Matteo Renzi, between the quest for “Europe’s soul” and the “assault of technocracy”

lindsethProf. Peter Lindseth

Two recent pieces in the FT (here and here) brought home the magnitude of the task currently confronting Italian Prime Minister Matteo Renzi as he seeks to reform a sclerotic domestic system and yet ward off complaints from supranational technocrats unsatisfied with the pace of change. The Renzi challenge can be seen as a case study in whether and to what extent charismatic political leadership in a national democracy can successfully achieve its goals in the face entrenched bureaucratic power both national and supranational. In that regard, readers may find of interest remarks I delivered last month at the Summer School on “Parliamentary Democracy in Europe” at the LUISS Guido Carli School of Government in Rome. My focus was Renzi’s recent speech before the European Parliament on 2 July 2014, viewed in relation to statements made before the Italian Chamber of Deputies and elsewhere around the same time. Renzi’s line of rhetoric on Europe—notably his quest for Europe’s “soul” and “the meaning of [its] life together”—provided a point of entry into a broader set of reflections on the current state of the integration process, its socio-political / socio-cultural underpinnings, as well as the challenge of reconciling (national) democracy and (largely but not exclusively supranational) technocracy. The full remarks can be found here (including citations), while below is an excerpt.

Renzi began [his speech of July 2d in Strasbourg] by offering congratulations to the members of the EP for their recent election. He spoke of the “great responsibility” of the EP to bring “trust and hope” (fiducia e speranza) to European institutions. But note what he did not say: He did not say that EP brought “democratic legitimacy” to European policy-making. He did say that it was “only right and politically just” for the European Council to respect “the results of the recent electoral campaign” and hence the EP’s “prerogatives” in the choice of the new Commission president. But he avoided using the language of EU “democracy” to describe this step.

Of course, I have no special access to the workings of Renzi’s mind. Nevertheless, I think it is fair to say that he deliberately avoided the language of democratic legitimation with regard to the EP. The prior week, in a speech before the Italian Chamber of Deputies, Renzi stated: “Those who imagine that the democratic ‘gap’ in Europe will be overcome simply by the appointment of Juncker as President of the European Commission are living on Mars.” In that earlier speech he went on to describe not only the low turnout in the European elections but also the significant percentage of the vote that went to parties hostile to the European project. From there he segued to a theme that would be central to his speech in Strasbourg the following week: “It is not enough to have a currency in common, or a President in common, or a source of funding in common.” Rather, what is needed is for Europe to “accept the idea that we have a destiny in common and values in common.” In his speech the following week before the EP, Renzi elaborated: “The real challenge confronting our continent is to find the soul of Europe, to find the profound meaning of our being together” (my emphasis).

Now I know as scholars we are not supposed to pay much attention to these sorts of rhetorical flourishes by politicians. Nevertheless, I found this entire line of discussion fascinating. Perhaps Renzi did not intend it but his reference to finding Europe’s “soul” and “the meaning of our being together” brought to mind a similar line of thinking in Ernest Renan’s famous 1882 lecture, “Qu’est-ce qu’une nation?” (“What is a Nation?”). According to Renan: “A nation is a soul, a spiritual principle…. [It is] the possession in common of a rich legacy of memories [but also] present-day consent, the desire to live together … [It is] a daily plebiscite ….” In speaking of the current ills afflicting the EU, did Renzi intentionally mean to invoke this paean to liberal nationalism of the nineteenth century? After all, isn’t European integration supposed to be a “post-national” project, something designed to transcend the legacy and evils of nationalism?

Perhaps Renzi was not invoking Renan specifically, but there is much in the speech to suggest that Renzi would like nothing less than for the integration project to emulate at least some aspects of nationalism. Most importantly, Renan associated nationalism with a “large-scale solidarity”—something that Renzi might love to see replicated on a European scale in response to the Eurozone crisis.

The clearest indication was Renzi’s invocation of the famously dismissive observation of Metternich to describe Italy in 1847, in which Metternich asserted that Italy was nothing more than “a geographical expression.” For Renzi, today’s Europeans must demonstrate that that Europe is something more than a “geographical expression.” According to Renzi: “There will be no space for Europe if we remain only a dot on Google Maps. We are a community, a people, we are not a geographical expression—to use the phrase applied to Italy by a great Austrian statesman of the nineteenth century” (Metternich was not specifically named). Continue reading

Does Germany need a political questions doctrine?

