The United States of Europe: Inspiration from India? - by Stephen Green

There are powerful voices who suggest that the United States of Europe could have had no future. They say it is an overly ambitious design.

But what about India? This, after all, is indeed a country with a vibrant democracy, a rich and colorful cultural diversity, 29 states and seven union territories and over 40 official languages.

If India can manage such a Union successfully, why can’t the wealthy Europeans, with all their means, do so as well?

The answer to this provocative question is clear: First, the new India was not born in peace and consensus, but in bitter and violent strife. That strife resulted in the breakaway of a huge area of historic India into Pakistan (and what subsequently became Bangladesh).

What we have instead is a European Union that is on a unique journey. It has progressed from an economic starting point, from a coal and steel community through a common market and the European Economic Community to what is now the European Union, through a series of treaties, which have continually increased the degree of integration.

But now it is subject to the real risk of fragmentation for the first time in its relatively short history.

Whether or not the Greeks are able to find a new modus vivendi in the eurozone, there is no turning back from this journey. From a technical point of view, the increasing integration of the eurozone is effectively a one-way street.

Even more fundamentally, it would be existentially impossible — particularly for Germany — to withdraw from a project whose collapse would unravel the whole tissue of European integration that has been woven since 1949.

And what is true for Germany is true just as much at least for the founding members of the original European project – the signatories of the original Treaty of Rome. And none of the other members want to see it unravel either.

There is an inevitable price to pay for this: painful adjustments in weaker economies and financial support from the stronger ones – both of which are of course deeply unpopular.

But it is a price that will be paid. Equally inevitably, it poses a serious challenge for the British, many of whom have always been lukewarm about the European project and do not relish the “ever closer union,” which is envisaged in the foundational treaties of the EU.

Read more: The United States of Europe: Inspiration from India? - The Globalist

Europe's Future Is Federal - by Jean Tirole

Numerous Europeans view Europe as a one-way street: they appreciate its advantages but are little inclined to accept common rules. An increasing number throughout the Union are handing their vote to populist parties – Front National, Syriza, Podemos – that surf on this Eurosceptic wave and rise up against “foreign”- imported constraints.

Embroiled with the Greek crisis, European policymakers will soon have to step back and reflect on the broader issue of the Eurozone’s future. Before envisaging an exit or, on the contrary, more sustained integration, it’s right to reflect upon the consequences of each option.

Oversimplifying, there are three strategies for the Eurozone: a minimalist approach that would see a return to national currencies, while keeping Europe perhaps as a free trade area and retaining a few institutions that have made a real difference such as common competition laws; the current approach based on the Maastricht Treaty of 1992 and its fiscal compact update in 2012; and, finally, the more ambitious version of federalism. My own clear preference is for the federalist version but I’m not at all convinced that Europeans are ready to make it work successfully.

Note EU-Digest:  Federalism is probably the only way to go if Europe does not want to become subservient to the presently ruling superpowers, China, the US, and even Russia. Populism and nationalism is not the way to go, as it has always turned sour in Europe's history. True federalism would certainly require finding another historic shining political star like Mustafa Kemal Ataturk, who has the ability to get the EU reorganized, and all the EU member states moving in the same direction. Let's hope we get blessed soon in finding that "needle in the political haystack" to rescue the EU out of the iron grip of the Wall Steet dominated financial community.

Read more: Europe's Future Is Federal » Social Europe

EU's new President Jean-Claude Juncker - Profile

Jean-Claude Juncker

Among EU government leaders only the UK and Hungarian prime ministers voted against him at an EU summit on 27 June.

Crucially Germany's Chancellor Angela Merkel backed his bid - after some hesitation - as did the centre-left leaders of France and Italy.

There are many voices in the European Parliament too who argue that Mr Juncker should get the job. The parliament believes the choice of European Commission president now has to reflect the election result.

Yet he is a controversial figure in the EU, as a leading advocate of deeper EU integration, and is often called a "federalist"
.
A veteran of Brussels deal-making, he headed the powerful Eurogroup - the eurozone finance ministers - at the height of the eurozone crisis, when crucial decisions were taken about austerity and bailout conditions.

He was prime minister of Luxembourg from 1995 to 2013 and one of the architects of the euro.

But according to Pierre Leyers, financial editor of the daily Luxemburger Wort, it is misleading to call him a "federalist". "He wants deeper integration, but not a European superstate," he told the BBC.

