Year LIX, 2017, Single Issue, Page 123

 

 

CONSIDERATIONS ON THE 1996 INTERGOVERNMENTAL
CONFERENCE AND THE PASSAGE TO
THE THIRD PHASE OF MONETARY UNION*

 

 

The Problems we Face.

The European political debate is presently conditioned by two issues, which pose a series of complex problems. These issues are, on the one hand, the drive toward enlarging the Union and the risks this presents for the Union’s survival in the absence of a reinforcement of its institutions; and, on the other, the proximity of the two crucial deadlines laid down by the Maastricht Treaty, namely the intergovernmental conference for re-examining certain of the Treaty’s clauses, due for 1996, and the decision, due to be taken no later than 31st December of the same year, regarding the possibility of starting the third phase of monetary union prior to the final deadline set by the Treaty of 1st January 1999.

The complexity of problems to be faced over the next few years divides politicians and confuses observers. It should however be noted that this is the result of the weakness of the politicians’ political will and the insufficient mobilisation of public opinion. Problems of a similar complexity were solved quickly on the occasion of German unification, thanks to the presence of a power that was determined to deal with them and which was sustained by a strong degree of consensus. But in today’s Europe there is no-one with the power or will to cut at a single stroke through the various knots that are preventing the continuation of the integration process. It is therefore necessary to try and introduce some clarity into the tangle of problems we are faced with, and to propose solutions, in the awareness that only in this way is it possible to contribute to the evolution of the political will which is currently weak or lacking, as well as to the development of a consensus among public opinion, which is presently stifled by the lack of purpose of the political class and by the citizenry’s insufficient knowledge of what is at stake.

First of all, though, it should be stressed that the drive toward enlargement corresponds to the Union’s fundamental vocation, and neither can nor should be stopped. The historical significance of the revolution of 1989 will depend on the Union’s capacity to attract into its orbit the states of central and eastern Europe which are knocking at its door. If this does not take place, these countries will become victims of the destabilising forces of nationalism. Moreover, the Union’s enlargement southwards would be decisive in bringing stability to an area that is suffering from devastating conflicts. It is sufficient to recall the recent example of the hard-won free trade agreement with Turkey, which offered a glimpse of the possibility of beginning to resolve, through Cyprus’s entrance into the Union, a problem which neither the UN nor the United States have been able to solve in the past. Besides, it should be remembered that if the Union tries to evade its responsibilities by simply maintaining its current composition, and does not endow itself with the necessary instruments to govern itself and to be an effective presence in European and world affairs as a force for peace and progress, it will in its turn be overcome by the forces of disintegration. The fact is that the Union can no longer stand still, because the present international context does not allow it to; rather, it must choose between advancing or retreating. Hence, even if there were any sense prior to the entrance of Austria, Finland and Sweden in trying to block enlargement for a few years while waiting for the institutional reforms delegated to the 1996 Intergovernmental Conference, the idea now of the Union retreating into itself with the sole aim of preserving the status quo makes no sense at all. On the contrary, the problem is to encourage enlargement while at the same time preventing it from bringing about the Union’s dissolution through its transformation into a large free trade area. This problem can be resolved only by strengthening the Union. Moreover, on this point, with the exception of John Major’s government, there is a broad, if rather unfocused, consensus.
 

Monetary Union and Political Union.

The motivations for monetary union and for the institutional reform of the Union had different origins. The former was essentially dictated by the need to eliminate the final and most serious obstacle to the functioning of the single market; the latter by the inherent dangers of enlargement and by the need to face up to them in order not to condemn the Community venture to failure. Nevertheless they are closely connected. The link between them has caused some people, including both friends and enemies of the European ideal, to argue that the creation of a true European government is a pre-condition of monetary union. Such people maintain, with good reason, that a currency is one of the essential instruments for the exercise of sovereignty. It would follow from this that there can be no single currency without political union, so that the creation of the latter should in all events accompany or precede the establishment of monetary union.

