(9) European Union Crisis

European Debt Crisis - Economic Collapse In 3 Minutes - Clarke & Dawe


9. Democracy and its discontents

THE NOTION THAT THERE IS A DEMOCRATIC DEFIGT in Europe is almost as old as the European project itself. Until 1979, when the first elections to the European Parliament were held, none of the European institutions were directly elected, and the gap between ordinary citizens and decisions taken in Brussels was seen to be a yawning one. National governments, which are elected, are of course represented in the Council of Ministers, the senior legislative body. But most have tended to keep quiet about their bargaining and few are held to account for actions in Brussels by their own national parliaments. Moreover, the spread of qualified-majority voting has meant that individual governments can now be forced to accept policies that they have themselves opposed.1

Over time, various suggestions have been made for filling this democratic deficit. Increasing the powers of the European Parliament is one that has been pursued through almost every treaty. Greater transparency in both the Commission and the Council has long been another favourite. Greater democratic input into the Council of Ministers through national parliaments has often been urged. So sometimes has the idea of some body that more directly involves national legislatures. And there is increasing recourse to referendums to approve new treaties: no fewer than ten were promised for the abortive constitutional treaty, compared with just one for the Single European Act of 1987.

None of these has proved satisfactory as a remedy for the deficit. The European Parliament has continued to disappoint even its most ardent supporters. Transparency has been improved, but few ordinary citizens understand even the basics of how the EU works; indeed, most have no idea what the difference is between the Commission and the Council of Ministers. Most national parliaments remain bad at holding ministers to account for decisions made in Council meetings, and attempts to get them to work together have largely failed. As for referendums, almost as many have been lost as won, so most governments feel decidedly nervous about holding any more.

It is true that public scepticism about institutions has been as strong (or sometimes even stronger) at national as at European level. In many countries, the loss of faith in the European Parliament, for instance, is matched by a similar or even greater loss of belief in the efficacy of the national parliament. Moreover, in many countries duties that once devolved on directly elected governments – monetary policy, exchange-rate policy or competition policy, say – have been handed to unelected bodies on the basis that they will be done better. Yet there is still a bigger cause for concern when something similar happens at European level. Even when citizens are fed up with their own government or parliament, they do not question their legitimacy or their continuing existence. But when it happens at European level, which seems more foreign, many query both.

Following the national model, some commentators have accordingly suggested as an alternative that the European Union should rest on a different idea altogether: that of output rather than input legitimacy. On this basis, there is no real need to get hung up about democratic accountability as such. 

Rather, the European project can be expected to gain and retain public support – and thus end up acquiring greater legitimacy – simply by delivering good results. If voters can see that, thanks to the EU, their economies are more successful than they would be without it, they will be content. In this context it helps when there are concrete results from EU actions to point to: lower airfares or mobile phone roaming charges, say.

Yet three related developments have largely kyboshed even this notion. The most obvious is that, far from being seen to deliver consistently good results, the European Union and especially the euro are now seen by large numbers of voters to be delivering mostly bad ones. Across much of the continent, Europe (and especially the single currency) is today associated with austerity, spending cuts, tax increases, rising joblessness and chronically slow growth. Debtor countries have seen a particularly sharp fall in enthusiasm for the European project as a result. But even in creditor countries, which have suffered less economically, Europe and the euro have lost their appeal, because they are now associated with bail-outs and transfers rather than with rising prosperity.

This new mood music has become especially discordant for Europhiles. Their messages that the EU would boost growth through its single market, that the euro would improve competitiveness by promoting reform and that both groups would protect European citizens from the pressure of globalisation and the fallout from the world financial crisis have fallen flat. Instead, Eurosceptics everywhere feel vindicated: their view that there is too much regulation by a remote EU bureaucracy and their warnings about the insanity of adopting a single currency without the right institutions, without moves towards political union and without enough democratic control seem to have been borne out by events.

The second consequential development has been a sharp fall in the popularity of the European project, right across Europe. Polls taken in 2013 by Euro barometer, the German Marshall Fund and the Pew Global Attitudes survey have all come up with similar findings.2 Especially in the south, but also in the north, approval of the EU has declined fast in recent years. The number of people who consider their country’s membership to be a good thing has also fallen. The decline has been most precipitate in Mediterranean countries like Spain and Greece. But it is also remarkable in France, where the latest Pew survey found an even smaller proportion of the population approving of the EU than in the traditionally Eurosceptic UK.

This sharp dip in the EU’s popularity in opinion surveys is reflected in the rise of populist parties that are anti-euro and anti-EU. Some of these parties are from the far right, some from the far left.

