Government and Institutions

On European order

In recent years, euroscepticism has been growing in the UK and elsewhere. This is largely due to concerns about a perceived overreach of EU institutions, coupled with insufficient accountability to electorates. Such concerns are valid, but not always well defined.

This article outlines some specific developments within the EU which have contributed towards its current political and economic instability. It then describes some specific reforms which, from a German and perhaps an Anglo perspective, would go a long way towards solving those problems.

The call for European reform does not just come from the ‘usual suspects’. It is the only compelling conclusion of any realistic analysis of the European project and its development since the Maastricht Treaty.

In summary, the French-dominated steering of the erstwhile European Community intentionally transformed it into a federal union with enlarged competences and constructivist political ambitions. The outcome of this process has been an overload of missions and a widening gap in democratic legitimacy.

The current position of the euro project illustrates the biggest failure and a profound institutional dilemma. Despite the obvious shortcomings of the project, the Commission has declared even Greece’s membership irreversible. In addition, the Commission has been persistently reluctant to take the growing divergence of the Eurozone economies, which is itself a consequence of the currency union, into account. It refuses to discuss a Plan B for the monetary reorganisation of Europe.

Other projects, though of a more practical nature, have smacked of institutional self-aggrandisement. For example, the Galileo Navigation Satellite System illustrates the Commission’s ambition to carry out projects which European industry has judged to be too risky. The fact that the Union continues with such a mega-project irrespective of the setbacks, delays and cost overruns reveals another feature of EU instability: the major lack of political and financial accountability.

These institutional mismatches have led to a dramatic deviation from the Union’s course, which was plotted in the Treaties, in a lot of policy areas. A brief consideration of three domains illustrates the point.

First, competition policy. Since 2001 the Commission has been rewriting primary law rules in the area of antitrust. Under Article 101 of the Treaty on the Functioning of the European Union (TFEU), cartels were forbidden, and exemptions could only be made via individual decisions of the Commission. The Commission has changed this primary law to the point of undermining it, through its interpretation of Section 3 of Article 101 TFEU which sets out exemptions. It has done so by replacing the need for individual exemptions with a blanket „legal assumption“ which only has to be invoked by a corporation that wishes to engage in cartel practices. The concept of this „more economic approach“ has been  created as a decision-making method by (DG) Competition in order to give more discretionary powers to the Commission.

The efficiency criterion, although nowhere to be found in the Treaties, has become the de facto political guideline for both cartel prohibition and merger control. In this arena, Germany as the spiritual founder of competition policy is no longer a significant player in Brussels.

The second domain is Internal Market policy, which has become a trite commonplace, and a standard excuse for EU hyperactivism. Invoking the need to establish a functioning internal market, pursuant to Art. 114 TFEU, seems to have become a (back)door opener for initiatives of the Commission which would otherwise clearly need an independent authorisation. The constitution of a Single Resolution Mechanism for banks, defining a wide range of fees and contributions to be raised by the member countries in order to be used  in a Resolution Fund, was the outcome of the Commission‘s arcane legal strategy.

A third area where the Commission has overreached itself is climate policy. In EU-speak, this was a cornerstone of European ‘soft power’, which was initiated before the Lisbon Treaty. There was, however, clearly no authorisation for a CO2 emission trading system at that time. In subsequent years, this policy has led to competitive disadvantages for European industry. Both the U.S. and China continue to be grateful to the Commission‘s climate evangelism.  These countries play at their own tempo in the field of climate policy, whilst the cheerleaders of EU fashion, namely the climate panel, are coming increasingly heavily under scientific attack.

In all of these fields, the EU Commission and Parliament have usurped power by systematically misinterpreting European primary law, thus turning themselves into the masters of the integration process. A principal purpose of law, however, is to define the limits of executive power, providing checks and balances to the self-authorisation of individuals and institutions who hold that power. This should be as true for European law, as it is for domestic legislation.

Since no other institution than the EU Council can stop the Commission and Parliament in their collusive actions, the role of the European Court of Justice has to be reassessed. How can it enforce the rule of law in the future and become an effective countervailing power to the other official guardian of the Treaty, the European Commission?

Another field of European policy where the EU endangers political stability concerns foreign policy and the role of the High Representative. The European Foreign Service is liable to cause more harm than good, because it is incapable of substituting or accomplishing the work of national governments. The temptation for people with a minimal stake in the EU to play a disproportionate role is great.

Having identified some of the specific instances of EU overreach, it is evident that a political process is required, aimed at overcoming these shortcomings. Full debate is required, on both institutional reform and a catalogue of specific political measures. To inform such debate and actions, the following broad principles may be useful to the endeavour of stabilising the EU through reform.

Instead of paying lip service to the principles of subsidiarity and conferral (Art. 5 TEU), these should be formally restated as overarching constitutional principles which confine the Commission and its allies to the limits of their mandate. As the subsidiarity objection by national parliaments has hitherto not been effectively used, the EU needs an institutional body whose exclusive remit would be to monitor, and where necessary object to the Commission’s initiatives if they are judged not to be in line with either subsidiarity or the principle of conferral. This new organ should have no more than 50 members and would be elected by strictly democratic principles (one person one vote) guaranteeing however membership for smaller nations.

A reform treaty should shed competencies which are redundant for the integration process with regard to the internal market. Sports, tourism, humanitarian action, cultural and health policy, industry, social cohesion and civil protection should no longer be on the list of Union competences. The Committee of Regions as well as the Economic and Social Committee and the European Social Fund should be immediately abolished.

A delicate question concerns the future of the European Parliament (EP). In point of fact, the EP is not a fully functioning parliament, because it has no power to tax. Its co-determination right in legislation has neither increased the debate, nor given weight to the above-mentioned principles of EU self-restraint. The EP is a driving part of the Brussels conglomerate of powers, which reinforce each other and suffocate debate instead of bringing the most important matters to the level of open debate. A realistic and pragmatic reform would be to cut the number of MEPs by half, backfilling the vacant positions with members supplied by national Parliaments.

These proposals may be considered provocative, but they are not revolutionary. They are conservative-minded because they seek to achieve political and institutional stability, founded on a democratic base. Moreover, they are inspired by increased German responsibility for the EU. Only Germany has the economic and political influence, to prevent destabilising internal EU projects, and to signal to external politicians the limits of their influence on European matters.

These ideas are intended as a modest contribution to the world of Brussels affairs, a world in which criticism is frequent but answers are few.  In this context, the proposals may be considered to be useful, or at least a starting point to spark further debate.

Dr Markus C. Kerber is a Professor of Public Finance and Political Economy at the Technical University of Berlin. He is the founder and president of Europolis, an interdisciplinary group of economists and lawyers for European integration.