The changing space for EU politics

Transcription

1 The changing space for EU politics Democracy and ideology in times of crisis Olaf Cramme Policy Network Third floor 11 Tufton Street London SW1P 3QB United Kingdom t: +44 (0) f: +44 (0) e:

2 Abstract The casualties of the global financial crisis are already numerous, ranging from sustained output losses and far-reaching social aftershocks to dismal public finances. Today, many now fear that democracy and representation will be the next victim. In the European Union, in particular, the sovereign debt crisis seems to undermine popular perceptions of democratic politics at a time when deeper EU integration is being fast-tracked, driven by the sheer economic necessity of avoiding euro area break-up, or worse still, large-scale disintegration. The outcome will be a new conditionality regime pledging to guard Europe from future turmoil. Against this background, this paper re-visits the debate about the EU s alleged, perceived or real democratic deficit. It does so by looking at the changing space for EU politics and how political parties, both on the left and right, need to adapt in order to provide meaningful choices vis-à-vis European integration. It concludes that on current form politics will struggle to sustain Europe s direction of travel. About the author Olaf Cramme is director of Policy Network and a visiting fellow at the London School of Economics European Institute. He is also co-founder and vice-chairman of Das Progressive Zentrum, a Berlin-based political association and a member of the General Assembly of the Lisbon Council for Economic Competitiveness and Social Renewal. He publishes widely on the future of the European Union and European social democracy, and is editor of Rescuing the European project: EU legitimacy, governance and security (Policy Network, 2009), and co-editor (with Patrick Diamond) of Social Justice in the Global Age (Polity Press, 2009). He comments on politics, EU affairs and social democracy on 2 The changing space for EU politics Olaf Cramme October 2011

3 Contents 1. Introduction 4 2. The nature of democratic politics in the European polity 5 3. Policy conditionality in times of crisis 7 4. The changing space for EU politics Can there be clear ideological differences in a crisis-driven EU? 13 3 The changing space for EU politics Olaf Cramme October 2011

4 1. Introduction The casualties from the global financial crisis are already numerous: the immediate economic recession led to sustained output losses and wiped out a huge share of wealth, in particular in the most developed nations; a series of social aftershocks exacerbate prevalent clusters of poverty as well as tensions in the labour market and the pension systems; and costly bank bail-outs have not only left public finances in a dismal state but also, in part, triggered a devastating sovereign debt crisis in the eurozone, seemingly driving the common currency and European continent into political abyss. But there is a growing feeling among electorates that the long-term damages to our societies may yet claim another victim one on which everything else depends: democracy and representation. 1 This popular apprehension is driven by the perception that the burden of crisis adjustment remains grotesquely uneven. The global elite of political regulators, financiers and bankers, who caused the financial crash in the first placed, has re-emerged largely unchanged, if not untouched, while many ordinary workers and families find themselves squeezed to unbearable levels. Amidst the resulting social unrest, most visibly in Greece, inequality is set to rise across much of the OECD world. To be sure, anger has also turned against the wider institutional settlement which stands accused of complicity and making matters worse. At the global level, the IMF has come under increased scrutiny, especially from the leading developing economies. Serious questions are being asked about its capacity to ensure financial stability worldwide and address the often diverging concerns of its stakeholders. In Europe, a debate is unfolding about the unruly concentration of power that is held by large, typically multinational, corporations and their impact on local communities and businesses. Yet this debate is not only confined to the economic realm: the quality and responsiveness of public policymaking is seen as an equally pressing issue. 2 Neither the state nor the market would presently do well in any form of popularity contest. Against this backdrop, recent rumblings about the European Union s alleged, perceived or real democratic deficit are far from new. Scholars have been arguing about it for years, if not decades. On one extreme, it is said that EU practices are basically no less democratic than those in its member states, and that for instance low participation rates in European elections, the negative referenda in France, the Netherlands and Ireland, and the technocratic nature of EU politics are all wholly unsuitable criteria for exposing legitimacy problems. 3 This view seems to be somewhat endorsed by data from Eurobarometer, suggesting that trust in national governments and parliaments is often much lower than confidence in the European institutions. 4 On the other hand, the increasing might of non-political actors such as the European Court of Justice and the European Central Bank, the rise of anti-eu populist parties across Europe, or the familiar weaknesses of the European Parliament, are put forward to highlight the worrying state of accountability and representation in EU affairs. With salient policy issues such as immigration and calls for tax harmonisation gradually moving centre stage, the permissive consensus on European integration seems to be cracking, and fast. 5 In the past, for as long as the EU could rely on the output dimension of its legitimacy, this debate, despite a fair degree of public acknowledgment, only triggered limited reaction the most prominent exception being the UK. Indeed, ambivalence towards this predicament is shown by surveys which reveal that many citizens are both sceptical towards the EU and want it to do more in a number 1. An earlier version of this paper was first presented and discussed at the annual conference of ELIAMEP Adjusting to the Crisis: Policy Choices and Politics in Europe, Poros Image, Greece, 7-10 July See Priorities for a new political economy: Memos to the left, published by Policy Network, Andrew Moravcsik, The Myth of Europe s Democratic Deficit, in: Intereconomics, Journal of European Public Policy (Nov-Dec 2008). 4. Eurobarometer 73, Fieldwork May 2010, Publication November See various chapters in Olaf Cramme (ed.), Rescuing the European Project: EU Legitimacy, Governance and Security (London: Policy Network, 2009). 4 The changing space for EU politics Olaf Cramme October 2011

