Saving the Euro: A Pyrrhic Victory?
Nicholas Crafts (Chatham House)
Euro seems to have finally survived its existential crisis. No member country has abandoned the Euro, as some until recently suggested. The attention has now turned to economic recovery while the urgency of fundamental reform of the monetary union is fading. However, the survival of the euro meant a long recession and left the legacy of high public debt. At the same time, the fundamental weaknesses that undermined the functioning of the common currency have not been seriously tackled. It can be said that the price for euro’s survival was too high.
During the 1930s, the abandonment of the gold standard, which placed the value currencies against tangible assets (like the EMU today), was a part of the recovery process from the Great Depression. Today, politicians rightly fear that similar abandonment of the euro would be too risky. Similarly, it would be dangerous to let any of the states go bankrupt. Compared to the interwar period, the current crisis is taking place in a completely different context. A new phenomenon is an ominous loop between a state’s debt and the banks – more in particular, bank’s balance sheet grew several times the national GDP of some states. Through an integrated capital market, the effects of an economic crisis in one state can have indirect implications for other countries. In short, unlike in the past, the risk of a fatal economic crisis with unforeseeable dire consequences for the whole system is simply too high.
Tools that have remained in the hands of policy makers are neither very attractive, nor particularly effective. Attempts to solve the problems of highly indebted euro zone countries merely by fiscal consolidation not only seem to be insufficient, but also politically unbearable. A certain debt relief combined with financial repression, and perhaps also the change of the European Central Bank’s mandate, will be required. Euro was probably saved, but Europe paid a very high price. At the same time, as prospects for future growth remain weak, the crisis can result in a lost decade in the peripheral countries, much like the lost decade that Latin America experienced in the 1980s.
(The study can be uploaded here: http://www.chathamhouse.org/publications/papers/view/195771)
The New Inter-Parliamentary Conference for Economic and Financial Governance
Valentin Kreilinger (Notre Europe – Jacques Delors Institute)
The theme of this study is a new method of cooperation between parliaments of the EU member states. On the legal basis of Article 13 of the European fiscal compact, a new European Interparliamentary Conference on the economic and financial governance was created in April 2013. The form of implementation of Article 13 was negotiated at the Congress of Presidents of Parliaments in Nicosia, where a platform for communication between national parliaments was developed. This new inter-parliamentary conference was first held in Vilnius from 16-18 October 2013. The purpose of this platform is to keep national parliaments involved in the European decision-making mechanism, thus strengthening the democratic control of European integration on the road “to a genuine monetary union”. The author of this study, however, suggests that the compromise that was reached at the meeting in Nicosia is a missed opportunity, if we compare it to more ambitious interpretations of Article 13 of the fiscal compact.
The design for a new inter-parliamentary body has both its supporters and opponents in European structures. As the author demonstrates by directly citing different sources, the European Council has continuously sought to limit the cooperation of national parliaments. A conflict arose between parliaments when the northern group demanded a complete abandonment of these proposals and wanted to return to negotiations based on the old structures. The situation is further complicated by virtue of the legal initiatives – Fiscal Compact, signed in March 2012, has had only 25 signatories from 28 EU member states and the signatories are further divided into states within the eurozone and those outside it. In the final version of the conference, all the parties should be present but the conference will not be able to adopt legally binding initiatives. It will meet twice a year (according to the European semester) and up to 6 members from each parliament will be sent to the conference.
The author suggests that the effort to create a new inter-parliamentary conference seems to be only an old solution for a new problem. He stresses the importance of a stronger parliamentary scrutiny at the national level. In the accompanying analysis of the parliamentary members’ participation in two older Inter-Parliamentary Conferences (Conference of European Affairs Committees of Parliaments of the EU and the Inter-Parliamentary Conference on the Common Foreign and Security Policy), the author discovers that it is only a few from the national parliaments who make full advantage of these conferences and send there their representatives. Still, he favors the creation of a new inter-parliamentary conference, which would constitute the first step towards a real parliamentary control of the economic and monetary union.
(The study can be uploaded here: http://www.notre-europe.eu/media/interparliamentaryconferenceecofinkreilingerne-jdioct2013.pdf?pdf=ok)
The 2014 European Elections: Why a Partisan Commission President Would Be Bad for the EU
Heather Grabbe a Stefan Lehne (Centre for European Reform)
Presidents of the European Commission (EC) have until now been chosen by the heads of state and by the European Council. The European Parliament (EP) then approved the choice by the majority of the votes. The Lisbon Treaty has changed this procedure in that it now gives the EP the right to elect the President of the Commission. The major European parties favor a more direct link between the election results and the selection of the President of the European Commission who would be chosen from their own ranks. They argue that this would attract media attention which would in turn increase voter turnout. However, it is quite likely that any benefits gained from this transformation would be outweighed by the negative effects: a change in the functioning of the EU and the tilting balance of power between the EU institutions.
The president, who is clearly connected to one single party, would lose credibility if he or she wanted to impose sanctions or enforce measures against governments that come from the other side of the political spectrum. Commissioners, when taking their office, take an oath pledging that they will independently represent the interests of the EU. This oath would, however, become meaningless if the president comes from a single party. The Commission also gained new competences for the fulfillment of which it needs an impartial judge. The Commission decides about sensitive issues – hence, having a partisan president could make the decisions more prone to be challenged by the European Court of Justice. The Commission with a partisan president could also lose its status as a defender of democracy. This article describes how the dynamics between the Commission, Parliament and Council would change with a partisan president.
The priority for the European Parliament should be the appointment of an independent and impartial President of the Commission who can restore confidence in this institution. These elections are more important than the previous ones, as the EU is in crisis and needs to solve the economic and political challenges that are present at both national and European level. Rather than on the selection of the president by the European Commission, the European parties should focus their attention on practical benefits and economic needs, which call for European integration.
(The study can be uploaded here: http://www.cer.org.uk/publications/archive/essay/2013/2014-european-elections-why-partisan-commission-president-would-be-b)