Björn Hacker
Many of those interpreting the results of the European elections claim to discern a fundamental disenchantment with Europe among its citizens. On this basis the considerable success achieved by Euro-sceptic parties in some countries is only the harbinger of a broad repudiation of the EU and the excessive expansion of its competences. But is that true?
In the past five years the competences of the European institutions have indeed grown, due to the crisis, but in extremely diverse ways. For example, central control over the substance of Member States’ budget policies, with a measure of management and sanctions. This is most evident in the system of conditional solidarity offered by the EU rescue package comprising the EFSF and the ESM, which provide new loans only in exchange for austerity measures and structural reforms.
However, in terms of the newly created structure of EU economic-policy governance the reformed stability pact, the fiscal compact and the euro-plus pact furnish Member States with EU recommendations in every conceivable policy area within the framework of the European Semester. In order to ensure that budgetary obligations are met at least by members of the eurozone, demands are increasingly being formulated in Brussels for changes in economic, labour market, social and wage policy. Are the accusations that Brussels has become a monster, then, true? Is it an octopus whose tentacles have insinuated their way into the most sensitive parts of sovereign states?
Who Has Gained Power In Brussels?
To answer this question one must look at who in fact has gained competences in the EU. It turns out that the new European interventionism emanates primarily from the European Council, the Councils of Ministers and the Euro-group. It is the representatives of the Member States themselves who make decisions concerning financial aid and adjustment programmes for countries in crisis and that have the final say on reform recommendations and sanctions. The Commission implements these decisions, for example, within the framework of the Troika missions. The European Parliament is a regular participant in only a few procedures. In the case of the euro plus pact and the fiscal compact, the Member States are entirely out of the picture in favour of newly established structures beyond the bounds of the European treaties. The extent to which crisis management and the new structures brought into being for that purpose are intergovernmental could already be seen at the numerous crisis summits of recent years.
In short, since the onset of the crisis the EU has obtained competences in these areas, but especially with regard to budgetary controls. But for the most part it is the governments of the Member States themselves that exercise or delegate these competences at their institutional meetings in Brussels. This, if it were more widely known, would dispel allegations of an overweening regulatory mania on the part of the EU at the expense of sovereign states. In that case, the key question would be whether public dissatisfaction is the result of the one-sided and spurious focus on crisis management and its concentration outside clearly comprehensible, democratically legitimised procedures.
And in this context – because voters are not stupid – it has long been evident that the almost ritual repetition of claims that the crisis is virtually over and that our governments have things well under control is questionable, to say the least. The happy fact that the eurozone did not collapse in 2012 is attributed to the bold assertion by its president Mario Draghi that the Bank would do »whatever it takes« to maintain the monetary union. The ongoing reassurance of the financial markets – reflected in the falling interest rate premiums on government bonds of the crisis states – instigated in this way was not an option for heads of state or government. This is not because it was not in their power, but because some Member States have unwaveringly and successfully rejected any kind of Community guarantee of the euro’s survival. Instead, Angela Merkel has been able to get her colleagues, with support from the Netherlands, Finland, Austria and a number of central and eastern European states, to take the path of austerity, budgetary controls and reforms to enhance competitiveness. When this had been taken as far as it feasibly could, deviations from the path of righteousness were accepted in the form of direct financial assistance or to buy time. But the goal remained clear, namely a »stability union«, but absolutely not a fiscal union with elements of joint liability.
A Path Of Failure
From our current standpoint, however, this course taken by the Member States can only be described as a failure. This is because the effort imposed on the crisis countries to save their way out of the crisis has been accompanied by a collapse in investment rates and higher unemployment, alongside a lack of growth and increasing risks of poverty. This mismanagement also impinges on solvent states, however, because their growth has fallen far short of its potential due to the depredations in the south, while the spectre of deflation haunts the whole of the eurozone and the new socio-economic north–south split has resulted in political discord.
The Europe 2020 Strategy was supposed to raise the employment rate to 75 per cent by 2020 and reduce the number of people at risk of poverty and social exclusion by 20 million. At the halfway point the EU is stagnating, with employment at 68 per cent, the same level as in 2010, and just under 10 million more people at risk of poverty compared to 2009. Furthermore, the clandestine circle of government heads and finance ministers involved in dealing with the crisis has done little, with all its manoeuvring, to reinforce trust in the EU’s ability to solve the problems. The underestimation of the fiscal multiplier effects of the austerity programmes, the spillover effects of the refinancing crisis due to the debt rescheduling by the private sector in Greece and unviable ideas about »leveraging« the rescue package have only served to deepen the crisis and have embedded it in European policy.
None of this has escaped the attention of the general public, who used their votes at the European elections to show their governors the yellow card. Neither fundamental agreement with or rejection of the European project nor a putative power grab on the part of the European Commission or the European Parliament are behind this. Rather the outcome is a warning shot intended to get the EU heads of state and government to identify a clear way out of the crisis besetting the Union, one that does not constantly give rise to further negative consequences and confers more legitimacy on the adoption of new procedures and instruments. Against this background we can formulate the most urgent tasks for the three European institutions, the Council, the Commission and the Parliament, in the new legislative period.
What The EU Has To Do
The crisis should not be tackled only on the supply side, by means of austerity programmes and structural reforms, but also on the demand side through investment and economic stimulus policies. The European Central Bank’s unorthodox monetary policy will not be able, any more than the banking union, to solve Europe’s weak economic growth, high unemployment and critical socio-economic divergence. If a new policy approach that halts deflation and alleviates the social upheaval of recent years is to be implemented the recently reformed stability pact must not be unravelled or its criteria toned down. Instead, new elements should be added to the existing arrangements of European economic governance.
What about enhancing the procedure against macroeconomic imbalances with state investment and social security ratios as an index of prosperity or progress? Or including the so-called »magic square« of economic policy objectives (price stability, a high level of employment, balance of payments equilibrium, and steady and adequate economic growth) in the European Semester? What is needed is a better balance between the existing budget criteria and economic growth, employment and social cohesion. It must also be admitted that a fiscal union is unavoidable if the monetary union is not to be condemned to permanent crisis. However, deeper integration will be possible only if accompanied by corresponding democratic legitimation. But before opening up the Pandora’s box of treaty changes there is nothing to stop governments from transposing their intergovernmental agreements into Community law, involving the European Parliament in the European Semester and subjecting the missions of the Troika to parliamentary control.
The current furore about who will get the top jobs in Europe is something of a sideshow. Much more important are the substantive steps to be taken by the EU in the next five years and their democratic legitimation. An inter-institutional agreement not only between the Commission and the Parliament, but also with the Council could convert the warnings issued by the voters into a different policy for Europe.
At its latest meeting, the European Council already submitted a so-called strategic agenda for the years to come. Doubtful, if social democrats can be happy with finding in the document some buzzwords on investments and solidarity. To please David Cameron for playing the bad guy in the Juncker question, the champ of Member States in favour of the stability union approach succeeded in confirming all well-known policies of structural reforms, austerity measures and competitiveness issues. A new policy attempt for Europe would look slightly different than this condensed compromise. Even more doubtful, if the Parliament and the Commission can ever agree on the self-empowerment of the heads of state or government not only to define the general political directions and priorities of the Union, as specified in Article 15 of the Treaty. Far from this, the European Council narrowly purports the legislative planning for the next five years and even raises the claim to monitor the implementation of its strategic agenda (para. 26 of the conclusions). Who is able to stop intergovernmentalism changing the nature of European integration?
Björn Hacker is Professor of Economic Policy at HTW – University of Applied Science Berlin and works on European Economic and Comparative Welfare Policies.