Defining a new political contract for the EU

The EU is faced with the challenges of fashioning practices and institutions that reconcile the conflicting demands on political representatives from their international partners and their domestic constituents. This has been particularly manifest in the eurozone recently, but it reflects a deeper challenge which also concerns non euro-area members such as the UK.

Prof Albert Weale 

In his play Back to Methuselah George Bernard Shaw has one of the characters say: “You see things; and you say ‘Why?’ But I dream things that never were; and I say ‘Why not?’” Many people take this attitude to political legitimacy in the EU. They imagine a future constitution in which the ever-closer union of European peoples has been accomplished. If we dare to dream the impossible, so this point of view suggests, then the goal of an ever-closer union of the peoples of Europe will be realised. However, before seeking to live the dream, we should remember that it was The Serpent whom Shaw made utter these words so tempting Eve. The great temptation in thinking about future constitutional change in the EU is to ignore where we are now and only imagine where we might be in the future.  Some imagine that the EU can become a full-blown federation or indeed already is one. Others assert that the EU can acquire a fiscal capacity equivalent to its monetary responsibilities, holding that European monetary policy can only be made to work, when fiscal capacity augments monetary responsibility, without thinking about how this is to be achieved. But if we only dream the dream, then we shall be tempted to ignore the tasks of responsible political construction. Improvement has to start from where we are, not where we should like to be. There is no one bound by which Europe can be free.

Solidarity, accountability and obligation

Discussion of the crisis of political legitimacy in the EU inevitably focuses on the single currency.  With the move towards economic and monetary union in the Maastricht Treaty, political authority was transferred to the European level in policy areas that have high salience in national processes of elections and party competition. As is well known, the premise of European economic and monetary union was that it should be built as much as possible on depoliticised arrangements (James, 2012).  However, the depoliticisation of money requires a rearrangement of other political responsibilities, particularly the fiscal responsibilities of national governments, which enter into commitments with other governments about their levels of national debt and budgetary deficit (Weale, 2015). If there is to be cross-national solidarity, it needs to be built on credible commitment.

If the crisis of the eurozone has shown us anything, it is that economic solidarity has strict limits in times of austerity. The painful saga of the Greek debt reminds us that although solidarity exists, it is the solidarity of debt loans not the solidarity of debt forgiveness. There are cross-border transfers, of course, through the structural, cohesion and other funds. However, some of these funds, the Common Agricultural Policy in particular, are hard to justify in terms of economic solidarity. Yet, however the funds are justified, they are not devices of fiscal and economic equalisation as we find in some federations. In any case, the scale of those equalisations varies considerably from federation to federation, from high levels in Australia and Canada to low levels in Switzerland (McKay, 2001: 138).

It is easy to criticise this lack of solidarity as a fault. However, in a situation in which it is member states that have the primary responsibility for matters of taxation and revenue, domestic leaders are rightly accountable to their populations. When Robert Fico, the prime minister of Slovakia, says that it would be impossible to explain to the public why ‘poor’ Slovakia should compensate Greece, he is reflecting the fact of domestic political accountability.  Accountability requires explanation and justification, and democratic governments need to respect the demands that domestic accountability imposes. Democratic politics also requires leadership, of course, including leadership on matters that are not popular like cross-border solidarity. However, leadership become quixotic when it assumes that domestic constituents will willingly countenance unconditional transfers of resources without being part of some wider settlement.

This is not simply a matter of political feasibility. It is also integral to the norms of democracy within the member states of the EU. Democratic accountability is not just a feature of democracy but an obligation of actors within a democracy. The most elaborate justification of this position has been developed by the German constitutional court. Thus, in its 2014 sceptical majority judgement on the constitutional legitimacy of the European Central Bank’s policy of “outright monetary transactions”, the kernel of the court’s judgement turned on its understanding of Article 38.1 of the German constitution, which was interpreted as requiring that state authority not be transferred to the extent to which it makes democratic control nugatory. This is the continuation of a jurisprudence goes back to Brunner, the case that first authorised the German government to enter into the obligations of monetary union (Federal Constitutional Court, 1993). According to the court’s reasoning, the German state needs to be able to enter into long-term international commitments in order to be able to secure benefits that are only available through coordinated action among state. At the same time, however, the court held that any international commitment needed to be consistent with those principles of the Basic Law that binds the German state in perpetuity to the principle of democratic authority stemming from the people.