5 of policy areas, such as climate change and foreign affairs. It was therefore safe to argue that the Union, by competently going about its core mission of securing prosperity in its member states, was rather successful at brushing aside any major concerns about its democratic standards. The outbreak and subsequent ramifications of the eurozone crisis, however, have significantly challenged this assumption. Great doubts have emerged about whether democratic politics in the EU can handle the major socio-economic issues at stake. The purpose of this paper is to re-visit this debate against the background of two fundamental developments: first, the new level of policy conditionality which characterises the relationship between the EU institutions and some of its member states, in particular in the southern periphery of Europe; and second, that a radical push for further European integration is propagated as the only serious way out of the eurozone crisis that does not risk a break-up of the euro area or, worse still, large-scale EU disintegration. 2. The nature of democratic politics in the European polity Measuring the quality of democracy in nation states takes into account a variety of political and non-political factors, ranging from freedom of expression and the strength of the electoral system to performances on gender equality and the environment. But at its core, good democratic politics is about agreeing on rules and procedures, and then arguing about the policy substance. For this to happen, both the mainstream left and right unambiguously subscribe to core constitutional pillars but disagree on how to best use the space in between the defined limits. Electoral minorities accept defeat at elections in the knowledge that they will be given a later opportunity to have another shot at the title. It is this separation of constitutional and ideological politics which facilitates the healthy contestation to which both the public and political parties can duly relate. Great doubts have emerged about whether democratic politics in the EU can handle the major socio-economic issues at stake As a matter of fact, these conditions merely exist at the national level where democracy has reinforced and strengthened itself over a long period of time. In the EU, however, procedures can be as much subject to political controversy if not more as policy content, creating an additional layer of complexity which impacts on the normative debate about Europe s future. Scholars, like Sverker Gustavsson, therefore speak of a double asymmetry when they look at the challenges to democratic politics in a transnational context. 6 In the case of the EU, this asymmetry boils down to a procedural and a political dilemma: on the one hand, there is the mismatch between the degree of centralised decision-making and the predominantly decentralised nature of electoral accountability. Despite the European Parliament s new powers, heads of governments who give their consent to EU-wide legislation and initiatives continue to justify their respective action visà-vis their own national constituencies. On the other hand, the political and legislative threshold for removing barriers to the four freedoms as enshrined in the Treaty (negative integration) is significantly lower than implementing common rules and standards to mitigate any adverse effects that the free movement of capital, goods, services and labour might cause (positive integration). In ideological terms, this often results in a dispute over market-making versus market-correcting policies whereby the right and the left have to rely on widely diverging premises. Social Europe is therefore increasingly presented as an antidote to creating and deepening the Single Market. 6. Sverker Gustavsson, European transnational constitutionalism: end of history, or a role for legitimate opposition?, in: Elisabeth Őzdalga and Sune Persson (eds), Contested sovereignties. Forms of government and democracy in Eastern and European perspectives. London, IB Tauris, The changing space for EU politics Olaf Cramme October 2011

