Democracy in the EMU in the Aftermath of the Crisis

After the Treaty of Lisbon a variety of rules referring to democracy were incorporated in Title II of the Treaty establishing the European Union (TEU). The way in which representative and non-representative democratic principles are combined in the European Union legal system is not a unitary one, but it changes depending on the fields of competence of the Union. The paper will focus on the effects that the reforms introduced in the period 2011–2013 had on the combination of representative and non-representative democratic principles in the economic branch of the EMU. To that effect the original design of the role of democratic principles in this field will be briefly described. Then, a brief overview of the different rules included in the new law of Economic and Monetary Union, referring to democratic principles, will be provided. Finally, the contribution will evaluate the overall impact of the reforms carried out on democracy in the EMU. The following issues will be particularly addressed: (A) Are these clauses integrated into a complete strategy concerning channels of democratic legitimacy in the law of the EMU? (B) Is this strategy compatible with the TEU stance on democratic principles? (C) Can non-representative democracy principles be considered a real counterweight to the shrinking of representative democratic legitimacy in the EMU and in the fiscal policy of the Member States?

According to Article 10 TEU, the functioning of the Union and of the EMU shall be founded on representative democracy. The democratic principle is all the more necessary since economic governance is characterised by its institutional complexity. It calls for a more empowerment of the European Parliament in the EMU. In the European multilevel democratic system, the national Parliaments shall be involved in the economic governance. However, the involvement of the European Parliament and national Parliaments remains limited. Furthermore, the financial and sovereign debt crises triggered substantial reforms of the EMU that have diminished the role of the Parliaments in the European and national decision-making processes. In contrast, due the so-called “monetary” and “economic” dialogues, there is a promotion of Parliaments in accountability process of the EMU. Finally, an important issue arises with the mutation of parliamentary role: the competition between European Parliament and national Parliaments requires an inter-parliamentary cooperation. Provide legitimacy for the EMU has thus brought changes to the parliamentary role in a multilevel constitutional system.

This chapter aims to analyse the recent shift in the allocation of powers within the EMU institutional framework. In the words of Angela Merkel, a new Union method is emerging from the Lisbon Treaty. The management of the subprime crisis and sovereign debt crisis gave rise to practical institutional arrangements and the adoption of new secondary law whereby the European Council, as well as the Euro Summit were conferred on new political responsibilities. However, as we argue, this development in intergovernmental cooperation takes place with proper regard for the institutional balance and the complex system for the balancing of powers within the EMU. Following all the crises and reforms, EMU governance is neither more supranational nor more intergovernmental. It is both at once. To our way of thinking, to try to set the two approaches against each other would be a sterile exercise. EMU governance—and, in a broader sense, EU governance—is intergovernmental and supranational. It cannot be otherwise, so long as the EU bears the imprint of a twofold requirement: to achieve unity while respecting diversity.

The economic dialogue was created in 2011 in order to increase the European Parliament’s scrutiny powers in the framework of the new European economic governance. With this new mechanism, Parliament’s Committee on Economic and Monetary Affairs can invite top officials from other EU institutions to take part in an exchange of views, increasing the accountability of the decisions taken and ultimately reinforcing the democratic legitimacy of Economic and Monetary Union (EMU).

A legal analysis suggests that Parliament’s limited powers as well as the shortcomings in the economic dialogue provisions are at odds with the ambitions of this mechanism. Practical evidence however shows that the dialogue has proved remarkably adaptable to the new reality of EMU, leading to the development of a forum for regular public exchanges between Parliament and the key players in the new European economic governance. Nevertheless, the superficiality of the debates, demands by MEPs for visibility and Parliament’s marginal powers remain major obstacles for a real exercise in accountability.

Since the outburst of the Euro-crisis, legal measures adopted by the Member States and the institutions of the EU have produced a major centralisation of powers in the field of economic governance. Recent proposals to achieve a deeper and more genuine European Economic and Monetary Union—and especially the June 2015 Five Presidents Report on “Completing Europe’s EMU”, and the October 2015 European Commission communication “On Steps towards Completing EMU”—have called for further centralisation of powers in the Eurozone. In particular, both documents have proposed the establishment of so-called independent competitiveness councils which would advise State Governments on what structural reforms to undertake nationally as a way to boost growth. The purpose of this contribution is to shed a critical light on these recent proposals discussing the perils that centralisation poses on the balance of power between the EU and the Member States. The chapter, in particular, questions whether the objective of a full centralisation and control of national economic policy can be effective and legitimate. As an alternative, it considers what advantages would be connected to the creation of a genuine EU fiscal capacity: to this end, the chapter explains how an EU fiscal capacity could support the functioning of EMU without bringing about a full centralisation of national economic policies.

