In the current debate around the future of the Eurozone, much has been made of the notion of an “economic government” for Europe. This has raised fears in Britain of a European state-in-the-making. At a recent European Council meeting, Gordon Brown urged his fellow leaders to opt for the term “economic governance” instead. The final declaration, in true European spirit of compromise, made reference to both terms: governance in the English text, gouvernement in the French.
Some commentators say the present crisis makes it obvious that the EU needs to adopt the full trappings of government, not least a central treasury able to resolve solvency troubles. Robert Skidelsky argued in The Guardian on 23 March that “the Mediterranean crisis has exposed the Eurozone’s long-standing flaw: the absence of a single government”. He applauded Wolfgang Schäuble’s proposal of a European Monetary Fund: a concrete proposal that might shrink the Eurozone down to a “governable size” and give the EU the internal coherence and solidity that it lacks.
Others disagree, congratulating “Frau Germania” (Germany’s Chancellor Angela Merkel) for resisting calls for an EU bail-out. In doing so, she is defending one of the key pillars of European Monetary Union: the fiscal sovereignty of member states. Otmar Issing, former member of the European Central Bank’s executive board and one of the Euro’s founding fathers, argues that EMU is not a state. Rather, “it is a club of states with firm rules accepted by entrants”. The rules must not be changed ex-post and EMU must remain “a monetary union without a political union” (1).
What is the rationale for a European government and is it likely to come about as a result of the present crisis? The rationale is simply that as an unevenly integrated regional market, the Eurozone needs an administrative centre to provide some stability to the system. The introduction of the common currency has exacerbated the differences that have long existed between different parts of Europe. Some economists suggest that we should split the Eurozone in two, introducing a Euronord and a Eurosud currency – a model that would more accurately reflect the unevenness of the European economy (2). In short, national economies are stabilised through national central banks and treasuries. The Eurozone has the former, but not the latter. Hence the need for a European government made up of the European Central Bank and a European Treasury.
Even if the economic logic is compelling, this is all very unlikely: Europe is not in a period of grand institutional design. It lacks the forces needed to erect a European government that would replace the current messy structure. There are two sides to this. In Greece, public opposition to the government’s austerity measures is vastly out-weighed by public support for the cuts. A sense prevails that Greece does need to get its ho use in order and that doing so requires the disciplining hand of the EU. Since the crisis began, the Greek government has played up the danger of internal instability. Though there have been sizeable strikes, the reaction has on the whole been muted. Reporting on the strikes in February, foreign journalists were often caught waiting around for the mass mobilisation that never happened (3). Had Greece really been on the verge of civil war, with an organised communist party waiting in the wings, there is little doubt that a bail-out would have been more forthcoming. As it stands, the costs of being tough on Greece are minimal compared with the flak leaders of other Eurozone countries will face if they are seen to use scarce funds to bankroll Greece profligacy.
The other side to the coin is Germany. Enthusiasm in Berlin for another wave of European institution-building might have given some weight behind the discussion of European government. A notable feature of the crisis has been Merkel’s stubborn refusal to provide financial help to Greece. Journalists have been quick to leap on the implications of this for Germany’s role in Europe. Are we seeing the return of a selfish German giant, imposing its designs on the rest of Europe? What many commentators have realised is that Germany’s goal is to minimise its political involvement, not to expand it. Though this has been true for many years, it was masked by an enthusiasm for Europe. Today, Merkel’s hostility to an EU bail-out for Greece confirms what was already evident at the time of the debates around the Constitutional Treaty. Germany is increasingly a Euro-sceptic country and had Germans been allowed a vote on the Lisbon Treaty, they would have probably voted no. This reluctance is not new but dates back to the early 1990s and the hostile decision by the German Constitutional Court on the Maastricht Treaty.
An economic crisis accompanied by relative public acquiescence, combined with an inward-looking Germany, foreclose the possibility of grand institutional designs in Europe. But what of the “economic government” sought by the French and mentioned in a recent European Council declaration? Here we are in the worst of both worlds. What leaders mean by this phrase is a kind of cooperation between member states in Europe that lacks the rationality and transparency of a single European state but also disregards any principle of national autonomy or non-intervention. Merkel may have been forthright in defending her right to reflect the preferences of her own domestic public, but she has paid scant regard to the question of the “representativeness” or independence of the Greek government.
The outcome of the crisis will be an expansion in the powers of EU in the matter of fiscal supervision. The European Commission is fighting hard at the moment to make sure that it wins the right to send its officials into the ministries of high-spending member states. When Sarkozy and Merkel speak of “economic government”, they mean greater powers of regulation and oversight drawn up by finance ministers and implemented by Commission officials. Greece will look increasingly like the aspiring candidate states in the Balkans: subject to multiple instances of conditionality, its political life governed by experts from the European Commission. But powerful member states will not be held to account for such intrusion: a feature of “economic government” Euro-style is the difficulty one has in identifying who is in charge. Some might see in the involvement of the IMF a humiliation for the Eurozone. The complicated joint IMF-EU bail-out plan epitomises the “smoke and mirrors” approach preferred by European leaders where onlookers are left wondering what exactly the EU has committed itself to — if anything at all (4).
This outcome fits with the overall development of the EU: incremental change pursued through varying degrees of informality and ad hoc legal innovations. The Greeks may not be revolting against the stringent cuts imposed upon them in the name of saving the country’s finances. But we may see them revolt against the transformation of their country into a ward of Eurozone experts and administrators.