Building Europe: intergovernmental model vs supranational
The main political meaning of the Maastricht Treaty (1991-92), which prolongs and goes beyond the Single European Act (1985) is that the German, French and English imperialists bourgeoisies agreed to make a transfer (limited) of national sovereignty to start embryonic structures to create a supranational European state.
The introduction of the single currency put the question of state power in the center of the EU: the currency is a key attribute of any state apparatus, so that the euro entailed a waiver of national sovereignty and its transference to supranational institutions (mainly the European Central Bank). From that moment the single currency inevitably would have a decisive influence in the national – state politics of the government, so its introduction supposed the qualitative jump towards a truly central supranational state. A real step forward and a political victory of the European capitalism. However, considering the antagonisms between the state – national bourgeoisies, accentuated in the context of the present crisis, the European ruling classes have not managed to consolidate completely the project through a fiscal and political union that guarantees the culmination of the European supranational state.
These oppositions threaten the process of integration and the survival itself of the Monetary Union, and perhaps of the European Union. The European and Anglo-Saxon elites (including the USA), are divided as to the integration model: part of these European elites (e.g. German bourgeoisie) intend for maintain the intergovernmental model, while others propel the community – supranational model, (p.e. bourgeoisies of France, Italy, of the USA), generally referred to as ‘federal’ on the part of its promoters, given the the positive connotations of the word in the progressive environments. The federal model supposes that the states should abandon the levers of direct control of the European supranational institutions.
The supranacionalist ideas of the EU have been attributed to Jean Monnet, one of the founders of the EU, who preached that the states – nations should be subsumed in a post-national tecnocratic administration to bring peace in Europe. The idea defended by Monnet was, according to its own words “an union between the peoples, not a cooperation between the states”. This reflected his intention to help in the creation of an European Union that moved in the direction of the United States of America, the federal proto-state with great power at federal level and increasingly smaller state and regional power. For this reason he was accused of being an ‘American agent’, which was trying to eliminate the national sovereignty in Europe to create a federal Europe to weaken the powers of the European nations. Monnet’s ideas were not new. Hayek had already written in 1939 that a federal union should be created in Europe to act as a supra-national ‘negative’ power, in his own words, meaning that this would prevent the intervention of nation-states in politics and the economy.
By contrast, the intergovernmental ideology of the EU can be represented by the figures of the conservative politicians Charles de Gaulle and Konrad Adenauer, which defended that the EU should be constructed on the classic alliances between the states, especially between France and Germany, in the style of what Winston Churchill famously asked in his speech in Zurich in 1946. This position was reflecting the null motivation of the national political and economic elites of the time to renounce their power in favor of foreign forces.
In the Maastricht period, the supranational model of the European Union can be identified also with the figure of the German ex-chancellor, Helmut Kohl, who presided at Germany during the unification of the country and the conception of the project of the European single currency in Maastrich.It should be noted that one of the main motivations for signing Maastricht of this ex-chancellor was to obtain the supports of the other European powers to unify Germany. Kohl, throughout his long career often spoke about the need to abandon “the thought of the state – nation”. An example of this is his speech to the Bundestag after the Maastricht summit in 1991, in which he said that “it is not possible to turn back the entry into the European Union. Member states of the European Community are united in such way that makes any outbreak or relapse in the previous thinking of the nation state is impossible.”
The ex-president of the European Council Herman Van Rompuy said in 2012 this same roadmap in his report “Towards a Genuine Economic and Monetary Union”, called coloquialmente ‘report of four presidents’, since it carried out in close collaboration of the presidents of the Commission, of the Eurogroup and the European Central Bank Barroso, Juncker and Draghi respectively. Their main points were that the federal integration must be achieved through an integrated financial framework (ie, a banking union); with an integrated economic policy framework (ie, a fiscal union); with the strengthening of the democratic legitimacy and of accountability; and with an integrated budgetary framework (that includes the emission of common debt, ie eurobonds). The rejection of the German government to implement the eurobonds in 2012 buried the report of Van Rompuy temporarily and eroded his political figure. In spite of it, this ideological current has not abandoned his goal and in June, 2015 was published the report “To realize the European Economic and Monetary Union” called ‘report of five presidents’, which supposes an updated reprint of the report of Van Rompuy. It is at least paradoxical this same supranationalist project, as we said nicknamed federalist, is also defended by the part of the political center – left of the EU, from the Socialist Party to the groups that are included in the group of European Left (GUE).