There was, however, a further significant aspect of the Brunner judgement that bears on the question of democratic legitimacy, namely the extent to which the court was willing to articulate a number of important principles concerning the relationship in which democratic governments should stand to one another. In particular, the court asserted that an international order cannot produce democratic legitimation in the same way as in a national order, but that in an international order all member states must recognise obligations and their mutuality, with a readiness to accept obligations being characteristic of a democratic state. From this point of view, the emerging international order of the EU requires for its legitimacy a political contract among the member states as representatives of their peoples, a contract in which there is credible commitment by those states to one another and continuing political accountability of state governments to their domestic constituents (Bellamy and Weale, 2015; Weale, 2014).

These principles define the constraints that any attempt to reform the institutional arrangements of the EU should respect. The dilemma of political and institutional reform in the EU can then be stated as follows. Starting with where we now are, is it possible to construct a political order that guarantees the substance of continuing democratic accountability within the member states, whilst simultaneously reinforcing adherence to the political obligations that those same member states have taken on? Is it possible to write a constitutional contract for the EU that both respects domestic principles and supports the obligations to which states must adhere if that constitutional contract is to be stable?

European rules, national obligations

The experience to date of writing European rules to which national member states reliably adhere is not encouraging.  The original terms of the Maastricht Treaty were thought to be insufficiently strict, and so the rules of the stability and growth pact were devised, by which the 60 per cent government debt limit and the three per cent budget deficit limit were defined. Yet, almost as soon as these rules were written, they were breached by Germany over several years, with Germany also preventing the commission from issuing the warning that it had recommended in January 2002. In November 2003, finance ministers yielded to French and German requests to have the commission’s procedure halted and Italy and then Greece followed in breach (Issing, 2008: 195-200). As a result of the financial crises since 2010, the obligations have been strengthened by the fiscal compact contained in the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, by which member states have pledged to one another, as Article 3.2 states, to ensure that national budgets are in surplus “through provisions of binding force”. That the rules have had to be progressively strengthened in this way reflects the extent to which the original agreements failed to create the political and institutional conditions under which the mutual commitments of the parties provided rational grounds for compliance.

More importantly, however, if we conceive of the problem of writing a constitutional contract that simultaneously defines obligations among member states and respects the democratic accountability of those member states, the response to the failures of compliance has controverted the assumptions upon which monetary union was based. Jens Weidmann has interestingly argued that the original logic of European monetary union was to regard the member states as being in the same position relative to one another as commercial enterprises are in a market economy. The denationalisation of money did not of itself imply that budgetary responsibility was to be taken from member states. Instead, the arrangement implies that member states must accept responsibility for their own actions. When the exercise of this responsibility fails, those failures of compliance have strengthened the monitoring and control of budgetary matters under the European semester, the fiscal compact and associated measures. In place of a regime in which national governments make their own budgetary choices in a way that is accountable to their populations, taking the value of the euro as given, the commission under the excessive deficits procedure is put in the position of conducting negotiations over national budgetary details without a satisfactory system of parliamentary political accountability (Weale, 2015).

It might be argued that intrusive monitoring was simply a consequence of any enforcement regime. It is part of the logic of contractual association that those in breach or in danger of being in breach of common rules will need to have their behaviour closely monitored. However, within the context of the EU, it is important, in order to maintain domestic democratic accountability, to preserve the decentralisation of political authority as much as is possible, consistent with maintaining compliance with the rules. If the German finance ministry official is correctly quoted as saying that if there is more debate on the Greek debt discount “there will be no more reforms in Europe. There will be joyful celebrations in the Elysée and probably in Rome too” then the boundaries of political accountable authority have been crossed. Whatever the objective merits of structural reform in any economy within Europe, it is not the function of eurozone agreements to create a situation in which one country can use its financial advantage to press for domestic reforms in other countries. Economic inter-relationship has become ideological spillover, and a spillover, moreover, that is freed from the obligations of political accountability. What we are seeing in such a development is serious mission creep. The route to compliance needs to be consistent with respect for domestic political accountability. But is this feasible?

Domestic political accountability

Since 2010 the EU and its member states have been forced to improvise policies and processes to deal with the euro crisis, including measures like the European semester, the European financial stability facility, the European Stability Mechanism and a whole panoply of other measures. And, of course, for the bail-out countries there have been the measures imposed by the troika of the EU, European Central Bank and IMF, as well as the installation of technocratic governments as happened in Greece and Italy in 2012.

Against this background, it is easy to think that domestic parliaments are part of the problem and not part of the solution. When commission vice-president Maroš Šefčovič, testifying before the House of Lords European Union Committee, said that exchanges between the commission and member states parliaments on such matters as unemployment or pensions reform are “quite difficult discussions”, he must have been uttering one of the understatements of the year (House of Lords, 2014: 336). More generally, the excessive deficits procedure, as well as the emergency bailout measures, seem to curtail the ability of national parliaments to scrutinise what is happening. Yet, taking one’s political cue for the construction of a viable political contract from what are the inevitable exigencies of short-term measures is a bad idea. What is needed is a recognition that, as policy integration deepens, in a context in which there is going to be a long-term sharing of responsibility between the EU and national governments, no shared understanding of the obligations that the peoples of Europe owe to one another is possible unless it involves political representatives participating in and helping to define that understanding.