CormacCormac Mac Amhlaigh

The German Federal Constitutional Court’s (GFCC) recent decision on the (il)legality of the ECB’s bond-buying practices is the latest in what can only by now be described as a slew of cases from the Court since its 2009 Lisbon decision on questions which involve the German basic law but have an arguably disproportionate reverberation across Europe and particularly the European integration project. In fact, the OMT the decision itself, whereby the Court expressed doubts about the legality of the ECB’s bond-buying practices, but before making a definitive determination on the question, made a preliminary reference on the question to the CJEU, in a sense represents the making good on previous promises by the Court in Maastricht, Lisbon and Honeywell, where it threated to monitor the activities of the European institutions to ensure that they did not stray beyond the powers bestowed upon them in the treaties, and thereby vicariously break the German Constitution, (Maastricht and Lisbon) but would make a preliminary reference to the CJEU for its input into whether the activities of EU institutions are lawful before making a final determination on the point itself. (Honeywell)

The OMT decision has attracted much commentary and criticism in both the media and the blogosphere which I will not add to it here. Nor will I try to predict the future as to what Luxembourg’s response will be, nor Karlsruhe’s response to Luxembourg’s response (although it will be interesting to see what Luxembourg makes of a preliminary reference from a national Court which comes with a threat to ignore its opinion attached).  Rather, this latest case in the recent slew, and the occasion of the first preliminary reference from the GFCC in the fifty plus years of European integration, gives occasion, I think, to critically reflect upon the Court’s approach to politically sensitive issues involving the European integration process. 

To a student or teacher of British constitutional law, with its (however threadbare) doctrine of parliamentary sovereignty, one never ceases to be amazed by the extent to which the GFCC gets its hands dirty by wading into the heart of German political life, adjudicating upon high-profile and sensitive political issues such as the conduct of German foreign policy and the management of security threats, to the point of second-guessing the activities of the executive and legislature.  This fearless attitude to the separation of powers has resulted in some remarkable decisions in the past (see Franck for an excellent overview), and some, quite frankly, dubious political theory on the part of the court which was on full display in its Lisbon decision.    However, what stands out is the fact that Court seems to unquestioningly assume the propriety of its activities and the complete absence of any doctrine or criteria to filter out particular controversies which may be judged too politically sensitive for the Court to make a ruling.  Courts in many (if not most) other jurisdictions, tend to side-step heavily political matters through the savvy use of admissibility requirements such as rules on locus standi or the development of judicially fashioned doctrines on ‘political questions’ or justiciability. Continue reading

An End to European Multilateralism: A Comment on the German Bundesverfassungsgericht’s OMT decision

Oliver Gerstenberg

When it comes to adjudicating the European sovereign debt crisis, the German Bundesverfassungsgericht emerges as a sharply divided court. Back in August 2012, Mario Draghi pledged to do “whatever it takes” to prevent a single currency break-up. His words were followed by the Outright Monetary Transactions Programme (OMT), allowing the ECB to buy unlimited government bonds of over-exposed eurozone countries. The so-called “magic” of the OMT was that it has worked without ever being activated—the statement of a credible commitment alone was sufficient to stabilize markets without the ECB ever having to buy a single bond so far and to stop sovereign bond spreads.

In its pronouncement of February 7, 2014, on whether the ECB’s sovereign bond-buying program is “ultra vires,” the 2. Senate of the BVG, with a majority of 6:2, has for the first time ever turned to the CJEU for a preliminary ruling. But, appearances to the contrary, the deployment of the reference procedure is anything but an act of European-friendliness and judicial comity. The senate’s majority opinion uncompromisingly expressed its categoric view that essentially due to its unlimited nature the OMT programme indeed amounted a “structurally significant transgression of powers” under EU Treaty law: according to the six judges, “there are important reasons to assume that [the OMT-programme] exceeds the ECB’s monetary policy mandate and thus infringes the powers of the Member States, and that it violates the prohibition of monetary financing of the budget.” The consequences of these words are dramatic. For starters, those words may well set the stage for a constitutional conflict between the BVG and the CJEU, should the latter—as observers think is likely—see things differently and provide the OMT with a clean bill of health by declaring it an act of monetary policy. Perhaps even more fundamentally, rather than recant or eat its words, the BVG, upon a future constitutional complaint which the ruling self-consciously invites, has fully put itself on course of ordering Germany to leave the Eurozone entirely. In an ironic reversal of Draghi’s words, and in its own peculiar way, the BVG, too, seems bent on doing “whatever it takes.” Continue reading

