The euro crisis: An ever-deeper democratic deficit

The level of further integration necessary to deal with the euro crisis will be hard to square with the increasing cantankerousness of Europe’s voters – Published on The Economist, May 26, 2012.

FOR the past six decades, steps forward to greater European union have taken place at moments of incipient crisis. None, though, has been taken in a time of disaster. The next leap in integration looks set to change that. All the plausible solutions to the self-inflicted mess of the euro crisis require a significant new level of fiscal and potentially political union, not least because some countries, such as Germany, actively want greater political union and see it as the price of their co-operation.  

In order to make any such solution work, Europe’s elites will have to address a problem they have long shirked: that of the democratic deficit at the heart of integration. And they will have to do so under the worst of conditions … //

… Coming unstuck:

  • Now the crisis has struck, all the putative responses to the democratic deficit are being found wanting. The qualified majority voting introduced by the Single European Act of the 1980s and the subsequent enlargement of the union mean that nations, especially small ones, can frequently feel marginalised, and their electorates voiceless; the system is opaque, complex and remote. Countries outside the euro zone are not party to some decisions, which can make them fear marginalisation; the “six pack” of fiscal regulations agreed last year and the newly devised fiscal compact erode even further the ability of a government within the zone to control its own fate. Crucially, the pact imposes fines on governments in breach of its strictures automatically, unless a qualified majority of all the others votes against doing so. In 2002 Francis Mer, newly installed as French finance minister, dismissed commission requests for budget cuts to comply with the stability and growth pact by saying that “France has other priorities.” Pierre Moscovici, François Hollande’s new finance minister, stands no chance of being similarly highhanded. This lack of governmental override worries not just debtor nations but also some creditor countries such as the Netherlands—and even German states.
  • The other responses to the democratic deficit look even more tattered. Output legitimacy is a hard sell when the outputs voters use to reach a judgment are a crisis they didn’t create and austerity they don’t want. The idea that the EU is all about distant technical adjustments is laughable now that the euro is impinging on many basic functions of sovereign national governments, most obviously in Greece, Ireland and Portugal, but also in all the parties to the fiscal compact. If the euro is to survive, it will likely do so by impinging on them yet further.
  • And what of the European Parliament? It has, if anything, widened the deficit it is meant to make up. It has increased its powers with every EU treaty, including the fiscal compact; but it has seen no parallel growth in its legitimacy. In the commission and in national capitals alike, frustration with the parliament has been growing. It is almost always in favour of new regulation and always in favour of more spending. Any claim that this is what the voters want is undermined by the fact that the voters show ever less interest in it. At every election for the European Parliament since 1979, the turnout across the continent has plumbed a new low (see chart 2). National elections see higher turnouts almost everywhere. And if fringe parties are doing well in many regional and national elections—as the Pirate Party has been in Germany, and Beppe Grillo’s “Five Star movement” in Italy (see article)—they tend to do even better in votes for Strasbourg.

How to elect a president:

… The executive and the excluded:

  • If treaties are to be changed, though, Vernon Bogdanor, a professor at King’s College, London, would push the elections yet further, and elect the entire commission on a Europe-wide basis. He argues that the euro zone is at a similar stage to the embryonic United States in the early 1780s. That was the moment when Alexander Hamilton took the big step of federalising the states’ debts. In the euro zone, too, Mr Bogdanor suggests, it is time to move towards federalism with a new democratic input: hence the notion of an elected European Commission. To those who claim that there is no European demos to underpin such democracy, he argues that a Europe-wide election will itself create one.
  • This is the sort of thing that Larry Siedentop, a former Oxford academic, warns against under the heading of “faux democracy”. Sharing the general dissatisfaction with the European Parliament, Mr Siedentop doubts things can be improved by another elected body. In his prescient “Democracy in Europe”, published in 2000, Mr Siedentop warned that, after creating the single currency, “European elites today are in danger of creating a profound moral and institutional crisis in Europe—a crisis of democracy.” His suggested solution was to set up an appointed Senate, chosen from national parliaments; to those who feel democracy needs elections he points out that America’s Senate was appointed until 1913.
  • An alternative, and attractive, source of democratic accountability might be found in Europe’s national parliaments. Before 1979 there was an umbilical link between the European Parliament in Strasbourg and national parliaments, with some members circulating between the two. Now the different parliaments tend to see each other as rivals rather than as colleagues trying to hold the executive to account. The Lisbon treaty gives national parliaments only a limited role. Charles Grant, director of the Centre for European Reform in London, suggests enlarging this. He would give more prominence to COSAC, the group that brings together national parliaments’ European affairs committees, perhaps putting a delegation of national MPs in Brussels to work more closely with the European Parliament. Others want to give the budget committees in national parliaments a clear role in monitoring and applying the fiscal compact.
  • A continuing issue in all this is the balance between an inter-governmental and a federal system. Those leaning towards a bigger role for national parliaments and governments naturally favour the first. But Mr Klau of the ECFR points out that such a method makes it more likely that Germany, the biggest power and also largest creditor, will be identified as a target by the rest. Inter-governmentalism favours big countries, which is why small ones talk up the role of Brussels.The case for greater national involvement in running the euro zone is very strong. Whether Greece leaves or stays, the euro zone must be more politically integrated or fall apart. But deeper political union could provoke a backlash, in both creditor and debtor countries, that brings the whole system crashing down. In last year’s Finnish election the True Finns under Timo Soini went from almost no support to close to 20% by campaigning against euro-zone bail-outs. In the Netherlands Geert Wilders, who has just precipitated an election by withdrawing his support from the government, is now running as much on an anti-bail-out ticket as his more familiar anti-Muslim one. France’s National Front has long been anti-euro as well as anti-immigrant, and Marine Le Pen’s stand against the single currency contributed a lot to her strong showing in the first round of the presidential election.
  • Given that voters are making their antipathy heard by means of their national elections, they might feel better represented if national MPs and governments played a bigger role in policing the boundaries of political union of the euro zone. But this may be too sanguine. A significant number of voters clearly want not a more democratic version of the EU, but a fundamentally different institution. With views highly polarised, it is hard to see how any useful treaty could now get accepted by all 27 nations—which is one of the reasons why the fiscal compact has an opt-in system. When Ireland votes on the compact on May 31st, it will be voting in or out for Ireland alone, not threatening to block everyone else.
  • If Europe seeks a new political constitution, though, a dramatic lurch towards a rejectionist or extremist party on one country could lead to a break-up of the club. And there is also a profound structural problem. The new round of political integration is being driven by the need to govern the euro zone better; but ten of the 27 are not part of it. And although many of them have historically aspired to join, Britain and Denmark have formal opt-outs from the euro, and Sweden is also unlikely to join for many years, if ever. These countries have a strong interest in ensuring that, as the euro zone becomes more integrated, they do not lose their influence in debate or their part in decisions. But their voters are unlikely to accept commitment to a stronger political union. David Cameron’s “veto” of the fiscal compact in December 2011 was seen as a petulant obstacle to progress by many of his fellow heads of government; his party’s supporters in Britain greeted it with inordinate enthusiasm.
  • When the architects of Maastricht were unable to produce a political union some of them comforted themselves with the idea that a common currency would in and of itself bring further economic integration from which political integration would naturally flow. They did not foresee that it would do so by throwing the continent into crisis. And they did not provide the mechanisms by which the citizens of the union could feel they were both in part to blame for the problem, as some are, and in a place to help find a solution. A political settlement that protects the euro without incorporating new ways to get and earn their assent is unlikely to last long—or to deserve to.

(full long text and 4 charts).

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