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Democratic Deficit in the Economic Governance of the EU

The financial crisis and the anti-crisis measures thereafter highlighted the issue of democratic scrutiny over decisions taken by the European Council and the Member States (MS) outside the framework of the European Union (EU). This has triggered debate about the EU’s democratic deficit in the area of the Economic Governance, because of the limited powers of the European Parliament and national parliaments to exercise effective parliamentary control.

Democratic Deficit in the Economic Governance of the EU

@ CYCLONEPROJECT / Fotolia

Anti-crisis measures were adopted in a complex system of economic governance. Since the view prevailed that the existing Treaty provisions did not explicitly provide for the actions judged necessary, but no unanimity could be found to agree on Treaty changes, the response to the crisis consisted of both intergovernmental as well as measures  adopted within the EU framework.

The character of the economic-governance instruments involving Euro Area MS but also MS not yet using the euro, as well as the different degree of integration pursued by the MS led to a ‘differentiated integration’.  For example, the Euro Area MS agreed the European Stability Mechanism (ESM) outside the Treaty framework. Also outside the EU framework, the non-binding Euro Plus Pact and subsequently the binding “Fiscal Compact”, aimed in particular at increasing budgetary discipline, have been adopted by most MS. The “European Semester”, partly based on EU law (the revised Stability and Growth Pact) and partly on these agreements, gives the Commission strong powers to evaluate national measures.

Whilst these intergovernmental arrange­ments do implicate some EU institutions, notably the Commission, the European Parliament has also had a role, though minimal, both in their agreement and now in their implementation. Moreover, the varying institutional architecture and decision-making processes leads to a lack of trans­parency, legal complexity and a ‘demo­cratic deficit’, with neither the European Parliament nor national parlia­ments able to exercise effective oversight.

This keysource brings together some key studies & opinions on democratic deficit in the Economic Governance of the EU, focusing particularly on the role of the EP in democratic scrutiny.  

For more information see EPRS Briefings:

Constitutional problems of multi-tier governance in the EU / Francesca Ferraro, EPRS, Plenary Briefing, 06/12/2013

Parliament’s role in anti-crises decision-making / Eva-Maria Poptcheva, EPRS, Briefing, 17/12/2012

Rationale behind a euro area “fiscal capacity” Possible instruments including a dedicated budget / Alessandro D’Alfonso, EPRS, Briefing, 26/06/2013

Overviews

Economic Governance in the European Union: Past, Present and Future / Jacques Delors, JCMS 50th Anniversary Lecture, Notre Europe, Paris, 2012, 10 p. 

A new governance for the European Union and the euro democracy and justice: note / Miguel Poiares Maduro , European Parliament Policy Department C, PE 462.484, September 2012, 31 p.

“The report provides a democratic explanation for the crisis and the EU’s failure in successfully addressing it so far. It argues that the solution to the crisis and the future of EU governance must depart from a renewed justification of the project of European integration which must be founded on its democratic and justice enhancing potential.”

A Schuman compact for the euro area / Ashoka Mody, Bruegel – Essay and lecture series, November 2013, 42 p.

“This essay reflects on the idea of ‘an ever closer’ union. The author argues that even if many resolutions and measures have been implemented to try to solve the economic and fiscal crisis, we are still far away from a real political, monetary of fiscal integration.”

Institutional documents

  • European Parliament

European Parliament resolution of 12 December 2013 on constitutional problems of a multitier governance in the European Union (2012/2078(INI)) / Legislative Observatory

The report from the Constitutional Affairs Committee (rapporteurs Roberto Gualtieri, S&D Italy and Rafał Trzaskowski, EPP, Poland), on which the resolution was based, underlines the importance of using all the options within the Treaties in preference to the intergovernmental approach, and thus preserv­ing the Community method. Moreover, whilst the EP has gained a decisive role in the adop­tion of much legislation, it needs to become more involved in supervising its implemen­tation and in oversight of the institutions involved, in particular the European Central Bank, the ESM and the “Troika”. 

The EP in a multi-level governance EU – Ways to reduce the democratic deficit / Speech of the EP Secretary-General Klaus Welle at the CEPS lunch debate, 26/06/2013

Beyond dialogue: democratic framework and scrutiny for banking union and deeper EMU / Speech of the EP Secretary-General Klaus Welle at the ECB Seminar, 20/09/2013

Preparing for complexity. European Parliament in 2025 / European Parliament, Secretary General, 2013, 17 p. 

  • European Commission 

The EU’s economic governance explained / European Commission – MEMO/13/979, November, 2013

Six-pack? Two-pack? Fiscal compact? A short guide to the new EU fiscal governance / European Commission, March 2012

EU economic governance / Website of European Commission

A blueprint for a deep and genuine economic and monetary union Launching a European Debate / European Commission – COM(2012) 777 final, November 2012 

A Blueprint for a deep and genuine Economic and Monetary Union (EMU): Frequently Asked Questions / European Commission – MEMO/12/909, November, 2012 

  • European Council 

Towards a genuine economic and monetary union / Herman Van Rompuy in collaboration with José Manuel Barroso, Jean-Claude Juncker and Mario Draghi, 2012

Analysis

  • Democracy and Economic Governance

The Democratic Governance of the Euro / Poiares Pessoa Maduro, Luis Miguel; De Witte, Bruno; Kumm, Mattias,  European University Institute, EUI RSCAS Policy Paper 2012/08,  55 p.

