Fractious club of national leaders cannot lend the stability Europe needs

While markets and observers alike have rightly assailed the 17 national leaders steering the eurozone ship for constantly doing too little too late, there is no question that new crisis management instruments such as the European Financial Stability Facility (EFSF) in Luxembourg and commitments to reform eurozone governance have already moved us into a new world of burden-sharing and mutual responsibility going far beyond the original design of the EU treaties.

Of course, this came neither as a result of forward-looking political leadership nor specific popular demand. Our leaders found themselves forced to act by the escalating onslaught of financial markets threatening a flimsy edifice that needed and will continue to need massive strengthening to withstand this attack and future ones. Yet the lack of a specific popular mandate in no way makes such a reinforcement of the eurozone’s defences and coherence illegitimate.

When preserving the status quo is no longer a viable option, leaders must decide how to discharge their responsibilities to their electorates and their countries’ future. The true betrayal of popular will would be to empower the financial markets to unravel decades of European integration. Having handed the so-called financial industry the power to pile up insane amounts of risk, having rescued them from their folly at enormous public cost, we would now allow these same forces to demolish the European commonwealth – to argue that this is the politically most legitimate course flies in the face of common sense and voters’ preferences.

Constitutional referendums have at times returned hostile majorities, but decade after decade of democratic elections in Europe have sent parties into parliament that are committed to preserving the degree of integration achieved in Europe and develop it further. The mandate for eurozone leaders to do whatever it takes to preserve the euro could therefore not be stronger.

In the English-language debate particularly, the relationship between democracy and European integration is often most vigorously argued about by Eurosceptics. It is essential for advocates of deeper European integration not to leave the opposing camp in sole occupation of this vital terrain, especially as the issue of parliamentary democracy and eurozone governance is likely to move to the heart of the political debate in Europe.

European democrats must make themselves aware of the possibility that the crisis-fighting and policy-regulating instruments currently cobbled together by national leaders (with some involvement of the European Commission and the European Parliament) push democratic debate and voters’ choices to the margins as they amount to a takeover of the system by national leaders pursuing a Gaullist dream of unfettered executive power.

This is a danger to be identified and fought. Simply put, if national policy-making finds itself subjected to new jointly agreed eurozone constraints or new obligations to exercise euro zone solidarity, then that shrinking of the democratic space at national level must be counterbalanced by an expansion of the scope for democracy at the European level of policy making.

The familiar argument that after all, the eurozone’s national leaders are all democratically elected and therefore perfectly qualified to control and exercise the new European powers is so threadbare that it can be dismissed out of hand.

First, the reality of the last 18 months has shown us vividly that in times of tension and urgency, the leaders of smaller nations often have no practicable other option than to swallow a pre-cooked Franco-German deal.

Second, while the national leaders have indeed been properly elected, the nationally driven backroom dynamics prevailing at EU summits are a wholly insufficient substitute to a proper public debate and voting in a parliamentary body structured along recognisable lines of majority and opposition. Handing power taken away from national parliaments to a group of 17 or 27 national leaders engaging in often-obscure deal-making cannot be an acceptable way to adapt our continent to the economic and political imperatives of this century – nor is it efficient, as the sum of 17 or 27 competing national interests is inevitably less than what our European commonwealth needs for its stability and coherence.

Politicians from robust parliamentary democracies such as Ireland should have a particular stake in ensuring that new crisis-fighting tools such as the future European Stability Mechanism (ESM), the successor to the current EFSF, will eventually be integrated into the normal functioning of EU institutions. Equally, they should fight against tendencies to establish the eurozone leaders’ meeting as the new long-term regulator and arbiter of common and national eurozone policies.

As it is clearly not a sustainable option for the eurozone to grant its members full economic, budgetary, financial and fiscal room for manoeuvre, the only alternative to an inefficient oligarchy of national leaders is a strengthening of the political bodies less prone to takeover from the strongest and biggest nations, meaning the European Commission and the European Parliament.

In the longer run, it is clear that the eurozone and the EU will need leadership figures and institutions endowed with the power to speak and in some cases decide swiftly for all. The current fragmentation of executive, legislative and judicial power in the eurozone has led to enormous uncertainty among investors who are often quite clueless about the real distribution of power in the EU; this uncertainty has been a key factor eroding investor confidence and landing us in the mess we are in.

The eurozone needs more powerful leadership figures who can reassure citizens at home and investors abroad; the president of the European Central Bank, Jean-Claude Trichet, has emerged as an indispensable statesman in this crisis essentially because he presides over and speaks for the only eurozone institution that commands full federal powers of the kind the euro zone will ultimately need more of for its survival.

In an interesting recent opinion piece for the Financial Times, the ECB’s former economist Otmar Issing pointed to the indisputable fact that rules-based European agreements to govern national economic and budgetary policies such as the Stability Pact have so far signally failed to function. He threw up the question of how to avoid rewarding the spendthrift and punishing the prudent if eurobonds were indeed to be adopted as the only way to restore investor confidence in the future political cohesion of the eurozone and vigorously criticised the prospect that such a fundamental step would be embarked upon without adequate parliamentary scrutiny either at the national or European level. The launch of a eurobond market, according to Issing’s implicit argument, should ultimately require the creation of a European government controlled by an elected European Parliament.

The logic is flawless and points to the battle that must lie ahead. The establishment of a proper eurozone treasury as part of a European executive body controlled by European parliamentarians looks a long way off politically today. Yet this is the goal the crisis is driving us towards – as a matter of necessity and efficiency, not of idealism.

With global financial markets prone to panic and a lasting resolution to the turmoil not immediately in sight, it is tempting to dismiss such considerations as a luxury safely left to naive believers in the lost cause of a United States of Europe.

But the charge of naivety must be levelled even more forcefully against all those who ignore a decade of evidence and believe that a fractious club of national leaders can give Europe and the eurozone the policies and stability it needs. The eurozone needs the powerful, politically game-changing instrument of eurobonds – and eurobonds will ultimately need federal, democratically controlled institutions to give them sufficient legitimacy

This piece was first published in the Irish Times