The "no" results in the May-June 2005 referenda in France and the Netherlands on the European Union's proposed constitution were followed by predictable statements that the EU was in a condition of crisis. This crisis was said to be composed of three elements:

• the rejection of the constitution (more strictly, of the treaty establishing the constitution) by a national vote in two key member-states
• the doubts the failed referenda cast over further EU enlargement
• the doubts they cast over the economy – especially the future of the "Lisbon agenda" designed to improve Europe's ability to compete in global markets.

Such "crisis talk" remains a backdrop to much media discussion, and is reinforced by the apparent lack of substance in some of the EU's consultations (such as the European Council meeting to close the Austrian presidency, before Finland assumes the role for the second half of 2006). But the language of crisis was always artificial and overblown. A year on, the EU's mood is beginning to change for the better.

Frank Vibert is director of the European Policy Forum. He is the author of Europe Simple, Europe Strong: The Future of European Governance
(Polity, 2001)

Among Frank Vibert’s articles on openDemocracy:

"The future of Europe – simplify, simplify" (December 2001)

"The new cosmopolitanism" (March 2003)

"French referendum lessons" (May 2005)

A clearing wind

There are four reasons for optimism about the European Union. First, there are signs of revived economic growth in the EU's two largest economies, Germany and France, suggesting that gloom over Europe's economic prospects has been overdone. In addition, the strong performance of the euro is positioning it as a real alternative to a weak United States dollar; most of the ten accession states which joined the EU in May 2004 aspire to join the eurozone as soon as possible.

True, not all is reason and light in economic policy. Most notably, the French government has been buffeted by waves of street demonstrations and appears paralysed by fear of further mass popular opposition to economic reform; and the reform intentions of the Italian government elected in April 2006 remain to be tested. More broadly, cross-border mergers and acquisitions continue to be sensitive, and from Spain to Poland have provoked charges about resurgent economic "nationalism". But the other side of the coin is that such long-awaited mergers are starting to happen, and represent a positive sign that the single market is becoming a reality in corporate boardrooms.

Second, while the "pause for reflection" over the future of the rejected constitution has been extended, at least one possible way ahead is beginning to be mapped. This would involve a more focused and practical approach to institutional reform of the EU. It might proceed by selecting some key items of the constitution (such as the idea for a permanent council president, and the installation of an EU foreign minister) and submitting them to governments; they could then be presented for passage by parliament (where governments can rely on their majorities) rather than as elements of an overarching "constitution" that require endorsement by referendum.

Third, enlargement remains on track despite continuing concerns in each relevant area. The accession of Romania and Bulgaria – due in January 2007 – is proceeding, subject to a resolution of EU reservations about the integrity of justice and administration in the two countries. The path is becoming more clearly established in the Balkans, again notwithstanding uncertainties over the future constitutional status of Kosovo, the pursuit of suspected war criminal in Serbia, and the evolution of the newly-independent state of Montenegro. The negotiations with Turkey started in October 2005, and are proceeding even amidst tension over the opening of Turkish ports and airports to Cyprus and a more sceptical mood in Turkey itself over the prospect of EU membership (which in any case will not be realised before 2015).

Fourth, there is a sense that the EU is beginning to punch closer to its economic weight in world affairs (through, for example, its dialogue with Iran over Tehran's nuclear-research programmes). More generally, there is a sense of greater receptivity to Europe's views in the US state department and the White House. If a number of informed observers regard American "unilateralism" as on the wane, this is in part a result of the EU's efforts. The meeting of EU leaders with President Bush in Vienna on 21 June 2006 – which includes a more confident expression of European thinking over foreign policy – marks a confirmation of this mood change in the transatlantic relationship.

This change in the EU's body-language is still fragile and it is easy enough to identify four potential weak points:

• enlargement: in Turkey and southeast Europe, many obstacles still lie ahead
• institutional change: the orchestration of the next round of treaty change will demand a high degree of political and administrative skill, particularly of the German presidency in the first half of 2007
• economic renewal: the political manoeuvring around the EuroNext/New York Stock Exchange merger suggests that Euronationalism remains alive and kicking
• power projection: the EU's global diplomacy could yet be badly tarnished if the Doha trade round fails amidst accusations of EU agricultural protectionism.

