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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.
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In a statement of January 2014 the German Minister of Finances Schäuble said that “the European parliament should be involved more effectively in euro zone decisions. It would be relatively easy to achieve this by creating a euro zone parliament consisting of members of parliament from euro zone countries”. See Schäuble advocates separate eurozone parliament, Euractive, 28 January 2014. Declarations in favour of the establishment of a Eurozone Parliament were also proposed by the French President Francois Hollande in his speech of 14 July 2015 to celebrate the national holiday. See France’s Hollande calls for euro zone parliament, Reuter, 14 July 2015. Statements in favour of a “Eurozone Parliament” were released by the former French Economy Minister Macron. See Macron calls for radical reform to save euro, Financial Time, 24 September 2015.
More precisely, Hollande and Schäuble proposed the establishment of a “Eurozone Parliament” in relation to the creation of a separate budget for the Eurozone.
Article 10, para. 1, TEU states that the EU’s functioning is based on the principle of representative democracy.
See Verhelst ( 2014), pp. 4–5. Indeed, even if some of these procedures also apply to EU Members, which are not part of the Monetary Union, they don’t foresee sanctions for them.
The first direct election of the European Parliament by universal suffrage took place in 1979.
These limitations of sovereignty are extremely important because they have changed the way Member States conceive their budgetary competence. The Eurozone governance passed from the principle of individual responsibility ( Eigenverantwortlichkeit) outlined in the Maastricht Treaty to the principle of shared responsibility ( Mitverantwortlichkeit) of Member States for the management of their budgetary policy. Indeed, due to the strong interdependence within the Eurozone, the decisions of each Government in the field of economic policy must now be confirmed by the other Member States through the intergovernmental supervisory mechanism set up at European level. This is exactly the objective pursued by the strengthening of economic governance over the last years through the reform of the Stability and Growth Pact. The result is a collective management of national budgetary policy under European coordination.
These are the European Semester regulated in Regulation (EU) No. 1175/2011 and the common budgetary timeline regulated in Regulation (EU) No. 473/2013.
In particular, the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (so called Fiscal Compact) provides that the budgetary position of the general Government of the Contracting Parties must be balanced or in surplus. This provision must be incorporated through provisions of binding force and permanent character, preferably constitutional.
Conditions of financial assistance are negotiated by the concerned Member State and the representatives of the Commission, the ECB and the IMF (Troika) in a Memorandum of Understanding (MoU) and then formalised in a financial assistance facility agreement approved by the Board of Governors of the European Stability Mechanism.
See Fasone ( 2014), pp. 169–174.
The institutions in charge of economic coordination (the Council and the Commission) shall regularly report their decisions to the European Parliament and to the national Parliaments of concerned Member States. At the request of the European Parliament, they shall participate in a hearing, while national Parliaments can also address observations or questions.
The Eurogroup gathers together the Minister of Finances of the Countries sharing the single currency, representing the Eurozone version of the Ecofin Council. In general, within the Ecofin Council the voting rights of States that did not adopt the Euro are suspended for the adoption of recommendations to those Members whose currency is the Euro. The Euro Summit is instead composed of the Heads of State or Government of the Eurozone, consisting of the Eurozone version of the European Council.
The Governors of Central Banks non participating in the Eurosystem are indeed excluded from these governing bodies.
11 Eurozone Countries (France, Germany, Italy, Spain, Belgium, Portugal, Austria, Estonia, Greece, Slovakia, Slovenia) are negotiating the introduction of a tax on financial transactions by means of an enhanced cooperation. See Proposal of the European Commission for a Council Directive implementing enhanced cooperation in the area of financial transaction tax, (COM/2013/71).
The Member States outside of the Eurozone refused to participate in the bailout of Greece and the other Eurozone Countries experiencing financial difficulties. Sweden and the United Kingdom did not participate in the establishment of the Banking Union. The United Kingdom challenged the introduction of a tax on financial transactions before the European Court of Justice, which however dismissed the case on the 30th of April 2014 (see ECJ 30 April 2014, Case C-209/13, United Kingdom v. Council of the European Union).
This would be similar to the relationship existing within the ECB between the Governing Council and the General Council.
