Is it possible to have a fiscal discipline union before a political union? On Wednesday the European Commission is going to unveil proposals to vastly extend its budgetary oversight powers.
The move is part of an attempt to make budgetary surveillance so tight, and therefore the likelihood of a euro state fiscally misbehaving so slim, that Germany will ultimately be persuaded to sign up to the idea of mutualising eurozone debt.
According to a report in the Financial Times, the proposals include EU approval of all 17 eurozone budgets and the possibility of putting a country that is in trouble “under some form of administration” by EU authorities.
The draft proposals also suggest that the commission could ask governments to change policy decisions if they are seen as pushing the country concerned into excessive debt.
“If we want a common currency, we have also to share some discipline. In a monetary union we need to acknowledge this kind of interdependence,” Commission President Barroso said Wednesday afternoon, standing alongside Mario Monti, the new leader of Italy.
The significance of such steps is not to be under-estimated.
Of course, the proposals are a result of the ever worsening eurozone crisis. And we are where we are with the crisis, which is to say politicians are rushing to patch up the shaky foundations underpinning the euro. And they are being hounded by disbelieving markets all the way.
Once content to treat German and Greek debt as equal, markets have now become ueber-sceptics. And nothing short of a complete fiscal union will do. EU politicians have in the past said they will do everything it takes to save the euro. Before going on to do as little as possible to get themselves through the particular crisis summit of the moment.
This is a reflection of the vast and complicated nature of the problem as well as the different visions that EU leaders have of what “everything it takes” actually means.
So far it is translating into more power for Brussels.
“We need strong institutions with the power to act,” says Barroso. But will the institutions be stronger without political accountability?
I reckon we need to go the whole way. The budgetary oversight needs to be accompanied by a thorough reform of the EU’s political set up. It could be along the lines of what Finnish Europe minister Alexander Stubb and German Chancellor Angela Merkel’s CDU party suggested last week. So, a president of the European council and commission rolled into one, directly elected, a bi-cameral system with the parliament and the council of ministers, with the right to propose legislation. A parliament with representation reflecting the size of the member states.
During the press conference with Monti on Wednesday, Barroso repeated that the advantage of giving the commission more powers is that it is above politics.
“After the the Second World War, the countries that founded the European community created supranational institutions, and now we have the European Commission, the European Court of Justice and the ECB. Why? Precisely to have independent assessment and monitoring and also if possible independent enforcement mechanisms that are not subject to political manoeuvring.”
Given the kind of powers the EU has now and will soon get in the future, this trend towards validating technocratese is unhealthy. The EU needs more politics not less.
#1 by Joe on November 22, 2011 - 6:53 pm
Setting aside however-many seminars, poutings of philosophers, and other notions such as bizarre fantasies about supranartionalism, the question is simply: is it a nation or isn’t it? is there a common good at stake? Are there any shared beliefs?
#2 by french derek on November 22, 2011 - 7:16 pm
Joe, I can only give you my view. I doubt anyone could give you a definitive answer.
The EU is not, nor will be during my lifetime, a nation in it’s own right. I don’t think it was ever meant to be. But an ever tighter federation of states, Yes. And it seems that current moves, as noted by Honor, could be moving us in that direction.
Shared beliefs. There were some in the beginning of it all – even before the EC. If there is a common cause today it is in “strength in number”. And that is where the Euro proved itself – under non-stressing conditions. Current moves (if true) appear to be concerned with regaining that “strength in number”.
My own view is that the Commission may well be independent and away from the day-to-day pressures (not to mention re-election problems) facing national leaders. However, to fulfill its European democratic role more real power has to be handed over to the European Parliament. ie I support Honor’s final sentences.
#3 by Victor on November 22, 2011 - 7:17 pm
The EU (along with the markets and because of its lack of control of the markets) already decides when a government should fall and whether it gets any money to approve its “budget”.
So establishing a formal procedure for peer review of national budgets is actually giving back some of the control the EU now de facto has.
All of the new proposals from the Commission are mere tweaking of what is already either practice or law (six pack, VP for the Euro, etc).
The only new significant proposal being mooted by the member states is to have the Court of Justice be able to intervene in excessive deficit/debt procedures through treaty amendments or a Euro zone treaty. But there is little probability the Court would even then be allowed to intervene on its own initiative. There would always be Commission or member state (individually or through the Council) intervention (as is currently the case for all court cases of these types). Unless the treaties gave citizens the right to intervene in these cases either directly or through national requests for preliminary rulings, little would change. And as regards remedies, the Court can only impose fines or interpret the law, it can’t tell a government what to do. So unless there was a radical reform of the balance of powers in EMU and/or what the Court can order, what is being considered doesn’t amount to wholesale change.
