European governance, sovereignty and democratic bankruptcy

Vers une gouvernance économique renforcéeSince a little over three years, there have been major changes in what is typically called « European economic governance »; a term which tends to downplay the actors at work in this governance and which recognises that budgetary discipline is above all oriented around economic considerations. Set by the Maastricht criteria, European economic governance targets the control instruments of economic policies (notably fiscal) of the States and their European coordination.

Yet it raises serious democratic and legal questions (and reservations). Reservations that must compel us to ask questions not only on the economic opportuneness of the maintenance of the single currency, but equally, in my opinion, of its legal and institutional opportuneness.
The currency is only a tool. It must serve the common good and democracy.

Major changes in the economic governance of the euro area

a) Reinforcements of fiscal discipline
– December 2011, the Six-Pack: A set of 5 regulations and a directive aimed at reinforcing the Stability Pact (1997). Sanctions against States that do not respect the stability criteria have been reinforced, as has the preventive arm of the Pact.
– 2012, the TSCG (Treaty on Stability, Coordination and Governance of the Economic and Monetary Union), the so-called « Fiscal Compact »: It inserts the principles of fiscal discipline into the national law of the signatory States.
– May 2013, the Two-Pack: Two regulations aiming, on the one hand, to establish a monitoring framework for States with or wishing to obtain financial assistance and, secondly , to enable the supervision of draft budgets by the Commission every autumn.
– Two new proposals for reinforcement are currently being studied: firstly, the ex-ante coordination which aims to coordinate at European level all the major reforms (notably pensions), and secondly, reform contracts which would offer States aide in exchange for structural reforms.

b) Financial support instruments: the European Financial Stabilisation Mechanism, the European Financial Stability Facility, the European Stability Mechanism and the European Central Bank’s OMT programme.

c) Banking supervision (the so-called « Banking Union ») with the establishment of a Single Supervisory Mechanism and a Single Resolution Mechanism

We can draw several conclusions from these recent changes:
The need to put the national parliaments in the loop , even fictitiously . Indeed, the Fiscal Compact did not reinforce EU law in terms of budgetary surveillance.
Multi-speed Europe: The Fiscal Compact has also highlighted the fact that Europe could not be built with all 27 members of the Union. The Treaty was signed by only 25 States.
The European Treaties are inadequate: The need to go through a parallel track, including intergovernmental agreements (Fiscal Compact , European Stability Mechanism ) or by the independent action of the ECB ( OMT programme).
– The recognition that the crisis, which nevertheless serves as a pretext for tough austerity measures , is above all a crisis of private debt. Banking Union thus completes the single currency by eliminating, ultimately, foreign exchange risks.

These conclusions thus give reason to the criticisms made for many years by sovereignists:
Europe is being built at a distance from the peoples and their « natural » representatives (national Parliaments).
The enlargements have considerably damaged the European Union’s ability to reform.
– And, therefore, there is the difficulty or outright impossibility of building « another Europe. »

Democracy at risk

The reinforcement of fiscal discipline was achieved far from national Parliaments. They indeed did not participate in the adoption of the Regulations establishing this European governance (Stability and Growth Pact, Six-Pack and Two-Pack).
Those most concerned are thus reduced to being spectators of the European Union.

This situation is exacerbated in France by the institutional working of the Fifth Republic. The executive indeed holds the monopoly on foreign policymaking.
It is also exacerbated by the closed proceedings of the European Council and by the jurisprudence of the European Court of Justice, which has had a broad interpretation of the powers of the Union.

On European governance, two examples demonstrate the marginalisation of national parliamentarians :
The decision of the French Constitutional Council on the Fiscal Compact (August 2012): it states that, insofar as the principle of coordination has been ratified through the Maastricht Treaty in 1992, budgetary discipline can freely be reinforced without violating the principle of national sovereignty.
During the ratification of the Treaty establishing the European Stability Mechanism in 2012, the French Parliament did not adopt any law annexed to the Treaty allowing for the monitoring of the decisions of the Minister in the Council of Governors. They seem to consider that the budgetary laws approving the transfer of funds are alone sufficient for parliamentary control. To date, 16 billion euros of paid-up capital has already been transferred by France to the ESM.

Economic governance’s democratic deficit is reflected not only in the adoption process but also in its day-to-day operation. The most significant symbol is undoubtedly the Eurogroup Council: there is no agenda, no minutes, press releases are exclusively in English and there is no transparency of discussions and positions of each minister.
This criticism is voiced both ​by those opposed to the European Union and by the pro-Europeans.

Today, only the European Parliament is presented as the solution to the problem of the democratic deficit.
To the question, « Should we keep national parliaments in the loop? », MEPs say no. Article 12 of the Fiscal Compact, which sets up inter-parliamentary conferences on European Governance, was emptied of its substance by the European institutions. The Inter-parliamentary Conference in Vilnius was a failure, the European Parliament having refused to approve an agreement with national representatives. This position is in France is defended notably by Mr Caresche and Mr Marini.

I am curious to know the proposals of the United Kingdom which, with an eye on a reform of the Treaties, seems to want a strengthening of national Parliaments and in particular of the right of veto.

Legal issues

We can indicate five points which can be subject to legal criticisms.

a) The Fiscal Compact

Its legality has been questioned by Professor Fischer Lescano in a study commissioned by the GUE/NGL group in the European Parliament.
On the form, it indicates that the Treaty transfers new powers to the EU institutions even though it has only been approved by the States. Therefore, the institutions should not participate in the implementation of this Treaty because they were not involved in the adoption process.
On the content, the Treaty provides for an extension of the so-called reverse qualified majority procedure. It also provides for the possibility of sanction by the ECJ if the national legislation implementing the golden rule is not considered adequate, thus disregarding of the principle of subsidiarity.

b) The European Stability Mechanism

In addition to the « creative » ruling of the ECJ, it should be noted that the Treaty entered into force before the amendment of Article 136 TFEU, even though it had been presented as necessary for the establishment of such a mechanism, had been ratified by all European States. Indeed, the mechanism came into effect in September 2012, while the Czech Republic only ratified the amendment of Article 136 TFEU in March 2013.

c) The European Central Bank’s OMT programme

The recent ruling of the German Constitutional Court, even if it defers to ECJ for the final decision, voices serious reservations on the legality of the OMT programme under the European Treaties and the German Basic Law.

d) The Two- Pack

The law providing for the transmission of the draft budgets to the European Commission can be criticised on the form. Provisions calling for the establishment of an independent Fiscal Council did not comply with the principle of subsidiarity. In addition, these same provisions require transposition measures and should therefore have been mandated by a European directive.

e) The Troika

Recently, Professor Fischer Lescano has questioned the legality of provisions of the austerity programmes, which he considers contrary to the Charter of Fundamental Rights of the European Union.
The governance of the euro area, in addition to being based on a growing democratic deficit, is based on ever more legal uncertainty: a kind of legal patch-up job to remedy the shortcomings of the European Treaties.
We are far from a European Union based on law and reason.


We think about the existence of the euro, not only in economic terms, but also in political terms.

The Europe of Nation-States does not seem to be able to make the single currency work. Its maintenance therefore requires greater integration.

We clearly see two logics confronting one another and one does not know which we should fear more: discrete integration « on the sly » (advocated by France to avoid a new 2005) and the federalist method. Many MEPs have already clearly said they are in favour of the abolition of unanimity in the reform of the Treaties (towards a multi-speed Europe).

Parliamentary days ELD / EFD intervention Magali Pernin, February 19, 2014

Article in French


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