John Bruton

Opinions & Ideas

Category: EU (Page 2 of 2)

MAKING THE EUROPEAN UNION MORE DEMOCRATIC………………………………………..

WE NEED AN ELECTION THAT IS TRULY EUROPEAN……….NOT JUST 27 NATIONAL ELECTIONS FOR EU JOBS

Why is there criticism of lack of democracy in the EU at this  time?
One of the criticisms of the policy guidelines, laid down by the European Commission and Council of Ministers for economic policy in the European Countries, is that the European Union lacks sufficient democratic legitimacy to be making recommendations on things like this. I believe this criticism is exaggerated, but has some underlying validity. 

The guidelines , of course, really do have to be followed, not primarily because they have been recommended by the EU, but simply because lenders in the commercial markets will not lend money otherwise.

Without an EU endorsement, markets nowadays will hesitate to lend to governments, who are consistently  spending more than they are raising in taxes, or who are maintaining economic structures that inhibit the economic growth. 
Economic growth is needed to raise tax revenues, and thereby to sustain better public services. But economic growth requires the removal of rigidities in the market for jobs and services that may prevent change.

Constant change is actually essential to economic growth. Change is often painful, and evokes anger. Because its advice often advocates painful change, the EU is being criticised…and also accused of being undemocratic. 
But the truth is that, even if the EU, and the euro, had never existed, European governments with budget deficits, ageing populations, and rigid economic structures, would be facing painful change at this time, anyway. Neither the EU, nor membership of the euro, obliged the governments in difficulty to adopt the policies that have led to their present difficulties.
That said, there is a need for more democracy in the EU, so that the public will be willing to assess the legitimacy its guidelines on their merits.

Democratic legitimacy exists when the voters feel that, if they are not satisfied with what their government is doing, they can peacefully remove it from office.

Europeans feel they can do that with their national government, and  with their city or local government. But they do not feel they can vote any part of the EU government out of office
That should change.

What should be done to make the European Union more democratic?

There should, in future, be three, rather than the present  two, sources of democratic legitimacy in the EU.

  1. The existing democratic mandate that member state governments,  who make EU policy in the Council of Ministers of the EU,  already enjoy from their parliaments and people
  2. The  existing democratic mandate  that the European Parliament  has from  the  national constituencies, in which it members are  elected.  I believe this could be improved if some MEPS were also elected from an EU wide constituency
  3. A new EU wide democratic mandate, that a directly elected President of the Commission would have to win from the entire unified electorate of the EU. The President should be elected using the alternative vote system of Proportional Representation, whereby  voters would indicate an order of preference among candidates, and the votes of candidates, with lower numbers of first preferences, would be redistributed  according to the second preferences, until one  remaining candidate had achieved 50%. In this electoral system the President of the Commission would have to be acceptable, on a preference basis, to a majority of the EU electorate .In contrast, if a “first past the post” electoral system was used, the EU could find itself with a President, who might come from the  biggest party, but who still  had the support of a minority of the electorate. That would be unstable.

This new third element would create a vehicle whereby Europeans, voting all over Europe on the same day, could vote into or out of office, an office holder who could attempt to change the trajectory of EU policy. That would greatly enhance the democratic legitimacy of the EU. It would bring the EU closer to the people. It would bring the same degree of democracy to the EU, that Europeans expect at national and local level.

We must first create a truly European electorate, if we are to have the level of common identification with one another across national boundaries, which would be essential if there is to be public support for more federal integration. 

Elites in Brussels need to understand that electorates must first “think European” before they will happily pool more powers, especially on budgetary matters, They must trust one another, regardless of nationality.

For this reason I believe election of the President of the Commission, directly by the people of Europe themselves, is infinitely  preferable to an election of the President of the Commission by the European Parliament.

A President of the Commission, who had been elected by the European Parliament, and who could be removed by the Parliament (as happened in the Santer case), and  who has no power to  dissolve Parliament in the event of a policy clash(as most national Prime Ministers can), would be too weak, and would lack the necessary independence. He or she would be subject to too much short term parliamentary pressure. We would be introducing, at European level, the sort of weak governance that caused such difficulty for the Third and Fourth French Republics.

