Money is Not the Only Thing at Risk in the Euromess

Most of the media coverage of and commentary about the Euromess has focused, quite appropriately, on the potential enormous financial losses to European nations, banks and individuals. One proposed route toward a less painful European economic future is to give the Eurozone a centralized governing body with significant power over the member states’ fiscal policies. Indeed, this was the vision of Europe’s needed evolution among some of the architects of the Euro currency.

Such centralization might help stanch the financial losses caused by the Euromess, but money isn’t all that is at stake. If more and more political and economic decisions are made by transnational bodies based in Brussels (or Berlin), ordinary European citizens may come to see EU government as distant, hard to influence, and lacking in legitimacy.

This risk of “democracy deficit” is the subject of this intriguing article in the Economist, which is well-worth the time of Europe watchers.

Author: Keith Humphreys

Keith Humphreys is the Esther Ting Memorial Professor of Psychiatry at Stanford University and an Honorary Professor of Psychiatry at Kings College London. His research, teaching and writing have focused on addictive disorders, self-help organizations (e.g., breast cancer support groups, Alcoholics Anonymous), evaluation research methods, and public policy related to health care, mental illness, veterans, drugs, crime and correctional systems. Professor Humphreys' over 300 scholarly articles, monographs and books have been cited over thirteen thousand times by scientific colleagues. He is a regular contributor to Washington Post and has also written for the New York Times, Wall Street Journal, Washington Monthly, San Francisco Chronicle, The Guardian (UK), The Telegraph (UK), Times Higher Education (UK), Crossbow (UK) and other media outlets.

25 thoughts on “Money is Not the Only Thing at Risk in the Euromess”

    1. Dennis

      If asked to pick a pair of wildly different U.S. states, West Virginia and California would be a reasonable answer. I lived in each for about two decades, and they are indeed different places. But the people in them seem much more alike to me than are the “odd couples” you could think of within the EU, Germany and Portugal, Greece and France, for example, places with different languages and traditions and deep cultural architecture (and not incidentally places where people were making war on each other in living memory).

      Because of those greater differences within the EU versus the US I think as hard as it can be to give all Americans a sense that the “trans-state” government understands them, responds to them and cares about them, it’s even harder over here in Europe. If that is true, I think whatever alienation and disaffection and sense of impotence many Americans experience could be far less than what Eurocitizens will feel if the end outcome of the Euromess is that member states lose the power to make their own economic decisions.

      1. That was more-or-less my take, but I had it reversed. I was thinking, “If we are having trouble getting our stuff into one pile, how can the Europeans get it done?”

        My nominees for wildly different U.S. States: Kansas and Hawaii. Both places I’ve lived for extended periods (more than a decade in each) and about as unlike as night is from day.

    2. One lesson that you can draw from the Eurozone problem (though it isn’t explicitly mentioned) is that the EU, like the United States, has too many veto points in its political processes.

      In a way, that can become a democracy deficit because it prevents democratically elected representatives from implementing the policies that they were elected for.

  1. The problem is that there really isn’t much of an objective democracy deficit in Europe (anymore). The EU institutions are a fairly typical parliamentary system (with judicial review). The one oddity is that the EU parliament cannot initiate legislation (but that’s not necessarily a bad thing, and in national parliamentary systems, the executive initiates most legislation, anyway). But, otherwise, we have a president who is elected by the parliament and who then appoints the rest of the executive (essentially a cabinet). The parliament debates and passes legislation. The parliament is also quite capable of controlling the executive (see, e.g., the fate of the Santer Commission). And there’s the ECJ, which provides judicial review.

    If there’s a problem, it’s one of perception. The reporting by the media of events in Brussels and Strasbourg can at best be called thin and incoherent, and is often years behind: EU directives do not get reported on when they’re being debated by the EU parliament (whether in committee meetings or plenary sessions), but only when they’re then turned into national law, at which point there’s the usual ignorant outrage over Eurocrats (democratically elected Eurocrats, which few people seem to realize). Admittedly, the EU could do with fewer positions that sound like bureaucracy made flesh (I don’t think there’d be anything wrong with calling the members of the executive ministers instead of commissioners), but fundamentally, the problem seems to be one of education.

