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Exceptionalism as an excuse in Europe’s crisis

This crisis is being used by the national leaders to push the EU down the wrong institutional path, namely intergovernmentalism. The British Tory-led government veto played a role in this, pushing the other member states down the only road that remained available to them, an intergovernmental treaty, but it did so on already ‘fertile ground’.
Dionyssis G. Dimitrakopoulos Marco Scipioni
7 February 2012

Many well-informed and authoritative commentators and politicians have pointed out the apparent futility of the latest effort of the EU member states to tackle the so-called ‘Euro-crisis’. The early drafts of the new Treaty (‘Treaty on Stability, Coordination and Governance in the Economic and Monetary Union’) that was eventually agreed in its substance on Monday 30 January 2012 in Brussels, have been greeted with dismissive comments.

Indeed, many of the provisions introduced by the new Treaty were already largely in place (the 'Stability and Growth Pact' and its revision, the so called ‘six pack’). Since this is the case, why sign a new treaty? First, amending a treaty – like the one agreed on this week – is much more complicated than amending secondary EU legislation (directives, regulations etc.). Indeed, any treaty revision implies the re-opening of a grand bargain on, at least theoretically, several possible issues. This is proven by the fact that, unexpectedly, Eurozone member states had to agree on admitting non-Eurozone member states (after vigorous pressures by Poland) at the Eurozone meetings, despite French opposition. Negotiations can be ‘hijacked’ and thus prove to be very lengthy, at a time when EU leaders are short of time, with peoples and markets requiring resolute and quick answers (see the pressure on European leaders and Germany in particular at Davos, for instance). Second, symbols matter in politics. By setting austerity in stone (i.e. the Treaty), European leaders are trying to (a) reassure markets and domestic public opinions that any breach of the rule will be immediately sanctioned and (b) impose some conditions on individual EU member states.

Keynesianism removed

Nevertheless, some novelties have indeed been introduced. The main one is the introduction of the “requirement for national budgets to be in balance or in surplus (the structural deficit should not exceed 0.5% of nominal GDP) and a requirement to incorporate this rule into national legal systems (at constitutional or equivalent level)”. This has been rightly regarded as the removal of Keynesianism from the economic policy toolkit, at a time when the Eurozone needs an economic government that will address directly the issue of discrepancies between levels of economic development amongst the participating member states, as Jürgen Habermas and others have argued.

Much has been written about this development. We argue that there is an alternative interpretation which concerns the meaning of this Treaty for EU policy-making. This reform – whose benefit for the EU collective interest is contested  – is the umpteenth instance of the tendency to diverge from ordinary policymaking in the EU, this time motivated by the emergency of the crisis. This is so for three reasons, namely the context (internal and external pressures), the decision- making path chosen by the member states and, finally, the very letter of their agreement. 

On the international front, European leaders face constant pressures from markets, international institutions and other states to act quickly and resolutely to solve the crisis. The recent appeals by Christine Lagarde, the head of the IMF, to save Europe from a 1930s-style recession, US Treasury Secretary Tim Geithner’s frequent visits to and pronouncements on Europe’s crisis and even Mexican President Felipe Calderón’s statements, are well-documented. On the domestic front, interest groups such as employers’ associations are also very active (some, such as Italy’s Confindustria, at the European level as well), and the broader public is eagerly awaiting for effective, as well as fair, action.

At the level of the EU, leading MEPs such as those who have been invited to participate in the drafting process (Cohn-Bendit, Brok, Gualtieri, Verhofstadt, tellingly from the four largest groups in the European Parliament) have expressed their criticisms. What is the point of having agreed on an ‘ordinary legislative procedure’ (formerly known as ‘co-decision’, where the role of the directly elected European Parliament is central, as it should be in a democratic polity) for the adoption of secondary legislation, which has been used for the reform of the Stability and Growth Pact, if after a few months the same issue is dealt with – albeit with some changes - in an exceptional and intergovernmental form?

In our view, this crisis is being used by the national leaders to push the EU down the wrong institutional path, namely intergovernmentalism and the increasing side-lining of central institutions such as the European Commission and the European Parliament. The current British Tory-led government has played a role in this (by ‘vetoing’ the initial agreement reached on 9 December 2011 and thus pushing the other member states down the only road that remained available to them: an intergovernmental treaty) but it did so on already ‘fertile ground’. In short, the exceptional nature of the crisis is being used by national leaders to reverse years of institutional progress. As Jürgen Habermas rightly noted, through the fiscal pact we have - for the first time in the history of the process of integration – the deepening of co-operation between governments without the simultaneous enhancement of the role of the European Parliament which could legitimise the next step in the process of integration.