I believe that a  separation of powers is an important safeguard in a Union as complex, and large, as the EU. 

The direct election of the President of the Commission by the people, rather than by the European Parliament, would preserve the separation of powers, on the basis of which the EU has operated successfully since its foundation. 
Some suggest that the EU could gain greater democratic legitimacy, if the 27 national parliaments became more involved in EU policy making. One suggestion is to set up a joint committee of MEPs and national parliamentarians, who could question EU Commissioners and the European Central Bank.

This might do some good, but  it would not close the gap between national electorates and the EU decision makers. National parliaments are national entities with national concerns. That is their . It is not a European role. In any event, national parliaments are themselves facing criticism for the performance of their national roles, and giving them a new set of European responsibilities will not necessarily reassure national electorates about Europe.

Furthermore, national parliaments, subject to party discipline,  will tend to follow the policy line of the national governments , and  thus are unlikely to add many new, or different, inputs from those put forward in the Council by national Ministers. 
election of the President of the Commission does raise a The direct question about the quasi judicial functions that the Commission performs, like Competition policy, enforcement of EU laws, and the   guardianship of the Treaties, which many believe should not be subject to electoral pressures .  A solution would be to hive off these quasi judicial responsibilities of the Commission to an independent body, with a level of independence similar to that now enjoyed by the ECB, which would not be subject to direct electoral pressures.

I  do not  favour merging the roles of the President of the Council, and that of President of the Commission, but only one of them(The President of the Commission) should be directly elected. This would establish a natural hierarchy between them, and avoid the embarrassment of sending two Presidents to the G8.

Ideally, I would favour a smaller Commission, but I do not see how it will come about in practical politics, because smaller countries will not agree to amend the EU Treaties to give up ”their” Commissioner. A solution may be to enhance substantially the role of the vice Presidents, and attribute some of the “surplus” Commissioners to the External Action service, to handle EU relations with particular parts or regions of the world. 

In addition to the EU electorate, acting as a single body, electing the President of the Commission,10% of MEPs should be elected from in a single constituency of all of the EU. 
The question of a single EU wide constituency for a proportion of the European Parliament was an issue that the Convention on the Future of Europe was asked to consider, but it did not do so.
I believe the EU will evolve a true common foreign policy only after it has evolved a common defence policy, and I believe that will happen, very gradually, and only because of financial necessity, not  because of political idealism.

But it will never be sustainable to have a common foreign and defence policy until we, as Europeans, feel we have common interests, and common understandings, among ourselves. 
That has not come about yet. I believe that it can be brought about only if we have elections that are truly European, rather than mere national elections, to European jobs.

GERMANY BASHING IS BESIDE THE POINT……….. IT IS TIME TO FACE THE REAL CHOICES

We read that there is a severe outbreak of anti German feeling in Greece.Under the second EU/IMF bailout, Greece is being lent extra money  at interest rates  far below those at which it could borrow commercially, and in the meantime a portion of its existing debts are being written off. 
But  Germany is being blamed for the  unwillingness of the EU and the IMF  to sign off on this  second bailout , without , what some Greeks see as,  humiliatingly detailed assurances that
  • the money will be used properly ,
  • Greece will adopt specified policies to cut back state spending and raise taxes and that it will
  •  liberalise its economy, so that it can grow fast enough to be able to repay the extra money it is now to be lent.

The trouble is that Greece has a poor record in presenting honest accounts, and in implementing in practice, changes it has agreed to in principle. The extra assurances are being sought so that more good money is not poured down a black hole along with the debts that are now being partially written off.
Without this loan, Greece would default and it would leave the euro.
In fact, what Germany is really doing is defending the interests of savers, including Greek savers, from what would happen, if Greece defaulted and left the euro. If Greece left the euro, its banks would collapse, and Greeks would see their savings, whether   in the form of bank deposit accounts, life assurance policies, or claims on pension funds, disappear.

