatory frameworks can both help and destroy these
new phenomena. However, those who develop services based on sharing
economy strategies as well as blockchain technologies need to understand
the responsibility that the EU has in relation to its citizens, and they must
help the EU to ensure this responsibility within a digital context. Actively
developing a new digital society requires member states to make joint deci-
sions on how they want to see the technology evolve. For example, a deci-
sion must be made if the EU wants to establish a global standard for the
technology. A uniform standard would facilitate the communication
between organizations and authorities. However, a premature standardiza-
tion could lead to the implementation of suboptimal technologies and
monopolistic situations could arise. The EU should also decide whether the
Union should encourage open instead of proprietary source code and if this
will guide how research and development funds are distributed. The
European Parliament has already expressed its willingness to support proj-
ects based on open source code as this is considered to promote both demo-
cratic and economic values. Open source support becomes a distribution
policy tool when access to information is becoming increasingly valuable.
In a private blockchain, only a predetermined number of nodes are able
to edit the history. Private blockchains offer increased integrity and simpli-
fied regulation as well as reduced energy consumption. At the same time,
private blockchains reduce ordinary citizens’ ability to participate. This
makes it more difficult to create digital environments characterized by
both trust and democracy. Public blockchains will contribute to the EU’s
economic and democratic visions and they should therefore be supported.
The negative description that the sharing economy sometimes receives in
the media (e.g. how drivers and companies try to escape taxes as well as
how the platforms take advantage of their users) should be nuanced with
descriptions that focus on how actors in the sharing economy contribute
to growth and sustainable development as well as the inclusion of weak
social groups, all of which are intermediate goals in the EU 2020 strategy
(European Parliament & the Council, 2013). As Bitcoin and blockchain
technology start to produce lasting positive results with respect to eco-
nomic development, the description of these phenomena should change
to focus less on illegal trade and money laundering and more on robust
digital systems as well as increased trust in the digital environment. This
would, in turn, facilitate further development of these technologies.
Success stories of individuals and companies from the sharing economy
and the blockchain sector should be told in order to inspire others to
explore these areas.
Furthermore, there is no systematic measure of the value that is created
within the sharing economy, which further complicates the communica-
tion of sharing economic effects. Uniform approaches for measuring shar-
ing economic activity should be developed, especially when it often adds
to or completely overtakes current economic activity. Meanwhile, mea-
surement is often complicated by the fact that many activities lack a mon-
etary value, such as couchsurfing, while other activities cannot be measured
by changes in GDP, such as renting a room on Airbnb.
The ongoing transformation highlights the labor market’s urgent
need to offer fast retraining and re-education when jobs disappear due to
digitalization, automation and blockchain implementation. At the same

time, higher education must prepare to respond to this need, and the
governments of the EU member states should actively advocate the use
of platforms offering Massive Open Online Courses (MOOCs). Courses
in future subjects such as blockchain technology should be given priority.
In parallel, new certification programs and platforms should be designed
to enable individuals to verify the completion of MOOCs. This would
increase mobility within the European labor force as well as increase the
possibilities of finding internet-based work. Finally, since the sharing
economy is a global phenomenon, workers in the EU will have increased
chances of finding online jobs with overseas companies.
The sharing economy has the potential to increase economic growth
when individuals can sell their time, products and services on a global
market. Traditional forms of employment are challenged when individuals
can earn an income through several sources such as renting out rooms,
offering catering services or selling services through digital platforms.
Most current regulations that target the labor market are based on the
perception that individuals either are employers or employees—something
that is not optimal in a sharing economy. Regulation must be reviewed so
that it does not prevent people from participating in the sharing economy.
For example, many English sole proprietors are subjected to a penalty tax
based on a rule that originates from the early twentieth century that was
originally intended to encourage people to leave home to take on factory
work. EU member states should encourage citizens to explore opportuni-
ties for value creation while facilitating organizations that make this value
creation possible in a safe environment.
Blockchain technologies are able to reduce the importance of national-
ity in the relationship between consumers and companies. The need to
rely on a specific company has disappeared and it is now enough to trust
the blockchain. As a consequence, entry barriers to business opportunities
and trade are reduced, which not only strengthens the EU’s internal digi-
tal market but also, we might even say, European democracy. EU member
states must work for parsimonious regulations with respect to the sharing
economy and blockchain technology. For example, transport services
within the sharing economy show that European regulations differ con-
siderably, with some countries increasing the regulatory burden while
others are reducing it. Various regulations within the EU can lead to fur-
ther imbalances in growth and labor market characteristics. Also, the abil-
ity to handle the continued digitalization and automation of society are
adversely affected. We have developed the following recommendations for

the EU based on our research:
1. Expand the EU Blockchain Observatory and Forum into a lab

where different blockchain networks and applications can be tested
and developed while learning from each other, with a specific focus
on sharing economy applications. For example, examine whether a
standardized blockchain should be implemented within the EU or if
different industries should develop their own. Enabling trial and
error in the development phase is of great importance in order to
detect risks associated with the technology.
2. Develop EU regulations enabling flexible control structures in order
to not risk the robustness and reliability of blockchain technology
nor hamper the sharing economy.
3. Open a dialogue with the US and other non-European countries on
regulatory issues.
4. Strengthen the confidence in blockchain technology within the EU
through a broad and in-depth analysis of the possibilities of block-
chain technology as well as its challenges, for example, the possibil-
ity to improve welfare systems with increased institutional trust as a
result, with a particular focus on the sharing economy.
5. Provide all EU citizens access to high-speed internet; this can be one
of Europe’s most important democratic issues and is necessary for
the EU’s single digital market to become a reality.
6. Explore the opportunities to implement sharing economy principles
and technologies in the field of energy efficiency.
Notes
1. The number of blockchain initiatives by major institutions has increased
from 22 in the third quarter of 2015 to 34 in the fourth quarter of 2015 to
25 in the first quarter of 2016. Today there are more than 80 financial and
other institutions in the R3CEV consortium to develop the Corda block-
chain for the financial market and more than 150 organizations supporting
the development of Hyperledger.
2. See more information about the Europe 2020 strategy on the European
Commission’s website: https://ec.europa.eu/info/business-economy-
euro/economic-and-fiscal-policy-coordination/eu-economic-governance-
monitoring-prevention-correction/european-semester/framework/
europe-2020-strategy_en
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Trust and Crises in the EU:
Exit, Voice and Loyalty
Göran von Sydow
The European Union has been in a state of crisis for several years. Several
subsequent crises have come one after the other: the euro crisis, the refu-
gee crisis and most recently ‘Brexit’. The Union’s leading representatives
seem to have been deeply affected by the grave situation. The President of
the European Council, Donald Tusk, spoke in September 2016 about the
EU being in an ‘existential crisis’. In the same month, the President of the
European Commission, Jean-Claude Juncker, also painted a dark picture
of the state of the Union:
Never before have I heard so many leaders speak only of their domestic
problems, with Europe mentioned only in passing, if at all. Never before
have I seen representatives of the EU institutions setting very different pri-
orities, sometimes in direct opposition to national governments and national
Parliaments. It is as if there is almost no intersection between the EU and its
national capitals anymore. Never before have I seen national governments
so weakened by the forces of populism and paralysed by the risk of defeat in
the next elections. Never before have I seen so much fragmentation, and so
little commonality in our Union. (Juncker, 2016)
G. von Sydow (*)

Swedish Institute for European Policy Studies, Stockholm, Sweden

212 G. VON SYDOW
Juncker’s bleak picture illustrates a state of severe tensions in the

EU. Tensions between the EU member states, between member states
and EU institutions and between the electorate and the elected. In a nut-
shell: the Union seems to have entered into a phase of diminishing trust.
The concept of trust is hard to pin down and it may seem as if we tend
to notice its absence much more than its presence. The antonym of trust
is distrust. The synonyms are fairly wide-ranging: confidence, assurance,
reliance, faith, hope, belief. In relation to the European integration pro-
cess, the related concept of loyalty also seems relevant. Rothstein empha-
sises that personal loyalty depends on how we perceive and anticipate the
loyalty of other persons (Rothstein, 2005). In cooperative situations, we
make judgements about how we believe the others are going to act in the
future. The EU has evolved into a comprehensive cooperation in which
the member states are becoming increasingly embedded with each other,
but the EU is not (yet) a state. European integration is asymmetric in rela-
tion to the ‘what’ and the ‘how’ of cooperation. Due to this embedded-
ness and interdependence, however, a certain degree of loyalty and trust
has been considered essential to the survival of the EU in its present form.
Mutual trust is also necessary between the member states and the suprana-
tional level.
There are various ways to approach the problem of trust in the EU. In
this chapter, I focus mainly on trust between EU member states and
between member states and EU institutions. One cannot, however, ignore
the degree of trust that exists between citizens and their representatives
(see Linda Berg’s chapter in this volume). The EU is not structured as a
federal state; it is rather a far-reaching process of integration that trans-
forms the member states (see e.g. Bickerton, 2012). Although democracy
remains primarily national, the EU project is profound and imposes con-
siderable demands for loyalty. In earlier stages of the integration process,
the asymmetric relationships between power and accountability could be
upheld through a ‘permissive consensus’ that relied on the trust of citizens
in their national leaders and the often uncontroversial nature of EU poli-
cies (Lindberg & Scheingold, 1970). As the EU has become increasingly
involved in politically contested issues and policies while political leaders
have found it ever more difficult to mobilise support, the conditions for
cooperation in the EU are changing (Hooghe & Marks, 2009). Protests
against the austerity policy in the wake of the euro crisis, opposition to the
refugee policy, ‘Brexit’, national opposition to EU free trade agreements
with the US and Canada, are all signs of a heightened level of conflict and
TRUST AND CRISES IN THE EU: EXIT, VOICE AND LOYALTY 213
possibly an expression of rising mutual distrust of one another and of the

European integration project as such. As a result, national leaders are find-
ing themselves squeezed between loyalty to the EU and responsiveness to
their own voters.
European integration is becoming increasingly politicised, which raises
questions about what basis for legitimacy can bolster the long-term sus-
tainability of the system. For this reason, this chapter is devoted to a dis-
cussion of the EU’s legitimacy problem that brings the relationship
between exit, voice and loyalty to the fore as being of fundamental impor-
tance to the function and survival of political systems. The euro crisis with
focus on the troubles in Greece, the British impending exit from the EU
and the EU’s management of the refugee crisis are analysed through the
lens of this conceptual triptych. These dramatic events also have bearing
on what future European integration is heading for, in that all of these can
be considered systemic crises for the EU. A distinct retreat to nationalism
can be seen in the light of the surfacing antagonisms and the widespread
suspicion that EU member states seem to entertain about each other’s
loyalty. The antagonism within and between the member states is, of
course, obvious in the case of ‘Brexit’ but also in relation to opposition in
some EU member states to participating in the common refugee policy
and to cooperation in the euro zone. How does one compel greater loy-
alty from the member states to adhere to decisions once made? What is the
right balance between exit and voice to instil loyalty? The concluding dis-
cussion focuses on the EU’s future constitutional policy choices and the
prerequisites for restoring trust.
Trust and Loyalty in the EU

In spite of the supranational elements of the EU, democracy remains
national. This formula for coexistence is expressed in an ‘informal pact of
confidence’. This takes place in terms of a ‘living constitution’ in the EU,
where the member states remain loyal to the Union and where the supra-
national elements are exercised with respect for national democracy
(Gustavsson, 2014). During the euro crisis, attention was brought to signs
that the pact of confidence was beginning to crack and that national recal-
citrance can be interpreted as an expression that EU countries no longer
trust that the balance between common and national interests is being
appropriately struck. Article 4 of the Treaty on European Union includes
both the second paragraph, which addresses respect for national identities,
214 G. VON SYDOW
and the key principle of ‘sincere cooperation’ (Article 4(3) TEU).