Coming to the present, despite the speeches in support of a supranational integration of German leaders, along this crisis we have seen how the political decisions of German Chancellor Angela Merkel and his powerful finance minister Wolfgang Schäuble have been heading increasingly to favor this union almost exclusively promotes to the interests of the German nation-state bourgeoisie.
Merkel, for example, was declaring in the Bundestag on December 2, 2011 that the European leaders “had initiated a new phase in the European integration”. In the same speech she was affirming that quick steps were taking without much political discussion to promote the European fiscal integration, by the creation of supranational mechanisms that could help manage the crisis in the eurozone: We are not talking merely about a fiscal union, […] Rather, we have begun to create it. We need the budgetary discipline and an effective crisis management mechanism. So we have to change the treaties or create new treaties.” Schäuble, ex-member of the cabinet of Helmut Kohl and one of the most powerful politicians in the EU, who took over from Kohl as a promoter of the European integration , from his part for example was declaring in the middle of 2012 that “there is no alternative to the European integration, […] we lose together and win together. […]We need to create new structures of supranational government. It should be the next logical step towards the European unit. “It is vital” to recover the confidence in the European Monetary Union through institutional reforms.” The minister underlined this required the “transference of national competences” in European level and changes in the European agreements.
In spite of this supranationalist rhetoric, the reality has been reflected, as it was said previously, a position in defense of the interests of the German bourgeoisie, supported by a trickster story that has increased tension between the populations of the center and the periphery in the Eurozone. Germany and other states like Finland, have exploited a sense of grievance of their populations on the southern populations, which according to the used arguments, have had a standard of living beyond their possibilities, funded by Northern countries through EU institutions. With these arguments Germany has resisted grant part of their national sovereignty to establish permanent redistributive mechanisms inside the EU, blocking or limiting the proposals aimed at an integration of the fiscal systems based on the mutualización of the debts, uch as establishing a limit for 440 billion euros to the credit capacity of the European Fund of Financial Stability (EFSF) or imposing very harsh conditions on the states rescued like Greece.
Limiting the EFSF is a case that deserves mentioning. In the context of the current crisis, the creation of the EFSF (and its successor the European Mechanism of Stability) from which most widely speak then be understood not only like an answer to the crisis of the sovereign debt, but like a step towards the supranational – federal integration, through transferences of state – national important fiscal competences to supranational institutions of dubious democratic legitimacy. The German government, under pressure from the constitutional court and parliament of his country, limited the size of the EFSF-ESM at the time of its creation, and firmly opposed to increasing the amount of guarantees that Germany would provide, braking this way completely the plans of the European Council President Van Rompuy in 2012 to accelerate the supranational integration across shortcuts that avoid treaty changes. With the opposition to the extension of the guarantees to the EFSF-ESM, Germany was blocking the proposal of creation of the “eurobonds” of the European Commission, which supposedly had be used to unblock the crisis of the Eurozona, creating mechanisms of fiscal redistribution between the states of the Eurozona that would enable progress towards a federal EU.
Merkel also has been opposed to other steps towards the supranational – federal integration, like the competitions transference to the European Commission to examine and possibly to reject budgets projects before they are voted into national parliaments, or the transference of bank regulative powers on the German savings banks to the Single Supervisory Mechanism (MUS) in the context of the Banking Union. Schäuble, the German minister of finance, meanwhile, has also made proposals to create institutions as an European superdepartment of finance, which would have the power to decide and to dictate on the budgets and the indebtedness of the different member states of the EMU, and it would work maintaining the separation of the state passive. This proposal reflects an intergovernmental integration model, since part of the idea of that the most powerful and rich states of the EMU, principally German, should be in charge of this ministry.
