Overall, in the almost three years that have passed since the crisis erupted, the Eurozone has roughly implemented the necessary interventions to stabilize the financial markets and start solving the problem of budgetary discipline and the necessary structural adjustments. However, it has not dispelled doubts about the possibility of survival in the medium to long term, still threatened by the accumulated competitive imbalances and by the divergent quality of the institutions in the member countries. Furthermore, the construction of solutions proceeded by jerks, introducing notable mutations, and even lacerations, in the institutional arrangements. A serious problem has emerged of the democratic legitimization of the new structures of the governance economic, decided by the Council and implemented by technocratic institutions without adequate accountability mechanisms vis-à-vis national parliaments and the European Parliament.
This is the context in which last June the President of the European Council drafted, together with the Presidents of the Eurogroup, the Commission and the ECB, a proposal for the evolution of the institutions of the Eurozone in stages, capable of restoring coherence and legitimacy to the construction and to ensure its sustainability in the medium to long term.
As I believe you are aware, the Road map it contains four chapters: an integrated financial system, an integrated fiscal system, an integrated economic policy framework, democratic legitimacy and accountability.
The first chapter, the most developed, mainly contains the start of the banking union; the first step will be the establishment at the ECB of a "single mechanism" of supervision for the Eurozone and the non-euro countries that wish to join. The immediate objective is to subject Spanish banks to common supervision, a condition for recapitalization interventions by the ESM and, therefore, to break the vicious spiral between sovereign crisis and banking crisis in that country. Around the corner awaits Ireland, which is making enormous progress in macro-economic adjustment but needs some relief from the burden of repairing its banking system. The interventions must serve not to cover the losses, but to give the banks time to restructure themselves: with the clear understanding that if they fail, the capital will be reduced to zero and the losses will be borne by private creditors - with the exception of depositors.
The systemic goal is to remove from the system the moral hazard associated with the promises, explicit or implicit, of governments not to let their major banks fail, and the related tendency of national supervisors to try not to see the misdeeds of their national champions . With the banking union, an important leap would also be taken in the restoration of an integrated financial market, thanks to the pooling of the risks of failure. To achieve these objectives, the system must be completed with an integrated deposit insurance and bank resolution system, on which for the time being there are still no definite proposals.
The integrated budget system - which does not currently constitute a true fiscal union - continues to revolve around the exchange between the credibility of collective budgetary discipline and the mutualisation, if not of debts, at least of the risks of sovereign debt. On the first aspect, Mrs Merkel would like the new figure of the European Finance Minister, with direct powers to block and modify the budget proposal of a Eurozone country that is inconsistent with the common guidelines decided within the European Semester. Prime Ministers Hollande and Monti replied that the obligations already undertaken seem sufficient: recalling that the procedure of the European Semester and the Two-pack pending approval before the Council and the European Parliament already imply prior approval of national budgets; whereas the new sanctioning systems are quite strong; and that the Fiscal compact it already constitutes a strong limitation of national budgetary autonomy.
As for the possibility of establishing common mechanisms for guaranteeing sovereign debt, which would make it possible to reduce spread by making debt sustainability easier, it is now clear that massive operations to replace national debts with common debt are not feasible, because they would never be acceptable to German taxpayers (and Dutch, Finnish, Austrian, probably French ). On the other hand, the hypothesis of offering the joint guarantee to new issues of short-term securities – the euro-treasury bills – to facilitate the roll-over debts, always to a limited extent and with appropriate conditionality; and that of studying ways to transfuse part of the sovereign debt of the euro countries, for example the share exceeding 60 per cent of GDP, into a redemption fund assisted by segregated public revenues for debt servicing.
In 'interim report on Road map presented by President Van Rompuy to the European Council last October, the construction of a "common fiscal capacity", for now of uncertain contours, has also made its appearance. Two concepts emerge within it: that of creating one shock absorber central office in an anti-cyclical function, to face shock idiosyncratic about individual countries; and instead, conversely, to offer incentives for structural adjustment efforts – but without weakening fiscal discipline.
