Manipulating Europe’s DNA

The recent EU summit came out as a heated dispute about who should take responsibility for saving the common currency, and on what terms. This responsibility is measured today in billions of euros, which is why the discussion about a growth package, support for banks and a loosening of austerity measures was in fact a dispute about how deeply the wealthy Germans should reach into their pockets.

But the whole thing is not just about money. The stakes are higher and concern the European DNA: how to save the EU from economic depression and political disintegration without undermining the foundations of democracy? Two years after the crisis began, it has become clear that it is not just the lambasted Greeks or Spaniards who are responsible for the malaise but, above all, the economic and monetary union’s faulty construction.

First of all, the EU has a common currency but no common financial policy. Member states decide themselves about their budgets, taxes and borrowing. Neither the coordination-enhancing reforms (such as the Sixpack or the fiscal compact) nor the decisions made during the Brussels summit solve this problem. Secondly, there is a deficit of European political space. Important decisions are taken on the EU level, but actual policies are hammered out between the political parties, voters and media of the individual member states.

It has dawned gradually on policymakers that the existing integration model has worn out. The policy of small steps, such as the removal of customs barriers, integration of markets, introduction of common regulations, and coordination of policies towards an “ever closer union”, has been unable to plaster over the cracks that have appeared on the foundations of common Europe.

Technocratic federalism

“More Europe”, politicians are saying. But when some mean by this more German money for saving troubled Spanish banks or the shaky public finances of countries like Italy or Greece, others see this as a call for transferring member states’ sovereignty to the EU level. The paradox of today’s situation is that although both demands are generally justified, they can hardly be reconciled with the principles of democracy. During the crisis, the nature of the EU’s political system has changed imperceptibly but fundamentally as besides the traditional sovereign – the individual member states – there has emerged another one, and a very powerful one at that – the so called markets.

Conflicts between the two have usually been settled to the latter’s advantage. In the past, politicians would offer pork barrels. Today, it is the “market expectations” that have become the determinant and weaker countries such as Greece or Italy have had to accept reform packages agreed upon in Brussels as the price for financial support, while the wealthier member states, e.g. Germany, offered that support without paying heed to parliamentary procedures or public opinion. Jürgen Habermas has referred to this surrender of prerogatives by parliaments to intergovernmental arrangements as “technocratic federalism”.

During the recent summit, the EU leaders agreed to make further steps towards a fiscal and political union. Unfortunately, an important speech by the President of the European Parliament, Martin Schulz, who stressed that no goals could be more important than democracy, went largely unnoticed.

This was a mistake: the dilemma of how to save the EU without sacrificing democracy is very real. The propositions of measures towards a “genuine economic and monetary union” contained in the Van Rompuy report entail a significant transfer of nation states’ prerogatives to the EU level. A banking union, which is the talk of the day these days, is only seemingly just a technical solution.

European banking supervision or common deposit guarantees would mean greater EU interference with member states’ budget policies (fiscal union) and common responsibility for member states’ debts (”eurobonds”).

Even in Germany, which has firmly opposed the idea of a transfer union (that is, of subsidising the weaker economies), there has been a growing sense that only such radical steps can restore the markets’ confidence that the eurozone will eventually recover.

But the Van Rompuy report says nothing about how to satisfy the original sovereign – the European demos. The question of how to solve the EU’s democratic dilemma in the long term remains as tough as squaring the circle.

Conflict of sovereigns

On the one hand, there is the vision of a political union unfolded by Wolfgang Schäuble. ”If important prerogatives reserved until now for sovereign states are to be transferred to Brussels, parliamentary structures on this level should be strengthened too”. Mr Schäuble is in favour of creating a second chamber of the European Parliament that would consist of representatives of national parliaments, and of electing the President of the European Council by direct universal suffrage.

Germany would agree to bear greater financial responsibility (e.g. in the shape of eurobonds) only in such a union that would have the mechanisms of intervening deeply in member states’ policies and of legitimising such interventions. But France and many other countries are not prepared to accept such a far-ranging relinquishment of their national sovereignty. Nor are Europeans themselves ready for it.

The gap between what the EU needs and what European societies are ready to accept has never been greater. The EU’s deficit of democracy is not a new phenomenon. But today it has become a burning issue. There are no recipes today for escaping the trap of technocratism that is pushing forward in the name of higher necessity. But perhaps the greatest mistake would be to deny the fact that a conflict between the two sovereign of European policy – the markets and the people – exists, and to pretend that ”more Europe” is a remedy without its side effects. Today, speaking of a European federation without raising the question of the future of democracy is a token not of euro-optimism but of euro-naivety.

There is no doubt that the period of gradual changes in the European construction, silently accepted by the citizens, has ended. The EU needs a large step forward that will have to mean a redefinition of national sovereignty and of the model of democracy as we know it.

Time has come for the European elites to start treating their original sovereign more seriously as otherwise the mounting of resistance against the technocratic dictate will be just a matter of time. In the longer term, the European project will not be able to address this.