Even as time is rapidly running out to find a workable way to avoid a collapse of the common currency, a deepening rift is emerging between Germany and France over how best to resolve the Eurozone crisis. The Financial Times Deutschland reports a hardening in the position of Angela Merkel against both Eurobonds (as advocated by the European Commission or otherwise) as well as a broadened role for the ECB, favoring instead the automatic sanctions approach ultimately enforced by the European Court of Justice. Nicholas Sarkozy, by contrast, is deeply reluctant to allow this sort of supranational interference with national budgetary policy—and politics. This essentially intergovernmental conflict over the proper scope of supranational power vis-à-vis the more democratically legitimate member states brings to mind the “Preliminary Note on the Euro Crisis” with which I open my book Power and Legitimacy: Reconciling Europe and the Nation-State (OUP 2010). With apologies for the shameless self-promotion, I think this note holds up quite well as a description of the forces that would likely influence the legal and political resolution of the Euro crisis, and thus I thought it worthwhile bringing it to the attention of readers of EUtopia Law:
This book was in production when the Greek debt crisis intensified in the spring of 2010, precipitating a broader crisis that threatened the future of the euro as a viable common currency. Given the timing, it was impossible to assess the many implications of the developing euro crisis here. Nevertheless, even at an early stage, one could still note several institutional aspects of the unfolding drama that were entirely comprehensible from the perspective of this study. These included the relatively marginal role of European Union (EU) bodies in addressing the crisis in the first instance; the correspondingly critical role of national and intergovernmental politics; and the functional pressures—political and economic realities—that were pushing nonetheless toward greater supranational coordination to ward off a possible spread of the crisis elsewhere in Europe.
As of this writing (mid May 2010), it could not yet be determined whether the euro crisis would lead to a new institutional settlement for integration. The “special purpose vehicle” established to manage the new mammoth bailout fund [the European Financial Stability Facility (EFSF), now apparently not mammoth enough], along with proposals for increased supranational surveillance of national budgets, certainly suggested the possibility. But events are moving fast, and the crisis could still lead to an institutional transformation well short of, or even orthogonal to, some form of European “economic government.” Indeed, if Greece and other vulnerable Member States prove unable to satisfy market concerns regarding their public finances, the crisis could still lead to a default (in the form of a debt restructuring) or perhaps an unraveling of the EMU or worse, including a broader European banking crisis with untold consequences for the global economy. It could not yet be determined, moreover, whether the crisis would precipitate a new ruling from a national high court on the legal limits of integration relative to national constitutional orders, although that too was a possibility [and indeed it has come to pass via decisions of the German Federal Constitutional Court, and more may be coming].
Regardless of the outcome, the euro crisis will again force the EU to reconcile, just as it always had, two key but contradictory features of integration. The first is the cultural persistence of national democratic and constitutional legitimacy in the European system of governance. The second is the functional and political requirements for greater denationalized regulatory power in pursuit of integration. As this study seeks to show, the tension between these elements has characterized the integration project since its inception, profoundly shaping the contours of European public law over time. Short of a complete breakup of the EU (something I do not foresee, although some kind of transformation looks increasingly unavoidable), I fully expect this tension will continue shaping European public law as integration proceeds into an uncertain future.
[For readers interested in learning more about my historical argument, and its implications for European integration going forward, I urge you to check out the more detailed analysis in Power and Legitimacy itself.]