“This policy paper includes some of the contributions for a group set up at the EUI to address the crisis of the Euro area with a focus on its democratic dimensions. The perspectives included in here are diverse and not necessarily unanimous in the solutions they propose to address the crisis. What democratic challenges does this crisis raises and how to address them?”

The Euro Crisis and the Democratic Governance of the Euro: Legal and Political Issues of a Fiscal Crisis / Miguel Poiares Maduro, Bruno De Witte and Mattias Kumm, Policy Report, Robert Schuman Centre for Advanced studies, May 2012, 12 p.

“The report briefly describes how the fiscal crisis raises fundamental political questions relating to the democratic legitimacy of practices of national as well as European institutions. It analyzes different ways in which the democratic legitimacy of European institutions can be enhanced within the parameters of the existing institutional framework.”

Political Tensions in Euro-Varieties of Capitalism: the Crisis of the Democratic State in Europe / Aidan Regan, EUI Working Papers, European University Institute, 2013, 28 p.

“The European response to the financial cum sovereign debt crisis in the Eurozone is leading to a democratic crisis of the state. It has exposed a tension between the national and the supranational in a multi-level polity whilst opening up new political cleavages between the core and periphery of Europe. This dilemma has become particularly acute for programme countries that are either directly or indirectly in receipt of non-market financial funding from the troika.”

Lessons from Three Years of Euro-Area Crisis Fighting: Getting It Right Next Time / Alessandro Leipold, Policy Brief, The Lisbon Council, 2013, 16 p.

“As the debate on Europe’s crisis fighting strategy deepens with the leak of a critical IMF document pointing to deep flaws in the European decision-making process, the Lisbon Council launches a new policy brief, Lessons from Three Years of Euro-Area Crisis Fighting: Getting It Right Next Time. The policy brief offers a nine-point strategy for improving decision making and fighting the European crisis more effectively.”

  • Parliament’s role in the Economic Governance

From EMU to DEMU: The Democratic Legitimacy of the EU and the European Parliament, Andreas Maurer, IAI Working Paper 1311, April 2013, 17 p.

“Given the EU’s legal and institutional structure, the European Parliament (EP) is in a weak position to fully participate in the governance of the Economic and Monetary Union (EMU). The Eurozone crisis did not alter this situation. Instead, the European Council and the Eurogroup gained many new, discretionary powers without being bound by any kind of uniform, coordinated or reliable control mechanism of the European Parliament.”

The Struggle of the European Parliament to Participate in the new Economic Governance / C Fasone, EUI Working Papers, RSCAS 2012/45, EUDO, 2012, 31 p.

“This paper aims to analyse the European Parliament’s position in the aftermath of the reform of the economic governance in the European Union, in particular after the adoption of the “six-pack” and the “Fiscal Compact”.”

Legal Issues of the “Fiscal Compact” – Searching for a Mature Democratic Governance of the Euro / Roberto Baratta, 2012 EUDO Dissemination Conference, European University Institute, 22-23 November 2012, 29 p.

“The following legal analysis is carried out with the main aim of assessing the coherence of the fiscal compact with the principle of democracy. As tentatively showed, an issue of democratic legitimacy is indeed raised. The policy-making of the euro zone needs to be improved so as to rely less on national legitimacy inputs and more on its own direct source of democratic accountability – the European Parliament.”

The Inter-parliamentary Conference on Economic and Financial Governance / Valentin Kreilinger, Policy Paper, Jacques Delors Institute, October 2013, 26 p.

“This Policy Paper call for upgrading parliamentary control at every level in order to ensure that parliaments keep up with the future developments towards a “genuine” EMU – thus to make parliamentary control “genuine” as well.”

  • Differentiated integration

The Eurozone crisis and the legitimacy of differentiated integration / Thomas Beukers, EUI Working Paper MWP 2013/36, European University Institute, 2013, 25 p.

“This paper examines and critically discusses several new forms of differentiated integration developed in reaction to the Eurozone crisis, including the so-called Two-Pack of economic governance, the ESM Treaty and the Fiscal Compact.”

Challenges of multi-tier governance in the European Union effectiveness, efficiency and legitimacy: compendium of notes / Pernice, Ingolf, European Parliament Policy Department C, PE 474.438, March 2013, 189 p.

“This compendium includes articles of a number of eminent experts invited by the Policy Department C to exchange with the Members of the Constitutional Affairs Committee of the European Parliament on the issues related to the challenges of the multi-tier governance in the EU. They aim at providing unique insights into the major questions of efficiency, effectiveness and legitimacy that the EU governance is currently facing.”

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