The following lecture was delivered by Alexander Somek at the Princeton Transatlantic Youth Conference on December 6, 2012, in Princeton at Rockefeller College. The event was attended by students from both the US and Europe. Professor Somek is the Charles E. Floete Chair in Law at the University of Iowa College of Law, and currently a LAPA fellow at Princeton University.
I would like to thank the conveners of this conference for the opportunity to deliver a few remarks on the current state of the Union. It is an honor, and even more a pleasure, to be here.
It may have come to everyone’s attention that as a consequence of global credit crunch and economic recession the European Union is experiencing its most momentous crisis ever. What is at stake, precisely, is one thing, indeed, it is the thing that has been the epitome of successful economic integration, namely money, the European common currency. Every other day, we hear rumors about one or the other country potentially withdrawing from the Euro and wonder what this would imply for the Euro zone and European integration generally. Not least because the German chancellor Merkel has made the Euro into the Schicksalsfrage of Europe by declaring it to be the “symbol of integration”, the fate of the common currency has become tied up with the fate of Europe.
For students of European integration, a situation of this type, in which the Union is perceived to be in a severe crisis, may not seem unusual and even not entirely undesirable. Indeed, the Euro zone crisis may seem like another opportunity for the Union to grow in the vein anticipated by one of its founding fathers, Jean Monnet. He is alleged to have said that “people only accept change when they are faced with necessity, and only recognize necessity when a crisis is upon them.” The key to integration, thus understood, is to channel the participating countries into a situation of crisis in which they realize what economic rationality compels them to do. This is Monnet’s cunning mechanism of integration. This is how integration accomplishes the improbable by means of necessity. The improbable – the ever closer union among the peoples of Europe – on the basis of rational insight alone.
Not by accident, Monnet’s line has been recently quoted by Valery Giscard d’Estaing; and not by accident the quotation was followed by the statement saying that “this is why the European Union could leave this crisis strengthened.”
Scholars of European integration adopting the so-called “neo-functionalist” approach have tried to understand this cunning labor of necessity. Regardless of what it has been that has made their approach “neo” it embraces the core idea of functionalism in sociological theory: By virtue of unintended consequences of action, social systems will eventually end up doing what they have to do in order to sustain their state. In the case of integration regimes this means that they have to move forward. Crises serve as the incubators of growth. Monnet was a functionalist, thus understood.
With that preliminaries in mind, let me turn to the current situation. I am going to paint it with a broad brush.
The establishment of economic and monetary union involved the following package. The common currency is supposed to be stable. In order to sustain price stability the following unusual institutional arrangement was found:
First, monetary policy is the preserve of a system of independent banks, among which the European central bank occupies the position of the master. Monetary policy has been taken out of the hands of national governments. But this does not mean that they do not have any responsibility for it.
Second, in order to attain the stability objective all European States promise to sustain sound public finances. In practice this means that their level of debt must not exceed a certain reference level.
What happened – before the crisis and even more so in its wake – was that Member States went beyond the reference level. They ended up having excessive deficits. In fact, certain Member States, in particular Greece, have been hit so hard by the financial and economic crisis that they are still confronted with the prospect of bankruptcy.
In order to avoid a catastrophic blow to both the currency and the European economy as a whole, the Member States, aided by the European Commission, have done basically two necessary things.
Professor Somek addresses students at the Princeton Transatlantic Youth Conference on Dec. 6, 2012
First, they have quickly reformed the so-called stability and growth pact. This is the rather misleading name for a package of legislation that had been adopted in order to ensure limited deficits. As a result of this reform, the European Commission, which is very roughly the equivalent of the government of the EU, has been given much power to interfere with the Member States planning of public policy by means of controlling their budgets. What is more, the Union has the power to make the governments co-operate when the Commission conjectures that a so-called “macro-economic” imbalance is about to arise in their country. The legislation is rather vague, and the vagueness confers a strategic advantage on the Commission. Hence, one cannot but get the impression that in the wake of the crisis the Member States might lose much of their policy autonomy in the domestic field. The so-called “Fiscal Compact”, an international agreement concluded among Member States (with the exception of the Czech Republic and the UK), has complemented these reforms and even tightened these constraints. All of this is the “tough love” of necessity.
Second, in hasty efforts to bypass existing legal constraints on mutual bail-outs, the Member States created special purpose facilities in order to come to the rescue of those Member States that are confronted with mounting sovereign debt or a severe financial strain on their banking system. After a period of improvisation with the “European Financial Stabilisation Mechanism” and the “Financial Stability Facility”, the Member States have now created an International organization that is in charge of providing credit, the European Stability Mechanism. The operation of the organization is based upon financial backing, mostly guarantees, by other Member States. The availability of funds or credit lines is subject to conditions that are negotiated by the Member States with the so-called troika, namely, the European Commission, the European Central Bank and the European Commission. Spain has recently turned to the mechanism in order to provide funding for banks.