The building site on the integrated framework for common policies is proceeding rather slowly. The hypothesis of strengthening compliance with the countries' commitments regarding structural reforms with agreements of a contractual nature and that of establishing centrally governed macro-prudential intervention instruments to curb excessive credit expansion are being discussed; schemes for the harmonization of corporate taxation – the famous CCCBT – have also been proposed for some time now on the Commission's table, but which require unanimity and are unable to advance in the Council. An important novelty is the decision to subject internal market obligations to the binding procedures of the European Semester: a good choice, given the resistance that still holds back the creation of integrated markets for energy, transport, telecommunications and cheap online.
The chapter on new forms of democratic legitimacy is also progressing with difficulty; yet, in the long run it is the most important chapter in remedying the growing gap between the European institutions, increasingly as a source of trouble, and a public opinion hammered by sacrifices. The most acute problem evidently concerns the European Council, which has increasingly taken the form of the true executive power of the Union - for the Eurozone, in the Eurosummit formation of the Heads of State and Government of the Euro countries - which at the moment he simply does not answer to any elected assembly. Concerning the common economic policies, the Commission has assumed the tasks of the technical secretariat of the Council in the preparation of decisions, and of an authority with significant autonomous powers in their implementation, again without obligations of accountability towards the European Parliament on these tasks. These powers are similar to those already held as "guardian of the treaties" in the internal market and in competition and external trade policy.
The widespread opinion is that the problem of legitimacy must be tackled through the direct election of the president of the Commission; but this would not eliminate the self-referentiality of the Council, unless – taking advantage of the possibilities opened up by the Lisbon Treaty – it is decided to unify the two posts of president in the same person. However, this solution maintains two defects: on the one hand, the politicization of the Commission would compromise its impartiality with respect to the exercise of its duties as guardian of the treaties; on the other, the contradiction between the national political responsibility of the members of the European Council and a mechanism of legitimacy through Parliament's control over its president would not be resolved.
An alternative solution exists: this consists in having the prime minister elected by national parliaments, for example through a system of electoral colleges similar to that in force for the American president. However, the Council should be "federalized" through the adoption of majority voting on all matters within its competence and the obligation to report to Parliament on its decisions, which could adopt resolutions and recommendations on them. Under such a system, individual members of the Council would answer to national Parliaments for the positions they take within the Council.
In such a system, the president of the Commission would become a sort of prime minister's office in exercising the functions delegated by the European Council, retaining the autonomous duties of guardian of the treaties, for which he would continue to answer to the European Parliament.
On the other hand, I do not find the trend, which is spreading, to directly involve national parliaments in the circuit of European decisions, which I see as a sure promise of confusion and, in the end, paralysis, to be a good idea. Unfortunately, some important precedents have been set since fiscal compact, which provides, in article 13, for the establishment of an interparliamentary conference of the budgetary committees of the European Parliament and of the national parliaments for the discussion of common budgetary policies; and the decision of the German Constitutional Court to make any direct or indirect disbursement of funding from the ESM to member countries in support of their adjustment programs subject to the authorization of the Bundestag's budget commission.
On all of this, we need an in-depth debate before public opinion and Parliaments, which has so far been lacking.
I have tried to briefly describe the events that led to a dramatic acceleration of European integration, the new institutes that are emerging and the problems still to be solved. The final outcome is unknown to us; but we know that it will take place within the existing framework of the Union and the euro, and that this will not be overwhelmed by the markets. We note that the crisis is producing progress in the construction of a common European home that was unthinkable until recently, even if political union is not yet in the cards. The long shadow of diverging productivity and cost trends remains, which in the medium to long term can really break the monetary union.
For the complete intervention, download the Pdf
Attachments: Prolusion_Castellanza_12_November_2012.pdf