Together, these balance each other as regards loyalty to the supranational
Union from the member states’ perspective and respect for the member
states’ national identities from the supranational Union’s perspective. The
conflicts surrounding the EU refugee policy in recent years serve as a good
example of how the limits of the pact of confidence are being tested. This
applies both to the EU member states that are resisting coercive European
actions aimed at forcing solidarity through hierarchical governance and to
the member states that support the established policy and whose loyalty to
the system is at risk of eroding if joint responsibilities and regulatory com-
pliance fail to materialise.
It was in hopes of what practical cooperation would lead to that French
Foreign Minister, Robert Schuman, composed the by now famous text
calling for a united Europe. In the Schuman Declaration of 9 May 1950,
it was stated that ‘Europe will not be made all at once, or according to a
single plan. It will be built through concrete achievements which first cre-
ate a de facto solidarity.’ Seen from an academic perspective, Haas described
the integration process as ‘the process whereby political actors in several
distinct national settings are persuaded to shift their loyalties, expectations
and political activities towards a new centre, whose institutions possess or
demand jurisdiction over the pre-existing national states’ (Haas, 1958).
But do these conditions of shifting loyalties apply today?
It seems that the deeper cooperation within the EU reaches, the greater
the demands on trust becomes. Somewhat pointedly, one might ask: are
the euro crisis, ‘Brexit’ and the refugee crisis pushing the EU towards
becoming more like a real state or are these crises rather the beginning of
a process in which the EU is falling apart? Just as the euro crisis revealed
the weaknesses of the unfinished European structure, the latest develop-
ments show that the EU’s specific, soluble formula for cooperation is sen-
sitive to severe stresses. Having a common monetary policy but no
common fiscal policy gives rise to tensions. The refugee crisis highlights
the dilemma of free movement within the EU but without having fixed
external borders or common refugee policy. ‘Brexit’ lays bare the funda-
mental uncertainty about where the EU begins and ends, which in turn
begs the question of what loyalty can be demanded and by whom. Is the
choice between taking ‘the great leap forward’ towards the building of a
federal state or dismantling that which has been achieved thus far getting
closer? Those who advocate a leap forward suggest this could achieve bet-
ter balance between power and accountability and argue that this could
restore trust. Those who instead consider this to be a perilous path argue
that the fundamental prerequisites for taking such a step do not exist and
that trust would instead be severely damaged. Promoters of a sort of in-
the-middle muddle-through perspective emphasise that even though the
EU is facing severe stresses in which trust and loyalty will be challenged,
integration will nevertheless proceed in small steps.
The loyalty of the EU member states can thus be seen as a manifesta-
tion of trust, and yet political leaders need to be responsive to public opin-
ion in matters that have become increasingly politically sensitive. The
three disruptive challenges—systemic crises—for the EU referred to above
can all be, I contend, regarded in the light of the concepts of exit, voice
and loyalty. These concepts have been used by scholars including Stein
Rokkan when he studied state formation and nation-building processes in
Europe (Rokkan, 1970). Interaction and balance between how difficult it
is for political entities (people, social actors, territories, states) to exit a
context and what opportunities for political influence exist are central to
this typology, in which loyalty is seen as a mediating factor. If the balance
between exit controls and voice channelling is distorted, problems of loy-
alty (and trust) will ensue. The evolution of the EU should not be regarded
as a classical state formation process, but the issues that the EU nowadays
has become increasingly involved in impinge on matters related to core
state powers. Over time, the scope of European integration has expanded
and extended into policy areas that are more politically controversial (De
Wilde & Zürn, 2012). Taken together, this puts sharper focus on the basis
of the legitimacy of the Union.
A State in the Making?
The hybrid nature of the EU as something more than a strictly intergov-
ernmental organisation but less than a federal state offers a particular chal-
lenge. If one were to regard the European integration process as an
endeavour to engage in state formation, it can be useful to analyse it by
applying the concepts of exit, voice and loyalty. When Stein Rokkan wrote
about the emergence of the nation state, he was inspired by Albert
O. Hirschman’s classic book Exit, Voice and Loyalty: Responses to Decline
in Firms, Organizations and States. Put in simple terms, Hirschman’s the-
ory seeks to explain how we behave in response to decline. Should one
leave, object or acquiesce? Aimed at categorising alternative ways of react-
ing, Hirschman introduced the concepts of exit, voice and loyalty. Exit
216 G. VON SYDOW
entails switching suppliers, organisations, states or parties. The cost of

exit—as for entry—varies with the associated sanctions or the cost of out-
side options. If you are unhappy with the country you live in, you can
choose to emigrate, but this will result in costs: economic (you must find
another means of support), political (you might need to become a citizen
of a new country) and cultural (you must probably learn a new language).
If you are unhappy at work or in a relationship, you will face similar calcu-
lations. Instead of exit, you can choose voice, that is, to attempt to affect
your situation. The higher the cost of exit, the more reason to instead seek
to influence the content of the policy or the organisation (Hirschman,
1970). Hirschman does not, however, give a clear definition of loyalty
(Bartolini, 2005). Loyalty is instead an intermediate category used when
individuals consent to or accept something they feel strongly about and
which is perhaps an important part of their identity. Loyalty thus becomes
an expression of internalised boundaries.
Rokkan developed Hirschman’s essentially economic model of indi-
vidual behaviour into a macromodel of state formation. From this per-
spective, state formation involves limiting opportunities to exit a territory
by establishing and upholding boundaries. This refers to boundaries in a
wider sense than purely territorial: that is, also military, legal, economic,
cultural and political boundaries. The legal, cultural, economic and politi-
cal systems of the various European territories are also differentiated
through boundary building, which lays the foundations for the differences
between Europe’s nation states. According to this perspective, European
history can be read as a process aimed at making all of these boundaries
coincide within the framework of one (nation) state. From Rokkan’s point
of view, loyalty becomes the mechanisms and structures that hold the parts
together. Loyalty becomes a system-building component based on iden-
tity, solidarity and trust.
But it is important to remember that the differentiation in which vari-
ous overlapping systems in Europe are gradually separated and result in
the nation state is a process that spans several centuries (see e.g. Tilly,
1992). European history can be interpreted through the boundaries that
are created and removed. Again, boundaries refer to not only physical
border controls but also political-administrative, legal, economic, cultural,
military and linguistic boundaries. The state controls the costs of entry
and exit and how citizens and organisations can influence policy.
Importantly, state formation precedes both nation-building and democra-
tisation. In the often turbulent processes leading up to the birth of m
odern
democracy, the nature of external boundaries is profoundly important. In

peaceful state formation processes, the absence of conflicts about bound-
aries is beneficial to creating the right balance in order to control exit and
the voice of the citizenry. When democracy collapses, for example, during
the interwar period in Europe, the balance is skewed (Rokkan, 1970; Flora
et al., 1999). Unsettled boundaries were replaced with border conflicts,
wars and oppression, causing the nation state in several places in Europe
to take on its most destructive form as of yet.
Is examining the balance between exit control and voice channelling in
today’s EU a productive approach to understand how the EU as a political
system is developing? By illustrating what this balance looks like in relation
to a few contemporary examples, this chapter sheds light on the EU’s
present constitutional challenge. The EU thus entails an internal lowering
of boundaries, at least partially, and a weakening of differentiation between
its member states in the EU territory. But is the EU a kind of state forma-
tion? Well, not really. The EU is instead another form of cooperation
where new, hard external borders are not being built and where the mem-
ber states have chosen to retain several central functions while still delegat-
ing authority to the EU when and where necessary to solve common
problems. The gradual enlargement of the EU and the close relationships
to neighbouring countries have also blurred the Union’s external bound-
aries. Territorial boundaries will remain unclear due to ‘Brexit’—and this
also depends on what ‘boundary’ one is referring to. The external bound-
aries are porous and the ‘height’ and ‘strength’ of internal boundaries vary
between different types of policy areas in the EU. The EU has strong
regulatory mechanisms but only in certain areas, a strong judicial system
but weak central administrative power and weak military and fiscal policy
capability (Bartolini, 2005). In spite of these limitations, the integration is
of such importance that we can, like Bickerton, talk about a profound
transformation of member countries by which they are transformed from
nation states to member states, a development that the states themselves are
pushing for (Bickerton, 2012).
Free movement within the EU is driving deeper cooperation because
it is utterly apparent that problems become common and the same then
goes for potential solutions. The EU member states, however, have not
chosen to give the EU more power to decide over matters they perceive
as close to their own sovereignty. The central path through which
democracy works in the EU is still at the member state level, which is
also where it derives its legitimacy. Bartolini has applied Rokkan’s theory
218 G. VON SYDOW
on state formation and nation-building to the EU in his work on the

borders and boundaries of Europe and its ‘peculiar’ form of state forma-
tion. Bartolini argues that the EU’s ‘political production’ is not com-
mensurate to the loyalty that can be summoned from countries and
citizens. There is only weak system-building capacity in the EU. The
weak political structures and the lack of a common European identity
become a significant hindrance to the supranational level’s capacity to
compel results and support for decisions. Bartolini is, however, highly
sceptical of attempts to democratise the EU from the top down because
the political structures needed to lend meaning to a supranational
European democracy do not exist (Bartolini, 2005).
It is also notable, however, that the multitude of opportunities for par-
tial exit (i.e. choosing to opt-out of certain areas of the cooperation) make
the issue of legitimation in the EU different to a situation where there is
stronger control of exit options. Genschel and Jachtenfuchs (2016) have
studied how European integration within ‘core state powers’ has devel-
oped over time. They determine that there is steady growth of formal
authority in the EU over core state powers (e.g. coercive power, public
finance, public administration). In contrast to historical examples of feder-
alism, where nationalisation of the core state powers triggered an institu-
tional, territorial and political consolidation of the emerging state, the
integration within the EU of these powers of EU member states is instead
linked to institutional, territorial and political fragmentation. Unlike the
creation of the Internal Market, the integration of core state powers is not
being driven by business interests but by national elites and (constraining)
expressions of public opinion. Genschel and Jachtenfuchs conclude that
the integration of core state powers is leading to deeper integration but,
ironically enough, less federation. The differentiation that arises is not of
the ilk where the EU is moving at clearly different speeds, although the
euro zone is a form of distinctly deepened cooperation; instead, the
boundaries are blurred and overlapping in policy-specific forms of ‘variable
geometry’ or ‘Multispeed Europe’. Genschel and Jachtenfuchs argue that,
contrary to the expectations of the Euro-federalists, this type of integra-
tion is not contributing to ‘an ever closer union’ and a more federal Europe
but is instead driving Europe’s populations apart and fragmenting the EU,
territorially and institutionally. The more the EU is involved in policy areas
that define the state, the clearer it becomes that there are enduring differ-
ences between the EU and a state. But there is one difference here that is
based on whether the EU builds its own capacity, which tends to lead to
politicisation and fragmentation, but this does not seem to be the case
when the EU devotes itself primarily to regulatory activities.
Legitimacy and Voice in a Multilevel Polity

