Former Advocate General at the European Court of Justice in Luxembourg (from 2003-2009), Miguel Poiares Maduro is the Director of the GGP and, since October 2009, he has held the Joint Chair in European Law with the Robert Schuman Centre for Advanced Studies and the Department of Law at the European University Institute (EUI). He is also the Co-director of the Academy of International Trade and Investment Law of Macau. Read more..
The focus is on the democratic challenges raised by the current crisis in the Euro system and the governance proposals to address it and strengthen the EU in general. But the report goes further in the connection it establishes between the crisis and democracy: rather than simply addressing the democratic consequences of the crisis and the alternative solutions being put forward, the report places democracy at the heart of the crisis itself. My thesis is that the origins of the financial and economic crisis of the Euro system are state and market based democratic failures that the original regime of Euro governance did not adequately address. It is only by fully understanding the democratic character of the crisis that we can appropriately understand the extent of the democratic challenges faced by Europe and the role of the European Union in this context.
I argue that the future governance of the EU must depart from a revised justification of the project of European integration: a justification that focuses on the democratic and social challenges faced by the Member States and the EU value in addressing them. The EU should not be constructed as a challenge to national democracy but, instead, as offering renewed possibilities for democracy and social justice where Member States can no longer offer them. In this context, it is fundamental for democracy to be linked to a theory of justice in the EU. Citizens should be able to understand the benefits flowing from the process of European integration but also why those benefits come with certain duties towards others. Rights must be complemented by political empowerment and civic solidarity for the Union to be able to develop a genuinely legitimate form of economic and political governance.
The report starts by providing a democratic explanation for the crisis and the Union’s failure in successfully addressing it so far. The origin of the crisis can be found in the democratic failures of some Member States and the externalities they imposed on others but also in the incapacity of national democracies to control excessive cross-border capital flows. The Union’s failure to solve the crisis is, instead, imputable to the diffuse character of its political authority and its excessive reliance on national politics. The latter are incapable of internalizing the consequences of the interdependence generated by the Euro and integrated markets. As a consequence the Union cannot, de facto, govern and its policies are prisoner to national politics. The real EU democratic deficit is the absence of European politics.
The second part of the report discusses two models of governance for the Euro area as I review some of the proposals put forward so far. One model has at its core the Stability Compact. The other complements the discipline enshrined in the compact with instruments of financial solidarity and debt mutualisation. For example, either through the ESM or jointly issued bonds Member States insure each other’s debt. For reasons detailed below I have serious reservations whether such models can work. Their dependence on a permanent negotiation with national democracies (and the multitude of actors therein) will prevent them from providing the certainty that markets require. As to democracy, they are bound to put national democracies on a collision course. Some states will perceive themselves as shouldering others (and their moral hazard) while the others will feel that they are being governed by the former. A key finding of this report is that financial solidarity in the EU must be detached from transfers between states and related, instead, to the wealth generated by the process of European economic integration.
My alternative proposal departs from the previous idea. It requires an EU budget capable of providing the Union with the necessary financial muscle to address and prevent future crises. This budget would dispense with the need for national democracies and their citizens to insure each other. Their liability would be limited to contributions to the EU budget resulting from EU own resources. These resources, in turn, are linked to EU generated wealth: economic activities that the EU enables and have mostly benefited from the internal market. The legitimacy of these resources is further enhanced by linking them to forms of revenue that have made use of increased economic mobility to lower their tax burden at national level. The proposal suggests using the enhanced EU budget for two fundamental purposes: a stability fund providing collateral to state issued debt when necessary and subject to an adjustment program; and new EU policies aimed at addressing asymmetries in the economic and monetary union. In addition, I argue that the Union needs more than simply new policies. It needs to change the nature of its policies so as to improve how they “communicate” with citizens and increase their capacity to induce real systemic reforms in Member States. These changes would also allow the Union to complement the increased discipline it can impose on Member States through positive incentives. The final pillar of the model proposed addresses political integration. Rather than on institutions, my focus is on politics. By transforming the character of politics at EU level we will be able to infuse its institutional system with real democratic potential. I try to explain how to do it.
Throughout, the report highlights elements of a possible political strategy to promote these proposals. In my view this is the right path forward and the one more likely to gather the support of EU citizens in the different Member States. I have no doubt that some of what has already been suggested in the previous paragraph might be enough to label my proposal as impossible. But, as explained in more detail below, the question soon to be faced by European politicians is which, among several impossible proposals, may be the easiest to present to their citizens. I believe that this is the proposal put forward here. Not least because it links the developments argued for with a clear and convincing justification for the process of European integration. Furthermore, it does not require amending the Treaties (though it could benefit and be enhanced by Treaty amendments). Most of the suggestions put forward do require unanimity however. But I am also convinced that in all those cases recourse to enhanced cooperation is possible. I am naturally available to provide further clarification.
When the Euro was created it was presented as a big achievement of European integration but the rationale behind it was never fully articulated to European citizens. It was perhaps thought that any attempt to do so would engulf the project of the Economic and Monetary Union in endless political debates about the nature of European integration and the impact of the single currency on national sovereignty. Instead, the Euro seemed an ideal way to deepen European integration in the usual way: as a technocratic regime disciplining (but not replacing) national democracies. The governance regime emphasized this technocratic dimension of the project with a focus on the role of the European Central Bank and its insulation from political pressures. Economic and fiscal politics was left to the Member States which were deprived of their role in monetary policy but, for the rest, were supposed to comply with certain limited rules that proved to be too weak to prevent the current crisis. The hope was that the model could protect both national and EU different legitimacies by a strict separation between the technocratic and political dimensions. The price to be paid was leaving outside Euro governance fundamental dimensions of economic and fiscal policy impacting on a monetary Union. This was necessary so as to preserve space for national politics.
This separation has failed. We have found out that a European Monetary Union cannot be fundamentally dependent on national politics. Yet, though many now recognize the political dimension of the Euro project and call the present crisis a political crisis, we are far from articulating exactly what that means and its consequences. In order to think right about the future democratic governance of the EU we have to clearly understand the political and democratic dimension of the current crisis.