On the unified representation of the euro area

2015-10-24

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In an October 21 fact sheet, the European Commission provides information on its forthcoming initiatives for deepening the integration of Europe’s Economic and Monetary Union (EMU). These are in line with the vision set out in the Five Presidents’ report, a document I have commented on in a number of articles, the last one being the dialogue on Europe’s sovereignty mismatch.

Though there are many topics worth commenting on, I here focus on the external representation of the euro area to the International Monetary Fund:

The Commission invites Member States to adopt a decision laying down the measures required to pave the way for the euro area to have a unified representation at the IMF by 2025 at the latest. The Commission also invites the Council to improve the process for coordinating euro area positions at the IMF, and to strengthen accountability arrangements. Finally, the Commission invites the Council to make representation of the euro area at the Fund gradually more consistent. The Commission will work inclusively with all EU Member States to further improve coordination in all international fora.

The international standing of the EMU is of particular interest to me. It is a criterion for determining the constitutional status of the supranational level. For the time being, I contend that the EU, or in this case the EMU, is a _quasi-_confederation, since, among others, it is not an independent state and, hence, has no single international personality.

The unified representation of the euro to the IMF does not entail a uniformity in the international status of the EMU. It does not mean that it will automatically be recognised by the rest of the world as a single state, nor will it be treated as a member of the United Nations in its own capacity. This proposal only concerns the IMF and is limited to the representation of the euro. The Commission suggests that euro area Member States will retain their status as IMF members.

I understand this as a half-measure at best. The euro will politically be represented by the eurogroup’s president, yet its membership to the IMF will remain divided along national lines. In this context and for the EMU to be considered a state in its own right, membership to the fund has to be specific to it, not be divided among its constitutive states. Thus, the next move would be in that direction.

External representation is indicative of a single international personality. This is a feature of every sovereign state in the international order. The Commission’s intention is to gradually flesh out the elements that make up an independent state, to provide the impetus for transforming the EMU from a quasi to a proper confederation.

If we are to have the euro area function as a confederation, we might as well begin to think of ways that would make it work properly. We will have to have Treaty changes that pursue the following basic objectives:

• legitimacy: the EMU has to have an elected administration; if the Eurogroup were to be preserved, it would then need to be transformed from the current inter-governmental model of pseudo-foreign-policy among finance ministers of individual states, into a democratically legitimised deciding executive: the political entity for representing—and for deciding on issues of—the euro area at-large;
• bifurcated executive function: the deciding executive will operate above the implementing executive, in a similar, albeit more transparent, fashion to how the European Council is currently forming the rules of the EU by providing the general direction of European integration, while the Commission, together with the European Parliament and the Council of the EU, are tasked with making the rules via the ordinary legislative procedure;
• proper depoliticisation of the Commission: the European Commission should then be stripped of its pretences on input legitimacy (the spitzenkandidaten procedure), to become the implementing arm of the Eurogroup qua deciding executive, and remain limited to the tasks of offering technical expertise while acting as the “guardian of the treaties”;
• accountability: the EMU’s bifurcated executive should be subject to democratic control from a bicameral European Parliament (House of Representatives and Senate); a Parliament that would have the right to, inter alia, initiate the legislative process, which entails the capacity to be the prime mover for repealing an existing piece of legislation.

Understandably, these are not part of the Commission’s fact sheet, for they are contingent on amendments to the Union’s primary law, something that only the Member States can decide on. Still, the Commission’s intention is to build a certain momentum and, if possible, to pave the way for such a Treaty change.

The afore-mentioned quote also makes reference to “all international fora”. One would have to assume this includes the United Nations. The inference to be drawn is that once the unified representation of the EMU to the IMF becomes standard procedure, it will be used as a template for broadening the overall international status of the EMU.

Of course, none of this may happen. The Commission’s proposal needs to be approved by national governments, while it has a ten-year horizon. I expect that a precondition for enacting such a reform, is the reinforcement of the legal framework for economic governance. I find it implausible for common representation to the IMF to become a reality if it is not preceded by changes to the internal structure of the EMU. For instance, one would expect that the provisions of the European Semester would become stricter. This anyway is part of the purpose of the Five President’s report, in particular the intention to proceed with a “fiscal union”.

The unified representation of the EMU to the IMF must then be seen as the culmination of a certain process to (i) consolidate the post-eurocrisis changes to the economic governance of the single currency, and (ii) create a “political union” of sorts from within the existing structures of the euro.