    And let me add that I’m not in favor of electing the President of the Commission directly. It would most likely just reduce or even outright eliminate the oversight powers that the EU parliament has.

    Anyway, here’s a short primer on EU institutions:

    European Council: Comprises the heads of the governments of the member states. They do not have any actual legislative power at the EU level, but collectively they set the general political direction of the EU and can request the commission to initiate legislation.
    European Commission: The cabinet of the EU, headed by the president of the commission. The president is nominated by the European Council (based on the election results for the parliament) and elected by the European Parliament. He or she then appoints commissioners in consultation with the member states, which are voted on by the parliament. The commission proposes legislation. In some select cases, the commission can implement legislation directly without consulting the parliament.
    European Parliament: Elects and controls the commission. Debates and passes legislation. May also request the commission to initiate specific legislation, but cannot initiate legislation itself. Legislation primarily consists of regulations and directives. Regulations have immediate effect and override national law, directives need to be transposed into national law by the member states (who have treaty obligations to do that).
    European Court of Justice: The highest court of the EU.

    1. Oh, and I forgot to mention another important institution. There’s also the Council of the European Union, which, confusingly enough, is not the same as the European Council. The Council of the European Union fills essentially the role of an upper chamber in the legislative system, representing the executives of the member states.

    2. That´s not quite correct.
      When the European Parliament was created smaller countries got more seats than justified population wise. That rule is still in effect. For example a Spanish, French or German MEP represents 800,000+ citizens. A MEP from Luxembourg or Malta 80,000. The rest of the EU countries are in-between.
      (In the next election this will get even worse. Germany will loose 3 seats, from 99 to 96, and Malta will get an additional seat.)

      Under German election law any German election with such obvious inequalities (10:1) would be unconstitutional. (If an election district deviates from the average by 15% it is advised that district borders should be readjusted. If it´s 25% then the borders must be changed.)

      So transferring additional powers from a more representative German Bundestag to a less representative EU parliament is a constitutional problem. At least in Germany, don´t know about other countries.

      Also the EU parliament can´t nominate the executive. The member state governments do that, the parliament can just approve or disapprove. It can force a Commission to resign, it can´t nominate a new one.
      There´s no “shadow cabinet”, no official “opposition”. It´s not a parliamentary system as we know it.

      1. I agree that I may have overstated this a bit (for the sake of simplicity, not to mislead), but I still disagree with your reasons.

        Parliamentary systems come in all sizes and shapes. For example, equal representation is hardly universal among parliamentary systems (especially not the Westminster type) and, in the form that you describe, largely a creation of the German Constitutional Court (e.g., in BVerfGE 16, 130).

        The EU parliament can’t nominate the executive, but neither do parliaments in parliamentary systems (with few exceptions, such as a constructive vote of no confidence in Germany). That’s technically the prerogative of the prime minister (though, in practice, heavily influenced by a party’s power structure and in a coalition government by the wishes of the coalition partner or partners).

        Shadow cabinets are also a speciality of the Westminster system and aren’t always be found in other parliamentary systems.

        The major difference compared to a traditional parliamentary system would be that the executive and the parliament are not as politically aligned. The primary reason for this is that there really is no EU-wide party system, so the parliament is more fractured; and the considerable influence of the member states (especially through the fairly low veto requirements within the Council of the EU as the upper chamber) is also a contributing factor. In some ways, the de facto mode of operation of the EU legislature is reminiscent of the US Congress.