European Parliament excluded – what of national parliaments? 

One could argue that the exceptional means used to deal with this crisis prove right those who claim that the institutional architecture of the Eurozone as designed in the early 1990s is incomplete and simply incapable of dealing meaningfully with a crisis of this kind. Poor leadership – as Helmut Schmidt has rightly argued, the lack of trust that is required for the creation of more advanced institutional arrangements and disagreements over the substance have hitherto prevented member states from taking more appropriate steps towards proper economic and political union, i.e. the solution that the Eurozone needs. Since the new treaty brings little novelty into the EU legislative acquis, the leaders’ choice of method and institutional path is even more significant, exactly because the content of their latest response is seen as being either unnecessary or harmful. 

The high frequency of meetings of the European Council (and/or of leaders of the Eurozone’s members) and countless bilateral and trilateral meetings, have largely led to the exclusion of the European Parliament, particularly if compared with the involvement achieved through the most recent treaties (Constitutional Treaty, Lisbon Treaty). The 'Fiscal Compact' reinforces and institutionalises (through the Eurozone summits) the side-lining of the directly elected European Parliament. In the wording of two of the drafts, it is stated that the President of the Euro Summit will keep the EP “informed” about the “outcome” of the meetings (Art. 12 (4)). In a third version, the “President of the European Parliament may be invited to be heard”. Beyond the “may” (which does not express legal obligation), what is problematic here is “to be heard”. Who will decide that the EP President is to be heard, and on what grounds? To add to this picture, to date it is still unclear to what extent the ECJ will be involved, what would be the remit of its action, and who will have legal standing to challenge the decisions taken within the Euro governance framework. At the time of writing, the ECJ is expected to monitor only that the new budgetary clause is transposed into national legislation, but it is left unclear what will be its powers once this clause has been incorporated into national law.

A final interesting question concerns the role of the national parliaments. Budgetary powers were hitherto part of their competences in individual member states. Arguably, much of the political salience of parliaments is connected to their powers of allocating resources. Obviously, national parliaments are not to lose their powers overnight. However, first of all, parliaments should have been more involved in the run-up to the new Treaty. The ratification process that will follow may not generate significant debate about that fact, exactly because of the crisis and fears on the part of national parliamentarians of being held responsible for aggravating it. Also, the Treaty will enter into force when 12 of the signatories have ratified it. This provision is meant to by-pass foreseeable blockages (e.g. in Ireland), so as to speed up an otherwise potentially lengthy process of ratification. But it also diminishes the value of domestic debate.

The increase in coordinating, monitoring (e.g. Art. 6, 7, 8) and possibly sanctioning (Art. 8, with 'reversed qualified majority') powers at the European level has not been matched with corresponding guarantees and involvement of national parliaments. The Treaty states that ‘Representatives of the competent Committees’ of national parliaments will be invited in meetings (Art. 13), but it is not clear what their formal status would be. In other words, it is not clearly stated in the Treaty how the national parliaments' opinions will be taken into account. For instance, what would be their role in the crucial but inherently problematic point of deciding if and to what extent their individual countries face the “exceptional circumstances” of “economic downturn” (Art. 3(3)) that could mitigate the sanctioning mechanisms of this Treaty. The difference between this provision and the Lisbon Treaty, which gives national parliaments formal power of involvement in the EU legislative procedure, is noteworthy.

Schengen Budgetaire

All these remarks have been elaborated on the basis of drafts, press releases and politicians' declarations, but in the absence of the definitive version of the Treaty. However, from this brief reconstruction of the path that has led to the “Fiscal Compact”, some conclusions can be drawn. First, the choice for a re-statement of what has previously been agreed with EU ordinary procedure is surely unfortunate, sending the message that true political authority lies in the hands of member states executives, reinforcing a tendency which only goes to the detriment of the credibility of EU institutions and policy-making. What is the point of having spent nearly two decades in constructing a decision-making process which respects a carefully balanced institutional setting, if we have to re-state the content of the decision in another institutional forum?

Secondly, the highly formalised EU decision-making procedure, despite being criticised by some for its bureaucratic and convoluted form, offers to a number of actors the possibility to intervene and be heard in the legislative process. This “Schengen budgetaire” has had the unfortunate outcome of leaving in politicians' hands the decision about who, when and to what extent other actors will be at the table at a time when too much, rather than too little, intergovernmentalism is at the heart of the EU’s crisis.

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