Even pro-European commentators in Britain have been turning against monetary union and questioning the EU's democratic credentials. Charles Grant says that Emu would not have the dire economic consequences they predict and that Brussels institutions are imperfect but reformableby Charles Grant / October 20, 1996 / Leave a comment
Britain’s eurosceptics have always opposed “Brussels,” but its Europhiles could be counted upon to defend it. No longer. The tide of Euroscepticism now laps around the feet of many essentially pro-European commentators.
Last November, Will Hutton and Martin Kettle wrote in the Guardian calling for a weaker European parliament. They also argued that Economic and Monetary Union (Emu) would be deflationary and should be scrapped. In June this year, in a Prospect essay, Timothy Garton Ash claimed that Emu would require fiscal harmonisation and political union, and therefore should be abandoned. And in the same month, Andrew Marr, in a full page editorial in the Independent, argued against Emu and for reducing the power of Brussels institutions.
These writers are sympathetic to European integration. They are repelled by nationalism and xenophobia. Yet they have partly accepted two essential tenets of Eurosceptic faith-that Emu is dangerous and unnecessary and that EU institutions are irredeemably undemocratic. My own starting point is that of a former Brussels correspondent who observed the European commission, parliament and court of justice close up. I believe that, although these institutions need reform, they do not, overall, do a bad job.
Let us examine the canard that monetary union would require fiscal and even political union. If this were the case then much of the opposition to Emu would be justified. It is true that many continentals believe that a single currency ought to lead to a fiscal union-the Beneluxers, because the centralisation of budgetary policy would be a step towards their goal of a federal Europe; the French, because they fear that the European central bank would impose a monetarist economic policy on the union unless EU finance ministers created a common fiscal policy; some Germans, because they worry that, if a profligate government such as Italy can borrow as much as it wants, interest rates will rise elsewhere in the EU; and other Germans, notably Bundesbank officials, because-while not openly admitting hostility to Emu-they hope to undermine the project by arguing that it would require huge payments from rich countries to poor ones.
The answer to the Bundesbank is that the Maastricht treaty’s plan for Emu does not allow a country to join the single currency unless its economy has converged sufficiently with those of the other participants. But even if poorer members were allowed into the currency union, there is no evidence that their economies would collapse under the strain of being unable to devalue. If devaluation created wealth, Britain would be one of the world’s richest countries.
Others argue that a single currency would require a budgetary union to soften economic shocks. They compare the EU with the US. Suppose, they say, that Texas suffers from a drop in the oil price. Texas does not need to devalue a Texan dollar to boost its competitiveness because it benefits from federal assistance programmes. Within the EU, the argument goes, financial transfers are too small to provide a cushion against economic crises (the EU’s budget is now about 1.2 per cent of its GDP). Thus, if Britain suffered an economic shock but could not devalue, it would have no choice but to adjust through higher unemployment and wage cuts.
The flaw in this argument is to assume that economic shocks apply to geographic areas that coincide with individual countries. If a sudden crisis hit the wine producing regions of the Mediterranean, devaluing a national currency would not be the answer. Even if a calamity befell a particular national economy-suppose that terrorist bombs destroyed the Spanish tourist industry-the government concerned may borrow, swelling its budget deficit until the crisis passes. And if the shock is so huge that national borrowing cannot cope, it could borrow from the EU (France did in the early 1980s).
A single currency can work without European control of national budgets. There is nothing in the Maastricht treaty that prevents political parties from offering electorates meaningful choices of economic policy-on the size of the budget deficit, on the proportion of GDP taken by the state and on targets for public spending (on education or defence, say).
The late-19th century gold standard worked without a fiscal union. The French franc zone in west Africa has one central bank but 14 divergent fiscal policies. Belgium and Luxembourg have enjoyed a currency union since the 1920s, but have no harmonised budgetary policy. The Canadian states share a common currency but those with big budget deficits pay relatively high rates of interest on financial markets; more prudent states pay lower rates.
Would Emu be deflationary? The treaty states that a country wishing to join the currency union should have a budget deficit no greater than a “reference value” of 3 per cent of GDP. But that figure is rather elastic. If the deficit is declining and moving towards the reference value, if it is exceptional and temporary, or if a portion of it is the result of government investment, more than 3 per cent may be permissible. The treaty would make impossible the kind of high inflation, big devaluation policies practised by the Labour party in 1974-75, and by the French socialists in 1981-83. However, the financial markets already stop governments from engaging in economic policies that are radically different from those of their neighbours. The markets are much more powerful than they were in the 1970s: even a country outside the exchange rate mechanism, such as Britain, which pursued a policy of reflation would soon find that a swift collapse of its currency brought the experiment to an end.