THE CHOICE FOR GREECE IS BETWEEN PLANNED AUSTERITY, AND SUDDEN INDISCRIMINATE, AUSTERITY

 
Some argue that “austerity” is a mistake, because the cuts in spending and tax increases dampen confidence so much that the economy stops growing. In the short term, this is true.  But those who criticise on that basis,  have no realistic alternatives to offer.
Where can Greece get the money on better terms than it is getting from the EU/IMF?  
 Nowhere.
There really is no Keynesian alternative for Greece.   The Greek economy is too elderly, too inward looking and too riddled with restrictive practices, to benefit from a Keynesian stimulus, even if someone could be found to finance it. Greece must modernise first. The EU/IMF programme gives it some breathing space (perhaps too little) in which to do that.
Keynesian economics might have been relevant in the  1930s, when the European  population was much younger and could respond to an economic stimulus.  Europeans today are much older, many are retired, and their priority is saving for their old age, rather than going out shopping in response to a boost in government spending. It is not going to get easier. The age dependency ratio in the EU in 2007 was  25%, by 2050 it will be 50% !   What people are looking for now, is stability.

 Greece faces an alternative of two forms of austerity
  • austerity through  planned  cuts and tax increases under the EU/IMF programme or
  • austerity through indiscriminate inflation, of the kind that would  occur, if Greece  left the euro and devalued.
One of Greece’s problems is that it finds it very difficult to reduce wages, which is one of the many things it needs to do if it is to make its exports more competitive. Wage setting is highly regulated in Greece. That is why some favour Greece leaving the euro and allowing devaluation and inflation to cut the real value of Greek wages, and thus  regain competitiveness.  Inflation is the politically easy way to impose wage cuts, but the effect on living standards is at least as bad as cutting the wage rate, and much harder to control.
 But the price of this inflation/devaluation option would be high.  If Greece left the euro, its banks would collapse and the savings of ordinary Greeks, who were patriotic enough to leave their money in Greek banks, would disappear.  Inflation is hard to keep in check once it starts, and Greece also lacks big export industries ready to boost exports quickly on the back of a devaluation.

THE REAL POLITICAL DIVIDE………SAVERS VERSUS BORROWERS
 
It is true that current EU policies are favouring savers over borrowers.    This is so because the ECB, unlike the US Federal Reserve and the Bank of England, is not willing to engage in “quantitative easing” ,printing money indiscriminately, to revive the economy temporarily.
ECB refuses to print euros without limit, and refuses to use them to buy Greek bonds without conditions. It refuses to do so because that would lead to inflation, and to a devaluation of euro. The more euros that are printed the less the euro will be worth.  That, of course, might suit borrowers, because the euros they would using to pay back their debts at the end of their loan, would then be worth less,  than the euros they borrowed in the first place.
 
But that approach would be bad for savers, who would see the purchasing power of their savings disappear.
 
The real political divide in our societies today, is not between Greeks and Germans, or between the profligate Mediterranean nations and the thrifty northerners.
It is between savers, who do not want their savings devalued or confiscated, and borrowers, who would like to be allowed to pay back less than they owe.

“ORDINARY PEOPLE”, SOMETIMES THE SAME PEOPLE, ARE ON BOTH SIDES OF THIS DIVIDE

But if borrowers pay back less than they owe, someone somewhere else has to take the hit.
If  borrowers are helped by having  their debts being  written off, or having  their debts  are  devalued by inflation, someone else will lose.
Who would lose? 

  1. The losers would include taxpayers, who now own  many of the banks, and who would  see the value of those banks go down
  2. Other losers would be pension funds and insurance companies who own bank shares, and the people who rely on these pension funds and insurance companies to pay their pensions, or insure them against risk.
  3. Yet other losers would be   the people who have deposits in banks, who would see the value of those deposits reduced by inflation, and who could even lose those deposits if the bank collapsed. 
The challenge we face is that of devising an economic policy that acknowledges that there are ”ordinary” decent  people on both sides of this divide.
We also need to acknowledge that no one will be willing to lend any European Governments money any more unless they face up to realities about the cost of ageing societies that will  grow steadily everywhere over the next twenty years.
Greeks bashing Germans, or all of us bashing bankers, may give emotional satisfaction, but it will not pay our bills.
 
We need to think things through , rather than emote. We  need to strike a balance between debt relief, and protecting the savings we need to prepare ourselves for  a time when, instead of four,  there   will only two people at work,   for every one  that is  one too old to work

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