Beyond the overarching narrative of the European integration process as a
way to prevent large-scale wars in Europe, the traditional way to legitimate
the EU has been linked to higher efficiency gains. Common EU regula-
tions have made it possible to demonstrate the benefit of integration in
relation to effectiveness. Scharpf describes how the EU’s capacity ulti-
mately lies in generating ‘output legitimacy’, while the EU’s structure
does not offer the same alternatives when it comes to ‘input legitimacy’
(Scharpf, 1999). The EU is still based on the idea of conferral of powers,
where the EU member states are the masters of the treaties and democracy
chiefly remains with them. Because there is no effective means of exercis-
ing accountability at the supranational level, there is also no effective dem-
ocratic input side. Such a link would, in Scharpf’s view, be required if it
were to pursue policies of a redistributive nature. Removing barriers to
trade in order to create an efficient Internal Market, however, is doable
based on a purely output-oriented logic of efficiency (Scharpf, 1999).
In the early 1970s, Lindberg and Scheingold identified the ‘permissive
consensus’, meaning that citizens of EU (then European Economic
Community (EEC)) member states could accept the transfer of power to
the European level with no consequent implication that the supranational
Union (then Community) was democratic or that there were any oppor-
tunities for demanding accountability at the European level (Lindberg &
Scheingold, 1970). The democratic deficit, which can in its most con-
densed form be described as an asymmetric relationship between power
and accountability, could be accepted because citizens had a high degree
of trust in their national leaders. In addition, the matters regulated at the
European level were of a technical nature and rarely concerned redistribu-
tive aspects. Today, Hooghe and Marks are describing a post-functionalist
integration where permissive consensus has been replaced by a ‘constrain-
ing dissensus’ (Hooghe & Marks, 2009). A few decades ago, the low
political salience of EU policies and issues among the European elector-
ates gave political elites wide scope to drive EU integration onwards. But
as the policies and issues addressed within the framework of the EU have
become increasingly politicised and have come to encompass matters that
are traditionally the subject of political conflict and domestic policy
220 G. VON SYDOW
competition, a constraining popular opinion has emerged in many EU

member states.
The potential for political mobilisation against the EU is a ‘sleeping
giant’ that can be awoken by increasing the salience of the issues dealt with
by the EU (van der Eijk & Franklin, 2004). There is a distinct pattern of
discrepancy between public opinion towards the EU and the election
results of parties representing a similar point of view. The electorates in
most EU member states have tended to vote for political parties that are
more positive towards the EU than the electorates are. The explanation
for this discrepancy of opinion presented in the research often has to do
with the relatively low importance of EU issues in eyes of the voters when
they go to the polls (von Sydow, 2013). When the EU project involves
issues of a more politically sensitive nature, mobilisation may ensue. This
mobilisation of opposition is facilitated by its linkage with other matters
related to boundaries, such as immigration, multiculturalism and free
trade (Kriesi et al., 2012). Combined, these issues form a new dimension
in politics, exploited primarily by radical right-wing populist parties. These
parties inject a high dose of establishment critique into their political mes-
sages. National leaders find their scope of action restrained when they
must take a clearer stance in relation to public opinion in EU matters.
And yet, there are obvious difficulties with how interaction with the
electorate should take place in the EU and as regards EU issues. Mair
contends that there is a problem in that the EU tends to have a depoliticis-
ing effect. The internationalisation of decisions shrinks the scope of
national decision-making. This can obscure political cleavages and alterna-
tives. If classic opposition politics cannot be channelled, there is risk that
this will instead be replaced by system-critical opposition. This is driven by
the political ‘void’ that is created when political leaders use the EU to
avoid being held accountable and when discussions of political delibera-
tions are not held in public when they involve EU issues, and when a far-
off ‘Brussels’ is used as a scapegoat for (often self-inflicted) problems
(Mair, 2013). Mair succinctly concludes that ‘Political opposition gives
voice. By losing opposition we lose voice, and by losing voice we lose con-
trol of our own political system’ (Mair, 2007, p. 17). Mair essentially
argues that since we cannot organise opposition in the EU, we instead
organize opposition to the EU (ibid.).
This has to do, at least in part, with the special constitution of the EU,
in that the Treaty for the European Union does not clearly differentiate
between the form of EU policy and its content. Constitutions commonly
regulate, first and foremost, how we make decisions and not what decisions
can or cannot be made. Naturally, there are restraints imposed by the rule
of law but, in general, the will of the people should influence the direction
of policy. The EU treaties tend to lock the political output of the Union
to a particular policy outcome (von Sydow, 2014). This constitutional
lock-in of policy direction also makes things considerably more difficult
for those who suggest that the EU should be politicised and that there
should be more political conflict surrounding the question of which EU
we would like to see in the future. It is hard to foresee that such a genuine
political arena for political competition and accountability can become a
reality within the framework of the current constitutional order in the EU,
even though one can argue that small steps were taken in this direction
during the European Parliament election in 2014 when, for example,
party groups put forward candidates for the President of the European
Commission before the election (i.e. the so-called Spitzenkandidanten)
(Hix, 2006).
In the absence of a means for the national parties to handle the EU
dimension within the frameworks of representative democracy, a need is
thus emerging to manage these conflicts and tensions in other ways,
including referendums. Holding referendums tends, however, to politi-
cise rather than depoliticise the EU question. In subsequent elections,
this benefits parties that are highly critical of the EU (von Sydow, 2013).
Because mainstream parties and other social elites usually support the
EU, a conflict between the ‘people’ and the ‘elites’ is shaped. Referendums
can thus be considered as a way of dealing with the lack of a functioning
electoral linkage in the EU. In addition to the difficulty of ‘squeezing’ the
EU dimension into traditional conflict structures on the national level,
such as the left-right scale (and the EU’s tendency to split parties inter-
nally), referendums can also be used for tactical reasons. For example,
when the former British Prime Minister David Cameron promised a ref-
erendum on UK membership in the EU (ahead of the 2015 general elec-
tion), his intention was to isolate the national (and for him, the primary)
voter arena from the EU issue, in a bid to win the election. It did not
exactly work out according to the plans, to say the least. However, in
terms of exit, voice and loyalty, British voters were afforded an opportu-
nity to use their voice to make an exit from the EU. Although this did not
occur within the framework of representative democracy but instead via a
referendum.
222 G. VON SYDOW
No Exit, Limited Voice, But Pressure to Stay Loyal