  2. Katja: As always, I learn from your analyses of European politics. You are right that it is a typical parliamentary system, but that doesn’t mean it’s seen as legitimate by the people. Friends just back from Greece tell me many Greeks are suffering and angry and feel that the EU doesn’t care — telling those Greeks “It’s a typical parliamentary system” will not make them see it as legitimate. If people perceive that elected officials don’t understand them, don’t care about them, don’t even live in their country and speak their language, whether those officials are in a parliament or a US style system or something else is not going to matter.

    Your point here: “If there’s a problem, it’s one of perception. The reporting by the media of events in Brussels and Strasbourg can at best be called thin and incoherent, and is often years behind: EU directives do not get reported on when they’re being debated by the EU parliament”. So much of legitimacy IS perception that I don’t think this distinction is sustainable. If people don’t even know when the debates that will affect their nation are happening, they only find out later, that makes the system lose legitimacy. And if that’s the case now, wouldn’t it be moreso if those decisions start including the overturning of national economic desires, as some politicians want the EU to do as a way to deal with the Euromess?

    1. I don’t necessarily disagree. That’s what I tried to convey when I said that there’s no objective democracy deficit; it’s subjective. Hence, why I don’t think that fiddling with the institutions will help much (not that they can’t be improved, but there’s no fundamental democracy deficit anymore that I think can be cured that way).

      What you’re suggesting (if I’m reading it correctly) is not related to a democracy deficit: It’s giving the EU more power at the expense of the governments of the member states (which, if anything, would reduce actual democratic legitimacy). That would make sensible policymaking easier and could possibly make the system fairer, but I suspect such a proposal would go over like a lead balloon with a population that is already skeptical of the EU.

      Right now, the British Murdoch rags [1] do not let a week go by without complaining about something Europe-related. Their current preferred target is the ECJ (and also the ECHR, even though the ECHR is not part of the EU) and its “unelected judges”, because of unpopular decisions concerning human rights and because, apparently, judicial review is not a proper British thing [2].

      Practically, I also think you may be underestimating Angela Merkel’s aptitude for dilatory tactics, a.k.a. “sitting problems out” (“aussitzen”). It’s a technique she learned from her mentor and predecessor Helmut Kohl — you do the absolute minimum necessary and hope that the problem will go away by itself. Needless to say, that’s not going to fix the Euro crisis (because it’s more about preserving power than policymaking), but it’s also very difficult to formulate effective countermeasures against such an approach. This is why I still think Europe’s best hope is for her to lose the next election (as the social democrats seem to be willing to take the political and policy risks that she is avoiding).

      [1] I’m using the derogatory term intentionally. It’s sad to see the formerly proud Times print this kind of tabloidy garbage.
      [2] They are correct insofar as the unwritten British constitution does not allow for judicial review (supremacy of parliament and all that), but many people consider that to be a bug, not a feature, especially with respect to human rights violations.

  3. On a less technical note, I worry about the fragility of political institutions in times of severe economic hardship. The political situation here in the US should remind us that latent lunacy boils just under the surface of what appear to be the most stable of democracies.

  4. there’s no objective democracy deficit; it’s subjective.

    This isn’t so at all. Germany, ECB et al are dictating economic policy for the periphery. Show me a major economic policy fight that Merkel hasn’t won. Granted, the economy itself hasn’t obeyed Merkel’s directives, but further centralization of authority isn’t going to change that, any more than it would allow Merkel to nullify gravity.

    1. Shockingly enough, Angela Merkel has also been setting Germany’s domestic policy with no effective opposition for the past years, too. That does not mean that there’s a democracy deficit in Germany. It simply means that a parliamentary system allows the government to govern with little restriction for 4-5 years, after which it faces voters again.

      At the EU level, Angela Merkel hasn’t won because she wasn’t democratically elected or because the European Commission or Parliament wasn’t democratically elected. It’s because she managed to get majority support for her policies. (And, in fact, a good part of those are to be implemented via treaties between member states, outside the EU’s normal legislative framework.) Bad policies, I agree with that, but democratic government is no protection against stupidity.

