economic governance, nouvelle gouvernance économique

More than ever, Europe needs a debate about ideas!

For the last three years, European Union (EU) bureaucrats, with the general consent of European leaders, have generated a ‘mini revolution’ from Brussels. They have ratified, or soon will, a tremendous number of proposals, against the background of increasing risks related to the ongoing “euro crisis” and the urgent need for an enhanced economic governance.

The purpose of the present article is threefold. First of all, it aims at highlighting the democratic deficit that characterizes current EU’s crisis management. Secondly, it intends to show that the roots of the crisis are to be found in the neoliberal policies of the 80’s, directly inspired by the neoclassical economic theory that has been prevailed in the western world for centuries. Finally, the last section attempts to provide an answer to the essential question of whether or not economic liberalism is part of EU’s DNA, while introducing the cornelian dilemma of progressive Europeans on the purpose of the European construction.

A new governance architecture

Numerous steps were recently taken, bolstering the layout of a technocratic Europe, and giving birth to a new economic governance architecture. To name only three of them:

(1)   The Treaty on Stability, Coordination and Governance (the so-called fiscal compact), entered into force in January 2013 and requires Eurozone countries to respect a new budgetary “golden rule” limiting structural deficit to 0.5% of GDP.

(2)   The two-pack regulations, whose aim is to strengthen the Commission’s surveillance of national budgetary and economic policy, and further economic policy coordination (to be ratified this summer).

(3)   The Treaty Establishing the European Stability Mechanism (ESM), built on two pre-existing instruments (EFSM and EFSF), aims at providing sufficient institutional protection for the single currency with lending capacity of €700 billion.

Image: Jared Rodriguez / t r u t h o u t; Adapted: MayaEvening, Giampaolo Squarcina

A primary analysis of these recent mechanisms raises a cumbersome number of questions, especially over the independence of the European Central Bank (ECB), the shady twists and turns of the ESM (immunity of its staff, lack of transparency), and the disrespect of state sovereignty and of the subsidiary principle in regard to the new European Commission (EC) and European Court of Justice (ECJ) roles. Our governments are nowadays transferring ever more fundamental competencies to these technocratic institutions, which are subject to little if no democratic control. Moreover, these initiatives have been ratified following a new technocratic procedure that is difficult – if not impossible – to track, let alone influence by those who stand to lose out.

EU and economic liberalism

However, beyond these worrying considerations hides another substantially more afflicting concern: these new mechanisms seem to be out of tune with the real causes of the crisis. Since the 1980’s, right- and left-wing liberals have successively:

  1. Conceded systematic financial activity deregulations to financial lobbies;
  2. Formulated European treaties gradually imposing the suppression of any obstacles to the free movement of capital;
  3. Signed every World Trade Organization rule prohibiting any limitation on the liberalization of financial activities.

By doing so, governments have allowed the practices that were at the root of the crisis that detonated in 2007-2008. They let the banks grow too quickly, borrow too much, and create financial assets that were too risky. They stood by during the emergence of worldwide, all-powerful, private banks, such as Goldman Sachs, that later became ‘too important to fail’. In regard to these developments, the responsibility of the post-1980’s European leaders is overwhelming.

Additionally, since the construction of the European monetary system in 1983, those same institutions have been endowed with a prior mission of competition and deregulation, later translated in 1986 in the Single Act and then in the Maastricht Treaty of 1993. Gradually, those institutions have established a relentless competition between among Europeans and regions, the competition of all against all, disregarding social ‘acquis’ and the population’s aspiration for equal access to healthcare, education, culture, energy, transport, and decent social security. Applying the same logic, employers have been allowed (if not pushed), to look for the most ‘fiscally friendly’, ‘socially and ecologically least constraining’ country, within the EU, to settle down. To a larger extent, it is the same logic that prescribes unfair competition between companies that are based within the EU, with companies that moved outside, where wages are extremely low, work conditions equivalent to 19th century Europe, and where sanitary and ecological requirements are low or inexistent.

On such waters does Europe now navigate, trying to escape the storm while stubbornly refusing to update its maps and change its direction. It should be made clear here that no sustainable and socially fair solution to the crisis could be foreseen using these same old neoliberal economic recipes.

Towards a progressive Europe?

Confronted with the single currency crisis, unpopular austerity measures, and a lasting disenchantment with regard to the build-up of a ‘social Europe’, progressive politicians and intellectuals have been divided on the purpose of the European construction. In September 2012, in an article titled “Plus que jamais, l’Europe”, Jürgen Habermas called for a politically unified Europe, arguing this could only be possible under the condition of a substantial democratisation of Europe, that will affect the very nature of its powers and representativeness, and therefore its legitimacy. By doing so, he joined the ranks of those believing the EU could only be changed ‘from the inside’, and manifest his willingness to carry on the European spirit and conserve the acquis of forty years of common history. Moreover, he endorses the idea that the EU has become inevitable, in the sense that none of the Member States could nowadays play, individually, a substantial role in the world economy, the climate change issue, or the quest for Global Justice.

However, such a strategy could only work if progressive Europeans manage to bring the debate outside the narrow framework of the ‘European dogma’, which continuously opposes the Nation States “archaism” to “miraculous” Federalism. The EU should become a battlefield of real ideas. Beyond the present necessity for a more democratic Europe, and the urgent need for an economic and fiscal union, the main challenge for progressive Europeans is to bring Europe to question the ideology behind its construction. This implies for Europe to redefine its prosperity, outside the obsolete trade-off between debt-digging Keynesian New Deal and harmful austerity.

Recent developments suggest that lines are moving away from the conservative baseline. Member States have lately witnessed the European stability pact shattering, the modification of the ECB’s framework of intervention, and last but not least, the fortuitous silence of the European Commission in respects to the banks bailouts by Member States.

While speaking about European culture, we often attribute to Jean Monnet the following statement: “if it were to start anew, I would start from culture”. What Jean Monnet didn’t mention in his denunciation of a materialist Europe, is that when it turns to the European construction, nothing can be taken for granted. History has proved us that in the same way as institutions could be modified, treaties could be re-interpreted.

Sevan Holemans is currently a student in EU Interdisciplinary Studies at the College of Europe (Natolin). He holds a Master’s degree from the Economic School of Louvain and earned his bachelor’s degree from the faculty of economics at Clemson University in South Carolina.

To find more:

On the new economic governance of the EU:

The dilemma of European Left:

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