A bad bet on crisis consciousness
The proposals on ‘economic governance’ could be a time bomb under the legitimacy of the EU institutions.
Angela Merkel and Nicolas Sarkozy’s ‘competitiveness pact’ has set a new agenda for reforming ‘economic governance’ in the EU. Or, rather, it has blown the lid off an ongoing debate on new rules for economic governance for the whole EU.
Even if the pact is not accepted – and it could meet resistance in the European Council – it has proved that the two major players are willing to attack wages, pensions and social spending at member-state level. And that is significant for the European Commission’s proposals on economic governance due to be adopted this summer.
According to the pact, member states should commit themselves to “quantifiable indicators” on wages and public finances. That should sound familiar to anyone acquainted with the Commission’s proposal on ‘macroeconomic imbalances’, which suggests that member states should be judged on a number of indicators. If they cross the line, sanctions could follow.
According to the Commission’s proposal, called ‘the excessive imbalance procedure’, those indicators will be decided on at a later stage. However, in putting forward their pact, Merkel and Sarkozy have made wages, pensions and social spending the obvious candidates.
That provokes the question: has the present crisis created a ‘crisis consciousness’ that allows for these kinds of reforms to gain support and legitimacy?
For the EU institutions, the answer seems to be a clear ‘Yes’. At a Commission conference in Brussels in January, Mario Monti, a former two-term European commissioner, caught the spirit of the audience when he praised the reforms, saying: “Thank you, Greek crisis!”
But are the EU’s citizens really prepared for a fiscal union along the lines of the pact and the proposals put forward by the Commission?
If a given member state were asked, under the excessive imbalance procedure, to lower wages to gain a notch in ‘price competitiveness’, it would imply that the EU was imposing wage levels – something that is alien to EU countries where collective bargaining is strong and extremely popular.
The same goes for state budgets. According to Merkel and Sarkozy’s pact, the rules should be “comprehensive”, while, under the excessive imbalance procedure, the Commission would be able to draw up a number of ‘threshold levels’ to determine inappropriate levels of social expenditure and, if these thresholds were crossed, the Council of Ministers could ask a member state to change its budget priorities. Given the fierce debate around budgets in many member states – a sign of a vibrant democracy – this could prove to be quite a bitter pill to swallow.
If adopted in their present form, the economic-governance reforms will go a long way to removing deeply political issues from the sphere of democratic influence, pushing them into a world of scoreboards, cumbersome ‘procedures’, high-level consultations, and political prescriptions before any public debate can even take place.
There is of course already mounting trade-union opposition to these proposals, and indeed, the only real proponent outside of the political sphere is the very business community that inspired the reforms in the first place. By pushing through these measures, there is a risk that the EU will add to the already troublesome democratic deficit in EU affairs, raising serious questions about the legitimacy of the EU institutions themselves.
That remains to be seen, of course. But when the public mood toward deeper economic integration was recently put to the test in Denmark on a TV show, shortly after the presentation of the competitiveness pact, it proved hostile. Prime Minister Lars Løkke Rasmussen had aired the idea of a referendum on the introduction of the euro. The TV show asked viewers to send a text message on their position. Ten thousand people ‘voted’ within minutes. Three-quarters were against.
Kenneth Haar is a researcher at Corporate Europe Observatory.
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