The Dilemmas of European Decision-making and the Illegitimacy of the Fiscal Compact

EU decision-making assumes agreement at two levels: the national and the European. The dilemma highlighted by the crisis is how to make collective EU decisions acceptable not just to the 28 governments and MEPs but also to each of the peoples they represent. This problem cannot be resolved by either taking problematic decisions out of the political domain or confining them to decision-making purely at the EU level.
Prof Richard Bellamy
February 2014

The English phrase 'to have your cake and eat it too'  is rendered in Italian as 'the wife drunk and the barrel full' and in German as 'trying to dance at two weddings at the same time'. These different expressions for the same basic idea no doubt reveal interesting cultural as well as linguistic differences between these three countries - not least that whereas the English and German versions involve the logical impossibility of wishful thinking, the Italian version describes merely an unlikely if alluring possibility.  Yet, taken together they offer an all too accurate summary of the dilemmas confronting decision-making in the EU, and the problems they pose given the crisis of the Eurozone.

EU decision-making assumes agreement at two levels. At one level, the governments or agents of the Member States must reach agreement with each other. Despite qualified majority voting, consensus is the norm and unanimity the rule for treaty changes. At another level, these same Member State actors must also obtain the agreement of their respective citizens. Moreover, both agreements must be capable of enduring over time. In the German version of the saying, not only must Member State governments dance at the wedding they hold with each other in Brussels, any deal they agree to must be able - metaphorically speaking - simultaneously to dance at 28 domestic weddings too. The need for a multiple majority, it should be noted, is more or less built into the decision making of the European Parliament (EP) as well. Here constituencies are apportioned on a national basis that is 'degressively proportional' to their populations. Given votes in the EP require an absolute majority of MEPs rather than simply a majority of those present, any measure in effect requires the support of a qualified majority of the representatives of Member States.

These thresholds are far higher than legislation or constitutional change require in any Federal Polity. They produce considerable inertia in the system. Though the Treaty of Nice was widely viewed by a majority of Member States as deeply flawed - the culmination of a long period of failed efforts at treaty reform - it took a decade to achieve the relatively modest yet important changes embodied in the Lisbon Treaty. The reason is simple: if the consent of all is necessary, then those Member States most attached to the status quo can veto, or at least stall, any change. Each enlargement of the EU potentially makes this situation worse.

How, then, has the EU kept going, progressively expanding its competences over time? Up until the 2004 enlargement, most new Members demonstrated their EU credentials by supporting the deepening of EU policy making. However, that was possible in large part because the policies in question were broadly win-win and not of immediate interest to most voters. In sum, as the English expression has it, Member States could agree because it appeared they could have their cake and eat it too. Broadly speaking, all parties believed they gained from European integration, even if not for each and every measure or to an equal degree.

Of course, even in win-win scenarios there is a danger that not all will play their part in generating the collective benefits so long as they can get the advantages without bearing any of the costs. After all, thieves benefit from a law-abiding society and want everyone to obey the law - everyone, that is, apart from themselves. They free-ride on the law abidingness of the rest of us, facilitating as it does their criminal activities, without the costs of being law abiding themselves. Tax avoiders operate in a parallel way. So, for those so inclined, if the wife is drunk, and not only not competing with you for the wine but unable to stop you from consuming it, you will drink unimpeded from the barrel. To avoid that happening, the EU binds its Members to agreements that once in place are not only hard to change but also supposedly hard to evade, with the Court of Justice and the Commission the guardians of the Treaties. Again, this scenario works fine so long as agreements are win-win and domestic compliance is assured. But from the Treaty of Maastricht onwards, these twin conditions have been increasingly hard to achieve.

The reasons for this difficulty have been made all too evident with the Eurocrisis. Enlargement has produced an EU that is not only more diverse but also more clearly divided between rich and poor states. Proponents of the single market and the common currency contended they would bring about convergence. Yet although their efficient operation may have presupposed such convergence, in its absence ever greater divergence was likely to be the result. In these circumstances, the likelihood grows that sections of the populations of both sets of states will perceive European integration as lose-lose. Domestic dissatisfaction follows, not least because the EU has begun to operate in areas that are increasingly salient for voters. Much of the early integration process concerned issues the economic impact of which was often indirect and obscure to most people. However, citizens are now all too aware of the effects of greater mobility of job seekers across European borders, of a collapse of the Euro on savings and house prices, and of EU imposed public spending cuts on services and employment in the state sector. As a result, domestic acquiescence in EU affairs has become increasingly difficult to achieve. Instead of the pre-Maastricht 'permissive consensus', EU politicians now find themselves confronted by well mobilized opposition and a general demand for a clearer justification of and accountability for their policies.

