Over the last ten years of economic and financial crisis, a new centre of European power has taken shape: the ‘government’ of the Euro Area (that we would reform). The expression may seem badly chosen as it remains hard to identify the democratically accountable ‘institution’ which today implements European economic policies. We are indeed aiming at a moving and blurred target. Characterized by its informality and opacity, the central institution of that government, the Eurogroup of Finance Ministers of the Euro Area, operates outside the framework of the European treaties and is in no way accountable to the European Parliament, nor to national parliaments. Worse, the institutions that form the backbone of that government – from the European Central Bank (ECB) and the Commission to the Eurogroup and the European Council – operate following combinations that constantly vary from one policy to the other (Troika Memoranda, European Semester ‘budgetary recommendations’ and bank ‘evaluations’ under the Banking Union).
However scattered they may be, these different policies are truly ‘governed’, as a hard core emerged from the ever closer union of national and European economic and financial bureaucracies – French and German national treasuries, ECB executive board, senior economic officials from the European Commission. As matters stand, this is where the Euro Area is supposedly governed and where the proper political tasks of coordination, mediation and balancing among the current economic and social interests are carried out. In 2012, as he gave up reforming the Treaty on Stability, Coordination and Governance, a cornerstone of this Euro Area governance, François Hollande contributed to consolidating this new power structure. From then onwards, this European executive pole has only seen its competences expand. Over a decade, its scope for intervention has become significant, ranging from ‘budgetary consolidation’ (austerity) policies to far-reaching coordination of national economic policies (Six Pack and Two Pack), the set-up of rescue plans for member states facing financial distress (Memorandum and Troika), the supervision of all private banks.
Both mighty and elusive, the government of the Euro Area evolved in a blind spot of political controls, in some sort of democratic black hole. Who indeed controls the drafting process of Memoranda of Understanding, which impose significant structural reforms in return for the financial assistance of the European Stability Mechanism? Who scrutinizes the executive operations of the institutions making up the Troika? Who monitors the decisions taken within the European Council of the Heads of State or Government of the Euro Area? Who knows exactly what is negotiated within the two core committees of the Eurogroup, i.e. the Economic Policy Committee and the Economic and Financial Committee? Neither national parliaments, which at best simply control their own executive, nor the European Parliament, which has carefully been sidelined from Euro Area governance. In view of its opacity and isolation, the many criticisms voiced against that Euro Area government seem well deserved, starting with Jürgen Habermas’ denunciation of a “post-democratic autocracy”.
While considering this democratic black hole, it is critical to keep in mind that it is not just a matter of principle, neither an issue of checks and balances. It has a real impact on the very substance of the economic policies carried out in the Euro Area. It leads to a form of generalised indifference towards whistleblowers and other discording voices – as is best exemplified today vis-à-vis the quasi-unanimous chorus of economists emphasising the ineluctability of a renegotiation of Greece’s debt. It favours a significant lack of responsiveness to the very pointed signals sent by national electoral processes, which persistently feature the rise of far right populism. From a more substantive point of view, this power structure overstates the stakes associated with financial stability and market confidence, and downplays the issues which are the most relevant for the majority (employment, growth, fiscal convergence, social cohesion and solidarity) and which only come to the fore with great difficulty.
There is, therefore, an urgent need to upgrade democratic values and place representative politics at the core of European economic policies. It is high time to get rid of the opacity and lack of political accountability which have so far characterised this new European power by inserting a democratically elected institution at its heart. Only a Parliamentary Assembly (see details here) would indeed have the sufficient legitimacy to hold this Euro Area government politically accountable. Some will argue that strengthening the position of the European Parliament may here suffice, but things are not (no longer) that simple. The government of the Euro Area is not a Europe like any other: it is no longer about organising a common market, it is now about coordinating economic policies, harmonising tax systems and fostering convergence among national budgetary policies, thereby entering the very heart of member states’ social contracts. It would thus be difficult not to directly involve national parliaments, unless they are to be progressively stripped of their main constitutional powers and if the institutions of national democracy are now left to run idle. As they remain closely connected to political life in the individual member states, national parliaments are the sole institutions with sufficient legitimacy to democratise this mighty intergovernmental network of bureaucracies which has emerged over the last decade. This, moreover, echoes the proposal Joschka Fischer made in his speech at Humboldt University on May 12 2000 (and more recently in his Europeanizing Europe op-ed on 27 October 2011), when he argued that the creation of a European chamber composed of national parliament representatives would be the crucial step towards Political Union.
An Assembly that matters
But this assembly would need to be entrusted with the necessary resources to effectively counter-balance this governing structure whose influence does not only derive from the institutional prerogatives it has accumulated over a decade, but stems first and foremost from its ability to expertly define the scope of any potential policies. In order to avoid a rump Parliament, constantly faced with a fait accompli, or one that merely rubberstamps diagnoses or decisions made elsewhere, this assembly must be given the capacities to fully participate in managing the Euro Area. This implies that it can effectively weigh on the political agenda: first, by co-producing the agenda of Euro-Summit meetings and the bi-annual work program of the Eurogroup but also by exercising this power of legislative initiative which the European Parliament lacks so far, rendering it unable to choose its own battles. It also implies that this Assembly will step in at every crucial juncture of that Euro Area governance process, whether under the European Semester (country-specific recommendations, the Annual Growth Survey), the financial conditionality of Memoranda of Understanding, the selection of the main executive leaders of the Euro Area. This finally requires setting up an autonomous and pluralist expert capacity, as well as investigative powers vis-à-vis all institutions constituting that government.
Under this treaty democratizing the Euro Area, member states would thus be delegating to the Assembly voting on the base rate of corporation tax and on a common tax rate to finance the Euro Area budget. The member states will remain able to vote on any additional tax rate, applicable to the same base. The Assembly would also be empowered to generalize across the Euro Area the automatic exchange of bank details, and pursue a concerted policy for restoring progressive income and wealth taxes, while jointly and actively combatting external tax havens. Europe must be able to bring tax justice and political voluntarism within the framework of globalization: these proposals will achieve substantial and tangible progress in that direction.
The treaty would also allow legislative action to mutualize public debt over 60% of each member state’s GDP. Such debt-mutualization would enable the adoption of a common interest rate and the promulgation of a partial or total debt moratorium, in conjunction with the ECB. This proposal echoes that of a European Redemption Fund made in 2011 by the German Council of Economic Experts, while adding a political dimension to it. Only a democratic body, namely the Parliamentary Assembly of the Euro Area, would be entitled to fix yearly investment and deficit levels, on the basis inter alia of the economic and social conditions pertaining within the Euro Area.
Of course, there is no institutional panacea. No institutional reform, however well-thought-out it may be, has ever sufficed to change course. Everyone is conscious that a new body will not by itself change Europe’s political destiny. Ultimately, a thorough review of the European project will become unavoidable. But along this path, setting up an assembly for the Euro Area stands as code for a wider political and cultural fight for the democratization of the European project and a new direction for the policies carried out on its behalf.
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As the T-Dem shows (see here, here and here), it is possible to act swiftly, without necessarily going through a highly cumbersome process of treaty revision involving all 27 member states, and open new democratic opportunities within the European executive bloc itself. It is now up to political parties and civil society organizations to seize this opportunity to liberate European politics from these technocratic trenches and remove us from this pernicious alternative of helpless national retreat and the status quo of Brussels economic policies.
The authors have recently published Pour un traité de démocratisation de la zone euro, Seuil, 2017. Already available in Italian (La Nave di Teseo, 2017), the book is scheduled to come out in most European languages within a couple of months.