That the currency is a political tool of paramount importance is a matter of fact. And it is also a matter of fact that in the case of Europe, monetary and political union are closely connected. But their connection should not be interpreted in a mechanical way. In the industrialised world, the need for central bank independence is now increasingly widely recognised, even if as part of a more general politico-institutional frame-work. This awareness reflects the relative autonomy which monetary policy currently possesses compared to economic policy and indeed to all other policies. As a result, monetary union could function for a few years even in the absence of political union, albeit at the cost of tensions and a lack of coherence in policy-making.

It should be added that monetary union, unfettered, or partially unfettered by political union, is easier to achieve today than political union itself, since it is provided for in the Maastricht Treaty, which regulates the procedures for its realisation, including the setting aside of the unanimity condition. This, by the way, reflects the fact that the abandonment of monetary sovereignty is now perceived in some countries as being less traumatic than either giving up military sovereignty or a reform of Europe’s institutions entailing the radical redistribution of European powers among the Council, Parliament and Commission in a democratic and federal sense.

The fact remains that the currency, in the final instance, is an instrument of politics. It is therefore true that the European monetary union can not survive for long without a European government.

This means that monetary union, in the absence of a political union, would in the medium term cause contradictions and imbalances among the Union’s members, and between these latter and the surrounding states. The requirements of monetary union’s functioning would forcefully raise the problems of a budgetary policy, a regional policy and a policy of solidarity with regard to the excluded states; this could only be achieved by a genuine European government. Through monetary union the European front would be reinforced and the nationalist front weakened; a wide variety of behaviours would be affected; the expectations of economic actors and citizens would be oriented toward the deepening and acceleration of the unification process, not only economically but also politically; the European Parliament and the Commission would be reinforced; and the competition between parties would tend to shift from the national to the European context. It should be remembered that the birth of political Europe will not be solely an institutional event. It will be marked by the birth of a new European legitimacy, which will of course be linked partly to the institutional reforms, but which will also depend on establishing the idea of European citizenship in the collective consciousness, and on all that this citizenship will come to signify. This means that in the presence of monetary union, an imperfect institutional arrangement which in an extreme hypothesis may not be much different from the current one, would be profoundly altered in its daily functioning by the fact of gradually becoming one of the preferred arenas for the confrontation of the political forces and an important point of reference for the consent of citizens. This trend would not do away with the necessity of institutional reform, which would always remain the destination point of the process. But the latter would be greatly speeded up by the spontaneous evolution of politicians’ behaviour and of widespread attitudes.

The connection between monetary and political union (compounded by the fact that the Intergovernmental Conferences for both matters will take place at the same time) therefore means that they must necessarily be considered in the context of a single process. Furthermore, the German government has clearly declared its opposition to establishing a monetary union that does not provide for the democratic reinforcement of the Union’s institutions. It is therefore impossible in practice to isolate the objective of monetary union, setting aside that of political union. The two must be considered as joint aims.

Nevertheless, the fact remains that if the result of the great appointments awaiting the European Union over the next few years is solely the creation of monetary union accompanied by insufficient institutional reform, this should still be considered a very important step forward. Monetary union with these limitations would install an element of irreversibility into the process by creating institutions, such as a European system of central banks, and a network of relations of interdependency which could not be suppressed without a crisis of catastrophic proportions. Monetary union would certainly require the pursuit, or rather the intensification of the struggle to create a democratic European government, but would also allow this struggle to be carried forward on a more solid basis and would greatly improve its prospects of success.
 

The Politico-institutional Minimum.

