In Discussion Paper No. 1242, Alexis Jacquemin and Research Fellow Andre Sapir analyse the proposal to create a hard core of EU countries committed to deeper and faster integration by studying the economic structure of the proposed grouping. They first examine the relative weight and structural characteristics of the five potential candidates for early membership of the hard core in comparison with the whole EU, Japan and the US. The analysis leads to two major conclusions regarding the credibility and viability of a hard core comprising Germany, France, and the three Benelux countries (EU–5). First, EU–5 represents a considerable economic space: depending on the precise indicator, its weight varies between 60-70% of EU–12, 50- 75% of the US and 80-100% of Japan. Second, EU–5 contains a fairly homogenous group of countries according to these indicators. The degree of similarity is particularly notable for Germany and France, even using industrial policy indicators.

The authors next use principal component and cluster analyses to investigate whether these five countries represent a homogenous grouping vis-à-vis the other EU members. This analysis leads to three conclusions. First, the proposed EU–5 hard core does not emerge as a `natural' cluster; instead, what strongly emerges is a North-South rift, with Italy in an unstable position between the two clusters. Second, Denmark and the UK belong to the same northern cluster as EU–5. Hence, on the basis of these criteria, there are no structural considerations which would exclude these two countries from the hard core, only their own preference for less rapid and deep integration. Lastly, based on purely structural factors, Germany occupies a special position inside the northern cluster due to its relative specialization in manufacturing.

Is a European Hard Core Credible? A Statistical Analysis
Alexis Jacquemin and André Sapir

Discussion Paper No. 1242, September 1995 (IT)