After the Eurozone crisis, European Union (EU) Member States have the obligation to establish independent fiscal institutions (IFIs)—also known as fiscal councils—composed of recognised experts responsible for the monitoring of the compliance with fiscal rules in accordance with European norms. Eurozone Countries are the first addressees of this obligation and are bound by stricter legal constraints than States outside the Euro area. The form these IFIs take varies from one Member State to the other and so do their powers. In any event, in requiring their creation, the European norms have potentially led to a reorganisation and a change in the institutional balance at national level. At the same time, they may have participated to the improvement of democracy in ensuring more independent expertise, transparent and public information, and knowledge that Parliaments can use to control and scrutinise their Government’s actions, although the fiscal councils themselves remain weak. In this context, this contribution aims to answer the following research question: Do IFIs, according to the new European and national rules of implementation, constitute a threat to democracy or, rather could they, in fact, enhance democracy?

The European process of integration is currently suffering an identity crisis. The outbreak of the sovereign debt crisis revealed serious democratic deficits, which have characterised the construction of the Economic and Monetary Union (EMU). The necessary involvement of democratic institutions in the functioning of the new economic governance has to deal with the process of multispeed integration. Pushed by the need to save the single currency from the possibility of collapse, the Member States of the Eurozone have accepted significant limits of their sovereign prerogatives of economic policy and are discussing the establishment of a Fiscal Union. In order to prevent this limitation of national sovereignty from turning into a loss of democracy, it may be opportune to establish a Eurozone parliamentary scrutiny in charge of co-decisions on economic and fiscal matters together with the Eurogroup and the Euro Summit. This proposal has been put forward by a number of European leaders in recent times with increasing pressure. The paper will explore the legal opportunity and feasibility of creating a Eurozone parliamentary scrutiny in the light of the existing political debate on the future of the EMU.

During the long years of the Euro-crisis, the European Central Bank (hereinafter ECB) played (and still plays) a really significant role to support states in crisis or banks facing lack of liquidity. As a consequence, it has been accused in the political, but also academic debate to exceed its own powers. First of all, the allegations were related to the scarce respect of its own legal framework (competences and limits established by the EU Treaties); secondly, they regarded her invasion of the field of economic policy while it had to limit its intervention to monetary policy; finally, it was pointed out how it played a too “political” role. This chapter aims to dismantle such criticisms showing how the ECB’s intervention—even if unconventional—was required by the critical moment and felt within the scope and the borders of monetary policy. Finally, it will address the peculiar “political” activity of the ECB, which is a technocratic institution inevitably called to exercise a discretion within the range of multiple policy options. Its freedom of judgment has to be grounded and duly motivated on economic reasoning, relating it to price stability. Nonetheless, it remains relevant.

In the past 7 years, the EU has adopted various measures to react to a banking crisis. In a context where the incompleteness of political union has been one of the major drawbacks to the European reaction to the crisis, the European Central Bank (ECB) has had to play a role as substitute for political institutions. The ECB’s interventions have been both conventional and unconventional; the latter often criticised and challenged in European and national Courts. The first part of this study aims to define the ECB’s “unconventional” measures, which derive from the economic practice. Then the applicable rules to ECB actions are discussed, together with their interpretation, provided by the Court of Justice of the European Union and the German Federal Constitutional Court, the latter being particularly active on the point. Finally, the study attempts to apply these principles and practices to the unconventional measures adopted by the ECB to verify their effective implementation.

The crisis has shown how the financial markets move very rapidly and the reaction times of democratic institutions are too slow for preventing the negative effects of financial turmoil. In this framework, the ECB has been very active since the beginning of the crisis and its action helped the Eurozone to avoid its economic and political collapse. Nevertheless, the ECB’s action has been strongly criticised because it would appear to contravene EU rules and have probably had the effect to modify its role. The ECB would no longer be a technocratic institution, but the central hub of EU economy policy making, without any democratic effective control. This chapter intends to underline how the supposed democratic deficit can be avoided or limited by strengthening the ECB’s transparency and accountability, safeguarding its independence from political influence.

The purpose of this chapter is to single out the features of the European Banking Union that are most problematic to achieve solidarity among Member States. The focus will be on three elements of the European Banking Union where solidarity proves particularly difficult to be achieved: the Single Resolution Fund, the direct recapitalisation instrument of the European Stability Mechanism and the European Deposit Insurance Scheme.