Often they are anti-free trade and anti-globalisation. In many cases they are strongly against immigration, which is increasingly associated with the EU because of its eastward expansion to take in not just the central European countries but also Bulgaria and Romania, for which free movement of labour arrived only in January 2014 (the British and some other governments are trying to curtail benefit entitlements for some specified groups of immigrants). Anti-Islam feelings also play a role. But their new-found strength owes most to the populists’ ability to channel growing anti-EU sentiment.

Thus Greece has seen the rise not just of Golden Dawn, an explicitly extreme-right party, but also of Syriza, an anti-austerity left-wing party that is running ahead of the ruling New Democracy party in opinion polls. Spain and Portugal have, so far, escaped the rise of populist parties of the right, but the more extreme United Left party is doing well in Spain and support for the two mainstream centre right and centre-left parties has collapsed. Italy has seen the spectacular rise of Beppe Grillo’s Five Star movement, which took almost 25% of the vote in the election of February 2013, forcing the centre-left and centre-right parties into an uneasy coalition. In France, Marine Le Pen’s National Front is running close to 20% in the opinion polls.

The rise of populists and extremists is not confined to troubled euro-zone countries alone. In Finland, the True Finns (now the Finns Party) under Timo Soini, which came out of nowhere in 2011, largely to protest against the euro, are scoring 20% or more in most opinion polls. In the Netherlands, Geert Wilders’ Party of Freedom is also riding high. Wilders has formed an alliance with Le Pen for the European elections, campaigning on an anti-EU, anti-euro platform. The UK Independence Party has refused to join this alliance, but it too has been scoring highly in the polls. Across central and eastern Europe a swathe of extremist and populist parties, from Jobbik in Hungary to the League of Catholic Families in Poland, are similarly doing well.

Almost the only country not to have seen a sharp upsurge in a populist, anti-euro or anti-EU party is Germany. It is also one of the few countries where the number of people with a favourable opinion of the EU has not fallen sharply in recent years. Residual German war guilt plays a part in holding down extremist parties. Yet it is, on the face of it, surprising that anti-EU or anti-euro sentiment has not made itself felt, as the German public has shown itself deeply hostile to the whole notion of bailouts and transfers to Mediterranean countries. Moreover, a new party, Alternative for Germany, has been established and, although it narrowly failed to get into the Bundestag in the September 2013 election, its poll ratings have since been rising. The real reason Germany looks different from other countries may be that it has suffered little during the euro crisis. Besides, German voters have come to trust Merkel not to let them down.

The search for legitimacy

The third and perhaps most difficult challenge is a direct result of the euro crisis itself. As discussed earlier, a large part of the policy response has been to move towards deeper political integration in the euro zone. The fiscal compact, the European semester, the two-pack, the six-pack and the rest add up to far more intrusive monitoring of national governments’ fiscal and economic policies. The Commission now has the responsibility to vet and, if need be, propose changes to national governments’ budgets even before their parliaments have seen them. Coming on top of the loss of monetary and exchange-rate policy due to the introduction of the euro, the result is a significant transfer of power from national to European level.

It should not be a surprise that one consequence is a crisis of democratic accountability. As a senior German finance ministry official put it to Ulrike Guérot and Thomas Klau of the European Council on Foreign Relations in 2012, “the weakness of the system is not about spending and how to promote growth, but about legitimacy”.3 Some of those who pushed for a single currency at and before Maastricht always thought it would take closer political union for it to work satisfactorily – indeed, a few pressed for EMU precisely because they thought it would force the creation of a United States of Europe. But most voters and most governments were not persuaded. Now a form of political union is indeed being brought in, not, however, as a positive result of careful national debate and as a consequence of economic success, but rather as a negative outcome to ward off economic failure. That surely will make it even harder to persuade voters to support the entire notion of political union.

It does not help that in parts of Europe democracy is going through something of a crisis at home. There are many manifestations of this. One was the fact that both Greece and Italy had technocratic prime ministers thrust on them during the euro crisis. Greeks have long been fed up with their political leaders. In Italy, voters have become increasingly disillusioned with their entire political class, often known as La Casta and widely reviled for its excessive cost and many privileges. Yet neither country was happy to have unelected leaders appointed in place of elected ones. It was this, perhaps more than a lost love for Europe that led so many Greeks to vote for fringe parties in May 2012 and so many Italians to back Grillo’s Five Star movement in February 2013. In Eastern Europe, Bulgarians have spent most of the past two years protesting in the streets against their government.