The Eurosceptics’ best argument is that EU institutions are less accountable than national governments. It is hard to disagree with Marr when he writes: “The system of government is too complicated and too far from the lives of Europeans…” Marr calls for a stronger council of ministers, because it represents accountable governments; a weaker European parliament; and a commission that would retain what he calls its bureaucratic role, but cease to be the “campaigning arm” of the union.
In the complex, infuriating yet necessary organism that is the EU, the commission is the pulsating heart which connects the other parts. The way the commission works is far from satisfactory. Many of its procedures are long-winded; its organisation is too rigid; and promotion does not always reflect ability. But these are arguments for calling in consultants, not for destroying the commission’s power.
The commission does have qualities which impress. I remember how, as a Brussels correspondent, I was free to “borrow” official documents without fear of retribution. The commission normally publishes the working papers that precede legislative proposals. Most of its officials make themselves readily available to the swarms of Brussels lobbyists. Whitehall could learn a lot from the commission about openness.
A union of 15 or more states, each with its own, conflicting priorities, needs a central institution to promote the general interest. As the EU enlarges, that task becomes harder but even more essential. The commission’s principal jobs are to administer EU policies; to negotiate with third parties; to police EU treaties and laws; and to initiate legislation.
Because the commission, alone, has the right to propose laws, it can impose some direction and coherence on the EU’s work programme. Governments can and do suggest to the commission that it should legislate on this or that problem. But if each of them could table laws there would be much more legislation, and the risk that some of it would contradict existing statutes. If each country were free to pursue its own pet subjects-the British, animal rights; the French, workers’ rights; the Germans, food purity; the Scandinavians, strict environmental standards -there would be no sense of priorities.
The commission does take into account the views of governments. Thus since 1992 it has pulled back from proposing more labour market laws. But only the commission has sufficient objectivity to take an overview of the most urgent tasks and-even if powerful member states object-to draft the necessary legislation. There would have been no single market programme if Jacques Delors had not insisted on making that a priority. In recent years the commission has put the liberalisation of telecoms, air transport and energy markets at the top of the agenda-none of which pleased the French government.
The single market cannot work without strong institutions. Individual companies or governments are often tempted to break the rules, but any person, company or government that feels aggrieved can call on the commission to intervene. The commission may warn the miscreant and, if the problem persists, haul the government responsible before the European court. In 1995 it threatened legal proceedings against member states on 5,068 occasions.
Consider some random examples from June 1996: the commission warned Belgium and Finland that restrictions on their pension funds investing abroad breached an EU directive on free movement of capital; it declared that a $160m subsidy from the state of Saxony to Volkswagen was illegal, since it gave the company an unfair advantage; the European court of justice ruled that Belgium, Greece and Luxembourg acted illegally in barring EU citizens from holding public sector jobs; and the court decided that Italy was breaching EU law by requiring foreign securities dealers to have a registered office in the country.
If, as has happened in the past, the Spaniards break EU environmental rules by draining wetlands, or the Italians cheat on milk quotas, or the British give illegal sweeteners to companies being privatised, the only institutions that can enforce the law are the commission and the European court. In July Saxony defied the commission over its aid to Volks-wagen. That would not have happened five years ago, when the commission was a stronger and more feared policeman.
The commission should be made more accountable, but so too should the council of ministers, which takes many more decisions than the commission. The individual governments which make up the council are accountable to their electorates, yet the council is a powerful institution in its own right and, as such, is not directly accountable to anybody.
Much of the council’s real power lies in “Coreper,” the committee of permanent representatives, the most senior national officials in Brussels. Coreper takes many decisions itself, passing them on to the ministers for rubber-stamping. Countless working groups, meetings of national officials, prepare the ground for Coreper and ministerial gatherings. The council of ministers’ secretariat, consisting of some 2,500 officials, services all these meetings and, together with the presidency, sets the agenda. This huge, bureaucratic empire-which like all institutions has its own objectives-is much more secretive than the commission. Yet Marr calls for the council of ministers to be strengthened at the expense of the commission and the European parliament.