Allow me, as a point of privilege, to say something about these measures from the perspective of a legal scholar.
First, they arise from feverish efforts to innovate the European system of economic governance. As a result one get a number of regulations, agreements and new institutions that raise questions as regards their legal basis. They also create a perplexing overlap of strategies: Six Pack, Euro Plus Pact, Fiscal Compact. As a result, the whole system, which is already very technical, becomes confusing and next to impossible to understand for outsiders. As one would have imagined, the structure of co-ordination in the relation of the Troika is far from transparent.
Second, no policy area appears to be exempt from macroeconomic risk management centralized in Brussels. The sheer holism of economic governance is astounding. The Commission has been given the power to influence the totality of public policy. One wonders what is going to happen to Europe’s most cherished constitutional principle, subsidiarity, according to which decisions are to be made as closely as possible to the citizens; it gives in principle preference to the lower levels of government within a multilevel system.
In reply to these legal concerns, one may want say that once an organization is confronted with an emergency situation of this magnitude the rule of law regrettably but necessarily has to take some damage. Instead of sticking to the letter of the law, responses need to be creative and proportionate to the challenge (which existing European legislation clearly is not). The normativity of legality is legitimately overridden by the normativity of distress. Something has to be done, and it has to be done quickly by someone who can move things forward.
But even if one were to concede the point about the diminished relevance of law, there is a much deeper worry to which the European management of the currency crisis has given rise. Both arrangements, even though responding to necessity, have turned out to be deleterious to European integration. The reason is straightforward. They have a disintegrating effect. This effect can be observed along vertical and horizontal lines.
The measures are vertically disintegrating, that is, in the relation between European institutions and the populations in the Member States. This is evident in the widespread protest that the measures have precipitated in Europe. Ordinary people feel that they have become the victims of international financial institutions—in particular given that the IMF is involved, which has never been experienced as a benign force by ordinary people in the affected countries. As a result of this vertically disintegrating effect, the already existing widespread alienation from the Union has been severely exacerbated.
Somek's current research explores how the authority of the constitution needs to be understood in a cosmopolitan world.
But the measures are also horizontally disintegrating. This is particularly obvious in the case of Greece. While German taxpayers complain about having to pitch on for a bunch of allegedly profligate slackers, some Greece protesters have likened the German chancellor Angela Merkel to the Führer Adolf Hitler. Both reactions are, of course, overdrawn, but it is often in exaggeration that something important is revealed of the overall situation. The nation states of which the Union is composed are not slowly but surely coming closer together but rather, all of a sudden, drifting apart. National cleavages are reasserting themselves in Europe.
It should not come as a surprise, then, that there is a growing awareness among European leaders that the European Union cannot go on like this. It is understood, at least by some, that the only way out is to move forward towards a political union. The crisis reveals necessity. The necessity points forward. And one the arrow pointing forward is printed in boldface “political union”.
Here we have it.
Paradoxically, however, it is not quite clear what it would take to make a union of this type possible for there is no canonical understanding of “political union” (in contrast to the more imperfect union that the Union represents right now).
Let me, in my remaining remarks, very briefly sketch three different understandings of “political union” and express my preference for the last. It will reveal that I am not an avowed follower of Monnet’s.
1. Political union as the heightened connection with citizens that is necessary for the Union’s survival
This is the meaning of political union that we encounter in the current debate, in particular in the speeches by Commission President Barroso. Indeed, the understanding follows the basic integration logic of “a crisis makes us realize the dictates of necessity”. From this perspective, the current monetary and economic union stops short of political union because it does not yet embrace fiscal union. Fiscal union is supposed to be the road to political union because it promises to be, in the light of the current crisis, the decisive step toward transforming the union into a polity with which people have a direct connection. Once you pay taxes, you belong. No representation without taxation. Taxation is ticket of admission to an unmediated relationship. This is political union.
The most daring proposals to this effect have originated from the wider circle of policy advisors surrounding the commission. At its core, the proposal concerns a system of European taxation. The revenues from these taxes are supposed to go into various rescue funds. The idea is that in contrast to the current arrangement, where some Member States pay into the Stability Mechanism, while others take out loans from it, such a system would not be divisive. German taxpayers would still pay more because there a more Germans than, say, Slovenians, but they would pay the same amount as other Europeans. Moreover, the taxation could be given a more populist twist by calibrating it such as to target the beneficiaries of European integration, for example corporations. Even though the system of taxes and transfers would be limited, the revenue might be enough to sustain the Euro.