Mr Leyers argues that coming from a tiny country has enhanced Mr Juncker's influence in the EU, odd though that may seem to people unfamiliar with Brussels politics.

Luxembourg was a founding member of the community which became the EU and, sandwiched between France and Germany, "it had no choice but to try to be on good terms with its neighbours", Mr Leyers said.

 "So some Luxembourg politicians were always good negotiators and diplomats, to get France and Germany together."

The drive for post-war reconciliation shaped Mr Juncker's political views.

But some of his past remarks have raised eyebrows, suggesting a less than firm commitment to democracy.

Ahead of the French vote on the European Constitution in 2005 he said: "If it's a Yes, we will say 'on we go', and if it's a No we will say 'we continue'"
.
And in 2011 he said "monetary policy is a serious issue - we should discuss this in secret, in the Eurogroup... I am for secret, dark debates".

His greatest EU challenge has been shoring up the eurozone since the 2008 financial crash, when Greece's colossal debts, and those of other struggling eurozone countries, threatened the very survival of the single currency.

Mr Juncker is a strong advocate of a European "solidarity" union - an EU that strives to raise living standards in its poorest regions and sectors.

He has not explained how an EU-US free trade deal might impact on EU social protection policies, which currently cost the EU many billions through support for farmers and projects to help poor communities.

He claimed that such a deal would give each European an extra 545 euros (£443; $742) - an exaggeration, according to a fact check by Eurovision, which hosted the debate.

He has also defended the Common Agricultural Policy, saying agriculture employs about 30 million Europeans. But the UK government is among the many critics who say the CAP is wasteful and want more of the EU budget spent on digital technologies, research and investment in small businesses.

Mats Persson, director of the Open Europe think-tank, says Mr Juncker is associated with the EU of the 1980s and 1990s, echoing a criticism attributed to UK Prime Minister David Cameron.

After an election that saw a surge in support for Eurosceptic parties, that connection with past EU policies may be a disadvantage, Mr Persson told the BBC, adding that Mr Juncker was "sidelined quite a bit during the eurozone crisis" and "ran a vague election campaign".

However, Mr Juncker is not vague about the political risks of taking tough economic decisions. He once said "we all know what to do, we just don't know how to get re-elected after we've done it"

EU-Digest

Jump media player

Media player help

Out of media player. Press enter to return or tab to continu

Sayonara Britain: EU backs Juncker to head Commission in blow to UK

EU leaders in Brussels have nominated former Luxembourg PM Jean-Claude Juncker to be president of the European Commission, in a blow to the UK.

Prime Minister David Cameron called it "a serious mistake". "This is going to be a long, tough fight," he said.
He had pushed for a vote on Mr Juncker - breaking with tradition - and 26 out of 28 countries backed him.

Only Mr Cameron and Hungarian PM Viktor Orban voted against him. Mr Juncker is also likely to win a vote by Euro MPs.

It is the most powerful job in Brussels - the Commission drafts EU laws, oversees national budgets, enforces EU treaties and negotiates international trade deals.

Mr Cameron believes Mr Juncker is too much in favour of closer political union and might block EU reform.
"This is a bad day for Europe... it hands new power to the European Parliament," Mr Cameron said. "This whole process has simply reinforced my conviction that the EU has to change."

Read more: BBC News - EU backs Juncker to head Commission in blow to UK

The European Union as an Emerging Federal System - by Dr.Thomas O. Hueglin in collaboration with Alan Fenna

Among the growing number of international organizations and systems, the European Union stands out for two reasons: First of all, it is the most advanced transnational system of political integration, comparable in size and economic power only to the United States of America. It may indeed have model character for transnational governance in a globalizing world. Secondly, while the European Union must be considered as an altogether new form of transnationalized multilevel governance, it can be regarded as an emerging federal system nevertheless. It is included in this section because it has followed the German model in several important ways.

Interlocking Powers in the European Council.

At first glance, the institutional set-up of the European Union very much looks like that of a federal state. There is a directly elected European Parliament, a European Commission in charge of executive governance, and the Council of Ministers, a kind of superior legislative chamber with ultimate decision making power. It is the construction of this Council of Ministers which resembles German federalism most closely. First of all, its composition is based on the council principle. The members are instructed representatives of the European member-state governments. Their votes are similarly weighted as in the German Bundesrat. Secondly, given the superior if not exclusive law making powers of the Council (see below), the European system of governance is very much one characterized by political interlocking rather than a separation of powers. 

