Vivien Schmidt Presentation on the Euro Crisis of Governance at Dublin European Institute

My recent UCD lecture draws on a report that I prepared for the European Commission. The EU’s economic crisis has generated a crisis of democratic legitimacy, as deteriorating economics and increasingly volatile politics have combined with restrictive governance processes focused on ‘governing by the rules and ruling by the numbers.’

Using the systems related terms of democratic theory, this paper first analyzes this legitimacy crisis in terms of problems with the ‘output’ performance of EU policies, the EU’s responsiveness to European citizens’ political ‘input,’ and the quality of the EU’s ‘throughput’ processes. It then considers how these play out for EU institutional actors—including in turn the ECB, the Council, the Commission, and the EP. The paper’s overall argument is that EU actors have sought to fix the economics and calm the politics by progressively reinterpreting the rules without admitting it in the discourse, and that such reinterpretation ‘by stealth,’ although perhaps beneficial for output legitimacy, risks generating further problems for input and throughput legitimacy.

The paper also shows that EU institutional actors differ with regard to their avenues for legitimation and their responses to fast burning versus slow burning phases of the crisis, with the main differentiation between technical and political actors. The paper finds that both EU technical and political actors have generated mixed responses from the public and analysts alike as a result of the disconnection between what they do and what they say. The ECB is seen either as ‘hero’ or ‘ogre,’ the Council as ‘dictator’ or ‘deliberative public body,’ the Commission as ‘ayatollahs of austerity’ or ‘ministers of ‘moderation,’ and the EP as a ‘talking shop’ or a potential ‘equal partner.’

The paper ends each of the sections on EU institutional actors with proposals in the short-term for modest remedies to the EU’s legitimacy problems, even without treaty change, plus some more bold solutions for the medium and long-term. It adds a final note centered on how to rethink EU governance if Eurozone economic governance deepens. In the conclusion the paper sets the crisis into the context of globalization, capitalism and democracy, and suggests possible future developments for EU legitimacy.

For the Commission, this paper highlights the need for leadership through greater flexibility and transparency in the reinterpretation of the rules, made possible by its new EP linked input legitimacy, and its now simultaneous accountability to the EP and Council. It also recommends a transformation in the Commission’s own approach to administering the rules—from community enforcer to community enhancer/facilitator/advisor within a more decentralized system of supervision/support. For all the institutions, it proposes a return to the long-standing institutional balance embodied by the Community Method. Among the other EU institutional actors, the ECB is to limit its focus to Euro-related issues of monetary governance, leaving economic policy orientation to the other institutional actors, while doing all the necessary as quasi lender of last resort and bank supervisor. The Council is to become a more open and transparent arena for political debate about the rules.

The EP is to be brought into all Eurozone decision-making, and better tied in with national parliaments, which will also see their role expanded. Finally, for the medium and long-term future, in addition to greater fiscal solidarity, the EU should end the unanimity rule, replaced by supermajorities with opt-outs, while treaty-based rules regarding the Eurozone are to become ordinary legislation, and therefore more readily amended. Moreover, instead of a Eurozone hard core with its own Euro-parliament the EU should be conceptualized as consisting of overlapping policy communities made up of clusters of member-states, in which all have voice but can vote only in the communities in which they are members.

The Understanding the Eurozone Crisis Seminar Series (Autumn 2015) was co-hosted by UCD Dublin European Institute, UCD College of Social Sciences and Law, UCD College of Business and UCD Industrial Relations and Human Resources Group.

Originally published November 25, 2015 at https://www.youtube.com/watch?v=ttPk3CQOZug&index=10&list=PLHKVjBSDqMB6VImr3bEut6Cp0In5Wrp7n