The Democratic Disconnect

Professor Albert Weale

To understand the ‘economic constitution’ of the eurozone, we need to see it as a political contract among member states. The rules of the constitution are defined by the Maastricht treaty, the stability and growth pact, the fiscal compact and so on. The underlying logic of this contract is to avoid a situation in which national political parties enjoy the benefits of unconstrained spending and loose money, while the costs are displaced onto other countries in the form of higher inflation.

The two-level contract 

But we miss a central element this economic constitution, if we just think about it purely as a contract among member states. In terms of its political legitimacy, it is actually a contract among member states as representatives of their peoples. The key element of this role is that democratic governments make commitments to other democratic governments on behalf of their own peoples. In this sense it is a two-level contract: member states make promises to one another, but under the constraint of being democratically accountable to their peoples.

This logic has underpinned the jurisprudence of the German constitutional court from Brunner up to its recent judgements on the European Central Bank’s open monetary transactions and the European stability mechanism. The court has increasingly required democratic accountability in the exercise of delegated authority at the European level.

When we see the ‘economic constitution’ of the eurozone as resting on a two-level contract, issues of credibility become more complicated than they otherwise would be. Each state that is a party to the contract must take each other state as being a credible partner.  But a state’s commitment can only be credible provided that it can secure on-going democratic consent from those whom it represents, and this is intrinsically difficult.  

A good example of this complex logic is provided by the troika, the entity consisting of the European commission, the ECB and the International Monetary Fund, working hard in 2011 to ensure that Antonis Samaras, the Greek prime minister, was signed up to the austerity package before the elections the following year,  because if he was elected they wanted him to stick by the deal. Nevertheless, they did not predict the rise of Syriza. Similarly, France’s resistance to a strict interpretation of the excessive deficit procedure’s requirements illustrates the same tension between an inter-governmental contract and domestic obligations of accountability and responsiveness.

Fiscal credibility in the long run
So far, you might say, so much in line with anti-austerity thinking. Democratic legitimacy cannot tolerate too much fiscal orthodoxy. However, the logic of fiscal credibility is also built into the continuing viability of the European social model. Pensions, health care and education represent above all a transfer across generations and across the life-cycle. Unless, for example, a state’s fiscal stance is sound, then its promises on pensions to working-age citizens are not credible. A failure to balance budgets over a reasonable period of time will damage the viability of the European social model.

The challenge, then, for the eurozone is how to combine democratic legitimacy with economic viability, in a situation in which monetary policy is an EU matter and fiscal policy is a national matter. 

Some political challenges
In trying to answer this question, I have come to the conclusion that it is more important to talk about the ‘democratic disconnect’ than the ‘democratic deficit’.  In a regime in which fiscal responsibility still resides primarily in the member states, there is no alternative.

Already the German constitutional court has taken this line with respect to the participation of the German government in bail-outs, and there was a Bundestag vote on the Cyprus bail-out. Of course, there is a difference in the political dynamic of the relations between the EU and national parliament of  creditor countries and debtor countries, or countries in the excessive deficits procedure. As the European commission’s vice-president, Maroš Šefčovič, said to the House of Lords European Union committee, these discussions are “politically very sensitive and difficult topics” when talking to the latter group.

In terms of the current debate on how to secure genuine two-level accountability to overcome the democratic disconnect, the current suggestions canvassed in evidence to the House of Lords included: 

1. Greater scrutiny of the commission through appearances at national parliaments. This is already happening, and one might expect it to grow.
2. Greater scrutiny by parliaments of governments’ negotiating positions in the council of ministers.
3. Greater involvement of national parliaments in the European semester process. How exactly this is to take place is unclear.
4. An intensification and institutionalisation of inter-parliamentary scrutiny of economic and financial governance. Some favour a full second European parliamentary chamber, made up of representatives from the national parliaments. However, it would not be necessary to go that far. Building on the new Inter-Parliamentary Conference on Economic and Financial Governance, the inter-parliamentary group could be a relatively small body focused exclusively on economic and financial matters. The hope would be that it would establish divisions on the grounds of political affiliation rather than national interest.

To date, the expectation that the euro could be a pure unit of account in a decentralised system has been shown to be false. If there is to be legitimate governance, for the two-level political contract of economic and monetary union, the issue of the democratic disconnect needs resolution.

• This commentary was originally published as an article by Policy Network 
• Albert Weale is Professor of Political Theory and Public Policy at UCL's School of Public Policy.