—— ABOUT CRISES —— Francesco Nicoli's ideas den

« L'Europe se fera dans les crises et elle sera la somme des solutions apportées à ces crises »—Jean Monnet

From Governance to Government to save the Euro

The incapacity of the European Union of dealing with the Eurozone main problem has one single root-source: its aversion to deploy truly governmental instruments to tackle the crisis.

Not differently from US “confederative” interregnum between the independence war and the Constitution, the EU operates as a loose confederation without a a government. It takes its economic policy decisions through soft governance, where the centre provides advice and expertise, and decisions are either taken at the unanimity of the memberstates, or left to member states parliaments. as demonstrated here however there is no inter-governmental democracy possible in a fiscally-integrated polity: decisions have to be taken democratically, i.e. by majority voting among the participants. Having a parliamentary vote (or even a referendum!) has actually nothing to do with democracy but simply constitutes a more legitimate way of defining one government’s position. To save democracy, however, we must have a majority-voting elected body (a Parliament) in control of the Union fiscal policy. As long as the Union fiscal policy is dealt in a intergovernmental, unanimous voting system (as for the current economic governance) there is no true democracy regardless of how each government builds its own position.

Let’s be clear on this point: the economic governance, as it stands, is a failure that everybody can appreciate. The new “Five Presidents reports” is equally inconclusive and dramatically inadequate to tackle the Euro Area problems, which concern primarily democracy and [the lack of] expenditure. Instead, four things are urgently needed to prevent the collapse of the European project:

(1) the creation of a fiscal capacity for shock-smoothing and growth- enhancement at Euro Area level;

(2) the creation of a Euro Area taxation to finance it;

(3) the creation of a proper Union debt instrument in support of the fiscal capacity, to be repaid through taxation and returns on investment;

(4) a clear legitimacy framework where the Commission is in charge of managing these instruments under the control of both the European Parliament and the Council. Of course, there will be no mutualisation of outstanding debt stocks nor debt relief, because states must fulfil their commitments; but introducing the necessary reforms to re-start the Greek economy will be much easier to pass and credible to implement with growth-enhancing expenditure carried on by the European capacity.

The instruments, in part, are there: we have the ESM and the Juncker investment Fund; we have the European Parliament; we have a commitment to “own resources” and some examples of central taxation already in place (the carbon permits; the upcoming financial transaction tax). What we really need is to get rid of an idiotic political class which is, by any account, totally unable to connect these dots because of its terror when it comes to shifts of sovereignty. No new instruments must be created, but existing ones must be modified and integrated as a part of a larger project desperately needed to save the Euro: moving from Euro governance to Euro Government.


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Valentin Kreilinger

Researcher and think-tanker in EU affairs

Free Space Economics--Microgravity environment for social thinkers

Microgravity environment for social thinkers

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