Cultural Diversity. 

This is almost where the comparison ends. Obviously, since the European Union is currently composed of 27 member states with different histories, large variations in their social, legal and economic systems, and eleven different language, it can only be regarded as a case of cultural federalism. Its formation almost literally repeats at the European level the history of federalization in nineteenth century nation-states (see chapter 4). Its rationale has been based on a historical compromise between a shared desire to build a large integrated market, and an equally strong commitment to the retention of cultural autonomy and self-governance. As in the case of nation-state federations the question is to what extent the homogenizing forces of the market will eventually transform the federal system from a predominantly cultural one into an increasingly territorial one

An Eclectic Mix of Plural Powers. 

The institutional framework of the European Union departs farthest from the German, or, for that matter, any other federal model. The European Parliament has only limited powers and certainly does not follow the tradition of responsible parliamentary governance. The executive Commission is appointed by the national governments and only partly accountable to the Parliament. It is responsible for most European policy initiatives, and it watches over their implementation by the member states once the Council has approved them. That Council , on the other hand, operates more like an institutionalised form of intergovernmentalism than a second legislative chamber. As in Canadian First Ministers Conferences, for instance, changes to the Union Treaties require unanimity. Only when setting up specific policies to be carried within the framework of the existing Treaties, the Council has increasingly adopted qualified majority voting. 

With this eclectic mix of institutional arrangements, European governance somehow falls into the category of plural power dispersal. As master of the Treaties, the Council remains autonomous from parliamentary control and accountability. The Commission acts as the main executive, and as a semi-autonomous political entrepreneur for the entire process of integration, coordinating communication and interaction among a large number of public and private actors, member state governments, subnational regional and local governments, interest organizations and social movements. The transnational lobby in Brussels very much begins to look like its counterpart in Washington. So does the large and growing number of direct financial support programs the Commission administers. 

Legislative Cooperation, Competitive Administration. 

A categorical classification of the European Union’s functional division of powers and policy making style is even more problematic. The Treaties have the character of binding European law, and a very efficient European Court of Justice watches over the member states’ adherence to them. Insofar as these member states continue to be governed predominantly by national law, one can discern a legislative division of powers. At the same time, however, the directives and regulations which are put into place by the Commission on the basis of this Treaty Law, have to be implemented and executed by the member states, and this would point more into the direction of an administrative system of federalism. Evidently, all this requires a high degree of cooperation. Within the stipulations of the Treaties, the member states have agreed on a common vision of integration. This process of integration has remained a partial one, though, focusing on a common market in particular. A good deal of competition remains with regard to both unregulated policy areas such as social policy, for instance, and the general direction of the process of further integration.

In sum again, the European Union is both more than just another international organization, and less than a fully developed federal system. It is more than an international organization with specific and limited objectives because the achieved level of integration is unprecedented in quantitative as well as qualitative terms. It is less than a federation because the process is still ongoing and incomplete. 

Note EU-Digest: Probably it will always be a project in development, which makes it so unique. 

Does the Eurozone need its own parliament?

What is Europe? There is a geographic sense of Europe that would include Russia and Iceland. There is a cultural sense of Europe that would include Georgia, New Zealand and Cape Verde. And there is a political sense of the word. Politically ‘Europe’ meant the ‘EU’ composed of all its members – until the sovereignty debt crisis, that is. Since then ‘Europe’ more often means the Eurozone of 17 nations rather than the European Union of 27 states. Now, this new meaning of ‘Europe’ is to receive political representation.

Herman Van Rompuy’s  ‘’Issue Paper on Completing the Economic and Monetary Union”[1] published on the European Council website on 12 September 2012 posits the idea that a fiscal union should have its  own budget. This would be an important step forward in building of a true ‘economic’ union. This fiscal union and its budget would in turn necessitate the creation of a treasury office, also excercising budgetary control over national budgets. Hence, there is talk of some sort of a European super-finance minister. The democratic accountability of such a position remains a sensitive issue. Herman Van Rompuy asks the question: ‘’Would a more integrated economic policy framework require dedicated accountability structures specific to the euro area?” In other words, does the Eurozone need its own parliament?

