European Affairs

Letter from Europe: On Eve of Elections, Calls for Further EU Institutional Reforms Continue     Print
By Jacqueline Grapin, Founder and Co-Chairman of The European Institute

jacquelinegrapin2013.smCitizens of the 28 countries members of the European Union are getting ready to elect representatives to the European Parliament-- at the end of May 2014. For the first time since European parliamentary elections began in 1979, the results will have a direct influence on the choice of the president of the European Commission as he will be “elected” by the new parliament following nomination by the European Council which, in turn, is supposed to reflect the result of the election. Each of the two main political parties have designated their candidates: former Prime Minister of Luxembourg and President of the Eurogroup Jean Claude Juncker for the European Peoples’ Party, and current President of the European Parliament Martin Schulz for the Party of European Socialists.

 

This somewhat innovative procedure does not hide, however, the stark contrast between the lack of dynamism in the programs presented by the main political parties on one hand and on the other hand the proliferation of proposals for additional institutional reforms produced by a variety of non-party organizations in leading European places.  

One of the most daring suggestions was articulated recently in Berlin by Nicolas Sarkozy, former president of France, in a meeting of the Adenauer Foundation. Insisting on the necessity of a close Franco-German relationship, he called for “a more economic integration in the euro zone,” while putting less emphasis on full EU integration.  Sarkozy said he expected that the European Union “may soon encompass 35 States” and must “abandon whole parts of its [current] activity” to concentrate on a “large market, legal and efficient” and to focus on “industry research, energy, agriculture, and competition” (foreign policy not being mentioned). To summarize, his recommendation is: “More integration for the euro zone, less integration for the European Union.”  

Groups advocating closer integration of the single currency area are proliferating and gaining influence. Many political leaders, realizing that the euro crisis is not over, are in search of improvements to bring more cohesion in the system. French President François Hollande has expressed recently his wish to revive the Franco-German leadership in the euro-area; and the president of the Federal Republic of Germany, Joachim Gauck, has invited the members of the influential Glienicker Group to meet him to discuss a more active German leadership posture.  

While an informal consensus seems to have emerged on the need for a better integrated euro-zone, the detailed recipe is far from agreed.  

The Glienicker Group was formed by eleven economists, constitutional lawyers and political scientists to explore ways of building a stronger political and economic Europe compatible with the German insistence that states remain liable for their own debts.  It envisages a separate treaty that would establish a “Euro Union” with an economic governing structure, elected and overseen by a Euro-parliament which would have the power to override the budgets from member states who breach agreed-upon fiscal rules. The Glienicker group also suggests the creation in the euro zone of a central fund providing euro-zone wide unemployment benefits to act as an economic stabilizer in downturns and to complement national insurance systems in states which have reformed their labor markets. The fund would be financed by a fee of about 0.5 % of the national output of participating member states.  

In France, the Eiffel Group, which connects and communicates with the Glienicker Group, was convened by Sylvie Goulard, socialist member of the European Parliament. It proposes an EU- wide democratically elected Parliament with the power to raise EU Community revenue independent of national budgets, and to put an end to the squabbles over whether member states get a “fair return.”   This revenue would finance major transport, energy and digital infrastructure projects as well as unemployment insurance.  

One important difficulty, among many, posed by these ideas is that the German Constitution would have to be amended in order to allow a European authority to override a budget along the lines proposed by the Glienicker Group.  Either the Glienicker or Eiffel Group plan would require negotiation and adoption of new EU treaties.  

In today’s atmosphere, negotiating a new European treaty and/or reforming the German constitution may seem like an impossible dream.  However, the very fact of these new proposals, and a number of others emerging in Brussels, serve to generate forward thinking on how to improve a system, which almost everyone recognizes as not fully mature or functional in spite of the many improvements that have been adopted and implemented during the euro-crisis.

While it may be necessary to ask for more in order to get less, it is worth looking back to the proposals made by Jean-Claude Trichet when he retired from the presidency of the European Central Bank in November 2011. He contended that improving the governance in the Euro area was less a matter of institutions and more a question of political will and that major changes could occur within the context of existing institutions.  

Trichet suggested the appointment of a minister of finance for the Euro zone, who would be a member of the EU’s executive branch, together with the other ministers responsible for other federal departments. From his perspective, the current Commission presages a future European democratic government, consistent with German Finance Minister Wolfgang Schäuble’s proposal for a directly elected president.  

In addition, he proposed what he called “federalism of exception.” Instead of imposing fines on countries that break rules and ignore recommendations, the European Commission, the European Council, and the European Parliament should decide directly on measures to be immediately implemented in the country concerned. Under this plan, fiscal and other economic policies would be subject to activation of a eurozone “federation by exception.”  

This would include the possibility of imposing (under the control of the members of the European parliament from the Euro-area) a “government of economic exception” upon the states which failed to implement the agreed upon budgetary measures. The decision would need to be approved by the European Council and the European parliament. The most important element of this system would be a strong democratic anchor and its activation would be subject to a fully democratic decision-making process, with clear political accountability. Decisions to implement measures proposed by the Commission and already approved by the Council would require a majority vote by the European Parliament – that is, those representatives elected from the EU’s eurozone members. “In such exceptional circumstances, the parliament of the country concerned should have the opportunity to explain to the European Parliament why it could not implement the recommendations proposed, while the European Parliament could explain why the eurozone’s stability and prosperity are at stake. But the final word would belong to the European Parliament,” Trichet said.  

The Euro-finance ministry would be responsible for implementing new crisis-management tools like the European Stability Mechanism, overseeing the banking union which would help to separate the commercial banks’ creditworthiness from that of their government. The ultimate stage of this evolving integration would be when the “federation by exception” would cease to be an exception.  

For the moment, the ministers of finance of the euro-zone are struggling to finalize the details of the Banking Union. And it is worth remembering that since 1987, Jacques Delors, who initiated the process toward a single currency, keeps insisting that an effective coordination of economic and budgetary policies will be necessary. His recommendation has repeatedly fallen in deaf ears, but the Euro-zone is muddling along toward that goal. The reason is simple: while national political systems are fighting a rearguard battle for their independence and the euro emerges as the most powerful integration factor in Europe, it is becoming clear that whatever the mechanisms proposed, its governance will remain difficult as long as economic and budgetary coordination remains too loose.