The European Union Crisis and European Democracy

The role of the European Parliament for effective governance of the European economy.

, by Guido Montani, translated by Francesco Santini

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The European Union Crisis and European Democracy

The European Monetary Union is in danger. In as much as the EMU is the most important success in sixty years of European integration, the survival of the European Union itself is called into question. The cause is not only the Greek crisis, but also the inadequate system of governance of the Union. For example, to save Greece from bankrupting George Papandreu did not confer with the President of the European Commission, but with Chancellor Merkel, Sarkozy and Obama. Therefore, we wonder: who is the responsible for the future of the European Union in the current situation?

The intergovernmental method of governing European affairs is confusing and mixes national and European interests. National governments cannot survive without Europe, but at the same time are obliged to defend their national interests. The result is a slow, inefficient and contradictory decision-making process. The proposal to expel Greece from the Monetary Union has paved the way to financial speculation against Euro and justified a potential division within the EMU. Moreover, the decision to involve the International Monetary Fund in the bailout package of 750 million Euros represented a tacit admission of the weakness of the Euro against the dollar. The American government has never asked for the support of the IMF to save one of its fifty federal states by default risk, as in the case of New York in 1975 or now in that of California. The survival of EMU is a European problem. Nobody will save the Euro as long as Europeans will be unable or unwilling to change their ineffective decision-making system.

“... the future of the European Union...”

The German insistence for greater austerity by members of the Union is reasonable, but this is just half of the story. The other is the problem of European economic growth. Too much austerity can kill the patient. A dramatic economic crisis could lead to a deflationary vicious circle characterised by less public expenditure, less purchasing power, a persistent stagnation, etc. The future of the Union cannot be a mere “Europe of nations” with strong virtuous states able to cope with economic globalisation and a second category of weak, guilty countries in tow. The Lisbon treaty states that the Union “shall promote economic, social and territorial cohesion, and solidarity among Member States” (art.3). Yet, the European Union is currently unable to reach these objectives since it does not have the instruments, especially an adequate budget, which are needed for effective governance of the European economy.

In Maastricht in December 1991, the heads of states and governments decided to establish a Monetary Union but did not support it with the establishment of an Economic Union. The Delors Commission in 1993 launched an ambitious long-term plan for growth and occupation, but ECOFIN refused to issue the necessary Union Bonds. The Lisbon strategy, launched in 2000 has been a complete failure since it was founded on the illusion of a spontaneous cooperation among the 27 national governments. As a consequence of this strategy the Commission was not given real powers for the governance of the economy, but it was rather conceived as the secretariat of the Council. If the new plan of the Commission 2020 will not be financed by adequate means, a failure can easily reoccur.

“... a renewed pact between European citizens...”

Time has come to complete the EMU with a real Economic Union. European Institutions are thinking about two parallel reform processes: the reform of the Stability and Growth Pact and the reform of the EU Budget. These reforms must be merged, since the EMU can efficaciously work only if supported by a fiscal union, within which it could be possible to decide how much to earmark for pure European projects (i.e. European public goods) and how much for national ones (i.e. national public goods). The global economic crisis has dramatically worsened the situation of the European public finances. Taxpayers should bear new sacrifices for the coming years. The voice of European citizens and of their representatives can therefore not be ignored.

What we need now is a renewed pact between the citizens of the Union, from Germany to Greece, from Finland to Portugal, which establishes the principles for a new fiscal responsibility and solidarity.

What we need now is a renewed pact between the citizens of the Union, from Germany to Greece, from Finland to Portugal, which establishes the principles for a new fiscal responsibility and solidarity. In order to reach this historical agreement, national parliaments must be involved in the reform process, alongside the European Parliament, the European Commission and the national governments. Hence, the European Parliament, which defined the Union as a supranational democracy, should promote an Inter-Parliamentary conference (along the lines of the “Assise”, held in Rome in 1990) aiming at benefiting from the full potential of the Treaty of Lisbon and proposing the rules for an effective governance of the European economy.

Image: The new Euro coins, by Ssolbergj. Source: Wikipedia


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