N. 61 June 2013 | A pre-constitutional pact between the eurozone countries to pave the way for democratic and federal government

The latest statements by the governments of both France and Italy seem to be willing to overcome the accusations to the german government of making sovereignty sharing a condition on which european growth policies will have to be based on, and they're paving the way for an additional embryonic budget for the eurozone.

In Europe, as The Economist, too, has recently pointed out, “the reason for today’s inaction is not a shortage of things to do, but a shortage of the will to do them” (“The Sleepwalkers”, 25 May 2013). Indeed, while it is clear that completion of the four unions (banking, fiscal, economic and political) is the only way to consolidate the monetary union and create a framework that will allow Europe to overcome the present crisis and recover its capacity to grow and compete on the international stage, it is equally clear that the failure to advance swiftly in this direction is due to a lack of the real will to do so.

This is the background against which it is worth considering the recent and important signs of a change of position on these issues, on the part of both the new Italian government and the French president Hollande. For the first time, it seems that Germany can count on partners who are willing to take up the challenge and claim to be ready to take concrete action to advance European unity. Indeed, until just a few weeks ago, German chancellor Merkel and finance minister Schaeuble were lone voices underlining the need to resolve the issue of political union and indicating joint sovereignty as a necessary condition for full solidarity within the euro area. However, because of their failure to back up these views with precise indications on how to go about achieving this sharing of sovereignty, Germany’s position has often tended to be dismissed as unnecessary inflexibility or as an attempt to delay the introduction of European growth policies.

The first to respond to the German appeal to strive for political union was Italy’s new prime minister, Enrico Letta, who is currently struggling with a national crisis whose solution depends, above all, on solution of the European one (Letta has indeed stressed, both in speeches before the Italian parliament, and in meetings with Angela Merkel, François Hollande, and leaders of the European institutions, the need to see the EMU evolving in a federal direction). Subsequently, French president Hollande, speaking at a press conference on 16 May at the Elysée Palace, stated, for the first time, that “L’idée européenne exige le mouvement. Si l’Europe n’avance pas, elle tombe ou plutôt elle s’efface; elle s’efface de la carte du monde, elle s’efface même de l’imaginaire des peuples. Il est donc plus que temps de porter cette nouvelle ambition. L’Allemagne, plusieurs fois, a dit qu’elle était prête à une Union politique, à une nouvelle étape d’intégration. La France est également disposée à donner un contenu à cette Union politique. Deux ans pour y parvenir. Deux ans, quels que soient les gouvernements qui seront en place. Ce n’est plus une affaire de sensibilité politique, c’est une affaire d’urgence européenne”.

In short, the governments of the two key countries of the European Union, together with that of Italy, which has always played a decisive role in paving the way for the crucial steps in the integration process, seem at last to be converging on a key point, underlined as long ago as December 1991 by former German chancellor Helmut Kohl, who, addressing the Bundestag in the wake of the Maastricht summit, underlined that political union is the indispensable bedfellow of economic and monetary union, and that this point cannot be made often enough.

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The problem to overcome now is that of how to achieve the objective of political union. Europe’s complex institutional framework throws up legal problems that, notoriously difficult to unravel, constitute an obstacle to effective governance of the single currency and undermine democratic legitimacy in Europe. Indeed, it is now universally accepted that radical federal reform of the Treaties under the unanimity rule is not possible within a reasonable time frame, and in any case before the consequences of the crisis have fatally undermined social and political order in the different countries. The reality is that there is simply no time left to lose and the situation of Italy, a key European country which finds itself suspended between rampant populism and a difficult and painful process of internal reform, is absolutely emblematic of this. Italy’s government hangs by a very fine thread. Certainly, unless the next few months bring a real quality leap forwards in terms of governance of the EMU, the country, left in the current national and European framework, will be in real danger of imploding.

What the current situation demands, therefore, is immediate action – concrete forward steps, which must, however, be framed with a view to achieving radical EU institutional reform leading to the creation of a political union of the eurozone. For this reason, the strategy of incorporating the bailout fund principle and mechanism into the institutional architecture of the European Union, adopted two years ago by the governments and supported by the national parliaments and the European Parliament, seems once again to be the most appropriate course of action. This strategy allowed the European Stability Mechanism (ESM) to be brought into force in the 17 eurozone countries and at the same time it forced Great Britain to exclude itself from the euro area consolidation procedures (which, in any case, it would not have sought to impede, given that the survival of the single currency is in Britain’s interests too).

The effect of all this, regardless of the will of the governments and of the national and European institutions, was to inject fresh momentum into efforts to achieve differentiation within the process of European unification and create new ad hoc institutions for governing the euro area.

Today we need to apply this strategy anew, exploiting a similar dynamic in order to achieve a constituent political objective and using, as leverage, an issue of vital importance to the eurozone countries: the creation of a separate, autonomous budget for the euro area. As many studies show, and as is also claimed by the European institutions themselves, such a budget (additional to the EU budget) would be an essential tool for guaranteeing the proper functioning of the monetary union and the consolidation of the same through the creation of a fiscal union. It would also be a key resource for boosting economic development and employment and for giving European society as a whole a prospect of progress once again. This budget should not be subject to the same restrictions as the current EU budget and it must be financed with own resources – e.g. with revenue from the tax on financial transactions or the carbon tax –, and may thus serve as a basis for the issuing of eurobonds.

Provision for an ad hoc budget for the eurozone could be made, as with the introduction of the ESM, through modification of Art. 136 of the Treaty on the Functioning of the European Union; this would allow the eurozone countries to enter into a treaty that, like the ESM Treaty, would essentially leave the institutional balance of the EU intact, while still giving the participating member states freedom to act outside the constraints of the existing Treaties. The object of this treaty could be limited, covering only the pooling of resources, such as those deriving from the tax on financial transactions, and the creation of a body responsible for managing them. Although, as such, it would constitute only an initial step, it would nevertheless raise the issues of democratic legitimisation (of this new body) and of the structuring of an institutional framework for the eurozone; in other words, it would be a step that, within a short space of time, would require completion through a revision of the Treaties.

The creation of an initial, embyonic eurozone budget is thus an initiative that could be rapidly accomplished and that would give out a very strong signal to the European citizens and to the international community, but only if it is accompanied by the manifestation of a clear political will to find, rapidly, a supranational solution to the problem of the institutional structure of the eurozone. For this reason, it is necessary to work, in parallel, to pave the way for the creation of a new, pre-constitutional agreement between the eurozone countries in which they will undertake to move from a provisional, intergovernmental government, to a federal government responsible for currency, taxation and the economy, democratically controlled by the MEPs from the eurozone countries.

These are the objectives on which the governments, political parties, and national and European institutions must focus in the run-up to the next European and national elections, drawing the European citizens into a constituent debate. Because choosing to do nothing, or pretending that these are issues that can still be postponed, amounts to leaving the way clear for those wanting to see Europe’s disintegration, and resigning ourselves to the decline, not just economic, but also political, moral and social, of our entire continent.


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