We need a Eurozone Parliament

I was happy to read Wolfgang Schauble’s recent commentaries on the necessity to create a Eurozone Parliament. I would add, it should possibly be a democratic chamber set up as part of a Eurozone government, possibly less dysfunctional than the EU’s.

The German finance minister is essentially saying is that we need a whole new institutional infrastructure to govern the Eurozone in a) an efficient way and b) a democratic (better, legitimate) way. 

I have argued many times that a bulk of a Eurozone governance has been de facto created as a result of the birth of a separate constituency, a separate set of political interests and a separate set of policy priorities: it is embedded in the ESM statute, in some provisions of the Fiscal Compact and hidden behind the rising conflicts on the banking union, in which different institutional positions not only reflect different interests, but also different visions of the Eurozone-EU relationship itself.

Indeed, the latest institutional feuds between the Parliament and the Council have highlighted some of the contradictions of current EU decision making in the post-crisis world. Schauble has repeatedly warned that the current Treaty does not hold enough weight to allow European institutions to set up a single resolution fund based on article 114 and that not in the least bit was it foreseen by the authors of the Maastricht Treaty that one day there would have been the need for a collective bank resolution fund in the Eurozone. European citizens, argues Schauble, were never asked to put resolution money in common and the German Constitutional Court – albeit sometimes in a cheeky way – has a point when it warns that we have reached the limits, and maybe already surpassed them, of EU powers expansion.

But one thing is the EU vs Member States conflict of power; another one is the feeling that the protection and the completion of the internal market sounds more and more like a vague legal basis for the reforms that are needed for the sake of governing the Eurozone. To be even more clear: the Eurozone and the EU are also de facto in conflict.

Let me elaborate on this: the right of initiative of the European Commission on, say, banking union, is supposedly justified on the grounds of protection of the financial stability of the EU, which in theory is guaranteed by keeping the Eurozone financially stable. However, this might not be enough for the future, if even it is enough for the present, to justify action at the EU level: in other words, Today, the EU and the Eurozone have different sets of priorities that makes it impossible to govern the latter with the institutions (and the power balance) of the former.

European leaders perceived the institutional vacuum during the crisis and created fora where they could discuss issues at the time outside of the EU acquis, without the straitjacket of EU procedural burdens. This unconventional way to tackle problems was convenient and it was a blessing, but obviously led to confusion, many bad solutions and the request for a more rational governance.

The Euro was originally thought to be adopted by the overwhelming majority of the Eurozone, but still: the UK and Denmark had already opted out, even before the eastern European expansion added countries that did not have the economic strength to join the currency straight away. And it was definitely a mistake to not provide the newly-birth polity with its own institutions already from the very beginning.

Once it is finally acknowledged that the Eurozone will not correspond to the EU in the medium term, so why not go for a radical solution and build a new system?

The Eurozone is clearly the most important achievement in European integration and it requires enhanced governance and decision-making that could only happen if the entire current EU institutional balance is put into question. Of the ten countries outside of the EMU, Lithuania is entering in 2015 and Poland will be next. What a better moment to build a set of institutions from scratch, and including a new Parliament? After all, the ECB is already there and the Eurozone Council – the Eurosummit – already exists; so why not a democratically elected chamber that legitimizes the two other existing institutions?

The newly formed structure could focus on fiscal policy guidelines, creating a new budget starting from the ESM, even propose a referendum in the Eurozone on possible Eurobonds emissions. Discussions will be easier because of a tighter relationship and more similar interests. We could avoid the presence of UKIP, UK conservatives and Swedish MEPs taking the grand stand on issues that do not concern them (or only concern them marginally).

And we could still participate in the regular EU decision making (which would by no means be undermined, given that the same reforms that the Eurozone discusses could actually be adopted “by example” in a wider set of countries). This, until the Eurozone is expanded to include the whole of the EU – with the exception of the UK and Denmark which will, at some point, have to discuss an external partnership agreement to implement future policy developments decided at Eurozone level.

Meanwhile, we would be able to get rid of the college of Commissioners, the odd man in the game, which is not anymore – like in the 1980s – a meaningful promoter of further integration but has instead been transformed into a place where the protection of national interests is often the prominent reason for action. Conceived as a player in an international organization, the Commission has no citizenship in a modern federation: this, of course, won’t mean abolishing the precious experience of its staff, which could be used elsewhere.

Finance Minister Schauble is sometimes a bit assertive in delivering messages and I don’t generally side with him. But on the necessity for a Eurozone Parliament, and in general for a different set of institutions that could better deliver policy for the most integrated core of the EU, he is right on the money.

Alfonso Ricciardelli

One thought on “We need a Eurozone Parliament

  1. mfcurry

    I cannot say that I agree such a solution would be practical and efficacious. To begin with, consider the completely dysfunctional nature of the existing European Parliament and of most EU politics in general. Second, different member-states do not share the same interests in deciding to support or reject the Eurozone. Large-scale production countries, such as France and Germany, tend to dominate the internal market because smaller developing nations are left without the option to adjust tariffs to protect local investment and enterprise. There is no reason to believe a Eurozone parliament would function at all harmoniously, and it is more likely that the larger member-states, as in the Council of the European Union, will dominate the agenda. Third, the Eurozone system and the European Central Bank were specifically designed (largely at the behest of the Germans) to be as independent of politics as possible, functioning instead as a regulatory agency to whom non-democratic powers are entrusted to protect stability and consistency. While you are correct that such a situation may not function best under current circumstances, any attempt to change that paradigm will encounter stiff resistance from Germany, the number one supporter of the Eurozone.


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