Report on the Dynamics of Differentiated Integration

Abstract

This report examines the dynamics of differentiated integration. In particular, it studies whether differentiated integration is a path-dependent process, in which earlier differentiation increases the likelihood of additional differentiation in the future. In a set of analyses on the EU’s treaty-based and legislative differentiation and the Eurozone crisis, this report provides consistent evidence for path-dependence. The analysis of treaty reforms shows that the extent of pre-existing differentiation in a policy area is correlated significantly with differentiations in subsequent treaty reforms – even when controlling for exogenous factors of differentiated integration. In turn, differentiation in EU legislation follows differentiation in EU treaties. Whereas such path dependence only takes place in the area of core state power integration, it is clearly the most important factor driving legislative differentiation. Finally, in the Eurozone crisis, the differential impact of the crisis on euro area and non-euro area countries motivated the euro area countries to adopt far-reaching centralizing reforms and financial commitments that non-euro area members refused or were excluded from. In sum, differentiated integration has not only been pronounced in policy domains related to core state powers – such as macroeconomic and security policies – when they were initially integrated, but the legal gap between insiders and outsiders has grown over time.