in the Euro Crisis
The euro crisis, that has been ongoing for several years, shows that there
does not seem to be any exit from the monetary union, or at least that the
cost would be high. At the most critical points of the Greek crisis, a volun-
tary or forced exit (‘Grexit’) seemed imminent, but the price of allowing a
member country to leave has obviously been judged to be far too high.
Trust has been put under pressure as a consequence. The countries most
severely affected, such as Portugal, Ireland, Italy, Greece and Spain, have
been castigated for inadequate regulatory compliance and other short-
comings. The leading countries in the euro zone, Germany in particular,
have had credibility problems in their arguments, however, since several of
them were the first to breach the common regulations—without sanctions
(see Clas Wihlborg and Sarkis J. Khoury’s chapter in this volume).
In addition, the euro countries have gone above and beyond what is
stipulated in the TEU no-bailout clause and the crisis management mea-
sures have brought several institutional and political reorganisations that
transfer further decision-making power to the EU level. This makes the
legitimacy concerns partially different. Scharpf argues that declining trust
in the EU is a consequence of the increasing politicisation of the issues
combined with the inability to find a legitimate way to exercise power at
the EU level. There is no functional means of creating the input legitimacy
that would be needed to strengthen legitimacy and the political system of
the EU does not seem able to generate output legitimacy either (Scharpf,
2015).
Antagonisms between EU member states surfaced and trust between
them was damaged during the euro crisis. White describes how a kind of
state of exception emerges in crisis, creating a situation in which drastic
actions can be implemented under a coercive logic (White, 2015). Often,
these actions are such that go beyond, or outside, the rules laid down in
the EU treaties. Meanwhile, Mény sees the emergence of a kind of ‘execu-
tive federalism’ whose flawed democratic qualities make it unsustainable in
the long term. In a regime where political alternatives are ‘locked-in’
under the mantra that ‘there is no alterative’ (TINA), the options available
to the electorate are severely limited (Mény, 2014). Müller describes this
state of affairs as a European tragedy in which populism will grow if politi-
cal leaders are unable to give any better reason for policy than the TINA
mantra (Müller, 2016). In this way, populism and technocracy are mirror
images of each other. The populist logic claims that there is only one
authentic will of the people (and that the populist leader is the best
equipped to interpret it). To technocrats, on the other hand, critique of
the current economic and political order in the EU is seen as expressions
of irrationality, since in their view there are only a few ways in which eco-
nomic growth and political stability can be achieved. Both of these polar
opposites can be seen over the course of the crisis.
Especially in the EU countries worst hit by the crisis, there is limited
political scope for politicians who are aiming to adhere to agreements to
even suggest far-reaching changes. The prime examples of this lock-in of
political alternatives were seen in Ireland and Greece when lenders, repre-
sented by the so-called Troika (IMF, ECB and the European Commission),
demanded loyalty from both governing parties and opposition parties in
order to effectuate loans. When voters later go to the polls, it is not
unlikely that they will feel a certain measure of powerlessness. When there
is no alternative among the mainstream parties, there is a certain allure to
aligning with the parties that have often expressly dismissed governing
responsibility and instead unilaterally emphasised responsiveness, listening
and channelling opinions (Mair, 2011).
Seen from the electorate’s horizon, it also seems that what constitutes
potential political alternatives is determined somewhere else, outside of
national/electoral borders. Consequently, the pushback against a unilat-
eral emphasis on accountability is also directed at the EU. Within the EU,
the member states are expected to be loyal to the agreements they have
signed. The qualitative difference in the current situation in the euro zone
is that decisions bound by common respect and commitments are so
extensive and that they concern areas often surrounded by a high level of
national political conflict. One could say that the regulations that have
sprouted up around the common currency were intended to have a built-
in barrier against political ‘irresponsibility’ (i.e. not so strict fiscal and
monetary policies). The problem is that increasing criticism of this arrange-
ment is evident in the choices of the electorate. In fact, the limited scope
of action can encourage system-critical opposition because that which was
intended to create trust between elites at the European level has actually
created distrust of the EU at the national level.
During the crisis, former Belgian minister and political scientist Paul
Magnette (later Minister-President of Wallonia and, in 2016, the leader of
the opposition against the EU-Canada trade agreement) asked the rhe-
torical question ‘Who is Olli Rehn?’ (Schmidt, 2015, p. 102). The context
224 G. VON SYDOW
was that Rehn (then the European Commissioner for Economic and
Monetary Affairs) had given a stern warning to the Belgian government
that they must further cut the national budget or face sanctions. At the
time, the relatively recently installed Belgian government had just cobbled
together a comprehensive savings package after protracted negotiations
among many parties in the fragmented Belgian party system. Was the
Commission now going to override that which the national parliamentary
system had, with considerable difficulty, managed to push through?
Magnette’s rhetorical question stemmed from frustration over the asym-
metric relationship between power and accountability. If the national gov-
ernments, to a great extent, implement policy that was actually decided
elsewhere, by non-elected EU officials, who are the electorate supposed to
hold accountable? And through which electoral arena?
Greek voters have gone to the polls repeatedly during the gruelling
years of crisis, but the impression is that voters might not primarily want
to hold their national politicians accountable for the policy they have pur-
sued. A referendum on whether to accept the conditions of the bailout
package for Greece was held in July 2015. The outcome was a clear rejec-
tion of the conditions (61 percent of the voters said ‘no’). This was a way
for the Greek government to raise its voice against the lenders. Ultimately,
however, the Greek government chose loyalty to existing agreements and
to implement the policy dictated in the deal with the troika. The complex
arrangements that control policy frameworks in the euro zone offer few
opportunities for the system to respond to the demands of the electorate.
The voice of a single member state’s public cannot unilaterally change the
direction of the EU. Combined with what seems to be no option to exit
the euro (due to the high costs associated thereto), all that remains is to
attempt to generate loyalty in a rule-based manner in the face of the politi-
cal and economic bonds created by the common currency.
‘Brexit’: Voicing to Exit, But at What Cost?

A majority of the British voters that voted on 23 June 2016 supported the
option that the UK should leave the EU. With a turnout of 72 percent, 52
percent of those who cast their vote opted for the UK to exit the EU (out
of the entire electorate roughly about 38 percent voted to leave and 34 to
remain). The British process for implementing its exit from the Union has
thus begun in practice. The path provided by the EU treaty was taken with
the triggering of Article 50 by Prime Minister, Theresa May, in March
2017. In the case of the UK, the balance between voice and loyalty has
alternated over time during the four decades of British EU membership.

Finally, the British voters chose exit instead. The country already enjoyed
several opt-outs from the EU’s common policy, which can be considered
as examples of ‘partial exit’. Prior to the 2016 referendum, the British
government used its voice to negotiate a new agreement with the EU. One
issue that was an important matter of principle to the British was the impli-
cations of EU treaty’s wording on an ‘ever closer union’. The British criti-
cism can be seen as a matter of what future loyalty can be demonstrated
towards a system perceived as being in a state of constant evolution. Even
on the ‘remain side’, voices were heard that the EU of today is not the
same EEC that the UK once joined. Linked to the question raised in the
introduction to the chapter about how trust is created out of expectations
about the future behaviour of others, one can interpret the British trust in
the EU as very conditional indeed. In the agreement with the EU negoti-
ated in February 2016, the British government successfully negotiated a
concession saying the country did not have to be part of ‘an ever closer
union’. In return, several other EU member states considered this to be
disloyal and detrimental to the trust between them. But this assurance
alone was not enough to persuade the majority of British voters to choose
to remain in the EU in the referendum a couple of months later.
An ‘exit clause’ in the EU did not exist until after the Treaty of Lisbon
(and Article 50 TEU) entered into force. It was inserted as a way of
emphasising the international basis of the EU and that delegation of polit-
ical power to the Union can be revoked. Because the delegation of author-
ity is so comprehensive and the commitment to be part of the EU is so
demanding, there must arguably be a way to revoke this. This discussion
intensified in connection with the Maastricht Treaty in the 1990s, and the
German Federal Constitutional Court’s opinion on the treaty, in which
the idea of the legitimation of transfer of power to the EU as a sort of
‘provisional arrangement’ was extensively argued. Article 50 TEU can be
read in parallel with the preceding Article 49, which sets out rules for
membership ‘Any European State which respects the values referred to in
Article 2 and is committed to promoting them may apply to become a
member of the Union.’ Once a state has been admitted to the Union
(which must be approved by all EU member states), the rules of the club
must be followed. If a member state does not like it, it can notify its inten-
tion to withdraw and there is thus an exit. If the application of Article 50
turns out to be successful in the British case, this could be taken as a
pretext for that a member state can in fact ‘take back control’ and that the
226 G. VON SYDOW
existence of a door by which the member state can leave clarifies the com-
mitments of EU membership.
But taking back control, as promised by the Brexiteers, may prove
much harder than first anticipated. It seems that the British government
prefers regained national sovereignty over other desirable objectives, such
as economic growth and prosperity. The EU has made it clear that any
splitting of the free movement of goods, services, capital and people is out
of the question and thus indicates that negotiations between the EU and
the UK are going to end with a hard exit from the EU and that the new
relationship will be considerably less extensive than what the UK enjoys
today as being a full member of the Internal Market. Thus, there is an exit
from the EU, which eliminates the demand for loyalty. But lack of partici-
pation also begs the question of what voice the UK and its citizens are
giving up by leaving the important decision-making arenas to which they
have thus far had access.
Between Voice and Loyalty in the Refugee Crisis

Beyond ‘Brexit’ that is being negotiated and the ‘Grexit’ that did not
materialise, the EU is confronting several other major crises. Particular
tensions have arisen surrounding the handling of the refugee crisis in 2015
and its aftermath. The crisis has laid bare the incompleteness of free move-
ment of people within the EU with no fixed external borders. The
Schengen system has for all intents and purposes been sidelined due to the
lack of common management of the refugee situation. Further steps are
being taken gradually to establish a clearer, common external border, by
means including strengthening the capacity of the EU’s border authority,
Frontex. What is also obvious is that the refugee situation has sparked an
intense and contentious discussion between the member states as to
whether the EU can and should have joint responsibilities for resettling
refugees within the Union. Vocal dissent, especially by several of the
Eastern EU member states (such as Hungary, Poland, Slovakia and the
Czech Republic), include objections to decisions made by the European
Council on a system of mandatory quotas to reallocate 160,000 refugees
in Italy and Greece to the other member states (see also Bo Petersson’s
chapter in this volume). The countries that voted against the proposal in
the Council are clearly not willing to accept the outcome. Slovakia
requested a review of the decision by the European Court of Justice (ECJ),
and the Hungarian government held a referendum on the issue in October
2016. Opposition in the form of voice is thus being used by these EU