Independent of the connection existing between monetary and political union, it remains a fact that the prevailing opinion in Europe’s political debate is that the Union’s enlargement necessarily calls for some form of institutional reinforcement. Most European government ministers are aware of the decisive importance for all member states of pursuing the Community project, and are favourable to reforms that would make this possible, whatever their individual attitudes to the cession of sovereignty may be. Only a few governments differ from this position, primarily the British government, which explicitly proposes to exploit enlargement in order to water down the Union and transform it into a free trade area. However, the formulas proposed for reinforcing the Union’s institutions are numerous and mutually contradictory. They are divided substantially into two groups. Some adopt the goal of reinforcing the Union’s capacity to act by rationalising the existing institutions, that is they remain within an intergovernmental perspective. Others aim to change the Union’s current institutions in a democratic and federal sense.

Before embarking on the merits of these proposals, it is necessary to denounce the widespread belief that the exclusive nature of the difference between a confederation and a federation in unions between states is obsolete, and derives from a doctrinaire approach. According to this way of thinking, the “community” model represents a third way which can not be encapsulated in either of the former types of union. However, this third way does not exist. In the contrast between federation and confederation, which moreover was at the heart of the debate accompanying the creation of the United States of America, the concept of sovereignty is at stake, which in a federation is transferred to a new state entity (and thus guarantees the independence of member states by imposing the rule of law on their relations with each other, freeing them from the constraints which derive from power relations between sovereign states), while in a confederation sovereignty remains with the member states. Those who call the contrast between federation and confederation doctrinaire are in reality no more than defenders of the status quo, who seek to hide the fact that the foundation of a federation represents a radical break, and consequently involves an extraordinary mobilisation of energies. By identifying a “third way” in the community model, they try to avoid the choice about a transfer of sovereignty, in other words the adoption of a new legitimacy.

It goes without saying that this is not to deny the relevance of the community model, nor the presence in the Union’s institutions of potentially federal elements. But it must be strongly emphasised that European unification is destined to remain a transitional process, with institutional configurations that are provisional and unstable, until it has reached a federal outcome. The Union’s present institutional structure is one such configuration, and the presence within it of federal elements is undoubtedly an indication of its federal vocation. But it should be clear that we are discussing an unfulfilled vocation, in that sovereignty still belongs unequivocally to the member states; even though that sovereignty is in crisis, in as much as the prerogative concerns powers that are by now incapable of guaranteeing the security of their citizens and of promoting their well-being, and therefore of securing their stable consent.

The challenge of enlargement obliges the Union to provide itself with institutions that will make it democratic and capable of action. Now, many of the proposals which have been advanced in the European debate are based on the illusion (or seek to give the illusion) that these objectives can be reached without sacrificing the sovereignty of the states. This is the case, as regards the need to be democratic, for the proposal to strengthen the national parliaments’ control over Union policy. In reality this proposal is merely the democratic camouflaging of the national powers’ desire not to cede their sovereignty. A democratic government of Europe must express a political will which is formed at the European level and which has as its object the interests of the European people. If, however, the decisions taken at the European level are solely the result of a compromise of wills that are formed at the national level and which represent national interests, which by their nature are diverse, then these decisions will remain only diplomatic agreements, which as such are in no sense democratic. In addition, if the diverging national wills should be formed and solidified by means of national debates and national parliamentary votes, the compromise would result as being even more unsatisfactory, since the representatives of national interests would be bound in the decision-making arenas by a sort of imperative mandate, which would prevent them from sacrificing the short term national interest in the name of the European interest, even in cases where this would be possible through the discreet procedures of diplomacy. It goes without saying that these considerations do not diminish the role that can be played in some key stages of the Union’s constituent process by inter-parliamentary meetings (the “Assizes”), in which national and European MPs participate together, and where the national MPs would have the decisive function of involving the national political forces in the constituent process, and through them, their citizens.

