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Europe: better understanding it, and analysing its rejection
March 25, 2017 will commemorate the 60th anniversary of the Treaty of Rome, which established the European Economic Community. At a time when our shared European life is increasingly under threat, we are taking the opportunity to offer you a series of articles on Europe. We will provide insight on questions concerning the construction of European institutions, Europe’s resilience in the face of crisis, challenges for the future and emerging options to meet them. Lastly, a final component dedicated to the banking union will analyse these various aspects from the perspective of the European financial system.
The virtues of the European project…
Born out of the ashes of the Westphalian order and the ravages of the two world wars that followed, the European Union has first and foremost been a political project aimed at establishing a new international – or at least European – order. Abandoning the Bismarckian principle of a world order based on defending the national interest and evaluating the balance of power, which – as we know – had led to tragedy, the European project took up principles already supported by Metternich linking the defence of the national interest with the national interest of other States and accepting interdependence as a reality. Thanks to enlightened statesmen, countries transcended their historical divisions and rivalries to merge the main components of their economic power by embodying a project which, above all, represented mutual values of shared development. Let us not forget that, while the starting point was the economy, with the European Coal and Steel Community followed by the Common Market and the Economic and Monetary Union, these organisations were never meant to be anything more than steps towards an ‘ever closer union’ of peoples.
The founding fathers embarked on this huge task with the aim not of replicating some model or other, however effective, but rather of finding a regime suited to diversity and that would be acceptable to a majority. The result was a completely new regime, different from ‘traditional’ parliamentary democracies. However, its unusual nature meant it was sometimes hard to understand through national prisms and its appropriation by national leaders was uneasy[i]. The principle of equal terms for all countries, regardless of their size and power, led the organisation to step outside the framework of intergovernmental management and adopt a community-based approach, with an unparalleled body, the European Commission (EC), which has power of initiative and supervision over the implementation of shared rules. While it is national governments that choose the EC’s members, the latter are accountable to a European Parliament, which hears them before they take up their posts and can censure them (cf. Santer Commission). The European Parliament, unlike national parliaments, has no legislative right of initiative, though it has, in some areas, acted as joint legislator. It is elected by universal suffrage but in accordance with rules that vary from country to country, though without any nationality prevailing over shared values. The union of political groupings within the European Parliament appears sufficiently strong[ii], in spite of cultural differences, to ensure the prohibition on a binding (i.e. national) mandate.
In accordance with the same principles as the Commission, the European Central Bank is independent and its mandate is to look after the interests of all eurozone countries. This mandate is fulfilled through the ‘one country, one vote’ principle, which guarantees equal terms for small countries. The result is that less populous countries are over-represented in these three institutions, but this ensures that situations in which one major power dominates are not repeated. This institutional architecture represents a dramatic break from the way the European balance of power was managed in the past, perhaps making it less transparent to citizens and contributing to the view of the European project as a weird – if not harmful – edifice.
To make this unusual institutional configuration harder still to understand, the European Council, on which heads of State sit, was initially designed as an informal gathering with no decision-making powers, but which would back measures for which responsibility lay at the national level, in accordance with a consensual decision model subject to national parliaments. The Lisbon Treaty sought to impose on the Union, and thus also on the Council, two sources of legitimacy – that of States and citizens – by introducing the double majority vote (i.e. by a majority of both States and the population). However, this informal gathering, which Jürgen Habermas describes as ‘executive federalism’[iii], and which he denounces as a model of post-democratic domination, has, since the crisis, played an increasingly significant role in European decisions at the expense of the European Commission and the European Parliament. The joint exercise of sovereignty through the legitimation of the European Parliament and control (by the European Commission and the European Court of Justice), which has been called the ‘community method’, has lost ground to the ‘intergovernmental method’ led by the Council. This backward step relative to the model desired by the founding fathers – a sort of ‘revenge of the States’ – has admittedly made it possible to resolve certain crisis situations more quickly, albeit to the detriment of a democratic approach that has allowed divisions between countries to resurface, as well as a sense of domination by economically and diplomatically powerful or financially virtuous countries.
…and its vices
As such, Europe has been designed not as a parliamentary democracy but as a model of the ‘rule of law’, guaranteeing the protection of fundamental rights and the defence of freedom of competition within the single market, with less room left for public policy and limited capacity to sanction European governing authorities. This configuration has, it seems, fuelled perceptions of tainted political legitimacy. The relationship between the two levels of democracy – national and European – has not been helped by the lack of firepower in the European budget, which limits the ability to implement public policy Europe-wide, while community rules restrict the scope of domestic public policy. One iconic example is fiscal policy, where domestic room for manoeuvre is constrained by European rules without any consideration being given to a Europe-wide macroeconomic stabilisation function. Another example is competition policy which, by targeting concentration, prevents the rise of not only domestic but also European champions. A third and more actual example is the ever so controversial question of border defence. As a result of the long process of European integration, which structurally favours a one-step-at-a-time policy, Europe is now incomplete and unbalanced, with, for example, a monetary union but diverse tax systems. This imbalance between the politico-legal regime and the public policy arena has only added to the sense of a rule-bound Europe unable to respond to citizens’ needs[iv]. The result is a mounting obsession with sovereignty but also numerous instances of resistance at the constitutional level (Karlsruhe etc.).
The preamble of the Treaty of Rome assigns to the European Economic Community the primary goal of constantly improving the living and working conditions of European peoples. Over the first few decades, the establishment of the common market went hand in hand with strong growth and economic and social convergence both within and between countries. However, national policies often followed unsustainable trajectories, offering only the appearance of social convergence, inconsistent with productivity trends, notably for countries belonging to the Economic and Monetary Union. Meanwhile, welfare state reform has been partial and has lacked coordination with other policies, relegating whole sections of the population to outsider status and triggering the erosion of human and social capital. In the teeth of the crisis, the limitations of this model quickly became apparent. The incompleteness – and sometimes the inconsistency – of European governance has meant it has not been possible to effectively organise strategies for adjusting initial imbalances, thus losing sight of the initial goal of improving living conditions. The crisis has only accentuated this erosion, resulting in economic and social convergence grinding to a halt in Eastern Europe and stalling in Southern Europe[v]. The median voter is increasingly part of those left behind. Distrust towards institutions has inevitably risen.
If it is to continue to exist and push back against the upsurge of nationalist movements, the European Union must now remember its history and the common destiny of its members. However, it must also implement radical reform, to which countries and their leaders must not submit under sufferance: they must, rather, show themselves to be convinced of its necessity. Crucial to this will be the ability to go beyond the divergence between negative integration through law and positive integration through public policy, so as to provide concrete answers to return to the virtuous path of economic and social convergence.
Paola Monperrus-Veroni, Economic Research of Crédit Agricole S.A.
By Paola Monperrus-Veroni, Group Economic Research
[i] Goulard S., Monti M., De la démocratie en Europe. Voir plus loin, Flammarion, 2012
[ii] Frantescu D.P., Values topple nationality in the European Parliament, European View (2015) 14: 101-110, doi:10.1007/s12290-015-0349-3
[iii] Habermas J., La Constitution de l’Europe, Gallimard, 2012
[iv] Aglietta M., Leron N., La Double Démocratie. Une Europe politique pour la croissance, Seuil, 2017