The role of the national parliaments in European legislation and policy is now being widely discussed.  When the UK House of Lords looked at these questions, it highlighted a number of possibilities although its recommendations on the role of national parliaments in the European Union was weakest on issues of economic and financial governance – as distinct say from issues of subsidiarity in legislative matters. However, it is possible to see lines of development, including:

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, though exactly how this is to take place is unclear and will need to be developed.

4. Some 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, but it would not have to go that far. It could, for example, 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.

However, there is a larger set of questions behind these possible institutional developments, and that is the need to develop a shared understanding among those political representatives who are committed to the European social model that the model is only sustainable in the long term if it is built on a sound fiscal basis (Weale, 2014). Excessive government debt, while it has to be tolerated in the short term to avoid deflation, is not a basis upon which the long-term commitments implied by social security can be built.

And for those outside the eurozone?

Does the above analysis have any implications for countries, like the UK, that are outside the eurozone? Is the freedom to set their own monetary policy a sign that their democratic autonomy can remain more intact across a range of policy measures? Do different principles apply inside and outside the eurozone?

To answer these questions, we once again we need to go back to the principles of the German constitutional court, where the dilemma of international cooperation and democratic accountability was clearly articulated. The advantages to be gained from international cooperation do not warrant the abandonment of the values of domestic democracy. The task is to find a way of reconciling the two sets of conflicting claims.
If the above analysis is correct, then simply drawing an analogy between democracy in member states and decision-making at the European level is misleading. Within member states, sharing the European parliamentary tradition, there are powerful arguments for broadly majoritarian principles of democracy, in which governments that enjoy majority support for their measures or programmes in parliament can secure their desired policies and legislation within the bounds of agreed constitutional norms. For a complex polity like that of the EU, this idea of democracy is not applicable. Policy needs to emerge not simply from the aggregation of the preferences of citizens but also from the collective commitments of member states. To believe that European public choice can emerge from the aggregation of the preferences is citizens without modification by the negotiation processes of member states is to forget that democracy is not simply a formal set of institutions, but a body of practices and understandings that link political actors and their constituents.

Herein lies the error of the Spitzenkandidaten process. To suppose that the candidates preferred by one of the two major blocs in the European parliament somehow embody the general will of a diverse set of European electors is to ignore the social and cultural connections that make political representation meaningful. To the average elector, the emergence of a commission president through such a process does not look like a giant advance for democratic accountability, but yet another way in which a remote political elite conducts its business in remote places.

Conclusion

Ultimately, the crisis of political legitimacy in the European Union stems from the dilemmas inherent in political representation where lines of authority are significant at both the national and the international level. Just as nascent democracies at the beginning of the 20th century needed to devise ways of coping with the rise of democracy in the form of the competitive party system – a form of politics much feared by contemporary liberals, sometimes with foundation – so in the 21st century the EU is faced with the challenges of fashioning practices and institutions that reconcile the conflicting demands on political representatives from their international partners and their domestic constituents.

• Albert Weale is professor of political theory and public policy in the School of Public Policy, University College London. He is the author of a number of papers on political legitimacy and the EU.
• This piece was first published by Policy Network as part of its work on the Future of the EU.

References

• Bellamy, Richard and Weale, Albert (2015) ‘Political Legitimacy and European Monetary Union: Contracts, Constitutionalism and the Normative Logic of Two-Level Games’, Journal of European Public Policy, 22: 3.
• Federal Constitutional Court (1993) Brunner, available as BVerfG (1994) C.M.L.R. 57.
• House of Lords (2014) European Union Committee, The Role of National Parliaments in the European Union, Oral and Written Evidence.
• Issing, Otmar (2008) The Birth of the Euro (Cambridge: Cambridge University Press).
• James, Harold (2012) Making the European Monetary Union: The Role of the Committee of Central Bank Governors and the Origins of the European Central Bank(Cambridge, Mass.: The Belknap Press).
• McKay, David (2001) Designing Europe: Comparative Lessons from the Federal Experience (Oxford: Oxford University Press).
• Weale, Albert (2014) ‘Citizenship in Europe and the Logic of Two-Level Political Games’, German Law Journal, 15:5, pp. 867-81.
• Weale, Albert (2015) ‘Political Legitimacy, Credible Commitment and Euro Governance’, Hertie School of Governance, The Governance Report 2015, forthcoming.