The idea of having a directly elected politician occupying some office EU-wide is interesting, but this seems like something good to talk about but never actually implemented, as this would for the first time actually threaten states monopoly of democratic “legitimacy” in a way not even the directly elected European Parliament (EP) could. Better to first move with the idea of a limited Europe-wide delegation to the EP, just like the Chamber is debating.
Anyway, having a directly elected powerful politician would run contrary to parliamentary systems which rule in the vast majority of member states (the most notable exception being France in which a “presidential” system was “unconstitutionally” adopted -you guessed it- by referendum), so it would go against the notion of “common constitutional traditions” which is one of the cornerstones of the treaties.
So even it there was a directly elected politician, he/she, would probably have limited powers. And even if he/she did have great powers, this would still solve nothing, as the example of the American president shows. Western democracy is predicated on separation/balance of powers, so all the talk of a directly elected executive as a panacea seems more like a disguised call for dictators (ironic, coming from the same people who criticize technocracy and national consensus governing).
It is also ironic that so many of the people who call the Commission technocratic then support consensus government at the national level. When the Commission is consensus government at the European level.
With these contradictions it is not hard to understand how Europe’s economic problems take a backstage to all the political theorists who want to discard decades of political and economic fundamentals.
While the Commission slowly does its job of coming up with sensible proposals and the member states do the painful job a cutting budgets and approving bailouts, so much of the European commentariat does nothing but come up with criticism mired by short-term thinking or proposals that are either not grounded on reality or on a true democratic spirit.
The treaties don’t prohibit the same person holding the Commission and European Council presidency, so this wouldn’t require a treaty amendment, yet it can’t be done for several years until the end of Barroso´s mandate.
The “legislative authority” is already bicameral, so making the Council formally a chamber is nothing more than a formalism. Rebalancing the EP´s composition is also something already foreseen in the treaties. With France’s population growing and Germany’s stagnating, this will probably see the light of day as soon at it is a non-issue (the only problem being the fact that Italy also has a stagnant population).
Giving the Council and EP right of initiative would also be a formalism. National parliaments with rights of initiative are still dominated by the government agenda. And even if the treaties were amended, it is certain that the rules of procedure would make sure the Commission and the Council still had the upper hand over the directly elected Chamber.
The reason the EU would need the power to intervene in national budgets, which doesn’t happen in say the US, is because in the US states are usually not allowed to have budget deficits by their state constitutions (there are balanced budget rules in most state constitutions).
If EU debt is mutualized there is a need to prevent out of control debt on the part of national administrations. How it will be done is not a matter of putting the cart before the horse. The cart was already put before the horse when EMU was established and EMU was a political decision, democratically adopted through parliamentary ratification of the Maastricht, Amsterdam, Nice and Lisbon treaties. Not to talk of all the subsequent national general elections.
How come now all of a sudden parliamentary democracy is no longer democracy? Is there a need for referendums to re-ratify what already has been decided? The treaties have always talked of fines and penalties on members not complying with EMU rules.
Referendums are not panacea and can actually be quite counterproductive. The call for referendums as a tool against rising nationalism and populism is completely absurd. Referendums are the tools of populism and nationalism par excellence.
If it had to be done by referendum not many of the current European states would even exist, as neither would the US and so many other states and institutions.
Democracy’s current crisis is not a crisis of legitimacy but a crisis of effectiveness. People who call for more democracy before solving this crisis are the ones that put carts before the horse. Holding referendums during economic crisis is a recipe for ill advised moves (remember how Hitler rose to power?).
The US is democratic and it still can’t get a grip on its budget and economic troubles.
Meanwhile, China is not a democracy and its economy seems to be the strongest in the times we are living. I would never advocate the Chinese model, but it seems western democracy has been captured by a complete inability to understand the interplay between a social liberal market economy and a representative liberal rule of law democracy.
The problem with the West is debt, lack of jobs and rising poverty, the markets seem to want more austerity, but business will very soon realize that they are killing their customers. Some may be content with this, as they move their operations to Asia, but most won’t.
Once France’s debt is degraded, hopefully Europe’s public (just like its leaders are doing little by little) will wake up and realize they are all in the same boat. Germany can’t rescue all of Europe. So the German policy of austerity will have to be modified if not discarded wholesale.
