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Yanis Varoufakis, the former Greek Minister of Finance, delivered a speech in which he recounts the challenges he faced while in office. His narrative about the Eurogroup’s mode of conduct, if indeed true, should alarm any democratically-minded individual.
Given that we have no means of empirically validating his claims (a problem in itself) I will withhold final judgement on matters that appear to be factual. I am instead limiting myself to comment on Mr. Varoufakis’ normative propositions: on his view regarding the future of the European integration process, on what he labels “Decentralised Europeanisation”. Below are some indicative quotes from his speech:
Take the four realms where Europe’s crisis is unfolding. Debt, banks, inadequate investment and poverty. All four are currently left in the hands of governments that are powerless to act upon them. Let’s Europeanise them! Let existing institutions manage part of the debt of member-states, place banks that fail under a common European jurisdiction, give the European Investment Bank the task of administering a pan-European, investment-led recovery program. And, lastly, let us use the accounting profits accumulating within the European System of Central Banks to fund a poverty-fighting program everywhere in Europe – including Germany.
I call this overarching program Decentralised Europeanisation because it Europeanises our common problems but proposes no federal treasury, no loss of sovereignty, no fiscal transfers, no German or French guarantees for Irish or Greek debt, no need for Treaty changes, no new institutions. It gives more freedom to elected governments. It limits their impotence. It restores the democratic functioning of our Parliaments. (p.20-21)
On the face of it, I do support this approach. Let us make rational use of existing structures in ways that are beneficial for all sides involved. I am however concerned that this kind of rhetoric is not compatible with Mr. Varoufakis’ own depiction of the existing euro framework as a “shared iron cage”. It also seems to disregard an unpleasant reality: the current European Union (EU), and the Economic and Monetary Union (EMU), are sui generis entities founded on inter-state Treaties, meaning that all Member States must agree to change the “constitutional order” they represent.
The stumbling block of inter-governmentalism
For us citizens of Europe and the world to Europeanise these structures, we must, among others, have governments that subscribe to Mr. Varoufakis’ vision. I claim thus on the basis that unless we are willing to delude ourselves, we should acknowledge that the Eurogroup does not have an independent existence, separate from that of its parts. It is a quasi-legal body consisting of finance ministers from all Member States whose currency is the euro. What the Eurogroup’s decisions represent is the collective will of governments working in an inter-governmental setup and having to deal with the balance of power therein.
To do things differently within the framework of this EU/EMU, we need the Member States’ explicit support: national governments whose raison d’être is to undo the status quo. That is the situational aspect of the matter.
The structural aspect concerns the very design of the EU/EMU as an inter-governmental, quasi-confederal superstructure. Everything passes through the Member States, with the locus of authority being found in the European Council. For as long as we cannot formulate common politics in line with republican principles, we are decisively prevented from achieving the normative objectives of a European Democracy.
Couched in those terms, Mr. Varoufakis’ proposal is perfectly aligned with the underlying rationale of the EMU: of having common rules without common politics. In practice, if we follow that line of reasoning, we will effectively, albeit unintentionally, be strengthening the technocratic aspects of the EU/EMU. That is so because:
- as is currently the case, no parliament, neither the European nor any given national one, will be in a position to conduct an ex post review of the legal basis of any of the entities that will be tasked with the laudable objective of realising the “Europeanisation” of the four realms where the crisis unfolds;
- institutions tasked with key aspects of economic policy, such as managing part of the debt, without them being subject to democratic control, represent the kind of problem we are currently facing with monetary policy: a European Union institution, the European Central Bank, is empowered to “Europeanise” monetary policy in the absence of an overarching framework of a European federal republic;
- Dani Rodrik’s famous “impossibility theorem” applies perfectly to Europe’s Economic and Monetary Union: Mr. Varoufakis claims that we can have integration, national sovereignty, and democracy all at the same time, with nothing having to be given up; in effect, it is democracy that will be sacrificed in an inherently inter-govermental order.