      Likewise, the ECB may be making bad policy decisions, but the existence of an independent central bank has never been considered a democracy deficit (it has generally been a balance of power thing, in order to reduce the influence of the executive on monetary policy, just as the judiciary is independent).

      In general, you seem to mistake bad policymaking for lack of democracy. But they’re not the same. The US House of Representatives has been making some pretty horrible policy the past couple of years (which, thankfully, was generally killed in the Senate), but it was elected in a perfectly democratic fashion.

      1. I agree that I’ve been conflating bad policymaking and bad democracy, but in doing so, I’m adopting The Economist’s similar conflation. The magazine distinguishes between “input legitimacy” and “output legitimacy.”

        By your defintion, democracy is defined by “input legitimacy,” but the ECB clearly doesn’t have that, even by your own description:

        Likewise, the ECB may be making bad policy decisions, but the existence of an independent central bank has never been considered a democracy deficit (it has generally been a balance of power thing, in order to reduce the influence of the executive on monetary policy, just as the judiciary is independent).

        In fact, the ECB is seen as undemocratic, and rightly so. (The disempowered executive you’re talking about is the individual who is responsible to democratic institutions.) A lack of accountability to democratic institutions is, more or less by definition, undemocratic – unless you, too, are prepared to adopt the Economist’s defintions.

        And if you are, then you have to acknowledge that the ECB fails there, too – that it completely lacks output legitimacy because it’s decision-making is rotten and its results have been poor.

        1. The problem with the ECB’s original decision making was that it refused to exceed its fairly narrow mandate. That was not necessarily smart, but hardly undemocratic.

          Conversely, now that the ECB — especially since Mario Draghi took over and with its powers expanded somewhat by the EFSF — has been more active (rather than being complacent in its statutory lack of power), it has arguably been exceeding its mandate (or at least pushing the envelope).

          1. Italy is basically what the UK could have become in an alternate universe if Rupert Murdoch had been Prime Minister.

            I think this catches the root of our disagreement. I argue (speaking only of the economy) that Italy with Berlusconi and without the Euro is much better off than Italy with the Euro and without Berlusconi.

            Regarding the ECB, I can agree with you this far: Its problems were not primarily a result of its lack of democratic legitimacy. The U.S. Federal Reserve isn’t much more democratic, but has done significantly better. The difference can almost exclusively be accounted for by the ECB’s institutional limitations.

            (I must say, it’s gratifying to have a vigorous disagreement with someone who reads me carefully and gives my arguments a minimal benefit of the doubt. I’ve been fully expecting this conversation to devolve into quibbles about the real definition of democracy, or whether Britain can really be usefully compared to Italy, or whatever. Well done! I’ve tried to hold up my end.)

  5. One proposed route toward a less painful European economic future is to give the Eurozone a centralized governing body with significant power over the member states’ fiscal policies.

    Whether or not this is a good idea, this is more or less the opposite of democratization. I don’t think more democracy is the answer for every question, but let’s not kid ourselves about perception vs. reality. The European periphery would rightly see such a move as a surrender of democratic prerogatives.

  6. Per the Economist:

    Italy and Greece (until recently) have had unelected, technocratic prime ministers, in large part as a result of pressure from outside creditors.

    And we’re talking about a perceived lack of democracy?

    1. First of all, that’s something that happens within the member states, not at the EU level (and, if we’re talking about democracy deficits in the member states, I’d start with Hungary and Viktor Orbán’s new constitution).

      Second, the Economist may be confused about the inner workings of a parliamentary democracy (which is kind of odd, since they should know better, being a newspaper in a country with a prime minister that wasn’t elected, either).

      Prime ministers in parliamentary democracies aren’t elected directly (and often not elected at all). They are generally appointed or nominated by the head of state and in some parliamentary democracies may additionally require the approval of the legislature (such as the Tasoieach in Ireland or the Chancellor in Germany). The latter is optional in many parliamentary democracies, because parliaments can dismiss the executive via a vote of no confidence. Also, the executive in a parliamentary system has far more limited powers than in the US; it depends on a parliamentary support to accomplish anything of note and a single lost vote can already trigger a resignation of the government. In practice, prime ministers govern exactly as long as they command a majority in the legislature.