These include for example the adoption of the Schengen Agreements, the Prüm Convention, the Agreement on a Unified Patent Court.
Notably the United Kingdom and Denmark have an opting-out right on the participation in the Monetary Union.
The establishment of a Fiscal Union in charge of absorbing macroeconomic shocks and supporting structural reforms in the Member States is perceived more and more as a necessary step to stabilise the Eurozone. The European Commission and other European institutions have clearly taken a position in favour of creating a fiscal capacity in the framework of the Monetary Union. See Towards a Genuine Economic and Monetary Union, Interim Report by President of the European Council Herman van Rumpoy (in close cooperation with the Presidents of the Commission, the Eurogroup and the European Central Bank), 26 June 2012; Communication from the Commission, A blueprint for a deep and genuine Economic and Monetary Union. Launching a European Debate, Brussels, 30 November 2012, COM (2012) 777 final/2; Report “Completing Europe’s Economic and Monetary Union” by Jean-Claude Juncker in close cooperation with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz, 22 June 2015.
The German Constitutional Court itself affirmed that the principle of independence puts a limit on the classic application of democratic principle within parliamentarian systems. See German Federal Constitutional Court, Judgment of 12 October 1993, [BVerfGE 89,155], para. 154.
Article 10 TEU states that “the functioning of the Union shall be founded on representative democracy. Citizens are directly represented at Union level in the European Parliament”.
More precisely, on 504 million EU citizens 167 million come from Countries which are not part of the Eurozone.
In accordance with Article 14 TEU, “representation of citizens shall be degressively proportional, with a minimum threshold of six members per Member State. No Member State shall be allocated more than ninety-six seats”. The specific formula for representation is decided by the European Council. The last update in this regard was taken after the accession of Croatia in the EU (European Council Decision No. 2013/312/EU).
“The degressively proportional composition prescribed for the European Parliament by Article 14.2(1) third sentence Lisbon TEU stands between the principle of equality of states under international law and the state principle of electoral equality. […]. In federal states, such marked imbalances are, as a general rule, only tolerated for the second chamber existing beside the parliament […]. They are, however, not accepted in the representative body of the people because otherwise that could not represent the people in a way that does justice to equality based on the principle of personal freedom. The arrangement of the right to vote in the European Union need, however, not be a contradiction to Article 10.1 Lisbon TEU, which provides that the functioning of the Union shall be founded on representative democracy; for the democracies of the Member States with their majorities and decisions on political direction are represented at the level of the European institutions in the Council and also in the Parliament. Thus, this arrangement of representation of the Member States only indirectly represents the distribution of power in the Member States. This is a cogent reason for the fact that it would be perceived as insufficient if for example a small Member State were represented in the European Parliament by only one Member of Parliament if the principle of electoral equality were observed more strictly. The states affected argue that otherwise it would no longer possible to reflect national majority situations in a representative manner at European level. This consideration alone shows that it is not the European people that is represented within the meaning of Article 10.1 Lisbon TEU but the peoples of Europe organised in their states, with their respective distribution of power brought about by democratic elections taking into account the principle of equality and pre-determined by party politics”. German Federal Constitutional Court, Judgment of 30 June 2009, [2 BvE 2/08], paras. 284–286.
See Fabbrini ( 2015), p. 827.
Even if it was impossible to grant full electoral equality in representation, the distortions coming from the principle of degressive proportionality should be significantly reduced.
The comparative argument according to which other Parliaments also apply the principle of a degressive proportionality is not sufficient to dismiss the criticism regarding the deficits of representation in the European Parliament. By considering the voting power inequality due to skewedness of representation across territorial subdivisions (Voting Gini coefficient), the European Parliament has a coefficient of inequality in representation twenty times higher than the German Parliament and three times higher than the French Parliament. See Véron ( 2014).
National Governments usually prefer to transfer competences to intergovernmental institutions, they can still participate in and influence. On the contrary, sharing powers with democratic institutions reduces Governments’ ability to affect the decision making process at European level on their own. In the light of this consideration, it is unlikely that the process of European democratisation will be accepted by all Member States. Similarly, the Eurogroup and the Euro Summit would probably refuse to share their powers with the entire European Parliament, which may be dominated by majorities not representative of what most of Eurozone citizen’s representatives want to do.