One may be inclined to concede that this would take the heat out of the horizontal conflict between “contributing” and “receiving” Member States. Unfortunately, such a limited system would do nothing the resolve the vertical conflict. The austere fiscal discipline would stay in place. It would also be clear that such a system would not generate sufficient revenue to mitigate the hardship of the people in Greece, for example, who loose 30 percent of their retirement income, or to stimulate growth in Spain where the unemployment rate has reached 25 percent. If the identification of Europeans with the Union, and their willingness to make a sacrifice, is the hallmark of political union a tax and transfer union would have to be more fully developed in order to contain vertical conflict. But given that the Member States subscribe to various social philosophies, the creation of a European social welfare state is a non-starter. Hence, this form of political union may well not be an effective antidote to the current disintegrative drift.
2. Political union as a common identity regarding the high politics of foreign policy
This type of political union, to be sure, would do nothing to solve the European crisis directly. But it might create greater cohesion among the Member States, from which the Union might benefit generally and indirectly. The term “political” is, in this context, reminiscent of the manner in which Carl Schmitt introduced it. The Member States of the EU would have common friends and common adversaries. Yet, even though the Union has already had for a long period of time a common foreign and security policy, the relevant unity has been notoriously difficult to create. On most serious matters of foreign policy, think of cases of humanitarian intervention of the responsibility to protect, the Member States remain notoriously split. The most recent example is the vote on the observer status of Palestine in the UN. Even though no Member State voted against it, a number of them abstained in the vote.
3. Political union as the self-assertion of a form of life against the forces of necessity
This third version of political union puts something at the center that is most elementary to our political experience, namely, that we share a place together and that what we have at a place is a cluster of forms of life within which we lead our individual lives. People engage in political action whenever they make a joint effort to sustain, or to lend shape, to what is going on at their place.
Political engagement presupposes, of course, to accord to this joint political activity priority over unplanned forms of human conduct and coordinated activity, the media for which are markets. From markets originate some of the necessities that Monnet was talking about. Hence, this form of political union transcends Monnet’s vision. Life, as asserted politically, trumps life that is merely lived in individual adaptation to circumstance.
Emancipating, by means of political action, human life from the necessities that arise from unplanned co-operation is a shared European legacy. This legacy is not without ambivalence. The record includes a certain measure of success, but also tragic failures. It ranges from Christian and Social Democracy on the one hand (the brighter side) to experiments with forms of real existing socialism on the other (the dark side). In whichever form, it represents the attempt to create freedom from markets where exposure to market forces has a particularly adverse, and potentially enslaving, effect on human life.
This adverse effect is often symbolized with reference to the risk associated with being in a market society: the risk of illness, of old age, of being useless or idiosyncratic. The core idea is that political union facilitates de-commodification—emancipation from the market nexus—because the latter is necessary to sustain a cluster of European forms of life. When a risk is created together and for the benefit of all, social justice requires that the management of risk needs to be a common concern.
In the current situation, a form of political integration that is congenial to this European legacy would ask at least two questions: The first question is what Europe might be able to do to assert or reestablish political control over the forces that threaten to disable it? This means, in particular, how pressures can be lifted from the Member States and the Union that originate from financial markets and rating agencies? The second question concerns the essential role played by the Member States as communities the socialize risks and help to sustain forms of life against their extinction by unbridled market forces. The question is whether it would be desirable to sustain the common currency in this consolidated form and to create a more centralized European federal state in light of the space of maneuver that the Member States would have to retain in order to fulfill their political mission. The devolution of some measure of monetary policy may be required for that.
I need to concede that I do not have a “smart” answer to the first question. I hasten to add, however, that the Union has recently adopted regulation concerning rating agencies. But it remains an open question whether a European regulation alone would be enough and whether the subject matter does not require a coordinated global approach.
With regard to the second question, I believe that it needs to be answered by the European peoples. I do not mean to take refuge to a facile evasion of responsibility to work towards plausible solution. Rather, I think it has become clear that retaining the common currency would require major readjustments and a more enduring loss of power on the part of the Member States to determine economic and social policy. The question is whether that would be desirable. I am skeptical that pundits are in a position to provide us with the right answer. Too many things are left to judgment. Most of it is highly speculative and reflects a commitment to a certain economic philosophy.
This is a situation of great uncertainty. The only thing that helps in a situation of great uncertainty is, as Madison knew, the formation of public opinion. A referendum on the Euro would be a perfect occasion to stimulate a debate. What we would likely witness in the course of such a debate is the long overdue emergence of a federalist and an anti-federalist persuasion. For a last time, perhaps, Europeans would have an opportunity to learn from the American experience.