6 What is the answer to this double asymmetry? The academic debate largely wrestles with the question of whether it actually poses a problem or not. Some regard the constitutional settlement of this mixed polity as a major historical achievement, allowing Europe s troubled nation states to combine truly open markets with sufficient self-determination in the social realm. 7 They point towards the global triumph of market liberalism and the ability of well-governed countries, such as the Nordics, to successfully square the circle between opportunities and unavoidable constraints. Others, however, believe that the EU should better accommodate the different societal interests brought about by new economic, cultural, ethnic and religious cleavages. The proposed remedy is to inject a good dose of politicisation, providing the EU with the necessary means to absorb the often conflicting currents and feed them back into decision-making processes. 8 The supposition is that this will accommodate a better balance between perceived economic imperatives and divergent social demands. Albeit intriguing, none of these scholarly schools of thought seem to resonate or chime with real politics. This is not to suggest that policymakers across Europe are ignorant about the tensions emanating from the EU s idiosyncratic institutional set-up. Rather, they tend to choose a different path in addressing them. Three different practices ought to be distinguished: first, the push towards a genuine federalist model where the European Parliament ultimately becomes the bearer of democratic politics while social, fiscal and other contentious policies are gradually drawn into the competences of the EU; secondly, the attempt to undermine, if not re-nationalise, some of the previously integrated policy areas while cementing the prerogative of intergovernmentalism. Both federalists and confederalists thus share the view that democratic accountability and actual decision-making should take place on the same constitutional tier: either at the national or at the federal level (Gustavsson); thirdly, defending the institutional status quo whilst reverting to political intervention when an overly eager application of Community law (in particular with regard to the four freedoms) appears to attack or undermine national self-determination. In other words, there are those who believe that procedural and substantive aspects of EU politics can be separated as long as the national sensitivities of member states are suitably respected. It explains, for instance, why the markets for capitals and goods are still treated very differently to those of labour and services, which are, of course, much closer to the real life experience of EU citizens. So far, it is this latter practice which has been the dominant force in Europe, proving reasonably successful in controlling the space within which left-right politics can operate. In the national context, extreme positions are integrated into a menu of policy proposals which, broadly speaking, favour either incremental market-making or market-correcting measures. The different grades for passing the political and legislative threshold are accepted on the basis that European integration ultimately contributes to both social and economic objectives, for instance through the positive impact of growth on jobs and disposable fiscal revenues. At the same time, constitutional politics is outsourced to the European Parliament, or in rare cases, to national referenda. Pan-European parties such as the European People s Party (EPP) or the Party of the European Socialist (PES) can be trusted because they are bound to respect the divergent views of their political family on institutional matters and are therefore unlikely to become an agenda-setter in their own right despite this theoretical possibility. All this allows moderate ideological contestation to take place: not in its pure form as practiced in the national context, but sufficiently enough to give the perception that active democratic EU-level politics takes place. 7. Giandomenico Majone, Dilemmas of European Integration, Oxford University Press, 2005; Andrew Moravcsik, The European constitutional settlement, in; The World Economy, 31 (2008): Simon Hix, What s wrong with the European Union and how to fix it, Polity Press, The changing space for EU politics Olaf Cramme October 2011