National parliaments are ill-suited to call either the commission or the council of ministers to account. National MPs focus on what is going on in their own country. Few of them have the time, inclination or expertise to follow European legislation. And however carefully they try to examine draft proposals, they cannot exert much influence on European law, especially when the council of ministers votes by majority. In practice there is more horse-trading and compromise than actual voting in the council. It is in the nature of such bargaining that ministers cannot easily break off to consult national parliaments on the line they should take.
Certainly, the more that national parliaments can scrutinise EU legislation, the better. But for all the European parliament’s faults-its humourless debates, its absentee French and Italian MEPs and the gesture politics of its resolutions on foreign affairs-no one has come up with a better arrangement for injecting some democracy into the EU. The better MEPs have the knowledge, understanding and access to information which makes them the right people to hold the commission to account.
As a counterweight to the council of ministers, the parliament already has the power of “co-decision”-meaning that nothing can pass without a positive vote from both council and parliament-on the non-agricultural parts of the budget and on single market matters. The parliament can claim, with some justice, that it is sometimes more sensitive to public opinion than the council of ministers. In 1995 it held up approval of a customs union with Turkey, until some of the most anti-Kurdish clauses in the Turkish constitution were deleted. The parliament has several times amended legislation on car exhaust emissions, to impose more exacting standards.
The European commission has a kind of dual accountability, to national governments and to the European parliament. National governments appoint and may sack their commissioners. The European parliament can sack the entire college of commissioners (although it has never used this drastic power) and can be an effective interrogator of individual commissioners. When the commission draws up its annual work programme, it usually takes into account some parliamentary priorities; otherwise it may find MEPs disrupting legislation.
Those who would weaken the commission and the parliament have not thought seriously about the consequences. The Maastricht treaty’s second and third “pillars”-covering foreign policy and judicial affairs-offer an alternative to the EU’s usual arrangements. The commission, parliament and court of justice are, to a large extent, excluded from these intergovernmental networks where secretive committees of national civil servants are in charge. If the committee of top interior ministry officials abused the asylum rights of an individual, or covered up corruption in Europol, the chances are that no one would find out. Neither MPs nor MEPs have any means of scrutinising what goes on in the second and third pillars. Given the sensitivity of foreign policy and judicial affairs, it is inevitable that intergovernmental bodies will handle them for some time to come. But they are thoroughly undemocratic and-pace Marr-are hardly models for the rest of the EU.
The antagonism of some Europeans towards Brussels is part of a worldwide movement of antipathy towards established political institutions. The last US congressional elections, in 1994, had a turnout of only 39 per cent. In the same year 57 per cent of EU electors voted in the European elections (although only 36 per cent in Britain). The gap between European electors and the EU cannot be closed entirely-but there are ways of making its institutions more accountable.
The best way to boost the commission’s democratic credentials would be to hold direct elections for its president. That prospect would horrify the governments, however, given that-as happened after the introduction of direct elections to the French presidency in 1962-the commission would gain more authority. It suits the governments to keep the commission illegitimate (and blame “Brussels” for the bad things that come out of it and claim the credit for its successes).
I would propose the following alternative. Let the European council come up with a short-list of suitable commission presidents. Then, in front of television cameras, let a committee of MEPs grill the candidates. Then let the parliament vote between the names on the shortlist. This would give the parliament something useful to do and the commission a little more legitimacy. Further, let the parliament hold hearings on the appointment of individual commissioners and then vote them in or out.
The governance of Europe needs to become simpler and more transparent. When the council of ministers discusses legislation, it should let in television cameras. The public should have access to the minutes, voting records and agendas of ministerial meetings, of Coreper and of working groups. National governments should ensure that the history and workings of the EU are on school curriculums.
The existing rag-bag of EU treaties, which is incomprehensible to the layman, should be rewritten in simple language into a clear, short constitution. This would set out the EU’s aims-democracy, the rule of law, free trade, freedom of expression, environmental protection, racial and sexual equality, social justice, international co-operation-and thus bring home to EU citizens the many values they share. A section of the new constitution would highlight the rights of the individual citizen and how he or she could seek to have those rights enforced.
The peoples of Europe need an EU for their economic self-interest, for their security, and as an expression of their common culture. If the council, commission, court and parliament did not exist, they would have to be invented. The challenge facing the younger generations of Europeans is how to reform these bloodless bodies so that they become easier to understand, better run and more accountable.