The European Democracy in context
I am fully in favour of fostering a cosmopolitan network for the creation of a European Democracy. In my personal capacity I have sought ways to participate in such a movement. The idea would be to provide an impetus for the root-and-branch transformation of the existing EU into a genuine republic, a federation founded on a codified corpus of primary law, a constitution; a constitutional order that will supersede the existing treaties-based system, while incorporating whatever positive features may currently be identified in the Community’s acquis.
Still, the ideal of trans-border democracy requires a trans-national agency—the cosmopolitan network—that will be able to labour towards the realisation of its ambitions without being constrained by inter-state arrangements of power. Currently this sort of agency does not exist, at least not in its fullest.
To proceed with the plan B to such a federalist roadmap, to indeed consider as plausible Mr. Varoufakis’ proposal, we need to bring to power a Syriza-like leftist party in each and every Member State willing to partake in the “Decentralised Europeanisation” of the concurrent crises.
If time were on our side, I would be willing to entertain such an idea. However, I think we face pressing issues that cannot be postponed until we witness the “planetary alignment” of all radical leftists gaining a grip on power. Greece is facing a specific set of challenges. It has no monetary means at its disposal, while its scope for fiscal policy is severely constrained by a supra-national legal order. What is circumstantially and structurally possible within those constraints is internal devaluation, i.e. austerity. Mr. Tsipras learned this the hard way.
A currency as a tool for economic policy
A currency is an instrument. In Europe we have committed the mistake, indeed the hubris, of treating it as a political end, or as the most optimal means to a political telos. As is already clear from economic theory peculiar to Optimal Currency Areas, a common currency is the epitome of already integrated economies that have, among others, a political framework for dealing with whatever internal tensions and asymmetric shocks.
This understanding is reflected in the well-known argument of complementing the monetary union with a fiscal and political union. Whether that will actually happen in Europe, is open to debate. Given the Five Presidents’ report, which I have already criticised (see here, here, and here), as well as the kind of outlook that derives from Mr. Varoufakis’ own description of the effective EMU, I would argue that it is more likely than anything for the system to further deviate from democratic norms and economic reason.
I am all for a single currency that will substantiate the economic functioning of a pan-European republic. However, the euro is not the confirmation of benign integration. It is neither the vivid realisation of a United Europe nor the catalyst for the materialisation of that ideal. It rather is a failed experiment at a stateless currency. Failed because:
- it compounds the problems of inter-governmentalism;
- it engenders, deepens and lengthens asymmetric shocks;
- it calcifies the technocratic mode of decision-making found in Europe’s legal framework for economic governance;
- it effectively renders illegal any form of economic policy that deviates from its own canon (such as standard keynesianism);
- it is contributing to the recrudescence of nationalism: it is the root of the existing divisions in our continent, divisions that inevitably coagulate along national lines due to the inter-state politics of the EU/EMU.
Europe is not limited to the euro
Instead of perpetuating the euro’s statelessness and ill advised tenet of “common rules without common politics“ in hope that somehow a brighter future will come, we must seek workable arrangements that will allow us to adapt to existing economic conditions in a graceful way.
The European Union, in spite of all of its shortcomings is a great achievement of our time. For it to remain desirable, to stand for the lofty value of a United Europe, it has to be mentally divorced from a badly designed single currency. The two are not the same.
As things currently stand, and at least insofar as Greece is concerned, one must realise that clinging on to the euro, to a narrow and tokenistic conception of “europeanness”, without accounting for the costs and material implications, can only be a recipe for further suffering, and for the continued erosion of the modicum of self-rule still at the people’s disposal.
The architects of the euro opted to put the cart before the horse. To criticise—indeed to oppose—this order is to be against bad economics and dangerous politics. The modalities of European coexistence do not necessarily encompass a single currency that operates in the absence of a common republic. We first need to agree on the specifics of a European Democracy, on a federal republic, and then proceed to the enactment of a new single currency.