Crossing the line
Since the European debt crisis started, EU decision-makers have had to take crucial last-minute action in order to avoid the economic and financial mayhem that a euro break-up would cause. This has often been at the expense of legal Puritanism. Just ask Article 123 TFEU (European Central Bank (ECB) sovereign bond purchases ‘shall be prohibited’) or Article 125 TFEU (the EU or member states ‘shall not be liable or assume the commitments of central governments’, the now famous ‘no bail-out clause’). These legal provisions now feel as useful as Nigel Farage at a Europe Day celebrations.
Yet the recent crisis-fighting measures simply reflect the logical economic and financial implications of a project democratically and legally implemented 15 years ago: the Economic and Monetary Union (EMU). The problem is that the infrastructure was left incomplete – on purpose. This is why, paradoxically, the ECB had to break EU law (by purchasing the sovereign bonds of weak peripheral euro members to avoid an outright default) in order to respect EU law, as maintaining price stability in the Eurozone is at the heart of its mandate, and such stability would be harmed by a sovereign default. This situation created significant tensions amongst EU leaders, who have spent the past two years debating – just like John McEnroe would – whether a policy is ‘on the line’ or not.
Which legal provisions should be changed?
When you pretend to be a State – or a conglomerate of States – governed by the rule of law, reverting to legal uncertainty and improvisation is not a very good idea. Even if it is about avoiding a catastrophe. The prolonged ambiguity of EU rules could eventually threaten the credibility of the EU’s legal grounds. Over the long-term, it would also provide too much power to the Court of Justice of the EU, which would have to create ad hoc jurisprudence as legal cases come by, in order to fill the gaps that democratically elected governments were unwilling to complete.
If the EU really wants the euro to hold over the long-term, several Treaty changes would have to be performed. In order to allow the ECB to properly function as a central bank, it would have to be able to purchase sovereign bonds freely, although without abandoning its main objective (2% inflation). To avoid years of unnecessary confidence-eroding uncertainty, some form of sovereign debt-mutualisation would have to be implemented, which would have to be accompanied with tighter controls on public spending (eg. allowing the European Commission to veto national budgets) to avoid the excesses seen in the previous decade in Greece and the like. The upcoming banking union, with the ECB as supervisor of European banks and some form of mutualisation of bank debt (which would take place by allowing the European Stability Mechanism (ESM) to buy stakes in distressed banks), would also need a strong legal underpinning. Last but not least, a bigger EU budget is necessary in order to allow fiscal transfers to alleviate divergences in competitiveness. This would benefit everyone, as Europe’s wealth depends mainly on the strength and coherence of its single market – and the bigger it is, the better.
But all these apparently technical reforms are in fact highly political choices. Since changing EU Treaties requires a unanimous vote, renegotiating them would mean re-opening the Pandora box of conflicts and disagreements between ever more numerous member states, who all know they can block the process if they’re unhappy with what they’re getting (just like David Cameron, who blocked the Fiscal Compact in December 2011). In order to be successful, EU Treaties change would have to happen as part of a wider democratic reform of the EU, which acknowledges that it has several layers and that some countries want to move forward with integration faster than others.
The 8-years long Lisbon Treaty negotiations teach us that it can be a painful process. But the alternative – slowly letting the entire EU legal framework break down – is simply not an option. EU Heads of State showed they could act quickly and boldly in times of intense crisis, such as when they worked up and signed the Fiscal Compact and the Treaty creating the ESM in a matter of months. Some would argue that such a breakthrough was only made possible because of the intensity of the crisis. Well, the crisis is far from being over – especially for the 6 million young Europeans currently unemployed – so it is still urgent for EU decision-makers to take bold decisions to finally provide hope and a credible vision for a united and dynamic Europe that benefits everyone.