7 Yet the entire system relies on a simple principle: that of proportionality. In order to prove its own legitimacy, European integration has to strike a delicate balance between national autonomy and the precedence of Community law; between the views of shifting political coalitions; and between different policy ambitions, be they monetary, macro-economic, social or cultural. Politics and jurisdiction have entered an ambivalent relationship premised on mutual checks and balances, and held together by implicit consent on the precept of (ever closer?) EU cooperation. The superiority of EU rule is no longer only judicial but now also politically buttressed This principle has now been seriously shaken: in response to the crisis, Europe s leaders rigorously promoted the overarching primacy of European interest to maintain the stability and unity of the common currency. None less than German Chancellor Angela Merkel made this case by repeatedly arguing that if the euro fails, Europe will fail. Put differently, the superiority of EU rule is no longer only judicial but now also politically buttressed, inevitably reducing the margin of discretion which proved indispensable for sustaining the confidence of Europe s citizens. At the heart of this settlement is a new level of policy conditionality. 3. Policy conditionality in times of crisis The macro-economic policy choices were, of course, already subject to numerous constraints long before the outbreak of the crisis. In the case of EMU, monetary and exchange-rate instruments were passed on to the independent ECB, which responds to inflationary pressures arising through-out the entirety of the eurozone, as opposed to single countries. In addition, the Stability and Growth Pact (SGP) sets clear limits on the use of fiscal policy for spurring growth and domestic demand. Although its effectiveness has been subject to repeated controversy most prominently in 2003 when both Germany and France broke the rules and pushed through an amended framework the SGP certainly reinforced the shift to a more uniform application of supply-side economics. This particular set-up of EMU has now proven to be seriously flawed: it did not prevent the member states drifting apart in terms of export competitiveness, unit labour costs and current-account deficits; it even contributed, as some have argued, to fuel price and asset bubbles in those countries where the one-size-fits-all interest rate of the ECB was simply too low for a sustained period of time. 9 The question now is to what extent this severe economic shortcoming is matched by political brinkmanship. Until the crisis, the public largely subscribed to the view that the imposed constraints are justified by the perceived and real benefits of belonging to EMU. Proportionality prevailed in an evolving, new kind of polity that was clearly recognised as such by EU citizens. The sovereign debt crisis, however, has radically changed the terms of the debate, inasmuch as economic necessity and not political choice is overwhelmingly driving Europe s response. The benchmark and threshold for how much policy conditionality is actually reasonable is, hence, being seriously challenged: on the one hand by the EU s conduct in regard to the bail-outs; on the other hand by the preparations for a new rules-based rescue system, spearheaded by the European Stability Mechanism (ESM) which is supposed to come into force by 2013 at the latest. The history of bail-outs has shown that liberal democracies are most willing to accept a partial, if not substantial, loss in national self-determination as long as (a) it is temporary and (b) there is a clearly 9. See Fritz Scharpf, Monetary Union, Fiscal Crisis and the Preemption of Democracy, LEQS Annual Lecture Paper, London School of Economics, May The changing space for EU politics Olaf Cramme October 2011

8 established relationship between the cause of the problems and how the imposed measures serve the national interest above all other considerations. In the case of the eurozone crisis, those basic political stipulations remain less clear. For a start, the financial support offered to affected eurozone countries is not only subject to strict conditionally (i.e. austerity), but also embedded into a long-term surveillance mechanism to permanently control public spending, thus going far beyond the duration of the emergency loans. At the same time, the political discourse of creditor countries is dominated by the objective of saving the common currency as opposed to helping the country in need (i.e. solidarity). While this enlightened self-interest is perfectly logical and legitimate from one point of view, it also challenges popular acceptance of conditionality in the debtor country. The boundaries between what serves them and what serves us have become blurred to the detriment of rational argumentation. In the EU, this meant a considerable shift in the practice of democratic politics: public contestation had to be sacrificed for a common good (i.e. the euro), defined and spelled out by external players. Parliamentary debates or even elections in Greece, Portugal and Ireland could not affect in the slightest the previously agreed arrangement between the ruling government and the EU. Even in Finland, parliamentary conventions were thrown overboard to accommodate external pressure. Proportionality got a new denotation. The arrival of the European Stability Mechanism has the potential to be a real game changer, granting the EU substantial new powers Yet it is not only crisis management which is visibly impacting on the space for democratic politics in the eurozone. A whole set of EU instruments and initiatives have been designed to elevate policy conditionally and convergence to new levels. The reformed SGP, the European Semester, the Euro- Plus-Pact or the EU-2020 strategy all attempt to push member states towards a more prudent path of fiscal policy by toughening budget rules as well as coordination procedures, while encouraging deeper supply-side reforms to make Europe s economies more competitive and sustainable. True, previous attempts along these lines have failed because of unclear or weak enforcement rules: it was always unlikely that member states would punish each other in the European Council or impose fines on already struggling members. But the arrival of the European Stability Mechanism has the potential to be a real game changer, granting the EU complementary and substantial new powers. 10 Designed as a monetary fund similar to the IMF, the ESM s core purpose is to safeguard the stability of the euro area as a whole ( 136 of the Lisbon Treaty). Although its preferential tasks will be to provide emergency funds to struggling member states in case of liquidity problems, its mandate strongly incentivises, if not presupposes, the exertion of direct influence on national economic policy through the provision of sober assessments when the stability of the eurozone is actually under threat and when and what kind of adjustment is subsequently required. Formal competences are thus complemented by comprehensive informal ones which are likely to create their own momentum. In other words, the ESM is set to become the corner stone of EU economic governance, with the margin of discretion moving further away from a traditional understanding of politics and closer towards large-scale transnational coordination, including strong technocratic surveillance. Both the conduct of current bail-outs and this reinforced conditionality regime (Vehrkamp) will leave a profound mark on European democracy. The EU has entered unchartered political waters in its attempt to shed the sovereign debt crisis and avoid fragmentation, or even disintegration. Whether or not the newly imposed discipline will ultimately be regarded by Europe s citizens as proportionate to the requirements and benefits of common currency union remains, indeed, fiercely contested. 10. For a good summary (in German), see Robert B. Vehrkamp, Who s next? Die Eurozone in der Insolvenzfalle, Spotlight Europe, April The changing space for EU politics Olaf Cramme October 2011