Barking vs. Biting: Understanding the German Constitutional Court’s OMT reference … and its implications for EU Reform

lindsethProf. Peter Lindseth

I find myself in familiar territory.  Just as with the ESM Ruling of September 2012, some of the insta-commentary on a decision of the German Federal Constitutional Court (GFCC) on the Eurozone crisis calls for a response. At issue in September 2012 was the claim that the GFCC’s refusal to issue a preliminary injunction against the European Stability Mechanism (ESM) was evidence of “the Court’s weakness in EU matters.” At issue now is the idea that the Court’s decision this past Friday to refer a question to the CJEU – on the compatibility of the ECB’s OMT program with the treaties – is somehow an “abdication,” indeed “nothing less than a surrender of sovereignty by Germany’s highest court.”

Commentators much closer to as well as more knowledgeable of these matters have already weighed in on this over-reaction. I’d still like to offer some additional reflections, not merely to add what I hope will be some context to Friday’s decision, but also to shed some light on the Court’s strategy in the “game” in which it inescapably finds itself. Finally, I’d like to suggest that the Court’s ruling has major implications for the process of EU reform that David Cameron has been struggling to energize. As I’ll explain in the conclusion to this post (apologies in advance for its length), it is hard to envision any outcome of Friday’s decision that will not compel the Angela Merkel’s government to undertake reform, including treaty changes.  This presents an opportunity for the British government but only if it’s prepared to accept that European reform must include not merely “less” Europe, but also “more,” including possibly an expanded mandate for the ECB to explicitly embrace OMT.

Continue reading

Eight ‘right’ reasons why Chancellor Merkel will relax austerity

Dr Gunnar Beck

As I predicted in the Handelsblatt, Germany’s leading financial daily, Merkel emerged as the clear victor in Germany’s recent elections. It now seems there will be another Grand Coalition with the Social Democrats. Merkel’s popularity is due in no small measure to her management of the euro crisis where so far she has been able to present herself to many Germans as a tough negotiator insisting on strict assurances of tighter budgetary discipline in return for any German money. The truth is that the money is as good as gone but Merkel has profited from the extraordinary political imbecility of her opponents who whenever Merkel reluctantly agreed to yet further concessions to aid the euro, decried her hesitation to say she should have given in long before. Before the election, the SPD was calling for a German-led ‘Marshall plan’ for the euro. The SPD performed poorly in the elections, but their party’s policy on the euro is likely to prevail.  Merkel will soften her stance, and offer more solidarity in return for less and less solidity – not because of the Social Democracts and because post-war Germans, and especially Germany’s political elite, can no longer pronounce the word ‘national interest.’

The reasons for this are many, but in one way or another all relate to: i. Germany’s historical guilt complex, ii. the triumph of short-term calculus over long-term evaluation, and iii. the rise of oligarchic democracy in the West.

First, Chancellor Merkel, like any mainstream German politician, is a convinced pro-integrationist. ‘If the euro fails’, she has said again and again, ‘Europe fails.’ Those words, to the sober-minded, are devoid of logic. Yet, they signify a deep-seated and abiding commitment to EU integration and the single currency, not readily understood outside Germany.  Germany’s political establishment has been committed to ‘ever closer EU integration’ ever since West Germany became a state in 1949. The euro is part of that integration process. Any German Chancellor who would pull the plug on the euro, would be subject to unprecedented foreign political and media criticism and go down in history as a dangerous nationalist who placed narrow self-interest over wider responsibilities, turned his back on six decades of ostensibly consensus–based integration politics, plunged Europe into a long recession, and would get no credit for burying the single currency which never suited Europe. Merkel could probably rely on majority popular support, but, like any other German politician, she could not withstand market turmoil, the lobbying pressure by the financial services and multi-national industrial sectors, or the unprecedented foreign and domestic political and media criticism of the kind not experienced by any Germany Chancellor. Continue reading