Crisis in the Eurozone: the context ideal for integration
Since 2010, the Eurozone has suffered severe tensions. Before the crisis of the region was in an advanced stage of the integration of his commerce and finance, facilitated by the introduction of the euro in 2002. However, before the crisis, the Member states still had considerable considerable political power at national – state level, which allowed them to diverge in important economic policies with regard to their neighbors. A pronounced salary contention in Germany from the year 2000 increased its competitiveness. These diverse structures in the labor, fiscal and industrial field conjugated with the homogeneity of monetary politics, creating huge disequilibria in the balances of payments between the members of the Eurozona, with the north, especially Germany, becoming a major exporter and financier the so-called ‘periphery’ of Europe.
When the financial crisis erupted in the United States, beating strongly the American banks and and extending to the European banks, the western governments decided to rescue the bank systems in charge of the taxpayers. The one that began as a crisis of the private banking, was spreaded to the real economy and finally became a fiscal crisis in peripheral states of the Eurozona, which spent enormous sums in these rescues and also, beaten by the activity decay, they accumulated huge deficits by the descent of the tax collection. This shot quickly his public debt levels. To solve the fiscal imbalances and of general indebtedness in the Eurozona required to turn around him to the payments balances of Germany and of its importers and/or establish mechanisms of fiscal redistribution recycled surpluses from the countries with surplus towards those in deficit.
The imbalances caused in competitiveness depend almost exclusively on labor costs, therefore these imbalances would be corrected by raising the wages in Germany, or lowering them in the countries of the periphery. A third alternative, would be to abandon the currency parity of the European Monetary Union, to realize the adjustment in competitiveness through fluctuation of the value of the new currency.
Of these three possible strategies, finally the one imposed by the economic elites of the EU, principally the German, was to force under domestic deflation in the countries of the periphery, through wage restraint and cuts in public sector, politicies known better the generic concept of ‘austerity‘. These policies have amplified the effect of the already monumental banking crisis, generating an economic and social crisis in Europe similar to the Great Depression, with very high levels of unemployment, falling living standards of the population and levels economic activity, which last 8 years and which given the current signs, threaten to become chronic and even to deteriorate. However the levels of indebtedness of economies have not been reduced significantly, and in some cases as in Greece have continued to increase, making it clear that the debt problem can not be solved with current austerity policies.
Public policies of austerity, combined with the financial and economic crisis, soon lead to the brink of bankruptcy states like Greek, Irish, Portuguese, Spanish and Cypriot. These viewed as financing through bond markets was becoming more expensive, while they were pressured by Western political powers to accept rescues, which would be accompanied by severe adjustment plans.
New institutional architecture: preparing fiscal and political union
To realize the financial rescues to the states in crisis were established mechanisms in the form of new financial institutions. Possibly the institution more important from these is the European Financial Stability Facility (EFSF), mentioned previously, that was created in 2010 to realize this function, avoiding the European treaties which prohibiting the financial aids between member states of the EU.
Although the EFSF was created to manage nearly 800 billion euros of public money, their creation suffered from serious democratic deficits, being established in negotiations between senior European officials without any process of consultation with the European population and transgressing treaty rules. In order to avoid the necessary democratic processes to create this institution with accordance with the laws and treaties of the EU, the EFSF was established as a private company in Luxembourg, acting under British law and including clauses in their secrecy and inviolability statutes. These serious legal and democratic problems were identified by the fact that in parallel to the creation of the EFSF in June 2010, the European treaties were modified to create a legal basis for a permanent rescue mechanism , the European Stability Mechanism ( ESM) , created in March, 2011 and that would not break with EU law. This new entity agreed only six months after the birth of the EFSF, is its current successor, with only small changes, but the same mission.
These mechanisms were designed by the European bureaucratic elite not only as institutions ‘rescue’ a conjecture crisis, but to, using the occasion, facilitating progress in the supra-federal EU integration. The idea would be to leave open the door for these institutions couldin case of make the necessary agreements, realizing the function of fund of the European treasure, through which the tax system could be mutual in the Eurozona. The EFSF-ESM could issue “eurobonds” with the guarantee of the tax systems of the members of the eurozone, which would allow the institutions to redistribute these funds in case of crisis. A major grade of shared risk would have to realize new steps towards the political integration.