      For example, David Cameron is another unelected prime minister. In fact, technically he was appointed by a monarch. His predecessor, Gordon Brown, even was appointed mid-term without ever even having campaigned for the post in a general election.

      Conversely, Mario Monti actually won votes of confidence in both chambers of parliament immediately following his appointment. Italy actually requires that the prime minister gains a vote of confidence within ten days of his or her appointment (see articles 92-94 of the constitution of Italy).

      1. Certainly the forms of democracy are followed in Italy, but the choice for Italians is being dictated elsewhere. As with the Greeks, the Italians will be led according to the wishes of the German polity, or they’ll feel the lash. People feel disenfranchised because they are, as a practical matter, disenfranchised.

        I’d hate to get too bogged down in trying to define what we mean by “democracy” and “sovereignty,” but tell me this: Do you think, democracy-wise and sovereignty-wise, that Cameron’s ascension was roughly similar to Monti’s? If so, I think we can agree to disagree.

        1. To be blunt, we’re talking about the consequences of Italy having been Berlusconiland for too long. Both Italy and Greece are steeped in corruption and badly need internal reforms. Little has been forced upon either country that they ultimately weren’t for responsible themselves. It wouldn’t be much different if they weren’t EU members, because they critically depend on trade with the EU.

          Spain, Portugal, and Ireland are a totally different story. They face similarly sized economic problems, but also fully functioning internal democratic processes and haven’t really done anything wrong and thus no outside creditor has much power over them, despite those economic problems.

          1. We’ve got five Euro countries with similar problems. Two were profligate and corrupt*. Three were not. Is the problem profligacy and corruption, or is the the Euro?

            *you’re probably less sympathetic to Italy than I am, but we certainly agree on Greece.

          2. A major problem for Greece was the Euro, obviously (without it, they couldn’t have overspent). But the Euro is not a major obstacle to Greece solving its problems (if anything, they’d probably be worse off if they left the Eurozone).

            For Italy, the opposite is true: the Euro is an obstacle to solving its problems, but not really the cause (nor were they profligate in any meaningful sense of the word as applied to a country). Italy is basically what the UK could have become in an alternate universe if Rupert Murdoch had been Prime Minister.

            In either case, though, I’d argue that it’s primarily internal dysfunction, especially corruption, that allows for outside influence on the political process, not the Euro. Countries with low levels and a low tolerance of corruption also lack the backroom dealing mechanisms that allow outside influences to exert power over the political process in general.

            (For what it’s worth, when I talk about countries here, I’m primarily referring to actions of the political class, not the electorate in general. I have lots and lots of sympathy for all the innocent victims of the crisis in Italy and Greece.)

  7. If you’ll forgive me for one more comment, here’s the Economist again:

    The other responses to the democratic deficit look even more tattered. Output legitimacy is a hard sell when the outputs voters use to reach a judgment are a crisis they didn’t create and austerity they don’t want. The idea that the EU is all about distant technical adjustments is laughable now that the euro is impinging on many basic functions of sovereign national governments, most obviously in Greece, Ireland and Portugal, but also in all the parties to the fiscal compact. If the euro is to survive, it will likely do so by impinging on them yet further.

    Note what’s missing here: Any discussion of the need for Germany’s sovereignty to be impinged upon. Like others in this thread, I’ve lived in disparate places in the U.S. – Mississipi and New Jersey, among others. The hard-working people of New Jersey don’t much complain about the fact that they have been obligated over decades and decades to subsidize Mississippi, and to tailor national economic policies to include the American periphery. If the Euro is going to be saved, it will be because the wealthy core countries learn that they don’t get to have their way all the time.

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