The Social Dimension of EMU – Socialising Economic Governance

Prof. Kenneth A. Armstrong

On 2nd October, the European Commission published its anticipated Communication on Strengthening the Social Dimension of the Economic and Monetary Union. Yet barely had Commissioner Andor finished his press conference to launch the Communication than EP President Schulz intimated that the proposal was not ambitious enough. Observers of the EU will be familiar with the tendency of the Commission to refer to EU social policy as a ‘dimension’ of something else and with the criticism that its initiatives lack ambition. The ‘renewed’ social policy agenda of 2008 and more recently, the belated Europe 2020 ‘flagship initiative’ of the European Platform Against Poverty, were all greeted in more or less muted terms. In part, the rather underwhelming feeling about the Communication is a continuation of a disenchantment with the capacity of the European Union to develop a stronger social identity. But it is also a product of concerns with where EU social governance fits in the new governance architecture for economic and fiscal policy coordination given the political energy which has flowed into reforms to that architecture. Continue reading

Both ‘More Europe’ and ‘Less’: Some Thoughts on ‘Political Union’ and the Eurozone Crisis

lindsethProf. Peter Lindseth

Below is an excerpt of remarks that will be delivered at the conference ‘Political, Fiscal, and Banking Union in the Eurozone?’, taking place on April 25 at the European University Institute. EUI’s Department of Economics, the Robert Schuman Centre for Advanced Studies, and the Wharton Center for Financial Institutions at the University of Pennsylvania are the conference co-sponsors. Prof. Lindseth will take part in ‘Panel 3: Political Union in the Eurozone?’

The conference organizers have asked me to reflect on various possible meanings of ‘political union’ and whether there might be a tension between ‘de jure’ and ‘de facto’ dimensions of the concept. More specifically, they asked me whether there might exist any ‘barriers to real political union within the Eurozone and what the sources of those barriers might be’. Continue reading

Cyprus … or Why the ‘No-Demos Problem’ Defines the Policy Response to the Eurozone Crisis

lindsethProf. Peter Lindseth

Mervyn King’s now almost legendary quip about the global financial crisis—that global banks are ‘international in life, but national in death’—applies with even greater force to the Eurozone crisis.  And the consequences are increasingly devastating for European Monetary Union (EMU), as the unfolding drama in Cyprus well demonstrates.

In each stage of the Eurozone crisis—Cyprus simply being the most recent—we have been reminded that Europe’s banks, while purportedly ‘European’ in life (and allowed to grow, regardless of location, to an apparently ‘European’ scale), are very much national in their agonistic struggles to survive, ultimately dependent on national resources (or, in the case of Cyprus, also their depositors themselves).  When viewed relative to national resources—that is, access to capital to resolve/recapitalize or even just to insure deposits—many Eurozone banks (not just those in Cyprus) are potentially bloated and dangerous monstrosities, posing huge systemic risks to the EMU as currently constituted. Bailouts coming from the likes of the EFSF or ESM—channeled as they are through national governments, subject to strict conditionality—do not change this conclusion.  In fact, by ending up on national balance sheets and thus massively expanding national debts, these ‘bailouts’ only exacerbate the problem.

European leaders stated last June that they wanted to break the ‘the vicious circle between banks and sovereigns’.  Ever since, however, the core countries have done seemingly everything they could to perpetuate the ‘sovereign-bank link’.  Their actions have ensured that the entire cost of the EMU’s flawed design is born by the countries in the periphery, via austerity, the expansion of national debt, and now potentially the destruction of peripheral banking through depositor bail-ins and capital controls. There has, in other words, been no recognition of the fault that all Eurozone countries share in the flawed design of the EMU, or of the concomitant obligation to pool resources to solve the devastating problem of ‘legacy costs’.  Therein—as the innumerable advocates of a genuine European banking union have pointed out—lies the true heart of the Eurozone crisis. Europe will apparently get some kind of single regulatory supervisor for at least part of its banking sector.  But what it really needs, as so many recognize, is a common resolution mechanism and deposit guarantee scheme backed by the full fiscal capacity of the Eurozone as a whole (i.e., unshackled from the limitations of any single member state).

