In June 2007 in Berlin, the heads of state and government of the European Union agreed on a detailed mandate to finalise the text of a new treaty to reform the institutions of the European Union. The six-month Portuguese presidency (which inherited the mantle from Germany after the Berlin summit) now hopes to close the deal in October, thus terminating the two-year stalemate that followed the rejection of the constitution in France and the Netherlands.

Olaf Cramme is acting director of Policy Network

The importance of the so-called "reform treaty" should not be underestimated. The enlarged European Union of twenty-seven member-states needs an updated rulebook in order to become more effective. This is necessary to equip and prepare the EU to tackle major international challenges that states individually cannot address: among them climate change, the geopolitics of energy, the instability of the current financial system, and issues arising from migration and integration.

But what will come next? Once the agreement has been made, supporters of EU integration are likely to lean back and bask in the unfolding progress of the European project - in effect, to go back to sleep. Soon, the debates will centre again on the necessity (or nonsense) of restricting the import of Chinese light-bulbs, or the proposal to establish a European Institute for Technology. Brussels, in short, may well restart its autopilot.

Such a development will ultimately be detrimental to European integration. For far too long the debate about the future of the European Union has been kept in a technocratic bubble, dominated by an often misleading polarisation between more versus less integration, Europhiles versus Eurosceptics, or "social Europe" versus "market Europe". Yet decisions taken by the EU already have a profound economic and social impact on our societies. In face of this reality, national politicians still underplay this increasing influence of Brussels and thus unintentionally nurture feelings of Euroscepticism. As Loukas Tsoukalis outlines in his brilliant book What Kind of Europe?, there is now a chasm between policies and politics at the European level, whereas at the national level - despite the new constraints on autonomous national action - the opposite is happening.

The populist danger

In particular, current EU management thwarts the idea of European citizenship, a concept which demands that individuals must feel that they understand and share ownership of the core mechanism of their society. The Canadian intellectual John Ralston Saul argues that "this sense of understanding implies that each of us has the self-confidence to wish to change our society for the better" (see The Collapse of Globalism [Penguin, 2005]). This, in turn, requires that citizens come to see political leadership as the ultimate expression of their belief in the reality of choice and change.

Technocratic dominance and management of Europe, in contrast, proclaims the inevitability of developments and their dynamics - and in doing so serves to drive individuals away from citizenship and, eventually, from the very idea of EU integration. Worse, the absence of choice magnifies the feelings of insecurity, leading to a political arena where false populism appears more and more tempting. The rise of demagogues across the European Union, and from different parts of the political spectrum, exemplifies this.

In Europe, only a few leaders seem to have recognised this dilemma. France's president, Nicolas Sarkozy, is one of them. When he made his first post-election visit to Brussels in May 2007 he hinted at his thinking on the role of the European Union in response to globalisation: "Europe has to protect its citizen, not to worry them. Europe has to prepare itself for globalisation - it can't just be overtaken by it. Globalisation can't be a Trojan horse in Europe" (see "Sarkozy to champion Europe in trade talks", Financial Times, 23 May 2007). At the European council meeting a month later, Sarkozy insisted on removing the principle of "free and undistorted competition" from Article 3 of the old constitutional treaty.

Also in openDemocracy on the European Union in a decisive year:

Aurore Wanlin, "The European Union at fifty: a second life" (15 March 2007)

Krzysztof Bobinski, "European unity: reality and myth" (21 March 2007)

Frank Vibert, "The European Union in 2057" (22 March 2057)

Mats Engstrőm, "Europe's green power" (26 March 2007)

Simon Berlaymont, "Tony Blair and Europe" (30 May 2007)

His motivation and intentions are clear. Sarkozy, despite a declared intention to liberalise the French domestic labour market, does not believe in the virtues of free trade and openness to globalisation. Rather, he regards protectionism as a solution to the unskilled-worker problem, and thinks that the European central bank should make stimulating growth and jobs a priority instead of fiscal and monetary prudence. This questioning of the merits of competition has secured him electoral support in France and won popular favour in other parts of Europe. But the larger point is that in projecting this view, Sarkozy is also saying that he wants a more political Europe - self-evidently one that reflects his analysis and worldview.

Does this mean the provisional end of European harmony? It certainly requires other players to take a firm stand on the issues in question and clarify their divergent positions. If this happened, the healthy result might be that clashing interests and perspectivrs might come more clearly to the fore and thus allow EU decision-making on how to tackle future challenges to be put to the test.