9 Much will depend on whether the political mainstream on the left and right can effectively occupy the changing space for EU politics by providing meaningful choices vis-à-vis European integration. 4. The changing space for EU politics To appreciate the principle political choices on the table in a reformed and tightened EMU conditionality regime, it is worth using Dani Rodrik s impossibility theorem as an analytical tool. 11 According to his research, the world economy is faced with an inescapable trilemma, namely that we cannot simultaneously pursue democracy, national determination and economic globalisation. If we want to push globalisation further, we have to give up the nation state or democratic politics. If we want to maintain and deepen democracy, we have to choose between the nation state and economic integration. And if we want to keep the nation state and self-determination, we have to choose between deepening democracy and deepening globalisation. Rodrik acknowledges that they are not stark alternatives, in that some combinations and compromises are possible within the three objectives, but that inherent tensions exist between them and we therefore have to think through the consequences if we strengthen one side over the other. Put differently, the main challenge may not necessarily be getting the economic policy framework right against the background of open commodity and capital markets, but rather how to deal with the prevalent political trade-offs. Europe s political trilemma (Adopted and modified from Rodrik/O Rourke) The EU seems to be an ambitious attempt in transnational governance which can test, if not circumvent, these powerful hypotheses. Indeed, the eurozone crisis both its origins and the reaction to it indicate that EMU is operating within a very similar set of dilemmas. For instance, the political decision to keep fiscal policy under national authority in order to respond to demands arising from democratic politics has undermined the proper functioning of monetary integration (the third objective ). Or as Kevin O Rourke points out, the preference of European citizens for closer banking regulation is held back by the combination of deep economic integration and the prerogative of national autonomy in this area Dani Rodrik, The Globalization Paradox Democracy and the Future of the World Economy W.W. Norton & Company, New York and London, Kevin H. O Rourke, A Tale of Two Trilemmas, Conference Paper, March The changing space for EU politics Olaf Cramme October 2011