Continue reading

Original Sin: the EU tampering with the right to property in Cyprus is an unprecedented departure from EU norms and shared constitutional rights

Anastasios A. Antoniou

The facts are well-settled by now and the majority of us know that on the evening of 15/3/13, Eurozone finance ministers agreed on an extraordinary course of action in response to Cyprus’ request for a bail-out of the State and its banking sector, both on the brink of apparent collapse. The political agreement reached at the ministers’ Eurogroup configuration, seeks to impose a levy on deposits with Cypriot banks, catching both Cypriot and foreign depositors (hereinafter referred to as ‘the Decision’).

Developments are of course constantly unfolding. Following fierce reactions to the Decision, the Eurogroup held an urgent teleconference on 18/3/13, resulting in a statement by its president, Jeroen Dijsselbloem. The statement sought to assure that deposits under EUR100.000 would be fully guaranteed in what is presented as an upholding of the Eurogroup’s ‘view’ that ‘small depositors should be treated differently from large depositors’. The issue is that the Eurogroup never expressed such a view in the first place. Nor did it bother itself with revisiting the various legal anomalies emanating from what it wants to present as a political decision enjoying the consensus of all Eurozone member states, but has in fact been a catastrophic step, irrespective of whether it is eventually passed into law by the Cypriot Parliament. Continue reading

The Cyprus Bailout, Deposit Guarantees, and the Single Market (Updated)

lindsethProf. Peter Lindseth

 [This is a slightly updated and modified version of a post that appeared on europaeus|law over the weekend.  It is cross-posted here with permission.]

We’re all monitoring the intense fallout from the announcement by the Eurogroup that the Cyprus bailout will be conditioned on an “upfront one-off stability levy” on deposits in Cypriot banks.  The levy – 9.9% on bank deposits exceeding 100,000 euros and 6.7% on anything below that – will take place on Tuesday after a bank holiday on Monday.

There will no doubt be much more to be said about this in the coming days and weeks, but we note the general expectation that the levy, as structured, will hit small depositors in Cyprus banks especially hard.  Moreover, we want to point out the potential impact that the bailout conditions will have on the single market, notably harmonized deposit guarantee schemes.  As Open Europe asked on its blog:

Does this move break EU rules on capital controls and/or deposit guarantees? As noted above, it seems that depositors will be blocked from withdrawing their funds from banks. For other EU depositors this surely amounts to a form of capital control – strictly forbidden under the EU Treaty. Furthermore, as Sharon Bowles MEP has been tweeting, this move makes a mockery of the current EU rules on deposit guarantees below €100,000. The Eurozone may protest that the bank shares given in exchange are of the same value, but this is a very thin argument. Either of these issues could be challenged at the European Court of Justice.”

Bowles, a Lib-Dem MEP and chair of the EP’s Economic and Monetary Affairs Committee, has now issued a press release entitled “The Cyprus bailout deal is a disaster for EU rules andSingle Market principles“.  She writes:

“This grabbing of ordinary depositors’ money is billed as a tax, so as to try and circumvent the EU’s deposit guarantee laws. It robs smaller investors of the protection they were promised. If this were a bank, they would be in court for mis-selling.

“The lesson here is that the EU’s Single Market rules will be flouted when the Eurozone, ECB and IMF says so. At a time when many are greatly concerned that the creation of the ‘Banking Union’, giving the ECB unprecedented power, will demote the priorities of the Single Market, we see it here in action.

“Deposit guarantees were brought in at a maximum harmonising level so that citizens across the EU would not have incentive to move funds from country to country. That has been blown apart.

“What else will be blown apart when convenient? All the capital requirements we have slaved over, what about the new recovery and resolution rules? What does this mean for confidence in cross-border banking and resolution and preventing the fragmentation of the banking sector?

“When the dust has settled on this deal, which I hope it never does, we will see that the Single Market has been sold down the river for a shoddy price. All the worse as the consequences for Cyprus of the Greek bond haircuts were obvious.”

Continue reading