Once this policy of austerity is discarded all the talk of creating new institutions will be unnecessary, yet it will still become law, because appearances matter in politics. The quid pro quo will be the Germans get to have their rules, but they will not be applied in the current crisis. The alternatives are Euro zone breakup or muddling through.
But markets will not allow a return to the status quo ante where all sovereign borrowers were treated the same, so muddling through would be reminiscent of the currency crisis that eventually lead to the Euro.
Europe needs to understand it is a small continent with a small population, it no longer rules the world. It either learns to devise mechanisms to protect itself from globalization or will let the markets and the real superpowers have their way with “strong” and weak countries alike.
#4 by RCS on November 23, 2011 - 2:47 pm
The EU has been failing for the last 10 years. It is failing politically and economically. Remember the Lisbon agenda for growth? Look at the CAP – raised food prices and poverty in the 3rd world. Look at the CFP – most other countries can manage their fish stocks but the EU can’t. Look at the EU position on Global warming. It’s stopped. The IPCC is now backpedelling over their “projections”. We have an absurd energy policy that will drive thousands of EU citizens into fuel poverty. The biofuels policy has contributed to starvation in the 3rd World and doesn’t even reduce CO2 emissions. Last but not least, look at how the Euro has brought stability. Two democratic governments overthrown and EU apparatchnicks installed.
The thing that the Europhiles don’t seem to understand is that the EU commission cocks up virtually everything it touches and is creating an economically stagnant, over-regulated and repressive backwater.
I sincerely hope that individual countries will start to repudiate the EU – it is a failed experiment and it is bringing disaster on Europe.
#5 by Victor on November 23, 2011 - 8:08 pm
@RCS
we can only evaluate what has happened with the Euro because we don’t know what would have happened with the several currencies; the markets are doing with sovereign bonds what they would have done with currencies in other times (the effect is the same, turmoil in the balance of payments); the Euro doesn’t explain all the instability (look at the US);
Your comparison of the EU is against what imaginary countries?
Sure, some states, usually very small ones, have better policies than the EU on some of the issues you mention. But as a whole the criticism is unwarranted:
1) growth is on the downside in the West as a whole, with very few exceptions which are mostly related to commodities (the only real exception being some Nordic countries which had already undergone economic crisis and therefore reform in the 1980´s);
2) the EU mirrors the US, Japan and other industrialized countries in the CAP; the CAP has been significantly reformed (no longer as much surplus food); in a few decades keeping agriculture in Europe will be seen as having been a wise decision taking into account the risk of shortages due to rising global population;
3) the EU (with the member states) spends about as much on development aid as both on the CAP and all its other common policies; it spends much more than the US and than any other state;
4) the CFP just reflects national choices and yet, if you compare the EU against lets say Japan or China, it would come across as a much more responsible actor on fisheries;
5) the EU is the only global actor that is taking global warming seriously with binding targets that (regardless of the reason) are in line to be met; compare this to the US or China;
6) the EU has a barely embryonic energy policy, which keeps most decisions in member states hands, so how can it drive citizens into fuel poverty?;
7) the biofuels debate is very complex with both pros and cons in the short, medium and long term, yet the EU is analyses and reviews its approach (unlike the US) and the issue is dealt with through policy as opposed to other countries where the markets just do as they please;
9) it is markets that have overthrown governments (Italy and Greece), but citizens have done the same through elections (Spain, Ireland, Portugal) or through parliaments (Slovakia, Slovenia);
10) European governments have brought any disaster upon themselves, there is no such thing as a EU government, it is simply the sum of the parts. Whenever governments want opt-outs, derogations, exceptions, vetoes, or the like, they get them. They can also withdraw whenever they want.
#6 by ollegren on November 24, 2011 - 4:02 pm
Wise words, Ms Mahon – eventually we might make the US stop laughing behind our backs over the mishy-mashy so called union we have.
Paraphrasing Joe:
- should it be a nation or shouldn’t it?
- is the common good significant enough?
- is the lack of shared beliefs insignificant enough?
#7 by RCS on November 25, 2011 - 2:28 pm
@Victor,
God you are long winded!
The EU commission is the driver of EU legislation and they have produced failed policies after failed policies. Energy – Renewable energy as mandated by the EU and proposed by the EU commission, is the most enginering illiterate policy that is going to bite us all as a result of its total stupidity.
The Euro is collapsing, yet you witter on about how the problem is the people of Europe rather than the flawed design of a political project designed to force integration on Europe.
The EU is an experiment that is rapidly failing. Without radical reform, it will not survive but it is incapable of reforming itself – it lacks the democratic legitimacy.