10 Of course, this political trilemma must not only be applied to EMU but can also be useful for understanding more widely how deeper political integration in Europe is affected by a shifting emphasis on either democratic accountability or national sovereignty. In the case of foreign policy, for instance, the push for integration while maintaining a national veto defies demands by Europe s citizens to put decision-making in this area on a more reliable footing, i.e. in the hands of a central body capable of decisive action. Similarly, strong views on migration among large parts of our populations and national sensitivities have so far prevented a better coordination of policies, let alone harmonised standards and rules. The erosion of the Schengen Agreement through unilateral action by a number of countries in recent months is a case in point. The fundamental insight is that in any emerging polity which attempts to transcend national borders, all three basic objectives that of deeper political and/or economic integration, upholding democratic standards/responding to democratic demands, and reinforcing sovereignty must be subject to intense political contestation. Hence, this concerns both policy and constitutional issues: the former primarily relating to questions of more or less harmonisation, common rules, and standards or competition in a particular area; the latter on the axis between accountability in its traditional and recognised form, and national self-determination. Deeper political and economic integration is likely to divide the political space between a majoritarian mainstream and more radical or populist voices As I have argued above, EU policymakers have so far been quite successful in limiting the discussion on European integration to the horizontal dimension of conventional left-right politics while largely excluding the vertical dimension of institutional choice. This was possible because (a) democratic politics was apparently given a sufficiently wide space to argue about policy content in relation to deeper or looser integration, and (b) through diligent application of the principle of proportionality as well as the use of the discretionary power which both political and non-political actors hold in the EU set-up. As a result, European integration managed to progress without getting seriously caught-up in the trilemma trap. Thus, the imperfect nature of EU governance was merely an expression of equilibrating the three different poles all of which enjoy strong affirmation within the diverse EU family. Then came the crisis and the decision by Europe s elite to opt for radical integrationist measures, both short term and long term, in order to stop the eurozone from unraveling. By looking again at the political trilemma, the likely implications of this decision for democratic politics in the EU ought to become clearer: assuming that the euro survives the imminent pressure, deeper political and economic integration is now basically a given and likely to divide the political space between a majoritarian mainstream (supportive of the overall direction) and more radical or populist voices (fiercely critical of EU integration). Political discussion will increasingly focus on how the agreed macro-economic and policy framework can best be implemented and dealt with. Inevitably, these changes will reduce the salience of the horizontal dimension (the substantive aspects) and elevate the vertical one (the procedural issues). In other words, there is good reason to believe that policymakers will find it much harder to channel EU politics on a constructive path away from constitutional disputes and towards policy substance. 10 The changing space for EU politics Olaf Cramme October 2011

11 5. Can there be clear ideological differences in a crisis-driven EU? To be sure, the consensus over deeper political and economic integration as a response to the eurozone crisis is fragile. Vocal groups in EU net-contributor countries, such as Germany, Finland and the Netherlands, or indeed in the member states subject to harsh EU bail-out conditions, such as Greece, are likely to continuously question the wisdom of Europe s present journey. Intra-EU tensions are bound to increase and temporarily disrupt the process of setting up reinforced transnational policy coordination. But this particular challenge will be very different to the discussions about how the EMU can function more effectively, to which both centre-left and right have basically subscribed. From this perspective, a common banking resolution fund, eurozone bonds or even the creation of a European ministry of finance, as recently proposed by Jean-Claude Trichet, 13 can be counted as mere technical innovations to which EU leaders will have to commit in some form or another in the years ahead. Faced with the pressures of the new conditionality regime, the major political controversies are likely to be around some of the more radical policy measures which, as some have argued, will be required to effectively reduce the EMU s damaging macro-economic imbalances. Here, the proposed menu of choice is equally extensive, ranging from a pan-eurozone contributory unemployment benefit scheme in which EU workers would subsidise the unemployed instead of creditor nations paying for debtors, to co-ordinated wage bargain systems to ensure a suitable policy mix capable of maximising non-inflationary growth and employment across the entire eurozone. 14 The crux of the matter is that the ideological dividing lines are, at first glance, far from clear on most of these policy proposals. Even if the rhetoric of market-making versus market-correcting will persist (at least in the short/mid-term), both the left and right will take major issue with either limiting national control or diminishing democratic standards on anything to do with wage setting or unemployment insurance to name just two. Pursuing traditional social and economic objectives, such as reducing inequality or incentivising work, will require a careful re-think in this emerging integrationist settlement, characterised by new institutional predicaments, unknown procedural dynamics and further policy spill-overs. Both national and pan-european parties will have to take huge steps forward in terms of defining and then capturing Europe s emerging political space In any scenario, the EU s output-oriented legitimacy remains absolutely indispensible and will be a huge challenge in itself. But this time it looks like a mere precondition for taking on the often conflicting demands for more democracy and more sovereignty. This means that EU leaders and their political parties, both national and pan-european, will have to take huge steps forward in terms of defining and then capturing Europe s emerging political space. To bring European citizens on board such an offer will have to satisfy popular perceptions of democratic representation. On current form, politics does not look equipped to deliver. 13. Jean-Claude Trichet, Speech on receiving the Karlspreis in Aachen, June See Wolfgang Münchau, Ingredients of a European political union, and Why debt rescues will boost the scenario of a closer union, Financial Times, 5 and 12 June The changing space for EU politics Olaf Cramme October 2011