member states in several ways.
Meanwhile, those who supported the deal argue that it is unreason-
able to criticise a decision made in accordance with the current rules of
the EU. The Nordic countries have encouraged the European
Commission to take action and Swedish Minister of Justice, Morgan
Johansson, remarked in an interview with Dagens Nyheter in September
2016 that ‘If you are a member of an organisation, you have to follow
the organisation’s rules. Otherwise, you cannot be a part of it. We cannot
have a system where members can pick and choose which rules they will
follow’ (Dagens Nyheter, 2016). The conflict highlights the tension that
arises when one or more EU member states oppose decisions and refuse
to implement them. A unique feature of the EU, compared to purely
international organisations, is that there is scope for applying majority
voting in the Council. If the Commission’s role as the watchdog of com-
mon rules, the precedence of EU law over national law, the role of the
ECJ as interpreter of the law in disputes, as well as the power to fine
member states in infringement proceedings, are all taken into account
then it is clear that the EU has a relatively powerful enforcement arsenal
at its disposal.
Other EU member states have either encouraged the opening of
infringement proceedings, threatened to find ways to punish recalcitrant
member states by attempting to withdraw funds from the EU budget or
to open a process in accordance with Article 7 TEU on the breach of the
Union’s values. As in other situations when the fundamental values of the
Union as set out in Article 2 have been challenged, the mechanisms pro-
vided in Article 7 have appeared too draconian (hence, the sobriquet ‘the
nuclear option’) and the requirement for unanimity far too difficult to
meet. Nevertheless, the presence of Article 7 in TEU, along with the new
proceedings for safeguarding the rule of law in the member states, is a step
towards ensuring that the EU has instruments at hand when the member
states do not live up to the Union’s values as established in Article 2.
Failure to live up to the values can be considered disloyal to the EU (see
Joakim Nergelius’ chapter in this volume).
What should the EU do to compel loyalty from the member states in
cases where they really do not want to give it? The Hungarian Prime
Minister, Viktor Orbán, used a referendum to further strengthen his
negotiating position vis-à-vis the EU. A crushing majority of those who
voted (98 percent) supported the Hungarian government’s position,
228 G. VON SYDOW
which was to vote no to the proposal that the EU should be able to force
Hungary to accept refugees without the approval of the Hungarian
National Assembly. But the outcome of the referendum was declared
invalid due to the low voter turnout of 43 percent. The EU member states
that supported the decision on mandatory quotas contend that the deci-
sion was made in a valid process. But the problem of how the EU should
handle the issue remains. As said, there are certain ways and means avail-
able, but the nature of the issue is not only legal, political concerns must
be considered as well.
When European Commission President, Jean-Claude Juncker, dealt
with the issue of solidarity in the refugee policy in his State of the Union
address in 2016, he said, ‘[W]hen it comes to managing the refugee crisis,
we have started to see solidarity. I am convinced much more solidarity is
needed. But I also know that solidarity must be given voluntarily. It must
come from the heart. It cannot be forced.’ There is no explicit reference
to the mandatory quotas in Juncker’s remarks, but the address is still open
to the interpretation that the President of the Commission does not
believe that Brussels can hierarchically force loyalty and solidarity from EU
member states. One way of interpreting this conciliatory attitude is that it
is an expression of the ‘informal pact of confidence’ mentioned at the
beginning of the chapter and of that the European Commission does not
believe it has sufficient legitimacy to coerce loyalty through hierarchical
governance. The risk is that it would inflame the conflict and that the
recalcitrant countries would instead choose to exit the EU. At present,
however, it does seem as if the wayward countries have judged the cost of
exit to be far too high.
The unilateral opposition to adhering to the EU treaties’ demand for
loyalty of individual member states may present a risk of undermining the
collective trust among all member states, which would have systemic con-
sequences. The dynamics of the tensions arising from the management of
the refugee crisis are somewhat different than those of both ‘Brexit’ and
the euro crisis. The refugee crisis not only involves member states’ oppor-
tunities for voice in relation to the loyalty that is expected of them, but it
also risks effecting fundamental issues related to boundaries, both national
and European. As Genschel and Jachtenfuchs (2016) show in their study
of the European integration of core state powers, this has been possible
because the member states that did not want to participate could choose
‘opt-outs’. The demand for solidarity on the refugee issue seems to disal-
low this because it would impact the system as a whole. Now, opinions are
instead being voiced that flexibility is the only reasonable way to resolve
this conflict.
Another aspect that Genschel and Jachtenfuchs emphasise is that the
Europeanisation of core state powers is taking place primarily via regula-
tion and not capacity-building (Genschel & Jachtenfuchs, 2016). The
solution to the refugee crisis that, for the moment, seems the most
favoured among European leaders involves securing the external borders
of the EU. This would seemingly require more extensive European
capacity-building, which the member states might find more difficult to
justify than creating common regulations. Management of the refugee
crisis is inciting obvious tensions as regards trust in the EU. The perspec-
tive of the countries opposed to a common EU policy in the area is that it
would undermine national democracy and lead to deep distrust of the
EU. On the part of those who argue that the EU needs to act in solidarity,
there is peril that if joint responsibility is not taken this also risks foment-
ing distrust of the EU. If the European Commission does not take action
against the refractory member states, there is risk that the other member
states will begin to distrust the motives for the actions of the supranational
institutions and ask why they themselves should be loyal when the
Commission, on some other matter, opens infringement proceedings
against them. If the solution to this conflict lies in some kind of ‘flexible
solidarity’, there is risk that an attitude towards the EU, by which the
member countries can cherry-pick (or, in terms of the concepts of exit and
voice, engage in repeated partial exit from EU policy areas they do not
like), will be entrenched. This could damage trust in the system as such.
With no mandatory requirements for loyalty and low costs of (partial)
exit, the issue of legitimacy in the EU becomes less problematic, but it also
seems reasonable to believe that the benefit of cooperation would decline
substantially (perhaps even to the point where citizens start asking what is
the point of cooperating at all).
Balancing Exit, Voice and Loyalty: Ways to Restore

Trust
Wavering trust between the EU member states has been discernible dur-
ing the crises of recent years. The member states are also demonstrating
insufficient trust in and loyalty to the supranational Union and thus also
European integration as such. Behind this lies a lack of public trust in
European integration and in elected representatives. Due to the absence
230 G. VON SYDOW
of full democracy at the EU level, mandates for political action and

accountability occur primarily within the framework of national democ-
racy (Gustavsson, 2009). Insufficient citizens’ trust of elected representa-
tives is thus an underlying factor when one approaches the Union’s state
of declining trust. Paradoxically, this is occurring in a context where the
challenges the EU is facing seem to require the EU to assume more ‘state-
like’ characteristics. The EU version of state formation, however, differs
from the processes in which the European nation states emerged. The
integration in recent decades has in many respects involved areas that
encompass the core state powers, but the EU has not become more fed-
eral as a result. Instead, it is institutionally fragmented and territorially
differentiated. The euro crisis, however, has entailed stronger European
control over economic policy and the refugee crisis has increased pressure
to build up stronger external border control, increase joint responsibility
and increase common decision-making.
Going back to the issue of the state of balance between exit controls
and voice channelling within the EU, it follows from the arguments above
that it varies in different policy areas. The outcome of the British exit from
the EU will probably further clarify the cost (in the wider sense) of exit.
Regardless of the cost, the exit option exists, and this is important as a
matter of principle. That path thus exists for those member states that no
longer can or want to be loyal for other reasons, such as the refugee issue.
In relation to the common currency, the cost of exit seems considerably
higher. This should then lead to a more fundamental discussion of how
channels of voice can be found within the framework of the euro zone and
a more symmetric relationship between power and accountability. A fed-
eral structure for the euro zone would rectify the vague confusion of pow-
ers that leads to de-politicisation and difficulties with demanding
accountability at the appropriate level. From this perspective, a clear divi-
sion of authority should be made so that voters more clearly understand
what is decided at what level and that they can demand accountability
from elected representatives at the level decisions are actually made. From
a federalist perspective, trust in the European project can be regenerated
in this way. A clearer, constitutionally established division of competences
could break the policy lock-in if the political content was ‘de-
constitutionalised’ at the same time. In this way, genuine political compe-
tition among various political alternatives could materialise at the EU level
but only within the framework of the issues that belong at the EU level.
The aim would be to make it clearer to the electorate which issues should
be discussed and what accountability demanded at the European and

national levels, respectively.
But there is also ample reason to argue that the conditions for a func-
tioning democracy at the European level simply do not exist. A big leap
forward assisted by institutional reforms could damage trust and give rise
to even greater, and potentially more destructive, opposition. The crises of
recent years indicate rather that the boundaries of policy commitments at
the EU level must be set in better proportion to the loyalty that can be
mobilised in the member states. Others argue that this can be done
through a clearer division of competences that might entail a re-
nationalisation of certain competences. From this perspective, the con-
straining national interests should gain wider scope and the EU would, in
this scenario, become more of a ‘flexible union’. The member states would
have more latitude to pick and choose the parts they want from the coop-
eration and accountability at the national level would be clearer. This
would also be a way to manage the national differences in the EU of 27
member states. In this model, the member states would be involved only
where they want to be. National leaders would thus feel they had a clearer
mandate from their voters in connection with further delegation, where-
upon trust could possibly be restored. It should be noted, however, that it
can be argued that the EU’s historical success has relied on precisely the
opposite. That is, the common regulations, package solutions and com-
promises are what have made the EU into a cooperative project of its cur-
rent magnitude and without these arrangements, it is possible that trust in
the project would be further undermined.
The point I want to emphasise here is that regardless of whether one
recommends a leap forward or some other solution, it is imperative to
think critically about the capacity of representative democracy to channel
conflicts in an interwoven and multilevel polity. The insufficient trust in
the EU can, at least partially, be interpreted as an expression of uncertainty
about where power and influence are exercised and how we manage con-
flicts that pertain to matters involving both where decisions should be
made and what decisions should be made. The ‘locking-in’ of the areas of
political conflict described in the chapter have a tendency to make the
politicisation of the EU into an expression of pure voice rather than a
political conflict with multiple courses of action within the framework of
representative democracy. Whether one believes the solution lies in a more
effective system for political conflict and accountability at the EU level or
in the capacity of national democracies to manage EU issues, this issue is
232 G. VON SYDOW
central to correcting the problems of trust in the EU. In the light of grow-
ing populism and nationalism, it is imperative that actors endeavouring to
defend the European project find a formula for establishing trust among
the electorate. The often-cited technocratic rationality obviously does not
suffice. Instead, it should be possible to combine accountability and
responsiveness without obscuring relevant conflicts by means of depoliti-
cising techniques. At the same time, it is a major challenge of constitu-
tional policy to find a formula that balances demands for constitutionalism,
democracy and effectiveness in a complex and intertwined political system
such as the EU.
If the current formula is to endure—high demands for loyalty to deci-
sions made at the EU level while democracy remains national—it needs to
be based on the premise that national democracy is capable of managing
the conflicts that arise between loyalty to the EU and responsiveness to the
electorate. In times when the forces of populism are gathering strength, it
is easy to see how a shift in favour of responsiveness to public opinion at
home. This could make it more difficult to re-establish trust in and loyalty
to the common project. If trust is based on expectations about the future
behaviour and loyalty of others, political developments in several EU
member states, involving populism and nationalism, present a particular
challenge. If we do not trust that others will uphold key principles, there
is risk that our own faith in the system as a whole will be undermined. If,
moreover, the supranational Union does not have adequate means at its
disposal to stop a march away from constitutional democracy in the mem-
ber states, there is risk that trust will diminish even further.
One way of solving this problem is to have clear principles and values,
as well as procedures for managing breaches of these principles and values.
But it must also be even more clearly stressed in public debate that as long
as democracy remains primarily national, the capacity of the EU to compel
loyalty—in politically sensitive and controversial matters—will have its
limitations. It thus will not suffice, as some political leaders claim, for the
EU to return to simply ‘deliver’ desirable output. Emphasising effective-
ness on the output side is not enough to ensure an increase in trust in the
EU again, quite simply because the challenges the EU is confronting
today are of a politically controversial nature and thus demand another
form of legitimation. It would be a mistake for political representatives at
the national and EU level to not take these matters seriously, and a first
step in the right direction would be to facilitate a comprehensive debate
about the future of the EU that is directed at and yet aims beyond the
dichotomy between federalisation and re-nationalisation.
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Schmidt, V. A. (2015). The Eurozone’s crisis of democratic legitimacy: Can the
EU rebuild public trust and support for European economic integration?
European Commission Discussion Paper, no. 15.
Tilly, C. (1992). Capital, coercion, and European states. Oxford: Blackwell
Publishing.
van der Eijk, C., & Franklin, M. (2004). Dimensions of contestation in European
elections. In G. Marks & M. R. Steenbergen (Eds.), European Union and polit-
ical conflict. Cambridge: Cambridge University Press.
von Sydow, G. (2013). Politicizing Europe: Patterns of party-based opposition to
European integration. Stockholm: Department of Political Science, Stockholm
University.
von Sydow, G. (2014). Parties and politics of opposition in the European Union.
Polish Quarterly of International Affairs, 23(1), 69–82.
White, J. (2015). Emergency Europe. Political Studies, 63(2), 300–318.
Index
A Anti-suit injunctions, national courts,

