A New Parliament for the Eurozone?

5 avril 2019

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The 2008 crisis and its aftermath have been a potent catalyst for European integration. As the prospect of financial contagion loomed large over the Eurozone, governments pooled much of their sovereignty into economic policy. But this centralization of powers has not been accompanied by a complementary democratization process. Decisions taken in Brussels or Frankfurt receive little public scrutiny from national publics and parliaments, leading to low levels of perceived legitimacy.  Establishing a separate Eurozone assembly and improving the institutional architecture that emerged from the crisis could fix this democratic deficit.

The institutional mandate of the European Parliament has been gradually broadened from a consultative role to include budgetary and legislative powers. This process of empowerment culminated in the Lisbon Treaty, which extended the co-decision procedure to almost all policy areas, putting the Parliament on equal footing with the European Council. Considering that the European Parliament is the only EU institution directly elected by citizens, its progressive strengthening was welcomed as the solution par excellenceto the EU’s widely criticized democratic deficit.[1]

Today, this process has stalled and – to an extent – has been rolled back. With the notable exception of the Spitzenkandidaten[i] (transnationallead candidate) process[2], the European Parliament appears less relevant in EU politics than it was a decade ago.

This reversal is partly due to the way the 2008 crisis altered the institutional architecture of the EU: Tilting the balance of power in favor of the Council and the Eurogroup[ii] and away from supranational institutions.[3] Under the pressure of events, Eurozone states signed intergovernmental treatieswhich are not subject to co-decision procedures, and, by consequence, also not to parliamentary scrutiny.The most notably of these intergovernmental treaties is the European Stability Mechanism and Fiscal Compact.From 2010 onwards, the Council has emerged as the main decision-maker at the expense of the European Parliament, which has been sidelined in important decisions regarding fiscal coordination and sovereign debt treatment.[4] 

Even today, economic and budgetary coordination is being decided in closed-room meetings with heads of states and economic affairs ministers. The dominance of the executive branch prevents contestation and public scrutiny, fueling the perception of EU politics as out-of-touch and profoundly undemocratic.[5] 

Counteracting the democratic deficit by improving institutional architecture

The idea of a separate assembly for matters of economic governance has begun to garner support in political and academic circles.[6] Some leading politicians have indicated support for it, most notably French President Emmanuel Macron and former German Finance Minister Wolfgang Schäuble. But what would such a separate parliamentary chamber look like and what kind of powers would it have? 

When considering the first part of the question, two possibilities exist. The first and less invasive one would be to carve out a new chamber from the existing Parliament, creating a sub-committee dedicated to Eurozone matters. But this solution raises a thorny issue: should MEPs from non-Eurozone countries be included? Denying them this right would compromise the idea of the European Parliament as an institution where all EU citizens are represented equally. Including non-Eurozone members, on the other hand, would allow them to influence decisions that do not directly affect their constituencies.

Such issues could be avoided by creating a new chamber separate from the European Parliament. This distinct body would host representatives of Eurozone countries that intend to establish a closer budgetary, fiscal and political union. Its members could be elected directly by citizens or nominated by national parliaments.[7],[8]

Putting a new Eurozone parliamentary assembly into effect

What kinds of powers would such a new assembly have? Under a conservative scenario, its function would be merely advisory and consist of discussing, overseeing, and opening the implementation of the Eurozone governance regime to the public.[9] More ambitious proposals envisage outright legislative and fiscal powers. The assembly would join the Council in elaborating and revising the economic governance of the Eurozone. It could also legislate matters of fiscal policy and harmonize the various tax regimes in Europe – something that has been impossible so far due to the requirement of unanimity of the Council.[10]

The establishment of a separate Eurozone assembly would most likely require a treaty change to be ratified by each member state. Eurozone countries could avoid this by means of an intergovernmental treaty akin to those approved in the aftermath of the financial crisis to create, among other things, the European Stability Mechanism. 

Both scenarios are admittedly unlikely considering the inflamed climate of EU politics today. Yet proposals of this kind must be addressed. The creation of an assembly for the Eurozone would foster transparency and accountability in economic governance, which has become the most controversial and divisive policy area in recent years. It is also the policy area that has contributed the most to the cleavage between the EU and its citizens.

Besides democratic legitimacy, the survival of the Euro itself is at stake. European countries have pooled their monetary sovereignty but have failed to develop common fiscal and budgetary instruments. This institutional limbo benefits no one and is structurally unfit to face macroeconomic shocks.
Recently, there has been some progress: In December, Eurozone states agreed to the French proposal for a Euro-area budget. Even if it turns out to be smaller in size and less ambitious in scope than originally envisaged,[11] it is a step in the right direction. If Eurozone states want to move towards closer fiscal and budgetary integration, a new sovereign assembly is a top priority.

This article was submitted as part of our call for papers “Equipping the EU for the future”. Keep up with our work and future calls for papers via Twitter or Facebook!

References

[i] MEPs publicly choose candidates for the presidency of the Commission during the Spitzenkandidaten process.

[ii] The Eurogroup is the term used to describe the informal meetings of the finance ministers of the eurozone member states of the European Union.

[1] Diane Fromage and Ton van den Brink, “Democratic legitimation of EU economic governance: challenges and opportunities for European Legislatures,” Journal of European Integration40, no. 3 (2018): 235-248.

[2] “2019 Spitzenkandidaten.” Europe Elects. February 13, 2019. Accessed March 18, 2019. https://europeelects.eu/2019spitzenkandidaten/.

[3] Stefano Fabbrini, “After the Euro Crisis: A New Paradigm on the Integration of Europe”, ARENA Working Paper 5 (2014).

[4] Stefano Micossi, “How the EZ crisis is permanently changing EU institutions”, CEPR Policy Insight, no. 65 (2013).

[5] Ian Cooper, “A Separate Parliament for the Eurozone? Differentiated Representation, Brexit, and the Quandary of Exclusion”.Parliamentary Affairs, Vo.70, Is.4 (2017):  655–672.

[6] ValentinKreilinger and Morgan Larhant, “Does the Eurozone need a Parliament?”, Policy Paper, No. 176, Jacques Delors Institut, (2016).

[7] Christian Calliess, “The Governance Framework of the Eurozone and the Need for a Treaty Reform”, in What Form of Government for the European Union and the Eurozone?, Oxford, Hart Publishing (2016): 37–56.

[8] ThomasPiketty, “Our Manifesto for Europe ” The Guardian.May 02, 2014. Accessed March 18, 2019. https://www.theguardian.com/commentisfree/2014/may/02/manifesto-europe-radical-financial-democratic

[9] Jean Pisani-Ferry, The Euro Crisis and its Aftermath, Oxford University Press (2014).

[10] Thomas Piketty, “Our Manifesto to save Europe from Itself”, The Guardian. December 09, 2018. Accessed March 18, 2019. https://www.theguardian.com/commentisfree/2018/dec/09/manifesto-divided-europe-inequality-europeans.

[11] Sebastin Płóciennik, “Budget for the Eurozone: Germany’s Approach Gains the Upper Hand”,The Polish Institute for International Affairs, Bulletin No. 7:1253  (2019).

 

 

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Gabriele Furia is a master student at Sciencespo School of Public Affairs, where he focuses, among other things, on the economic dimensions of European Integration. He holds a Bachelor degree in Philosophy, Politics and Economics from Durham.