These problems were not immediately apparent. Initially the Euro seemed to offer yet another win-win policy. The export-driven German economy along with those of other richer states escaped the drawbacks of their success in the form of high exchange rates and rising prices, while poorer states enjoyed low inflation and interest rates. Yet, as the shock of the collapse of the banks revealed, this was a situation where the wife was drunk and all the Member States were drinking freely from the barrel. Now she is well and truly sober, the barrel is empty and cake in short supply. Creditor and debtor states both fear they will lose from the resulting situation. The former worry about default on their loans, the latter about ever emerging from indebtedness.

Meanwhile, the need to dance simultaneously at 28 weddings continues. Two solutions have been proposed, which however both reflect the standard EU response to past crises: a move towards greater political integration. The first proposal has been to depoliticize the most politically sensitive issue, that of national control over public expenditure. The Treaties and especially the Stability and Growth Pact sought to establish the conditions under which the Member States made commitments to one another in respect of monetary policy. However, these arrangements proved insufficient, especially given that both Germany and France openly flouted them while readjusting their economies. Nevertheless, those same conditions have been reinforced by the Fiscal Compact contained in the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (TSCG), signed in March 2012, with which Member States commit themselves to national budgets being in balance or in surplus. These commitments are to take effect nationally 'through provisions of binding force and permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout the national budgetary processes.' (TSCG, Article 3.2).

There are numerous reasons to doubt the workability and advisability of these proposed provisions. First, they may prove incompatible with existing constitutional provisions. Indeed, the Portuguese court has already judged certain austerity measures unconstitutional. Second, even if constitutionalised, citizens would almost certainly exercise their civil and political rights to protest them. Third, a clear difference exists between constitutionalising provisions such as basic rights, like the right not to be tortured, that have a categorical force that morally demand they should never be infringed, and economic provisions that at best are prudentially advisable given certain contingent conditions.

The second proposal seeks to answer these objections by proposing the strengthening democracy at the EU level, not least through a further enhancement of the powers of the European Parliament. Yet there is no reason to suppose that enhancing the number of decisions made at the EU level will of itself overcome the 28 weddings problem. Indeed, successive extensions of the EPs powers have in the past been greeted with parallel decreases in voter turnout. For the most part, they involve politicians with little domestic recognition, who are often elected in protest against the domestic performance of the main parties. The dissatisfaction of voters with the EU is as much dissatisfaction with a system that seems to reduce yet further their influence on politicians and the decisions they take. The EP may therefore be part of the problem rather than its solution.

The dilemma highlighted by the crisis is how to make collective EU decisions acceptable not just to the 28 governments and MEPs but also to each of the peoples they represent. This problem cannot be resolved by either taking problematic decisions out of the political domain or confining them to decision-making purely at the EU level. Instead, a credible mechanism is needed for reaching decisions between the 28 demoi of the EU. One important such mechanism is the cooperation between Member States' national parliaments, which in the Lisbon Treaty acquired the negative power to trigger a policy review if at least a third of them so demand it. These interactions need to be communicated more widely and used as a means whereby EU policies can be kept under the control of the constitutive European peoples.

To do so, European policies will need to be a part of national democratic politics. It is the perceived absence of connections between national and European policy-making that has promoted Euroscepticism across the EU. And it can only be addressed if voters regard their national governments as representing them in EU level negotiations - authorised by and accountable to them for their decisions. To achieve that, EU politics has to become an explicit part of the domestic political agenda of the national parties. At present, these seek the opposite: to keep EU politics as discreet from national politics as possible. Either EU policies are presented as required for functional reasons over which there can be no debate. This makes the EU the sphere of putatively 'responsible' rather than 'responsive' politics. Or governments disclaim responsibility for unpopular EU decisions, portraying them as imposed by one or more of the 27 others. This makes the EU the sphere of 'irresponsible' politics - bad decisions that are the responsibility of others. To avoid either, national parties need to present EU policy agendas as an integral part of domestic agendas to the electorate. In sum, EU decisions must come to be regarded as the decisions of Europe's peoples.  Only by making them so will the simultaneous dancing continue in times when only cake crumbs and the dregs are on offer.

• Prof Richard Bellamy, Professor of Political Science, UCL School of Public Policy

Acknowledgement

This is a short version of an article due to appear in Italian in the journal Il Mulino 2014 n. 2 March-April.