Accession 166–167
cautious approach, 34–37 Area of Freedom, Security and Justice
meeting requirements, 23–24, 33 (AFSJ), 159–160, 162
See also Eastern enlargement; Arrow, K., 93
Enlargement Asylum law, 151–152
Accession talks, Turkey, 56–57 Asymmetry, power and accountability,
Accountability 224
and power, 224 Austerity, 118, 212
supra-national, 219 Austria, sanctions, 29
Account Preservation Order Authoritarianism
Regulation, 169 attitudes to, 25–26
Adenauer, K., 4 Hungary, 52–53
Administrative resources, 10 persistence of, 34
Admission criteria, 11 Authority, Weber’s typology, 58
Affiliation, 13 Autonomy, of member states, 8–9
Age at arrival, and social trust,
100–101
Agenda on Migration, 152 B
Alternative für Deutschland, 25 Banco Monte del Paschi, 132
Amsterdam Treaty, 159, 160 Banking
Anachronism scenario, 48 crisis management/resolution, 128
Anderson, B., 45 before debt crisis, 126–128
Antagonisms, between states, 222 market discipline, 15, 132

Challenging Times, https://doi.org/10.1007/978-3-319-73857-4
236 INDEX
Banking (cont.) protocols, 197

regulatory framework, 128 Bogeyman scenario, 47–48
single licence, 15 Book
Banking Directive, 127 approach taken, 3
Banking regulation context and role of, 2–3
institutional competition, 126–127 overview and chapter outlines,
new rules, 129 11–19
transparency, 128 Boundaries, 216–217
Banking system risk, and sovereign Brexit, 7–8, 12, 24, 31, 45, 224–226
risk, 119 criminal justice, 140
Banking union, 14–15, 119, 129–133 effect on financial companies, 15
burden sharing, 134–135 potential benefit, 135
costs and benefits, 130–131 reactions to, 65
national responsibility, 132 systemic crises, 214–215
resolution process, 130 See also Referenda
strengthening trust, 133–135 BRICS countries, 48
Banks, protection of creditors, 129 Brussels Convention, 165–167
Barbulescu, R., 46 Brussels II-bis Regulation, 169–173
Barriers to trade, 120–121 Brussels I-Regulation, 165–167, 169,
See also Free trade 170
Bartolini, S., 217–218 Budget negotiations opportunities from,
Behavioural expectations, 7 36–37
Behaviour of governments, control of, Burden sharing, 134–135
46
Belgium, 223–224
Bergh, A., 100, 105–106 C
Bicchieri, C., 192 Cambien, N., 163
Bickerton, C., 6–7 Cameron, D., 8
Bitcoin, 183, 197, 201 Canary metaphor, 57
Bjørnskov, C., 95, 105–106 Capital mobility, 120
Blaming Europe approach, 83 Capital Requirements Directive and
Blockchains, 18, 182–183 Regulation, 129
development and implementation, Cassis de Dijon case, 142
201–203 Central Europe, 12
digital identification, 199 role in EU, 49–51
and the EU, 197–201 Chapter outlines, 11–19
as means of increasing trust, Charismatic authority, 58
195–197 Charter of Fundamental Rights of the
and nationalism, 204–205 European Union, 146
opportunities and investment, Citizens’ political trust, 78, 82
200–201 approach taken, 69–70
overview, 198 context and overview, 65–66
INDEX
237
decrease factors, 84–86 recommendations, 173–176

defining citizens’ trust, 66–67 regulatory pressures, 173–174
EU as political system, 68–70 summary and conclusions, 173–176
horizontal and vertical relationships, supportive governance, 174–175
66–67 Cohesion, factors in, 49
image of the EU, 71–72 Collective action, role of trust, 2
individuals and groups, 80–82 Collective identity, 49
macro-level factors, 76–80 Common asylum policy, 26
member states, 76–80 Common currency, 14–15
micro-level factors, 80–82 Common deposit insurance, 130, 133
and national politics, 83–84 Common identity, need for, 12–13
opinion balance regarding EU, Conferral of powers, 219
76–78 Confidence, 13
opinion balance regarding European Conflict of values, 11–12
Parliament, 78–80 Constitutional principles, criminal
rational basis, 67–68 justice, 144–146
recommendations, 87–88 Constitutions, policy direction,
socialization effects, 81–82 220–221
socioeconomic factors, 83 Constraining dissensus, 219–220
specific and diffuse support, 68 Contact hypothesis, 98
summary and conclusions, 86–88 Contested ideal scenario, 48–49
survey questions, 70 Cooperation, 9, 10
Sweden, 73–76 criminal justice, 16
temporal perspective, 70–73 and free movement, 217
trust in European Parliament, 72–73 guidelines for, 10–11
trust in institutions, 82–84 Copenhagen criteria, 33, 46, 59
Citizens’ rights, 143 challenges to, 12, 49
Civic criticism, 65–66 Core state powers, 218
Civics training, 13–14 Core values
Civil justice cooperation challenges to, 49
CJEU rulings, 171–173 protection of, 34–37, 58–60
context and overview, 159–161 and soft power, 36
development, 161–164 Turkish challenge, 56–57
e-justice, 175 See also Value crisis; Values
EU framework, 167–173 Cornell, N., 199
Internal Market, 160 Corporate governance, 126, 127
Justice Scoreboards, 175–176 Corporate law, 125
mutual recognition, 161–164 Corruption, 34
mutual recognition in international Court of Justice of the European
context, 164–167 Union (CJEU), 146
presumed mutual trust, 165–166, principles, 140
171, 173–174 relevance to civil justice, 171–173
238 INDEX
Criminal justice, 15–16 Currency area criteria, 114–115

asylum law, 151–152 Currency, flexibility, 14–15
CJEU principles, 140 Current situation, 6–8
constitutional principles, 144–146
context and overview, 139–141
EU area of freedom, security and D
justice, 141 Data protection, 155
EU competence, 143, 145–146 Data Retention Directive, 155
European Directive on EU Death penalty, 52
Citizenship, 149 Debt crises, 222
factors affecting trust, 146–151 Debt crisis, 117–120
function of trust, 146, 148 Decision making
judicial cooperation, 141–143, 156 by majority vote, 5
migration law, 151–152 national/international, 220–221
mutual recognition, 142, 144, De Grauwe, P., 115
148–149 Delors, J., 45
mutual trust, 146–147 Delors report, 113–114
and national constitutions, 149–150 Democracy
and national law, 141 and solidarity, 3
prerequisites for criminal law, 144 state-level, 217
presumption of trust, 147–148, Democratic consolidation, US support
171, 173–174 for, 4
principle of effectiveness, 149 Democratic deficit, 219
principle of legality, 145 Democratization, 9
principle of proportionality, Deposit insurance, 127–128
151–156 Deutsch, K. W., 2, 67
purpose of cooperation, 143 Developmental paths, 47–49
recommendations, 156–157 Dialogue, with Poland, 30
security issues, 141 Differentiation, 216, 230
summary and conclusions, 156–157 Digitalization, 17–18
See also EU law blockchain development and
Criminal law, as national issue, 147 implementation, 201–203
Crises blockchain protocols, 197
and challenges, 11–12 blockchains and the EU, 197–201
future potential for, 20 blockchains as means of increasing
management/resolution, 222 trust, 195–197
and national identity, 43–45 blockchains overview, 198
systemic, 18–19 context and overview, 181–183
Cross-border banking, 127–128 digital partnership, 201–205
resolution process, 130 effects on employment, 182,
Cross-border enforcement, 168–169 203–204
Cryptocurrencies, 201 internet access, 185
INDEX
239
and nationalism, 204–205 Easton, D., 67–69, 82, 84–85

opportunities, 182 E-commerce, 192–193
payment systems, 184–185 Economic and Monetary Union
possibilities and challenges of (EMU), 15
sharing economy, 185–192 Economic difficulties, 66
recommendations, 205 Economic growth, post war, 5
summary and conclusions, 201–205 Economic integration, 5–6
transaction costs, 182–183 Economic reconstruction, post-war, 4
and trust, 192–195 Education, and levels of trust, 83
virtual currencies, 200–201 Efficiency gains, 219
See also Sharing economy E-justice, 175
Dinesen, P. T., 100, 103, 105 Endogenous institutional
Directive on Bank Recovery and development, 114–115
Resolution (BRRD), 129 Enforcement Order Regulation, 169
Directive on Deposit Guarantee Enlargement
Scheme, 129 2004, 12–13
Distrust See also Accession; Eastern
popular, 11–12 enlargement
populist exploitation of, 32 Erdogan, R.T., 52, 56–57
Domestic banks, 128 Estonia
Double criminality, 142, 148–149 blockchains, 200
Draghi, M., 118 sharing economy, 188, 191
Duda, A., 54 Ethereum, 197
Dunning, D., 104 Ethnic heterogeneity, and social trust,
98, 101, 103
EU area of freedom, security and
E justice, 141
Eastern enlargement EU Charter on Fundamental Rights,
context and overview, 41–42 149, 150, 154, 165
developmental paths, 47–49 EU competence
dilemma, 42–43 criminal justice, 143, 145–146
EU identity, 45–46 presumption of trust, 147–148
and EU values, 42–43 EU Framework Decision on the EAW,
free movement, 42 141–142
identity and trust, 43–45 EU identity, 49
illiberal democracy, 51–54, 57–58 EU law
member states’ concerns, 42–43 monitoring, 144
protecting core values, 58–60 and national constitutions,
recommendations, 59–60 149–150
summary and conclusions, 58–60 precedence, 9–11
types of authority, 58 See also Criminal justice
undemocracy, 57–58 Euro crisis, 6–7
See also Accession; Enlargement role of Greece, 33
240 INDEX
European Arrest Warrant (EAW), Eurostat Urban Audit, 94–95

140–142, 146–150 Eurozone debt crisis, 6–7
European Banking Authority, 200 Euro zone, loss of confidence,
European Central Bank (ECB), 133–134
119–120 Executive direction, 9
anti-inflation policy, 116 Executive federalism, 222
constraints on, 115 Exequatur procedure, 168–170
expanded role, 133 Exit, 215–216
response to debt crisis, 118 partial, 218
European Coal and Steel Community Exit clause, 225
(ECSC), 4 Exit, Voice and Loyalty: Responses to
European Commission Decline in Firms, Organizations
definition of sharing economy, and States (Hirschman), 215–216
183–184
role of, 5
European Convention on Human F
Rights (ECHR), 30, 146, 154, 165 Fetchenhauer, D., 104
European Court of Human Rights Fidesz party, 28–29, 51
(ECrtHR), 165 Fifth freedom, 162
European Court of Justice (ECJ), see Financial Transparency Gateway, 202
Court of Justice of the European Fiscal austerity, 118
Union (CJEU) Fiscal deficits, 115
European Directive on EU Fiscal policy cooperation, 114
Citizenship, 149 Fiscal policy coordination, 115
European Economic Community Flexibility
(EEC), 4 currency, 14–15
European Financial Stability Facility monetary harmonization, 134
(EFSF), 117–118 Four developmental paths, 47–49
European Financial Stability Four freedoms, 120, 162
Mechanism (EFSM), 117 Fragmentation, 230
European Monetary Union (EMU) Freedom Party Austria (FPÖ), 29
confidence in, 119–120 Freedom, security and justice principle,
costs and benefits, 114–115 16–17
debt crisis, 117–120 Free movement, 42
foundations of trust, 113–117 and cooperation, 217
strengthening trust, 133–135 Free trade, 5, 123–124, 126, 212
European Observatory on Blockchain See also Barriers to trade
Technologies, 202 Fundamental Freedoms, 146
European social survey, 93–94
European Stability Mechanism (ESM),
118 G
European Union, defining, 46 Game theory, 93
Euroscepticism, strengthening, 18 Gateway criterion, 46
INDEX
241
Gender, and levels of trust, 83 attitudes to refugees, 27, 226–228

