Lithuanian Annual Strategic Review

This article discusses the institutional evolution of the European Union (EU) in reacting to the euro zone crisis and the new forms of differentiation in the EU. It presents and elaborates several arguments. First, despite calls to complete the creation of the “genuine Economic and Monetary Union“ and to make a step towards federal structure of the Union with single currency and single central budget used to react to asymmetric shocks, most decisions actually agreed upon by member states since the start of the crisis can be seen as attempts to avoid exactly such a scenario. Second, although the divide between the “Northern“ and “Southern“ groups of the EU member states seems attractive in its simplicity, it is a gross simplification of the current situation and hides important differences of member state preferences within each of the groupings. Third, it is also too simplistic to see the membership in the euro zone as the main characteristic defining the state of differentiation in the EU. As it is discussed in the text, both euro zone member states and EU countries outside the euro zone participate in different initiatives of integration and show different national preferences. Finally, the text concludes with a formulation of the main policy dilemmas for Lithuania in terms of ongoing process of complex differentiation and taking into account the prospect of joining the euro zone in 2015.