In the context of the new legislation establishing a banking union in the EU, some reporting and democratic accountability duties have been established for the Single Supervisory Mechanism (SSM) and the Single Resolution Board (SRB), essentially to the benefit of the European Parliament and of national Parliaments, as well as of the Council of the EU. These democratic tools reflect in their conception and first applicative praxis those existing for the ECB and can be considered a first attempt to counterweight the marginalisation of the democratically elected bodies in the adoption of responses to the financial and economic crisis. Being it conceived as an esthetic operation or not, and notwithstanding their mild pervasive power, these democratic tools can play a role in strengthening the legitimacy of the SSM and SRB and their actual capacity to make a contribution to preserving financial stability in the EU.

In this contribution, the recent institutional reforms introduced by the EU in the banking sector—in particular, the establishment of the European Banking Authority and the Banking Union—will be analysed and assessed against the democratic requirements of representation, accountability and the pursuit of the people’s interests. The analysis will assume that three institutional features are crucial for the fulfilment of these three democratic requirements, and thus for assessing the democratic legitimacy of the new institutional set-up. These determinants are: centralisation, independence and the regime of accountability. As result of the examination, various democratic institutional weaknesses will be highlighted.

This paper is aimed to examine the Single Resolution Mechanism (SRM) and the Single Resolution Fund (SRF), with particular reference to the effective level of control on their activity and the potential democratic deficit stemming from them. To this end, it first provides a definition of resolution for banks, followed by the examination of why the efficiency of prudential supervision in the Euro area is significantly linked to a centralised system of resolution. Within this ambit, it illustrates that the SRF is financed by contributions from the banking sector which transfer is based on a separate intergovernmental agreement between the Member States of the Euro area. After, it analyses the relationships between the SRM and the European Banking Authority (EBA) and their several implications. Finally, the paper tries to show whether, and to what extent, it is possible to overcome the democratic deficit in the SRM and the SRF and its contradictions.

Contrary to common expectations, the importance of EU law has grown during the State debt crisis. Law is used as an argument, it may be a tool of power, it can learn and it may reach its limits. EU law scholarship must react upon this greater role of law. Influences by national traditions must be detected and simplifications in transdisciplinary discourse eliminated. There are many untenable assumptions that are taken for granted in the current debate.

When intended to complement EU law or to enlarge its application to Third Parties, international treaties can empower the ECJ with additional tasks beyond the realm of EU law. This paper explores both the potential and legal constraints of the ECJ’s extra powers, building upon some selected cases of practice. It argues that if one looks at this practice in depth through the prism of the purposes for which such special category of treaties were enacted and the reasons that led to them, the common denominator for involving the ECJ can be identified in the need to safeguard their consistency with the fundamental role the ECJ enjoys in the EU legal order under Article 19 TEU. The reference to the ECJ, both for solving disputes between themselves and for protecting individual rights as guaranteed by EU law (or by provisions which are identical in substance to it), is not just in line with the principle of institutional conferral. It is also a route the Contracting Parties are bound to take in order to respect the autonomy of EU law.

This article examines the birth and development of the OMT programme and its implications for the EU integration process. It then analyses the OMT case from two perspectives. First, as an example of “Institution building” in the European Union: developments that lasted 2 years (2010–2012) and allowed the EU to establish a “permanent” programme which was capable of ensuring the effective exercise of ECB monetary policy. The legality of the OMT was recently confirmed by the Court of Justice in the Gauweiler judgment. Second, the OMT case reveals evident Member State dissatisfaction with the working of the European Union. This is highlighted in the sui generis 2014 preliminary reference of the German Constitutional Court, regarding the methods and the conclusion reached, on the legality of the OMT. The BVerfG reference led to the 2015 Gauweiler judgment. This position (as well as, before it, the position of the Bundesbank on the same issue) shows, ultimately, a distrust in the ability of the Union to enact, in the general interest of the Member States, measures in areas where the legislative power is now transferred to the European level. This situation resembles mutatis mutandis the 1832 “nullification crisis” between the State of South Carolina and the Federal Government of the United States of America. By analysing this phase of American legal history, the article tries to identify a common pattern of behaviour in “two tier legal systems”—such as the US and the EU—in their respective integration processes. This historical comparison sheds light on the peculiarity of the European integration process vis-à-vis the US experience and highlights the risks that lie ahead in EU integration.

Until not so many years ago, the EU economic and the monetary policies were quite snubbed fields of research by the majority of the legal doctrine, although with some excellent exceptions. The same two policies are today at the core of a wide constitutional debate, which involves essential issues such as democracy, fundamental rights, national sovereignty and institutional competences.

This debate concerns the aims, the tools and the methods of those two policies, that are formally separate, and submitted to different rules, but in practice strictly intertwined and reciprocally influencing. Opposite values are increasingly confronted: effectiveness vs. legitimacy, solidarity vs. responsibility, and loyal cooperation vs. vital national interests.