Romanians seem equally fed up with a long-running feud between their president and their prime minister. Hungary deserves a special mention here, as it has run into much condemnation in Brussels. Viktor Orban’s centre-right Fidesz party won a smashing electoral victory in 2010 after the outgoing Socialist government became discredited. But Orban proceeded to rewrite the constitution in ways that cemented Fidesz’s dominance over Hungary’s institutions and its intimidating control of the country’s media. Although the EU has managed to get the government to rewrite provisions impinging on central-bank and judicial independence, it has found its leverage over the government worryingly limited. As was discovered as long ago as 2000, when the EU tried to freeze relations with an Austrian government that included the far-right Jörg Haider as a coalition partner, a country that is a full member is much less susceptible to outside pressure than an applicant. Moreover, Orban’s membership of the centre-right European People’s Party transnational group is often said to have restrained his fellow heads of government from being too harsh on him. The result has been to damage the cause of liberal democracy in its broadest sense.4

Now the challenge from the euro crisis threatens to make matters worse. Indeed, in their first encounter with the European semester, several national leaders, even those normally thought of as pro-European, went out of their way to criticise the Commission for its intrusiveness. Spain’s Mariano Rajoy announced in 2012 that it was for his government, not the Commission, to decide the right level of the Spanish budget deficit. In France, Hollande early on declared that, while the Commission was within its rights to demand pension reform, his government should be left to decide what sort of changes to make and how quickly to make them. The Italian government rejected a criticism of its longer-term debt sustainability. And when Belgium, the most pro-European country of all, was rebuked over its budget deficit, one Belgian government minister asked aloud: “Who is Olli Rehn?” (the economic-affairs commissioner).5

Yet it is too simple to see the problem as merely one of excessive Commission interference in matters better left to elected national governments. That was to some extent true when it came to the operation of the stability and growth pact. When Gerhard Schröder and Jacques Chirac came together in 2003 to overturn any suggestion of Commission-imposed sanctions on their two countries for breaching the terms of the pact, they were simply asserting greater legitimacy for elected political leaders. There was little in the way of broader economic fallout. Indeed, that is precisely why their colleagues, with the partial exception of the rule-loving Dutch, made so little fuss about the demise of the pact at the time.6

But the euro crisis has changed this completely, by bringing into the picture nationally sanctioned rescue funds. A bail-out of an excessively indebted country has to be approved by national authorities, including national parliaments, because ultimately it must rest on the credit of sovereigns. As became clear in May 2010, the EU budget is too small for this purpose. For such a fund to attract its AAA rating, it requires guarantees from creditworthy governments. And in national democracies, that needs the backing of national parliaments. This is one reason the issue of democratic accountability in Europe has become so acute. When it is clear that something has to be decided at European level, the EU treaties have a supranational, if not always satisfactory, mechanism of accountability. When decisions are wholly national, similarly, a national system should work. But in the euro crisis decisions are, in effect, hybrid: they are taken at a European level, but the funds being committed are provided nationally. In such cases issues of accountability and democratic control can all too easily fall through the cracks.

Hence the experience of the Finnish parliament (Eduskunta), which has repeatedly demanded specific collateral for loans to Greece and others. And hence also the growing role of the German Bundestag in demanding the right to approve every bail-out individually. The Bundestag’s demand for a say in bail-outs is strongly supported by another crucial German institution, the Bundesverfassungsgericht, or constitutional court, based in Karlsruhe. The constitutional court has played a big role in the euro crisis, chiefly because a number of plaintiffs have repeatedly petitioned it to declare various decisions to be unconstitutional because they infringe the German basic law –ranging from the first Greek bail-out to the establishment of the European Stability Mechanism to the ECB’s programme of outright monetary transactions (OMT) to support sovereign-bond markets. So far the court has not ruled against anything, but it has often hedged its verdicts with language suggesting that there are limits to how far the federal government in Berlin can go. In the case of OMT, it made its disapproval clear but transferred the case to the European Court for a ruling. It has also made clear, including in its ruling on the Lisbon treaty, that it does not see the European Union’s democratic credentials as sufficiently strong.7

Many Euro-enthusiasts are horrified both by the Karlsruhe court and by the Bundestag’s assertion of control over bail-out decisions. They see a creeping renationalisation at work, all of a piece with Merkel’s new-found enthusiasm for inter-governmentalism and the “union method” at the expense of the traditional community method. Germany’s lack of enthusiasm for the EU institutions, notably the Commission but also the European Parliament, which used always to attract strong German support, is to them part of the same pattern. What such enthusiasts tend to favour instead as a way to inject more democratic accountability into EU-related decisions is to give a much greater role to the only directly elected EU institution: the Parliament in Strasbourg. Yet this runs into huge problems of its own.

