Beyond the Eurocrisis: Is More Democratic Governance the Solution for Europe?

After data that France slipped back into recession was published last week, French President Francois Hollande called for the establishment of yet another European institution: a Eurozone-wide economic government that would have its own budget, a right to issue debt, a harmonized tax system and a full-time president. Italy soon rushed to issue support for the proposal. In addition to his proposal, Hollande noted that a full European political union would also be necessary in the next 2 years, but the order in which this should happen was somewhat misguided. Political union and democratic legitimization of European institutions would have to precede rather than follow after further expansions in European institutions' authority.

Earlier this month, Harvard's Minda de Gunzburg Center for European Studies hosted a discussion with Nicolas Berggruen and Nathan Gardels, co-authors of the much-covered book, Intelligent Governance for the 21st Century: A Middle Way Between West and East. In their publication, featured on FT's Book of the Year list, Berggruen and Gardels' argue that Western democracies, and in particular the United States, have fallen victim to populism and short-term thinking, while authoritarian Eastern nations, most prominently China, are at risk of increased political instability as well as losing economic momentum if they do not strengthen their meritocratic authoritarian political systems with some type of popular legitimacy featured in Western constitutional democracies. The central topic of the book, however, is not what happened in the past but what should be done for the future in order to reach a level of effective governance that can lead to growth, development and stability from East to West. A way to accomplish this is, in the authors' view, is combining optimal governance models of each world for a political system that combines accountability and popular legitimacy of Western multi-party democracies with meritocracy and strategic governance of China's single-party system.

Between East and West, there is already a middle way of sort. The European Union is halfway both in terms of governance and geography, combining multi-party democracy of the European nation-states, joint and partly governed by a pan-European bureaucracy that, it can be argued, has some meritocratic features. Yet, this system suffers from fractionalized authority that, rather than enabling effective governance by a meritocratic bureaucracy mandated by leadership of popular legitimacy, results in tension over authority between the pan-European bureaucracy and the popularly elected representatives of separate European nations. This, in turn, results in a reluctant and populist-driven national governments' resistance to strengthening European institutions, while these institutions are reduced from a strategic planner to a crisis-manager of last resort.

The fiscal crisis has also changed the nature of European institutions, and some argue, given them greater mandate. Most notable is the European Commission and Council of the European Union's task of reviewing national budgets as well as other instruments introduced in reaction to the crisis (European Stability Mechanism and the EU Sixpack), some of which have been introduced outside the "community method", the usual method of decision-making that requires EU Commission to propose a law to the EU Council and the Parliament for review and adoption. The EU fiscal compact was adopted completely outside the EU legal framework and took the shape of a more traditional international agreement. The noted widening mandate of various European institutions is instinctively contrary to the argument that European institutions have a limited capability of enforcing change and more effective governance.

However, this expansion of authority was under the auspices of an interventionist mandate for crisis-aversion, and will be probed for legitimacy when, or possibly if, Europe's economy resumes growth. They lack democratic legitimization beyond the context of a crisis and can retain it in current form only if economic turbulence really becomes the new normal, and even then, likely not. Striking while the iron is hot can hardly work if explicit popular mandate is left out of the process. Thus, if the European Union and the Eurozone are to emerge from their current ills, more effective governance will be necessary. This can be achieved through either a break-up of the Eurozone, or by going forward, towards a stronger political union. If the latter is chosen, a more complete and thorough integration of member-states is necessary, resulting in a strong political union with democratic legitimacy. Without popular legitimacy, Europe's citizens will not take part in the process of integration as well as increasingly oppose any supranational authority. Thus, for Europe to emerge from its current economic and equally important, political crisis it must retain the benefits of a meritocratic bureaucracy while investing it with popular legitimacy at the European level. How can a strong, federal political union be achieved in Europe, with barriers to success ranging from economic and political issues to cultural, linguistic and historical reservations?

In March of this year, Jean-Claude Trichet, former president of the European Central Bank (ECB) and European Chairman of the Trilateral Commission wrote in his op-ed for the New York Times that, after the ESM, tighter fiscal rules and a commitment of the ECB and all national governments to preserving the Euro should suffice in the short-term. In the long-term, Trichet argued, a "political union" will be necessary as the "final stage of European Union" where decisions on fiscal economic and financial governance made by European institutions are reinforced by comprehensive and legitimate democratic control. Any solutions that would go towards achieving a political union should, thus, aim to advance full democratic accountability, effectiveness, fairness and subsidiarity on the level of Europe.

More concretely than Trichet's important emphasis of increasing the powers of European institutions (starting with the European Parliament, in Trichet's view), legitimacy of European institutions and the Eurozone should be achieved by focusing on introducing democratic governance at key levels and institutions in Europe. Firstly, more political integration will have to be preceded by more cultural and social integration across and beyond nations, increasing awareness of benefits of further European integration at the expense of nation-state autonomy. From there, the politicization of the European Commission is necessary, possibly through European Parliament elections as an electoral platform for appointing the presidency of the European Commission. While no taxation without representation proved an important concept in the democratic development of the United States, the reverse is true of Europe - European institutions can neither claim legitimacy of democratic governance (after being democratically elected) nor effectively govern without the possibility of raising taxes at the European level. Next is separating the mandates of the European and national parliaments, so that issues each decides on can really be solved at that level - European matters in the European Parliament and solely national matters in national parliaments. Finally, the transparency and accouEuropean Central Bankbility of the European Stability Mechanism (ESM) and the ECB have to be increased, ideally both by confirmation and direct accountability to the European Parliament. The idea of increasing ECB's accountability was also raised by the current ECB President, Mario Draghi, almost a year ago.

While all these steps will eventually have to be taken in some form if Europe goes down the path of further integration, as one of possible ways out of the current crisis of economic fundamentals and faith in institutions alike, it is necessary to remember that the current meritocratic bureaucracy of Europe might lack legitimacy but, possibly because of this, remains committed to the long-term despite its crisis-management responsibilities. If invested with popular legitimacy, Europe's success will depend on balancing it with long-term focused meritocratic governance and avoiding capture by short-term and particular special interests. A middle Way between West and East is indeed necessary.