As the same institutions of the EU confirmed the creation of the EFSF and its successor ESM should not be considered as a separate response to the crisis of sovereign debt, but rather as part of a new institutional structure based on a series of measures adopted at national level and EU towards fiscal and political integration. These measures are EU initiatives, such as strengthening of Stability and Growth Pact (Six-pack), the Treaty of Stability, Coordination and Governance in the EMU (Fiscal Pact), the European Semester, the Euro Plus Pact, the “Two-pack” and the new European system of financial supervision and resolution (Union Bank) . This new European institutions, imposed on the basis of coercion and threats under the pretext of the urgency and necessity of the crisis, has not made a debate. In fact is possible to argue that, rather than trying to solve the problems of governance in the framework of the EU, its main objective has been to, taken advantage of the political and social stress generated by the crisis, progress in deepening the neoliberal model EU based on privatization, deteriorating labor rights, cuts in social spending and the establishment of all kinds of policies that favor large transnational corporations.
The United States of Europe?
In the tension between the model of supranational integration, closer to the geopolitical objectives of French, Italian and Anglo-Saxon bourgeoisie and, the intergovernmental, which retain the national – state structures of political power, closer to the German interests, it is necessary to understand the current standstill of the crisis in the Eurozona and, especially, the difficulty in coming to an reaching in the course of the Greek crisis.
Since Syriza Greece took office in January 2015, Yanis Varoufakis, the Greek finance minister tried to convince his German homologue that his ‘Modest proposal’ , was compatible out of the crisis to avoid the establishment of an interstate permanent system of fiscal transferences to advance fiscal and political union. Thus permitting not to burden taxpayers to recover of the periphery of the European center. Although Varoufakis, Galbraith and Holland argue that their proposal was not a permanent mechanism, this supposed progress towards the implementation of Eurobonds, which would be issued by the ECB in exchange for government debt, so the debt system would be controlled by institutions European, principally by the ECB, which would acquire a lender’s character of last instance in the style of the Federal Reserve. It is no surprising so, that Varoufakis received, with this proposal that increased the power of the ECB, the support and collaboration of economists such as Larry Summers, ex-secretary of the treasure and current personal adviser of the president of the USA, and Jeffrey Sachs, advisor to many governments who abandoned the planned economy model to adapt to the neoliberal model, the two nearby international financial power.
Varoufakis ideas were completely contrary to the German anti-inflation doctrine, which serves to hold off the intervention of the ECB in the economic policy. In fact a central bank to buy debt in the style of the Fed indirectly would exercise permanent system of fiscal transfers, which remained incompatible with the objectives of the German bourgeoisie, focused on maintaining financial control of the eurozone to continue exploiting the mercantilist model allowing them to continue to dominate with an iron hand European politics and competing in the world as a global superpower.
The position of the German government in the negotiations has led to tensions facing not only with the Greek government, but also with the European bureaucracy, represented by the European Commission and the European Central Bank, also with the IMF, which during the negotiation has represented in great restraint the political interests of the USA, and other powerful states of the euro as France and Italy, interested in disempowering Germany, and its institutions such as the Bundesbank, which sometimes hinted without much impetus that proposed by the Greek government was not entirely inadequate. However, the denouement of the crisis has shown that the political representatives of Germany seem ready to accept any solution through losing economic power and national sovereignty. In fact, they came to demonstrate that they preferred the expulsion of the ‘weak’ members of the eurozone, such as Greece, running the risk of disintegration of the EMU, to make concessions of this type.
In short, the current situation can be framed in an attempt by the German bourgeoisie, especially industrial, to maintain and extend its hegemony and dominance in Europe, against others that promote a model of integration that will be able to reste it, principally French, Italian and English-speaking bourgeoisie, especially its financial elites. That is why the proposals of the German government, as the latest proposal by Schäuble, are aimed at the risks of sovereign passive remain circumscribed to states and that the new institutions of control and fiscal governance are managed by state authorities, principally by the executive powers of Germany and France.
Any of the two models, both supranational integration proposed by the ‘report of the five presidents’ and the proposed one by the minister of finance German Schäuble, they lack progressive character. Neither of them it aims to deviate from the neoliberal model corresponding to the current hegemonic institutional framework to board the democratization of Europe and strengthening economic, social, cultural rights and definitely human of the European peoples. That’s why the European left, which majority has adopted as his project ‘more Europe’ from the fiscal integration and mutualización of debts proposed by the European bureaucracy, must be critical of this proposal, as much as it is with the German proposal, by calibrating their high risks and few opportunities, so as to plan more consistent strategies with a progressive and humanist ethics.