Strasbourg blues

The Parliament is certainly ready and eager to step forward. It has already played a constructive role in drawing up the necessary legislation for the European semester. It wants to do more in the way of scrutiny of the Commission’s decisions and of any contracts for reform that national governments might accept. Yet the notion that it can help to fill the gap in the euro zone’s democratic accountability and in providing greater legitimacy for the system to ordinary voters is far-fetched and may be highly dangerous, for four reasons.

The first is institutional. The Parliament is quintessentially a body that brings together representatives from all 28 EU countries. It was relatively easy for the Council of Ministers to establish a sub-formation in the Euro group and now the Euro group summit. It is also fairly simple to form a tacit understanding that the economics commissioner as well as the Commission president should, like the presidents of the ECB and of the European Council, come from a euro-zone country. It is much harder to do the same in the Parliament. Indeed, the chair of the economic and monetary affairs committee during most of the euro crisis has been Sharon Bowles, a British Liberal Democrat.

Some have muttered about this, and a few enthusiasts, including the French Eiffel group, have even suggested setting up a separate or “inner” euro-zone parliament. But to most this would excessively institutionalise the already worrying divide between euro ins and euro outs.

A second objection is that the Parliament itself lacks legitimacy. It has been directly elected for the past 44 years, yet the turnout in successive elections has steadily fallen. European elections everywhere are treated as essentially national polls, in which voters typically register protests against their governments or back populist parties. There is no sense among voters of any Europe-wide political parties: few have heard of the main political groups or have any clue about what they actually stand for. The results of European elections are not seen to translate in any way into changes of executive power within the EU; they do not even determine the presidency of the Parliament, since this is divided between the two biggest groups for the term of each legislature. Few people have any idea what the Parliament does or who their MEP is. In short, for most ordinary Europeans the Parliament seems to be part of the problem of remote and largely unaccountable EU institutions, and not part of the solution.

Various remedies have been suggested for these ills. One old favourite is to give the Parliament more powers, which has been done so much that for most purposes it has become a co-equal legislator with the Council of Ministers. The idea is that if the Parliament is seen to be exercising fuller powers in the EU, voters will take it more seriously. And indeed the Parliament, especially through its committees, has become an important and at times extremely valuable part of the legislative process, often improving directives and regulations more effectively than the Council. Many people cite the examples of the REACH chemicals rules and the services directive, which was in part resurrected by the Parliament, as examples.

Yet even Europhiles remain dissatisfied with the Parliament. A believer in democracy might expect the three biggest groups, the centre-right European People’s Party (EPP), the centre-left Progressive Alliance of Socialists and Democrats (S&D) and the centrist Alliance of Liberals and Democrats for Europe (ALDE), to debate from their different political standpoints and vote accordingly, as happens in national parliaments. But far more often the big groups come together to make the Parliament more of a lobby or non-governmental organisation that sets itself up against the Commission and the Council of Ministers, rather than acting like a normal legislature. The Parliament is fond of passing largely meaningless foreign-policy resolutions. Unlike most national parliaments, it always wants both more powers for itself and a bigger budget – something few of its voters would support. The divide between voters and their MEPs was made starkly clear when the Dutch and French overwhelmingly rejected the constitutional treaty, which had been approved by almost all the MEPs from those countries.

Another suggestion has been to give the Parliament a bigger and more explicit role in choosing the Commission, especially its president. The Lisbon treaty provides that the European Council, taking account of the results of the European elections, should nominate a candidate, who is then “elected” by an absolute majority of the Parliament. (The Parliament is also required to approve the entire college of commissioners, but not each individual, this time by simple majority.) Most of the political groups have taken this language as an excuse to put forward their preferred candidate for the Commission presidency before the European elections. The S&D group, for instance, has proposed the current president of the Parliament, Martin Schulz; the ALDE has put forward its leader, Guy Verhofstadt; and the EPP is proposing Jean-Claude Juncker. The idea is that this should make the elections matter more to voters, since they will, in effect, be indirectly choosing the next Commission president.