General data protection regulation authoritarianism, 24, 52–53
(GDPR), 196 behaviour of government, 35
Genschel, P., 218, 228–229 canary metaphor, 57
Germany Fidesz party victory, 28–29
blockchains, 200 forced retirement of judges, 28–29
remilitarization, 4 illiberal democracy, 51–53
G7, Financial Action Task Force nationalism, 52–53
(FATF), 200 populism, 25
Governance questioning of values, 29–30
Internal Market, 176 Rule of Law Framework, 31
strengthening rule of law, 175 undemocracy, 57–58
supportive measures, 174–175 Hybridity, 215
Greater Europe concept, 48–49
Greece
debt crisis, 6–7, 117 I
Grexit, 222–224 Identity
referendum, 224 collective, 49
role in euro crisis, 33 EU, 45–46
Grounds for refusal, 168 European, 218
Growth and Stability Pact, 115–116 importance of, 67–68
Guidelines, for cooperation, 10–11 national, 43–45, 213–214
and trust, 43–45, 82–83
Ideological crisis, GAL-TAN, 31
H Illiberal democracy, 51–54, 57–58
Haas, E., 67, 214 Hungary, 52–53
Harmonization, 120–122, 126 Poland, 53–54
costs and benefits, 15, 124 Impressionable years hypothesis, 101
and flexibility, 134 Inequality, 106
of regulation and law, 123–124 Inflation, 116–117
Havel, V., 42–43 Information asymmetry, 125
Health, and social trust, 100 Innes, A., 57
Hegemony, American, 4–5 Input legitimacy, 219
Hertig, G., 126 Institutional competition, 122–126
Hirschman, A.O., 18, 215–216 banking regulation, 126–127
Historical perspective, 4–6 costs and benefits, 126
Holocaust, 46 possible effects, 15
Hooghe, L., 67, 81, 219 Institutional harmonization,
Horizontal Task Force, 18 120–121
Human rights Institutional quality, and social trust,
value crisis, 30 96–97
violations, 165 Institutional trust, 193–194
Hungary Institutions, trust in, 82–84
242 INDEX
Integration Internal differences, 65–66

banking before debt crisis, 126–128 Internal Market, 120
banking union, 119, 129–133 governance, 176
burden sharing, 134–135 mutual recognition, 147, 162–163
context and overview, 111–113 mutual trust, 163–164
core state powers, 218 removal of trade barriers, 219
corporate governance, 126, 127 International law cooperation, Brussels
corporate law, 125 Convention, 165–167
costs and benefits of monetary International Monetary Fund (IMF),
union, 114–115 118
cross-border banking, 127–128 International trade regime, 123
currency area criteria, 114–115 Internet, increased access, 185
debt crisis, 117–120 Interpersonal trust, 14, 66–67, 194
endogenous institutional Italian torpedo, 166
development, 114–115
fiscal policy coordination, 115
flexibility and harmonization, 134 J
four freedoms, 120 Jachtenfuchs, M., 218, 228–229
fragmentation, 119 Johansson, M., 227
free trade, 123–124 Judges, forced retirement, 28–29
harmonization, 120–124, 126 Judicial cooperation, 141–143
inflation, 116–117 as crisis management, 156
institutional competition, 122–126 Juncker, J.-C., 6, 45, 211–212, 228
Internal Market, 120 Justice and Home Affairs (JHA), 141,
lack of trust and support, 229–230 147–148
of markets, 162 Justice Scoreboards, 175–176
mutual recognition, 124, 126–128
Optimum Currency Area (OCA)
theory, 114–116 K
politicization, 213 Kaczyński, J., 53–54
process, 214 Kaelble, H., 7
recommendations, 133–135 Kerber, W., 125
sovereign and banking system risk, A Kidnapped West (Kundera), 50
119 Knowledge communities, 9
and sovereignty, 162–163 Kundera, M., 50
summary and conclusions, 133–135
trade barriers, 120–121
trust in EMU, 113–117 L
Interest rates, 118 Labor market flexibility, 114
Inter-jurisdictional competition, 125 Language harmonization, 121
Intermediaries, 193–194 Law
Internal conditions, for European implementation, 10–11
integration, 5 precedence of EU law, 9–11
INDEX
243
Legal framework, 26–28 McCahery, J. A., 126

Legal order, 9 Media, Poland, 54
Legal systems, 16–17 Membership requirements, 11
Legitimacy, 58 Member states
demands on, 18–19 economic difficulties, 66
and opt out, 218 oversight of, 34
presumption of trust, 148 supervision of, 23–24
source of, 18 Mengozzi, P., 146–147
See also Systemic crises Mény, Y., 222
Length of stay, and social trust, 102 Merkel, A., 56
Liberal-conservative clash, 31 Migrants, depiction of, 56
Lindberg, L. N., 219 Migration, 14
Lisbon Treaty, 139–141, 147–148, context and overview, 91–92
153, 154 from high-trust countries, 100–101
Lis pendens rule, 165–166 from low-trust countries, 98–100
Living constitution, 213 and social trust, 97–98
Lost wallet experiment, 96 Migration law, 151–152
Loyalty, 215, 216 Mistrust, growth of, 9
refugee crisis, 226–229 Mitteleuropa, 50
as system-building component, 216 Mongelli, F. P., 115
Luhmann, N., 192 Monnet, J., 4
Müller, J.-W., 57
Multi-level political system, 9
M Mutual recognition, 124, 126–128,
Maastricht criteria, lack of 140
enforcement, 116 civil justice cooperation, 161–164
Maastricht Treaty, see Treaty on the criminal justice, 144–146, 148–149
European Union (TEU) cross-border enforcement, 168–169
Macroeconomic stability, and social EAW, 142
trust, 96 in EU law, 142
Magnette, P., 223–224 Internal Market, 147, 162–163
Maintenance Regulation, 169 in international context, 164–167
Mair, P., 220 and sovereignty, 164
Managed recognition with essential Mutual trust, 3
harmonization, 125–126 criminal justice, 146–147, 165–166,
Manners, I., 47 171, 173–174
Market discipline, banking, 15, 132 Internal Market, 163–164
Market integration, 162
Marks, G., 67, 81, 219
Marshall Plan, 4 N
Massive Open Online Courses Nakamoto, S., 195
(MOOCs), 204 Nannestad, P., 105
244 INDEX
National bonds, 9 Permissive consensus, 9, 212, 219

National constitutions, and EU law, Poland
149–150 blockchains, 200
National courts, anti-suit injunctions, dialogue with, 30
166–167 illiberal democracy, 53–54
National identity, 43–45 media, 54
National interest, 8, 10 populism, 25
Nationalism Rule of Law Framework, 31
and digitalization, 204–205 Rule of Law Recommendation, 37
Hungary, 52–53 undemocracy, 57–58
rise of, 25 Policy outcomes, and levels of trust,
National law, and criminal justice, 141 83
National politics, and levels of trust, Political actors, 68–69
83–84 Political alternatives, determining
National sovereignty, 10 factors for electorates, 223
Nazism, 46 Political communities, 68
Netherlands, blockchains, 200 Political elites, seeking support, 58
Neumann, I.B., 49–51, 55 Political mobilization, potential for, 220
Normative power, 47 Political regimes, 68–69
North Atlantic Treaty Organization Political systems, objects of, 68
(NATO), 4 Political system support model, 84–85
Nouy, D., 130 Political trust
Nye, J., 47 defining, 67
See also Citizens’ political trust
Politicization, 9
O Popular distrust, 11–12
Öhrvall, R., 100 Populism, 222–223
One Union, One Money report, Populist parties
113–114 Austria, 29
Optimism, and value crisis, 33 exploitation of distrust, 32
Optimum Currency Area (OCA), growing support for, 12
114–116, 118–119 rise of, 25
Orbán, V., 7, 29–30, 51–53, 227 Postfunctional theory of European
behaviour of government, 35 integration, 67
Output legitimacy, 219 Power, and accountability, 224
Oversight, of member states, 34 Preconditions, for European
experiment, 4–5
Principle of effectiveness, 149
P Principle of legality, 145
Pact of confidence, 213–214 Principle of mutual trust, 159–160
Payment Order Regulation, 169 Principle of proportionality, 151–152
Payment systems, digitalization, role in criminal law, 152–156
184–185 Principle of subsidiarity, 140
INDEX
245
Prodi, R., 45 Rõivas, T., 191