It is not surprising that the lack of progressive perspectives inside of the current institutional architecture of the EMU and the EU, appear movements requesting a Plan B to design a political and economic alternative to the EU of neoliberalism.
The author has modified the original text published in Viento Sur to correct the argument about the fundamental macroeconomic causes of the crisis in the Eurozone, after drawing conclusions from the debate between Lapavitsas and Flassbeck, with Storm.
1 – Vercammen, F. (1999) “Europe: Face aux institutions of the Union européenne.” Inprecor: http://www.inprecor.fr/article-?id=1786
2 – Ibid.
3 – Monnet, French diplomat and entrepreneur who lived much of his life in the US, was close to people extremely powerful which included John Foster Dulles, André Meyer, the Rockefellers, the Bosch family, the family Wallenberg. He was the first president of the High Authority of the European Coal and Steel Community (ECSC), the first institution of the EU, which later merged with the European Commission.
4 – Monnet wrote drafts of the Schuman Declaration of May 1950 Schuman Declaration: http://europa.eu/about-eu/basic-information/symbols/europe-day/schuman-declaration/index_en.htm
5 – Marie-France Garaud, an advisor to the Gaullist French President Georges Pompidou and Jacques Chirac, then prime minister, threw this accusation. She felt that was part of an American plan to weaken the French power and declared the French TV program “Ce soir (ou jamais!)”: “He was an American agent. Now we know how much to pay, because this has been declassified. “
6- Hayek, Friedrich A. “The economic conditions of Interstate federalism.” New Commonwealth Quarterly 131 (1939): 49.
7- Van Rompuy Herman. “Towards a genuine economic and monetary union. Report of the European Council President Herman Van Rompuy.” European Council. June 2012. Available at: www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/es/ec/131290.pdf
8 – Juncker, Jean-Claude. “Making the European Economic and Monetary Union.” European Commission. June 2015. Available at: ec.europa.eu/priorities/economic-monetary-union/docs/5-presidents-report_es.pdf
9 – BBC News. http://www.bbc.com/news/business-16030374
10 – The Charlemagne Prize is a prestigious European award. It has been awarded annually since 1950 by the German city of Aachen to people who contributed to the process of European integration. http://www.aachen.de/EN/sb/pr_az/karls_pr/charlemagne_prize/index.html
11 – Speech at an event organized by the French National College of Administration (ENA) and ESCP Europe (European Identity and Global Perspective). September 2012.
12 – European Commission. “Green Paper on the feasibility of introducing stability bonds”. Brussels, November 2011.
13 – To illustrate it with data between 2003 and 2009 states like Greece, Portugal, Ireland and Spain saw increased its net external debt at 29%, 53%, 54% and 53% of its GDP respectively while Germany saw as its level of net external debt relative to GDP down by 27%. Data bases of the ECB and the IMF.
14 – Flassbeck, Heiner, and Costas Lapavitsas. Against the troika: Crisis and Austerity in the Eurozone. Verso Books, 2015.
15 – Article 125 of the Treaty on the Functioning of the European Union.
16 – Amendment of Article 136 of the Treaty on the Functioning of the EU authorizing the establishment of the ESM under EU law.
17 – Bank of Spain. “The European Stability Mechanism.” Articles. Monthly Bulletin. July 2011.
18 – European Commission. “Green Paper on the feasibility of introducing stability bonds”. Brussels, November 2011.
19 – To finance the fund issues debt securities markets backed by government guarantees of member states or directly provided as financial assets “in kind” to the applicant states to ‘rescue’.
20 – See the summary of the reforms related to European stability and growth pact on the website of the EC: http://ec.europa.eu/economy_finance/economic_governance/sgp/index_es.htm
21 – See the summary of the project of European Banking Union on the European Parliament website: http://www.europarl.europa.eu/atyourservice/es/displayFtu.html?ftuId=FTU_4.2.4.html
22 – Varoufakis, I., Holland, and S. Galbraith, J.K (2011). “A modest proposal for Overcoming the euro crisis.” Available: https://varoufakis.files.wordpress.com/2013/07/a-modest-proposal-for-resolving-the-