On 17 September a group of foreign ministers led by the German minister Guido Westerwelle brought out a report[2] in which the group stressed the importance of democratic legitimacy and the central role in this process of the European Parliament. Yet they recognised that,  ‘’...if a decision applies only to the Euro area plus other ‘pre-in’ member states who wish to participate, ways should be explored to involve the MEPs from these countries...”. In other words, the Eurozone will borrow democratic oversight from the existing European Parliament to codecide (or, to be consulted) on Eurozone-related issues, in the same way that for over a year the Eurozone has already borrowed its democratic oversight from the European Council. Why? Because the Eurozone-related issues are of much more concern to the Eurozone governments,  and MEPs are already elected from the Eurozone states. (When the situation falls outside of the EU competences, the national parliaments need to be consulted, too.)

Hence the following scenario: if Mr. Van Rompuy is right, the Eurozone will get its own budget administered by the European treasury. Its democractic accountability (Westerwelle group) would be provided by the Eurozone-elected MEPs. Potentially they would even elect the head of the new institution, ‘’the European Treasurer.” This powerful position would a) administer the Eurozone budget; b) control the national budgets of the countries in the fiscal union; c) chair the Eurogroup finance ministers meetings (currently the role played by the Luxembergish PM Juncker); and d) be fully accountable to the Eurozone MEPs and the national parliamentarians.

Thus is multi-speed Europe born. In its core is a ‘’political union” based on fiscal union, macroeconomic cooperation and budgetary control mechanisms matched with democratic legitimacy. With time, the dichotomy of EU competences vs. national competences in economic affairs will have to be overcome; hence the call for a new European Convention ( an idea promoted most recently also by the Commission President Barroso[3]) to solve this problem. The core institutions of the ‘’political union” include the summits of Eurozone heads of states and governments, the European Treasury, and Eurozone-elected MEPs. The group could even be equipped with a European army (Westerwelle group).

Read more: Does the Eurozone need its own parliament? | openDemocracy

Federalism or bust for Europe? - by Jean Pisani-Ferry

August was quieter than feared on the European bond markets. So, while resting on Europe’s beaches and mountains, policymakers could take a step back from the sound and fury of the last few months and think about the future. Is the eurozone sleepwalking into becoming a United States of Europe? Is it exploring uncharted territory? Or are its constituent nation-states drifting apart?

To answer these questions, the best starting point is the US. The model of a federal union that emerged from its history consists of a single currency managed by a federal agency; closely integrated markets for products, labour, and capital; a federal budget that partly, but automatically, offsets economic disturbances affecting individual states; a federal government that assumes responsibility for tackling other major risks, not least those emanating from the banking sector; and states that provide regional public goods but play virtually no role in macroeconomic stabilization.

This model served as a template for the European Union’s architects, notably for the creation of a unified market and a common currency. But, in several respects, Europe has diverged significantly from the American model.

First and foremost, Europe has not established a federal budget. Back in the 1970s, there was still hope that common spending would eventually amount to 5-10 per cent of EU GDP, but this dream never materialised. The EU’s budget today is no larger than it was 30 years ago: a meagre one per cent of GDP.

Unlike in the US, where federal public spending grew as a consequence of the creation of new expenditure programmes throughout the 20th century, public spending was already high at national level when Europe began to integrate. Significant federal spending programmes could have emerged only from the transfer of existing national programmes to the European level. Not surprisingly, such transfers were strongly resisted.

Read more: INDEPENDENT online

Federalism key to saving Europe - by Patrick Artus

The crisis in the euro zone has taught us a lot about the functioning of currency areas, which is markedly different to that which is most often expected. First of all, monetary unification creates increasing heterogeneity in the countries and regions that form the currency area, because it enables production specialization; the heterogeneity is not caused solely by bad economic policies implemented in some countries.

The euro will therefore only be sustainable, beyond the short-term bailout plans, if the euro zone’s institutions enable this heterogeneity to be countered, if federalism makes it possible for the regional adjustments in wages to be bearable and if the financing of euro-zone countries is ensured in ways that discourage speculation, which is still far from being the case.

First, it is impossible to imagine the survival of the euro zone if there is, on the one hand, increasing heterogeneity of income levels throughout the regions, due to the diversity of productive specialisations, and, on the other hand, the need to carry out significant downward adjustments in wages in certain countries, in order to achieve the necessary real depreciation of the exchange rate, in addition to the resulting risks of a depressive spiral and divergence between countries.

To make these changes bearable, the only solution is federalism, i.e. income transfers from high-income countries to low-income countries. Unfortunately, we know this is being increasingly rejected by the euro zone’s Northern countries.

For more: Federalism key to saving Europe