Can Europe Make It?

You call this a Rechtsstaat?

Legal improvisation marks European policy-making in the Eurozone crisis. This crisis damages the rule of law so essential to the European model and without which Europe will not last.

Ben Margulies
27 July 2015

European Union flag. Håkan Dahlström. Flickr/some rights reserved.I have always been of the opinion that, in politics, hypocrisy is as much an exercise of power as it is a moral flaw. It is a loud declaration that the rules apply to thee, and not to me. It shows that one does not fear accountability. Indeed, in a way, it is a declaration of sovereignty if we define sovereignty simply as “the power to make binding rules.”

In his book, Never Let a Serious Crisis Go To Waste, Philip Mirowski discussed sovereignty and economic crises. Specifically, he cited Carl Schmitt, one of the 20th century’s most influential conservative legal theorists. Schmitt turned the idea of sovereignty around, saying that it wasn’t so much the right to make law as the right to decide when it does not apply: the right to “decide the exception.” Mirowski was specifically describing the role of capital in the neoliberal system during the banking crisis. Normally, capitalism would dictate that capitalists who were improvident with their money go to the wall; but during the banking crisis they “decided the exception”, demanded and got bailouts, and forced the state to pay for their mistakes. In that sense, sovereignty is closely tied to declaring and managing states of emergency or siege – which are indeed sometimes called “states of exception.”

This came back to me a number of times watching the Eurozone’s leadership deal with the crisis over the third Greek bailout. Yanis Varoufakis, the former Greek finance minister, recently made clear in the New Statesman that he thought Germany had control over the Eurozone, and Wolfgang Schäuble control over the Eurozone council of finance ministers. This is not legally true, but Schäuble’s actions throughout the most recent stages of this crisis suggest the attitude of someone who takes no exception to deciding the exception.

Grexit and temporal Grexit under European Union law

Let us take Schäuble’s attitude on two issues: The question of relieving or forgiving some of Greece’s debt, and the central question of “Grexit” itself. The Syriza-led Greek government of Alexis Tsipras has sought debt relief from its creditors since assuming office last January. The German government has stated that this is impossible under European Union law, specifically a clause in the Treaty of Lisbon (Article 125, Section 1), which states that “The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, …”. Steve Peers, author of a blog on European Union law, makes this point as well.

But what was Schäuble’s headline proposal during the make-or-break negotiations in Brussels on July 12-13? That Greece “temporarily leave the Eurozone,” and then undergo debt restructuring. Is this provided for by the Treaty of Lisbon? No European Union law provides for the expulsion of a member from membership of the Union or its institutions. Again, citing Peers:

It’s not legally possible simply because a permanent Grexit isn’t legally possible, and so a temporary one isn’t either. I’ll briefly recap the reasons why, based on my recent blog post. There’s no reference in the Treaties to any power of a Member State to leave EMU once it joins, or of the EU institutions to remove that Member State from EMU, whether it agrees to that or not. A Member State can leave EMU by leaving the EU, but there’s no Treaty power to throw a Member State out of the EU, or to suggest that any Member State might ever be under the obligation to leave.

Peers has stated, in the blog post he refers to in the quote, that there may be some legal ways to exclude Greece from the Eurozone, including annulling Greece’s initial entry on grounds of fraud. Andrew Duff suggests another way to temporarily exclude Greece. But the German finance ministry's proposal doesn’t mention any legal mechanism whatsoever for accomplishing Grexit. One could argue that this was merely a bluff on Germany’s part, but even making the bluff implies a cavalier attitude on Germany’s part to EU law.

Varoufakis himself pointed out the arbitrary nature of Eurozone policy making after negotiations broke down with his fellow finance ministers at the end of June. After he left, the other 18 ministers left and issues a communique without him. When he asked whether this was lawful, he was told that the meeting of finance ministers, the Eurogroup, “does not exist in law, there is no treaty which has convened this group.”

A degree of legal improvisation has always marked European policy-making during the Eurozone crisis. Draghi’s “outright monetary transactions” plan, which Wolfgang Streeck calls an almost blatant violation of EU law, is one example. That, too, was a sort of state of exception. But as Pears noted, that at least had as its goal the preservation of the EMU. The German finance ministry was proposing to break it apart.

Admittedly, one can argue that Alexis Tsipras himself has also played fast and loose with the rule of law. The Syriza government’s referendum on the bailout terms, held on July 5th, was widely condemned for being biased, unclear and possibly unconstitutional, though the Supreme Administrative Court of Greece permitted it. However, it is the EU’s proclaimed mission to encourage the development of the rule of law in its member states; if there is little excuse for Tsipras to bend the law, there is even less for Brussels to do so.

This analysis does not, of course, conflict with Mirowski’s analysis. Greece’s debts were mostly socialized with earlier bailouts, so the creditors – the power of capital, in this instance – lies with state creditors, led by the IMF, the European Central Bank and the EU (the troika). Among the latter, the group of states with lower debt ratios, who are the Union’s main net creditors, are led by Germany, making Berlin, at least in part, the capital deciding the state of exception in this case. And Streeck points out that these states are also reliant on the capital markets both for their own spending and for economic growth more generally, and so cooperate to enforce market discipline on EU members to ensure the continued cooperation of the markets.

It is hard to overstate how important the rule of law is to the European project. It’s one of the reasons southern Europeans are so committed to the EU and the euro. When Ukrainians occupied the “Euromaidan” in the winter of 2013-14, demanding that their country ratify an association agreement with Europe, they were appealing to the EU to bring the rule of law to a nation ruled by the singularly lawless and corrupt clique surrounding President Viktor Yanukovych. Throughout the Greek debt crisis, attention has rightly focused on the damage austerity has done to Greece’s economy and society, and on the undemocratic, imperious and self-interested nature of European decision-making.

There has been less focus on how the crisis has damaged the rule of law and also damaged the sense that European institutions should act according to that rule rather than follow the whims of powerful members. The European Union has always cast itself as a model for a new human politics, founded on law and cooperation rather than conflict. Without the rule of law, that model cannot last long.

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