Yet this solution to the democratic deficit is unlikely to help. Most ordinary people remain profoundly ignorant both of the political groups that are proposing candidates and of the candidates themselves: it is hard to see British Labour voters, say, turning out in large numbers because they are enthused about the prospect of Schulz as the Commission president. Worse, by making the Commission more beholden to the Parliament than it already is, the plan would upset the EU’s institutional structure. Unlike the Parliament, the Council of Ministers cannot sack the Commission; if the Parliament has the decisive voice in the Commission presidency, this would aggravate the imbalance, making it all the more likely that the Commission and Parliament would come together to act against national governments. And worst of all, the plan would sharply reduce the field of candidates to become president of the Commission: no incumbent government leader would be ready to step down to campaign as part of the European elections.8

Besides the European Parliament’s own failings as an institution that can fill the EU’s and the   euro zone’s democratic deficits, there is a third reason to doubt that it will be the answer. This is that an increasing number of populists and extremists are now represented in the Parliament. On one level, this could be seen as positive: at least this strand of opinion, often hostile to both the EU and the euro, will be fully represented in the European institutions. But the presence of such a destructive group of oddballs, loonies and closet racists is hardly likely to enhance the reputation of the Parliament or make it easier for it to play a role in holding the EU’s policymakers to account.

And there is yet another, fourth reason, why the Parliament will never be the answer to legitimacy and democracy in the euro zone. This is that decisions over euro-zone bail-outs, the rescue of European banks or fiscal transfers to troubled countries will always involve national taxpayers’ money. The Bundestag’s insistence on approving such measures is not mainly a symptom of a sudden Euroscepticism in Germany. It is something far simpler: the notion that, where national taxpayers’ money (or credit) is being used, there must be some national control over what it is being used for – and also some national accountability. There is no way in which a European-level body could supply either of these, least of all one whose raison d’être is always to increase its powers and to spend more.

Back to national democracy

This points to another answer to Europe’s democratic deficit: greater national involvement. The spread of national referendums on European issues is part of this: besides the two habitual practitioners, Denmark and Ireland, several other countries now put substantial new EU treaties or decisions such as whether to join the euro to popular vote. France and Austria have, at various times, suggested that a decision to admit Turkey to the EU would have to be approved similarly (France put the issue of UK membership to a referendum in 1972, securing a large “yes” majority). Under its European Union Act, the UK is required to put any treaty involving a significant transfer of power to Brussels to a referendum. And David Cameron has promised that, if he is re-elected as prime minister in 2015, he will ask the British people to decide whether to remain in a reformed EU.

Referendums are, however, always chancy affairs. So it is really national parliaments that are best placed to improve democratic input and accountability in the EU and the euro zone. Their role in the EU machinery has been increased by successive treaties. Since the Lisbon treaty, national parliaments have been given specific powers to police “subsidiarity”, the provision that decisions should be taken at the lowest possible level. Under a yellow/orange-card procedure, national parliaments acting together can ask for Commission proposals for legislation to be withdrawn. The treaty also recognizes COSAC, a co-coordinating body of European committees from national parliaments, most of which maintain offices in the European Parliament building in Brussels. There is increasing interest in the more effective forms of national scrutiny of European legislation, with the most popular models being Denmark and Finland, where parliamentary committees hold the government to account for decisions it takes in the Council of Ministers.

The euro crisis has put renewed emphasis on the role of national parliaments. The Bundestag, the Eduskunta, the Dutch Tweede Kammer and others have asserted a direct interest in approving   any decisions that rely on their taxpayers’ credit or money. And the new powers of the Commission to scrutinise draft national budgets, to issue recommendations to countries with excessive budget deficits or with large current-account deficits (or surpluses) are inevitably impinging on national parliamentary authority over public spending and taxation. For this reason it has become desirable, indeed essential, that the Commission should engage with national parliaments. So far, its response to the yellow-card procedure has been disappointing: only one proposal has been withdrawn, and the Commission disgracefully ignored a complaint from 18 different parliamentary chambers about the legal basis for a European public prosecutor. But as the system beds down, the Commission should end up doing more at the behest of national parliaments, and it must be expected that the commissioner for economic and monetary affairs and his or her officials will have to appear before them more often.


Yet even this might not be enough to lend greater democratic legitimacy to a far more intrusive system of economic control. That is why several analysts and commentators have at various times suggested much greater moves towards fuller political union, with an elected Commission that includes a finance minister, or at least an elected president of the Commission and, as a necessary adjunct, a substantial euro-zone budget. No doubt if the European project were to take a leap into full political union, some kind of federal election would become necessary. But at least for the foreseeable future, neither European voters, nor national governments, nor Europe’s political leaders seem remotely ready for any such steps.9




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