This is where Sarkozy's line of attack also has a constructive element. Europe, if it is to regain the interest of its citizens and include its citizens centrally in its deliberations, urgently needs a proper debate as well as choices about its political direction. The changes in favour of more democracy and subsidiarity, as envisaged by the "reform treaty", may be a step in the right direction; but of themselves they will hardly generate more enthusiasm for the union. Instead, decisions about a host of issues - managing the single market, the nature of social Europe, Europe's role in a multi-polar world, competition rules, economic redistribution - ultimately need a stronger political underpinning.

A serious debate about what this will look like and how to get there will in turn have to confront a new level of complexity.

Principle and practice

At stake are two fundamental challenges. The first is analytical. The effects of EU integration, market liberalisation and enlargement (or any combination of these) are as heavily contested as those of economic globalisation, the emergence of the knowledge and service economy or changing demographics. While Michael Dauderstädt identifies an "economic tragedy of European integration" and George Schöpflin believes that the entry of China into the global labour market has been devastating for Europe (see "The European Union's troubled birthday" 22 March 2007), others would argue that the European single market and global market integration have decisively contributed to the growth of GDP and employment in most European countries. In particular, the impact of globalisation on inequality, social solidarity, citizenship and social cohesion in the industrialised societies is the subject of lively debate, but is inadequately understood.

Take, for instance, the falling labour share of low-skilled sectors since the beginning of the 1980s. The decline of unskilled labour in rich countries should be an indisputable fact. However, scholars still battle to ascertain its principal determinants. As Tito Boeri aptly asks, is it trade, technological change or weaker "compressing" institutions ( e.g. de-unionisation) or a combination of all these factors? (see "New protectionism and unskilled workers..", Vox, 8 July 2007). Nicolas Sarkozy is only one of many European politicians who seem to believe that the answer is trade. Whether or not this is correct, the debate about the future direction of Europe will rely to an unprecedented extent on informed analyses that can explain the true causes of current social and economic transformations.

The second dimension encompasses both philosophical and more traditional political considerations. At first glance, the question of how much solidarity and equality should Europe aspire to, or whether the EU should introduce a European minimum wage (to take only two examples) predispose themselves to answers that reflect classical left-right lines of argument. This is no longer true.

The point is illustrated by Fintan O'Toole's openDemocracy article which uses the dispute over the EU's service directive in an attempt to redraw such ideological differences (see "The European Union's two faces on globalisation", 22 March 2006). As he sharply concludes: "The divisive argument over creating a single market in services reflects the European Union's confusion over globalisation and reveals its need to articulate itself as a political and social project."

However, O'Toole overlooks the changing political landscape in Europe and its implications for debates among the different European actors. The traditional left-right divide is becoming obsolete. No clear political patterns any longer are neatly captured by a routine counterposition of those who want to be "an agent of globalisation" to those who want "protection for their citizens against the harshest consequences of globalisation".

Instead, there is a mosaic of shifting alignments in political Europe that crosses parties as well as countries. Two questions make the point. Does a belief in the virtues of free trade mean, for example, that Swedish, Danish and British centre-left politicians are automatically more "neo-liberal" than their French centre-right colleagues who are blind to these virtues? Do centrist political parties in east-central Europe broadly share the economic concerns of their counterparts in western Europe, or is it more accurate to see new cleavages emerging within and between "new" and "old" member-states in their perspectives on competition within the EU and between the EU and rest of the world?

A political direction

In addition to these puzzles, the debate is distorted by false (if fashionable) assumptions: for example, that more political integration and concentration of power in Brussels will ultimately lead to a more social-democratic Europe, while less integration and centralisation tends towards a neo-liberal agenda. Europe's historical experience (and that of the United States too) suggests that the exact opposite can also be true. As Adam Posen writes, the more the central body has had authority over economic policy, the greater the liberalising influence (see "Liberalism needs central power", Financial Times, 3 July 2007 [subscription only]). The hollowness in the arguments of many across the British political spectrum - most prominently the opposition Conservative Party - is evident here.

Hence, politicising EU integration constitutes a particular challenge. It is dependent on a better understanding of the implications of globalisation or internal EU developments such as enlargement and the introduction of the euro. Politicians need to acknowledge this difficulty and also start recognising the constraints on autonomous national action. This will happen only as part of a process in which the debates about the future of the European Union become more political, and in a way that reflects the importance of EU decision-making. Some of Europe's political leaders are beginning to understand this. Will others follow?