Nonetheless, a strong case can be made for saying that the EU has turned a corner, and that the language of crisis will evaporate in 2007-08. By then, Jacques Chirac and Tony Blair will have departed, Silvio Berlusconi will seem like a bad memory, and a new set of relationships can be formed among European political leaders.

A new jargon

Against this background of cautious optimism, an ominous new debate has started around the latest awkward term in the European Union lexicon that conceals as much as it illuminates: "absorption capacity". It is the latest example of the way that Europe's leaders tend to reach for jargon that is both misleading in itself and meaningless to citizens.

The term "absorption capacity" is derived from development economics, where it denotes the "objective" and measurable limits on a country's ability to make effective use of capital from abroad. In current EU discussion, it is being applied to suggest that there are empirical and "objective" limits to what current EU structures can accommodate – and that these limits have been or are close to being reached.

The appropriation of the phrase in EU discussions has been triggered mainly by fear of Turkish accession to the union. Europe's leaders find the phrase doubly useful in this context: it (positively) generalises the issues posed by enlargement beyond that of Turkish membership alone by invoking the putative empirical constraints imposed by EU structures, and thus (negatively) deflects attention from political arguments about whether Turkey "belongs" or would "flood" Europe with immigrants.

The "absorption capacity" phrase has become useful to two distinct (if occasionally overlapping) groups: those who wish to oppose further enlargement (and particularly Turkish accession), and those who wish to fight for new powers for the EU under a banner different from that of the "constitution". The dexterous convenience of the phrase is that it can bring into one debate each of the four elements of potential weakness in the EU's development: enlargement, institutional change, economic renewal and power projection. It carries the implication that only with a further centralisation of powers will the EU be able to enlarge much further, manage its economic policies effectively, or play a full role in world affairs.

The ideas embodied in the term are fallacious, both on a theoretical and practical level. The theoretical basis of the idea that the EU faces problems of "absorption capacity" is borrowed from what is known as "club theory". This focuses on the difficulties any large club has in making decisions and conducting common policies. As the club increases in size, so the argument runs, the more difficulties arise and the more the benefits of club membership become diluted.

This theory is weak in the context of the European Union. Many of the benefits of EU membership flow from following common rules, whose value increases as more people subscribe to them. The benefits are "network" benefits that increase with size and not – as the "absorption capacity" model has it – benefits based on sharing out something with a fixed supply.

The idea of "absorption capacity" is also weak as a practical concept. Its alleged relevance to the EU lies in relation to the difficulty the main institutions (commission, parliament and council) would have in reaching good decisions with a larger membership. But such difficulties evaporate if the various EU institutions are examined individually. Each of the institutions already has rules for making decisions that will work with larger memberships, and the Nice treaty (December 2000) has in case limited the future size of the commission and parliament. Across the European Union and in its separate institutions, the quality of decision-making can improve. But this has to be done for the existing membership anyway and the remedies would apply equally to an enlarged membership.

In this light, "absorption capacity" is in the context of the EU not just a flawed but a dishonest concept. First, because it refers to supposed empirical limits that have not been defined and have very weak theoretical and practical underpinnings. Second, because politicians can seek to use an apparently objective and "non-political" term to set new barriers to enlargement rather than confronting the political problems enlargement raises with their domestic electorates.

This approach is also remarkably shortsighted. The EU's greatest achievement to date has been to anchor newly democratised and marketised economies in a larger framework of rules and to provide them with incentives against backsliding. This function would be seriously at risk if the "absorption capacity" mentality gained acceptance.

The phrase is also unhelpful and misleading in the context of institutional change. It is indeed the case that Europe's political leaders will one day have to return to the question of how to reform Europe's rules and institutions. But the mantra of "absorption capacity" is deceptive here too. The reality is that the existing treaties remain unintelligible to citizens, unprincipled about organisation, and fail to provide Europe with an evidence-based, rule-making capacity that also reflects what Europe's citizens want.

The debate initiated over "absorption capacity" is a diversion from the European Union's real political problems: enlargement, rethinking its treaty base, economic reform, and its role in the world. These can be resolved only if the EU develops a much simpler overall structure that allows for much greater internal diversity. That is the real challenge facing Europe, and the way to guarantee that the current fragile optimism will be made secure.