Promised land scenario, 47 Rokkan, S., 215–218
Proportionality, 151–156 Romano, R., 125
Protests, 212–213 Rootless jurisdiction, 123–125
Psychological perspective, 104 Rothstein, B., 212
Public opinion, 13–14 Rule of law, 9–10
Public sector retrenchments, effects of, as constitutional principle, 144–145
66 policy document, 145
Punitive measures, threshhold, 34–35 and promotion of trust, 106
Putin, V., 54–56 strengthening, 175
Rule of Law Framework, 31
Rules, treaty-based, 35–36
Q Russia
Qualified majority voting (QMV), 26 challenges to EU values, 54–56
sovereign democracy, 54–55
R
Radicalization, 66 S
Rational-legal authority, 58 Safello, 201
Reagan, R., 1–2 Sakwa, R., 48–49
Referenda, 111, 221 Sanctions
Greece, 224 decision to apply, 37–38
Hungary, 226–228 initiation, 34–35
See also Brexit Scharpf, F. W., 219
Refugee crisis, 56, 226–229 Scheingold, S. A., 219
as part of values crisis, 28–32 Schengen area, 16
response to, 27 Schengen cooperation, 143, 226
and value crisis, 25–26 Schlösser, T. M., 104
Refugee policy, systemic crises, 214 Schuman Declaration, 214
Refugees Schuman, R., 4
attitudes to, 25–26 Security issues, 141
resettlement, 27 Self-determination, 10
Refugee situation, 7 Self-interest, 68
Regulation Services Directive, 120
sharing economy, 186 Sharing economy, 17–18, 182
and social trust, 96 benefits, 185–186
Regulatory capture, 131 blockchain development and
Regulatory framework, banking, 128 implementation, 201–203
Rehn, O., 223–224 blockchain protocols, 197
Reservoir of goodwill, 68, 69, 82, 87 blockchains and the EU, 197–201
Rights, protection of, 11 blockchains as means of increasing
Risk management, sharing economy, trust, 195–197
186–187 blockchains overview, 198
246 INDEX
Sharing economy (cont.) and age at arrival, 100–101

and consumer laws, 186–187 city comparison, 95
defining, 183–185 context and overview, 91–92
e-commerce, 192–193 country comparison, 94
Estonia, 188, 191 defining, 92–95
intermediaries, 193–194 and ethnic heterogeneity, 98, 101,
middle hands, 187 103
payment systems, 184–185 game theory perspective, 93
possibilities and challenges, and health, 100
185–192 high-low trust migration, 100–101
potential economic growth, 204 importance of, 95–97
potential of, 183 individual benefits, 97
responsibility and integrity, 186 and institutional quality, 96–97
risk management, 186–187 and length of stay, 102
role of platform owners, 187 and levels of regulation, 96
self-regulation, 186, 188 lost wallet experiment, 96
summary and conclusions, 201–205 low-high trust migration, 98–100
supplier position, 187 and macroeconomic stability, 96
taxation, 188 measuring, 93–94
transaction costs, 191–192 and migration, 97–98
transportation, 188–189, 191 migration-based comparison,
trust as currency, 194 98–100
trust-building, 194–195 psychological perspective, 104
user rights, 186 and rule of law, 106
See also Digitalization summary and conclusions, 104–106
Sincere cooperation principle, 10, 214 Soft power, 47
Single Deposit Insurance, 129 Solidarity
Single licence, 15 and democracy, 3
Single Resolution Board (SRB), 130 role in criminal law, 152–156
Single Resolution Fund (SRF), 130 Sønderskov, K. M., 103
Single Resolution Mechanism (SRM), Sovereign debt crises, 117
129–132 Sovereign democracy, Russia, 54–55
Single Supervisory Mechanism (SSM), Sovereign risk, and banking system
129–130 risk, 119
Slovakia, attitudes to refugees, 27 Sovereignty
Small Claims Regulation, 169 and integration, 162–163
Smart contracts, 196, 199 and mutual recognition, 164
Social diversity, and social trust, 97 and power of EU, 217
Social-psychological theories, 9 Spaak, P.-H., 4
Social relationships, horizontal and Spain, debt crisis, 117, 118
vertical, 66–67 Spinelli, A., 4
Social trust State administration, 10
INDEX
247
State formation, 216–218 T

State in the making, 215–219 Taking back control, 225–226
Stickiness, of trust, 105 Tampere European Council, 161
Sundararajan, A., 183–184 Taxation, sharing economy, 188
Supervision, of member states, 23–24 Technocracy, 222–223
Supervisory role, 129–130 Tensions, within EU, 9
Support, specific and diffuse, 68 Territoriality-based national treatment,
Survey questions, 70 125
Sweden The European Agenda on Security,
attitudes to EU membership, 74 150
blockchains, 200–201 Third pillar, 141, 147–148
citizens’ political trust, 73–76 Trachtman, J. P., 123–126
measurement of trust, 73 Trade barriers, 120–121
trust and satisfaction with EU removal of, 5, 219
democracy, 75 See also Free trade
Swedish Society, Opinion and Media Traditional authority, 58
(SOM) institute, 100 Transaction costs, digitalization,
Swedish Taxi Inquiry, 188 182–183
Sykes, A. O., 121, 125 Transparency, banking regulation, 128
System-building capacity, 218–219 Transportation, sharing economy,
Systemic crises, 18–19 188–189, 191–91
approach taken, 217 Treaty of Lisbon, 10, 15–16, 225
Brexit, 214–215, 224–226 Treaty of Rome, see Treaty on the
concepts, 215 Functioning of the European
context and overview, 211–213 Union (TFEU)
crisis management/resolution, 222 Treaty on the European Union
EU as state in the making, 215–219 (TEU), 141, 143, 147, 160,
exit, 215–216 213–214, 220–221, 225
Grexit, 222–224 Treaty on the Functioning of the
legitimacy, 219–221 European Union (TFEU), 26–27,
loyalty, 215, 216, 222–224 143
pact of confidence, 213–214 Trump, D., 31, 55–56
partial exit, 216 Trust
political scope, 223 centrality of, 3
recommendations, 230–233 defining citizens’ trust, 66–67
refugee crisis, 226–229 defining concept, 212
refugee policy, 214 erosion of, 6
restoration of trust, 229–233 and identity, 43–45
summary and conclusions, 229–233 importance within EU, 8–11
trust and loyalty, 213–215 interpersonal, 66–67
voice, 215, 216, 219–221 and loss of normative power, 49
248 INDEX
Trust (cont.) questioning of values, 29–30

nature of, 1–4 recommendations, 36
political, 67 and refugee crisis, 25–26
at popular and elite levels, 3 role of refugee crisis, 28–32
Trust and Power (Luhman), 192 solidarity and loyalty, 36–37
Trust game, 93 summary and conclusions, 37–38
Turkey supervision of member states, 23–24
accession talks, 56–57 Turkish challenge, 56–57
attitudes to refugees, 27–58 See also Core values; Eastern
challenge to EU values, 56–57 enlargement
refugee agreement, 12 Values
Tusk, D., 6, 211 questioning, 29–30
See also Core values
Varoufakis, Y., 7
U Vaubel, R., 125
Uber, 188, 191–192 Virtual currencies, 200–201
Undemocracy, 57–58 Visegrad bloc, 49–51
United Kingdom, blockchains, 200 Voice, 215, 216, 219–221
United States, corporate law, 125 Brexit, 224–226
refugee crisis, 226–229
Voting behaviour, discrepancy, 220
V Voting system, 5, 26
Vacuum of responsibility, 18
Value crisis, 11–12
access requirements, 23–24 W
application of sanctions, 37–38 Way ahead, 19
basis of rules, 35–36 Weber, M., 58
context and overview, 23–26 Werbach, K. D., 199
dialogue with Poland, 30 Werner report, 113–114
excess optimism, 33 White, J., 222
explaining clash of values, 32–34 Wihlborg, C., 116
human rights, 30 Willett, T. D., 115
Hungarian challenge, 52–53 World Trade Organization (WTO),
ideological crisis, GAL-TAN, 31 international trade regime, 123
legal framework, 26–28 Wyplosz, C., 114
need for caution, 34
opportunities from budget
negotiations, 36–37 Z
precipitating factors, 32 Zakaria, F., 51
protecting core values, 34–37

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Trust in The European Union in Challenging Times - 2019 PDF

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TRUST IN THE

ISBN 978-3-319-73856-7 ISBN 978-3-319-73857-4 (eBook)

Library of Congress Control Number: 2018941246

© The Editor(s) (if applicable) and The Author(s) 2019

Cover illustration: daitoZen

Printed on acid-free paper

This Palgrave Macmillan imprint is published by the registered company Springer

 rust in the European Union: What Is It and How Does It

 hat Explains the Lack of Trust in the EU Among Its

 erspective on the Eastern Enlargement: Triumph of the EU

 itizens’ Trust in the EU as a Political System 65

I s Migration Threatening Social Trust in Europe? 91

 rust in the Euro and the EU’s Banking Union After

 he Question of Trust in EU Criminal Law Cooperation:

 utual Trust in Civil Justice Cooperation in the EU 159

 he Importance of Trust in a Digital Europe: Reflections

 rust and Crises in the EU: Exit, Voice and Loyalty 211

Antonina Bakardjieva Engelbrekt is Professor of European Law and

tional practice theory, security communities, and EU foreign and security

Lars Oxelheim is Professor of International Business and Finance at the

Citizens’ Trust in the EU as a Political System

The Importance of Trust in a Digital Europe: Reflections

Trust is an elusive concept. We can have it without being able to see or

© The Author(s) 2019 1

verify’—illustrates this paradox rather well. Yet many of the institutions of

When EU leaders must find solutions to difficult problems, trust among

Trust Within the EU in Historical Perspective

community in Western Europe.3 The different political elites learned to

economic policy). It was in this context of close cooperation and rising

The State of Trust in the EU at Challenging Times

I have witnessed several decades of EU integration. There were many strong

The President of the European Council, Donald Tusk, spoke along

example. The eurozone debt crisis is often thought to encapsulate an

perceptions of EU membership have been a regular feature in British

How Does Trust Matter Within the EU?

obliged to grant EU law precedence in the event of a conflict with national

Different Dimension of Trust and How to Achieve It

elites in general and a distrust of the essentially supranational, cosmopoli-

commitment really mean? Due to cooperation in connection with

whether legal protection for individual parties can be sacrificed in order to

democracy can address conflicts and disagreements over European policy.

The Way Ahead

Future crises are likely to be exacerbated rather than solved if we act

Bremberg, N. (2018). The EU and the European security community: History

© The Author(s) 2019 23

and Romania as members to the EU in 2007, which took place despite

Against this background, it is today appropriate to say that a wide-

tendencies in other member states, chiefly Hungary and Poland. A crucial

The Current Legal Framework in the EU

EU (TFEU), was enacted on the basis of QMV on a proposal from the

Simultaneously, the EU offered to pay Turkey no less than €3 billion and

The Refugee Crisis as Part of the Greater Conflict

If we view the situation in a somewhat wider context, however, it is obvi-

Hungarian Prime Minister, Viktor Orbán, who in 2014 advocated in

EU fundamental values, namely the so-called Rule of Law Framework

How to Explain the Clash of Values in the EU?

International Monetary Fund (IMF), played a decisive, but strongly con-

rust in the European Union: What Is It and How Does It

hat Explains the Lack of Trust in the EU Among Its

erspective on the Eastern Enlargement: Triumph of the EU

itizens’ Trust in the EU as a Political System 65

I s Migration Threatening Social Trust in Europe? 91

rust in the Euro and the EU’s Banking Union After

he Question of Trust in EU Criminal Law Cooperation:

utual Trust in Civil Justice Cooperation in the EU 159

he Importance of Trust in a Digital Europe: Reflections

rust and Crises in the EU: Exit, Voice and Loyalty 211

Very/fairly sasfied with EU democracy Very/fairly much trust in the Commission

Berggren, N., & Bjørnskov, C. (2017). The market-promoting and market-