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Analysis: Complex, divided EU gets philosophical about its future

By Robin Emmott

COPENHAGEN (Reuters) - It is a club that is open to all of Europe, but not all members are equal.

As the euro zone debt crisis forces the currency area to integrate more closely to survive, those outside the bloc but in the European Union are worried that they will be left as junior partners without a say.

The euro zone's response to its public debt crisis has created layers of new agreements and mechanisms that affect the EU's 10 non-euro countries, who are shut out when deals are done and only learn later of the decisions of the 17.

Strategies to bring all EU countries together on overarching economic issues have had unintended consequences by creating divisions because not everyone can agree, threatening efforts to implement policies to revive the region's depressed economies.

"We need to make sure that the EU of 27 is actually working," said Margrethe Vestager, the economy minister for non-euro member Denmark, who broached the tensions when she chaired an EU finance ministers meeting in Copenhagen on Friday.

"There is a risk ... that the cooperation quietly drifts apart," said Vestager, whose bright red dress in a room of ministers in grey suits signaled a desire not to be overlooked.

Danish diplomats described Friday's debate - the first time such a discussion has formally been on the agenda - as a "philosophical" discussion on the future of the European Union.

Many EU officials concede that things are getting unwieldy, even for experts who struggle to decipher the structures intended to unify the EU's 500 million citizens.

"We are building a fiscal union in a complicated way," Germany's Finance Minister Wolfgang Schaeuble said of the euro zone at a gathering of students in Copenhagen.

Concern is growing both among euro "outs" which aspire to join the currency, and those which do not.

Poland, which aims to adopt the euro in mid-decade when it meets the criteria, warned last month against the creation of divisive "mini-EU coteries", that could entrench a two-speed Europe.

"The imperative for a closer cooperation of the euro zone members should not be a means of dismantling the European Union," Polish Foreign Minister Radislaw Sikorski said in a speech to the European Council on Foreign Relations in Paris. "Decision-making in this group cannot subvert step-by-step the decision-making among the 27."

Explicitly rebuffing a vision articulated by French President Nicolas Sarkozy, Sikorski said: "Poland says "no" to the institutionalization of "a new core and a new periphery" in Europe."

Separately in Helsinki, Finland's prime minister urged European Commission President Jose Manuel Barroso to avoid more divisions between the euro zone, of which Finland is a member, and the other 10.

"The EU's unity is crucial," Jyrki Katainen told reporters after meeting Barroso on Saturday. "We have to avoid these kinds of artificial divisions between the two camps," he said.

One such potentially divisive issue worrying the Finns is an attempt to create a tax on financial transactions, which France and Germany have tried to pursue within the euro zone after Britain blocked it at EU level.

HOW MANY PACTS MAKE A UNION?

Divisions that were less noticeable a decade ago have become more apparent as the euro zone, under duress, seeks to create a central fiscal policy to match its monetary union to convince financial markets the currency area can stick together.

That march towards coordinated fiscal policies in the euro zone has given rise to another schism in the EU's founders' vision of "ever closer union". Twenty five of the EU's 27 members signed a "fiscal compact" backing budget discipline in the euro zone. Britain and the Czech Republic stayed out.

Britain, for its part, demanded in vain guarantees that the euro zone would not take decisions on financial services or the single market that could affect its interests.

Euro zone leaders' will now hold at least two separate summits a year, only inviting the other signatories of the pact if issues that might concern them are to be discussed.

In another division, only 23 of the 27 countries agreed last year to a Franco-German strategy aimed at improving competitiveness in European economies, the Euro Plus Pact.

"In addition to the EU of the 27 and the euro zone of 17, we now have the Europe of the 23 with the Euro Plus Pact, and the Europe of 25, the fiscal compact," Vestager said. "We need to make sure that these formats don't split us apart," she said.

EU officials have long discussed "mechanisms of differentiated integration," EU jargon for allowing some countries to move forward faster together, rather than trying to create a monolith that could lead to irrevocable strains.

Britain, Denmark and Sweden have opted out of the euro, while London and Dublin declined to join the passport-free Schengen area.

After almost doubling its size over the past 15 years in an eastward expansion, the EU's growing pains are understandable, with an inevitability that not everyone can see eye to eye.

Still, the EU must address its future if it is to maintain its integrity, according to Brussels-based think tank Bruegel, whose research laid the basis of the discussions in Copenhagen.

One step would be to better share information between euro zone and non-euro zone finance ministers, Bruegel said in a paper for the ministers. The euro zone should also ensure that non-euro zone countries have more of a voice in designing the currency area's future.

"We should try to find common ground as much as possible," said Sweden's Finance Minister Anders Borg in Copenhagen.

But if an overarching integration strategy emerges, it must also go beyond monetary and economic affairs.

"The concurrent circles in the EU will always differ according to the subject," said Karel Lannoo of the Brussels-based Centre for European Policy Studies. "Today economic policy is most important, but tomorrow it may be defense."

(Additional reporting by John O'Donnell in Copenhagen and Ritsuko Ando in Helsinki; Editing by Paul Taylor/JEREMY GAUNT)

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