For example, the Finnish Parliament has been debating whether the Country should abolish the single currency. See Finland to discuss leaving eurozone after disgruntled citizens force debate, The Telegraph, 16 November 2015.
The current political momentum is proving how weak the Schengen acquis is compared to other fields of integration, notably the Monetary Union. While the debt crisis has obliged the Eurozone Countries to move forward with integration, national Governments are at the moment struggling to implement a common response to the unprecedented immigration crisis, preferring instead the reintroduction of national borders.
The Agreement on a Unified Patent Court was signed by 26 Member States. It follows the enhanced cooperation in the creation of unitary patent protection adopted in 2011.
Within the limits of the existing legal framework the European Parliament has instead adopted on December 2013 a Resolution to create an informal parliamentary scrutiny for the Economic and Monetary Union on the basis of a political agreement between political groups. “[The European Parliament] stresses that the internal rules of the European Parliament offer a sufficient margin of manoeuvre to organise specific forms of differentiation on the basis of political agreement within and among the political groups in order to provide for appropriate parliamentary scrutiny of the EMU; recalls that Article 3(4) TEU states that ‘the Union shall establish an Economic and Monetary Union whose currency is the euro’, and that Protocol 14 on the Eurogroup refers to ‘the need to lay down special provisions for enhanced dialogue between the Member States whose currency is the euro, pending the euro becoming the currency of all Member States’; points out that, if this supposedly transitory situation is to last, an appropriate accountability mechanism for the current euro area and the Member States committed to joining must be considered within Parliament”. European Parliament, “Constitutional problems of a multitier governance in the European Union”, Resolution of 12 December 2013, A7-0372/2013, para. 31. Such committee, however, would probably not participate in the economic governance of the Eurozone, but represent only an informal forum of discussion on issues regarding the Economic and Monetary Union.
A Eurozone parliamentary scrutiny provided with effective powers in the economic governance can’t be introduced by recurring to enhanced cooperation ex Article 20 TEU, which does not allow the reform of the EU institutional framework.
For an overview of the authors in favour of these three options see Verlhest ( 2014), pp. 17–18.
The West Lothian Question depends on the not symmetrical devolution process in the United Kingdom that regards Northern Ireland, Scotland and Wales, but not England. The question asks whether it is acceptable that parliamentarians from Northern Ireland, Scotland and Wales shall vote on legislation that mainly affects England alone. In the current situation it is indeed possible that a majority of member of the Parliament from England is overruled by a majority of all United Kingdom parliamentarians on a decision affecting only England. In order to address the West Lothian Question the British Government appointed a Commission chaired by Sir William Robert McKay in 2012. The latter adopted a Report in 2013 making a number of proposals to ensure the principle “English votes for English laws”. “Decisions at the United Kingdom level with a separate and distinct effect for England […] should normally be taken only with the consent of a majority of MPs for constituencies in England […]”. See Report of the Commission on the Consequences of Devolution for the House of Commons, (The McKay Commission), March 2013, pp. 8–9.
Häde speaks in this regard of “Flucht ins Völkerrecht” (escape to international law). See Häde ( 2012), pp. 15–16.
The Treaty on the Stability, Coordination and Governance recalled the possibility of inter-parliamentarian cooperation in relation to interinstitutional dialogue. The role for the Conference of National Parliamentary Committees (COSAC), however, is not specified.
In its Judgment on 7 September 2011 the German Constitutional Court stated that the participation of Germany in the rescue mechanisms shall not undermine the full control of the Bundestag on the national budget ( Budgethoheit). For this reason, the Bundestag must individually authorise every large-scale aid measure. The Government has to receive in particular the approval of the budgetary Commission of the Bundestag before agreeing on financial help within EU institutions. See German Federal Constitutional Court, Judgement of 7 September 2011, [2 BvR 987/10], paras. 121–124.
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- Does the Eurozone Need Its Own Parliament? Legal Necessity and Feasibility of a Eurozone Parliamentary Scrutiny
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