N. 63 July 2014 | A constituent legislature

The importance of this legislature shows why the fight which took place during the election was so radicalised: the new Parliament and the governments will have to be able to finalize the transformation process of the monetary union and turn into a real political union, starting with the implementation of fiscal federalism.

In the next five years, the process of transforming the monetary union into a true political union must reach completion. Failing this, the end of the entire European project will be inevitable.

The emergence of increasingly radical political positions in the course of the recent European electoral campaign may, indeed, be seen as a sign of the vitally important role that this legislature is called upon to play. And, from this latter perspective, the outcome of the European elections must surely be considered, on balance, a positive one. First of all, the much feared wave of euroscepticism did not acquire the dimensions necessary to make it a real obstacle to the process of European integration; furthermore, the nature of the clash between the pro- and the anti-European forces has made it clear that the vast majority of European citizens are basically in favour of closer supranational integration.

The two most significant events following the end of the electoral campaign, both emblematic of the climate that has been created in its wake, are the selection of Juncker as President of the European Commission and Italy’s return to the centre of the European stage (after two decades in which the country has been, more than anything, a problem for Europe).

The clash over the appointment of Juncker, which during the pre-electoral skirmishes had seemed to foreshadow a clash between European institutions, and in particular between the Parliament and the European Council, has, in the wake of the elections, turned into a clash between those governments that want deeper integration and those that do not. Great Britain, isolating itself from the rest, even requested that the European Council conclusions include the following statement: “the European Council noted that the concept of ever closer union allows for different paths of integration for different countries, allowing those that want to deepen integration to move ahead, while respecting the wish of those who do not want to deepen any further”. Juncker’s appointment thus provides confirmation of two facts: it confirms the will of the eurozone countries to move, in the space of this parliamentary term, towards deeper integration (notwithstanding the uncertainties over how best to proceed); and it underlines the difficult position of Cameron, who is powerless to stop the deepening of the monetary union and, at the same time, driven into a corner by the mood of public opinion at home, which even wants freedom from the rules of the single market and is, therefore, clearly willing to put the county’s deepest interests at risk.

Italy’s situation is equally significant. The recent elections, characterised by a radical clash over the direction Europe should take, have finally highlighted the will of the country’s majority to strive for modernisation and reform of the national system and for stronger European integration. And this has had an immediate and twofold effect: first, it has restored a climate of trust between Italy and its European partners, who have welcomed this development with considerable relief; and second, given the internal consensus and influence in Europe secured by the main ruling party and by its leader, it has given Italy a real chance, once again, of playing a driving role in Europe, in line with the country’s finest tradition.

This situation has been further underlined by the fact that all this has coincided with the start of Italy’s six-month presidency of the EU. Italy has presented a programme structured along two main lines, which are inextricably linked: on the one hand, the need to restore, and relaunch through appropriate policies, a shared vision with regard to growth, competitiveness and innovation; on the other, the need (“joint strategic decisions cannot be taken through simple coordination instruments” – italia2014.eu) to make European governance and the European decision-making mechanisms more effective and democratic, both as regards the single market and, more specifically, the eurozone, through the road map to the four unions (i.e. the banking union, which is now practically complete, the economic and fiscal unions, which are the subject of ongoing negotiations between the governments and within the European institutions, and the political union).

It is an ambitious programme that extends far beyond the six months of Italy’s presidency. For this very reason, the Italian government has taken care to identify it with the deepest ideals that have underpinned the process of European unification, and with the aim of contributing to the birth of the United States of Europe; it is a programme that Italy, during its presidency, can certainly help to start, by establishing guidelines and setting some deadlines for the political cycle that has just begun. However, it will not be a straightforward journey, as recognised by German minister Schäuble, speaking about institutional reforms of the eurozone in an interview with the Financial Times on June 29 (“… The German government has clear plans… How we now get there, step by step, is as always a more complicated process”). But it is important, first of all, to draw attention to the real obstacle that must, as soon as possible, be overcome. As explained by Shahin Vallée (in a December 2013 essay entitled From Mutual Insurance To Fiscal Federalism), it is necessary to start building, within the euro area, a federal fiscalsystem, starting with an ad hoc budget that will lead to the centralisation of certain powers of control over national fiscal policies and of some of the powers of economic policy. This is the necessary condition, both for overcoming the limits of the current system of control over national fiscal policies (which is credible only up to a point and which, in an intergovernmental framework, encounters strong resistance linked to issues of democratic legitimacy and has no scope for improvement), and for overcoming “the weakness of the current coordination framework and (superseding) the modest interference in national economic policies with a view of allowing effective, legitimate and time consistent economic policy decisions in the best interest of the union as a whole”.

Launching the implementation of fiscal federalism within the eurozone is therefore the necessary prerequisite for: i) overcoming the reservations of the eurozone countries faced with the need to transfer further portions of their national sovereignty to a European supervisory power; ii) establishing a stable climate of mutual trust; iii) creating, at European level, the resources and decision-making powers necessary to implement an effective supranational development plan; iv) overcoming the difficulties linked to the institutional changes necessary to resolve the democratic legitimacy issue, so that the citizens of the eurozone will be in a position to monitor the federal government.

This is the basis on which the Italian government can, as of now, start to tackle (also exploiting the room for maneouvre affored by the existing Treaties) the question of contractual agreements for reform and growth. Until now, the Italian government has gone no further than suggesting that the flexibility built into the existing rules should be used as an incentive for reforms. However, as clearly explained by Lorenzo Bini Smaghi in an article published by the Istituto Affari Internazionali (IAI) on July 8 (L’Italia e le regole europee – I dilemmi della flessibilità), this is too narrow an approach to be capable of being a real turning point; a fact also shown by the discussions and reservations it has prompted. The reality is that such agreements can acquire credibility only if they are combined with the launch of a supranational solidarity mechanism in the euro area, in such a way that the member states, in exchange for the monitoring of national budgetary discipline and of their capacity to implement structural reforms, receive concrete support in terms of either a common social welfare system, or joint investment and development projects based on European own resources.

The further surrendering of national sovereignty, now essential, will be possible only if the relinquished sovereignty is recovered at European level, and in a setting in which it is not just budgetary discipline and rules that are institutionalised, but also solidarity and a shared economic policy. To achieve this – here we return to the question of the new parliamentary term that has just got under way –, the capacity of the European Parliament to set up a constituent process will be fundamental. If, from the outset, there emerges within the new Parliament a federalist vanguard capable of bringing out the will and consensus necessary to propose a federal institutional structure for the eurozone together with the mechanisms necessary for governing its coexistence, within the EU, with the non-eurozone states; and if, at the same time, there emerges a strong willingness, among the main political forces and the institutions, to unite the pro-European factions among the parties, the representatives of European institutions and the governments, then the political union objective really will be within reach, and our European community will find itself in a new historical phase, characterised by high hopes and great projects.


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