Other proposals have been advanced with the aim of reinforcing the Union’s capacity to act, to prevent it from becoming watered down by enlargement into a body that is entirely incapable of taking decisions, but without sacrificing the sovereignty of the states. These include talk of a new Elysee Treaty; a reinforcement of the Eurocorps; limiting the number of the Commission’s members by making the Commissioners from small countries rotate; modifying the share of votes in the Council in favour of the large states; altering the composition of the “troika” so that it always includes the representative of a large state; making the number of national representatives in the European Parliament more closely related to population size, and so on. All these proposals in fact aim at modifying the decision-making mechanisms of the Union so as to form a directorate composed of the more important states within an enlarged Europe, which would in fact have the power to decide in the name of all. Yet clearly this solution would be entirely inefficient, aside from being anti-democratic. There already exists a directorate in Europe, albeit an informal one: and it was precisely its patent incapacity to take decisions, a dramatic example of which was seen with the tragedy of the former Yugoslavia, which generated the call for institutional reform. To seek in the context of a Europe which is on the way to having twenty or thirty members, to re-propose a formula which has failed so spectacularly in the context of a Europe of Twelve, is to ignore the evidence.

Moreover, formalising the directorate model is condemned to almost certain failure because of the foreseeable resistance of the small states, which would never resign themselves to a situation of institutionalised dependency. Besides it is unthinkable that Europe should be constructed through authoritarian methods, rather than through the free development of a more advanced conception of the common good.

The creation of monetary union would in any case reinforce the process, even in the presence of institutional policies of an intergovernmental nature. The fact remains that in the medium term, beyond this important but provisional step, the only effective institutional response to the challenge of enlargement is the creation of a genuine embryonic federal state, which achieves democratic equality both between all the Union’s citizens, and between its member states. The minimum institutional requirements for a reform of the Union’s institutions to qualify as federal are essentially those which would redistribute the already existing European powers among the Union’s various bodies, overcoming the current concentration of the majority of both executive and legislative functions in the hands of the Council. In substance, this would be a matter of effecting legislative co-decision in all areas of Union competence between a European Parliament that represents European citizens in proportion to their number, and a Council that represents the states on an equal basis or strongly weighted in favour of the small countries; and of transforming the Commission into a genuine government, responsible to the Parliament.

In this context the extension of majority voting, of parliamentary control and of the competence of the Commission to handle foreign and security policy could be realised at a later stage, at the end of a transition period. Two observations must be made regarding these proposals. First, that the principal instruments of a federal European Union’s foreign (and security) policy would be the opening up to the rest of the world of its commercial policy, as well as its vocation to enlargement or at least to the creation of organic links of association and co-operation. Foreign and security policy in the strict sense would tend to follow the lines pursued by the commercial and economic policies of co-operation, and would therefore be guided by a common European interest; even if it should remain under the control of the states for a transition period. Secondly, that the symbolic significance invested in foreign and security policy, especially in states like France and Great Britain which have nuclear weapons, makes this competence the preferred point of reference for what remains of national sentiment and for the nationalistic rhetoric that accompanies it. Hence, to call for the immediate attribution to federal European institutions of the competence of foreign and security policy as the sine qua non for the acceptance of any reform of the Union’s institutions would therefore be an extremist request, prejudicial to the success of the battle for the creation of an initial federal core.
 

The Federal Core.

Whatever the difference in attitudes regarding the minimum requirements that the Union’s institutions need to possess in order to face up to the challenge of enlargement, there is a widespread awareness that institutional reform can not involve all the member states and candidate countries to the same extent but that a “core” must emerge within the Union, that is a restricted group of states which will assume the task of leading the way.

Before proceeding, it should be stressed that in the political debate, especially in France, the expression “core” is often used in an ambiguous way which tries to make the notion compatible with the maintenance of the intergovernmental method. In this sense the core should comprise only those countries (revolving around the Franco-German axis) which, maintaining particularly close relations of policy co-ordination among themselves, would take joint decisions which they would then impose on the rest of the Union, availing themselves of new rules, if need be, about majorities in the Council. This boils down to the “directorate” concept outlined above, which (apart from the stabilising effect it may have in the short term as the political expression of monetary union) would not substantially modify the current situation.

In reality the “core” concept means something only if it is founded on the awareness that an institutional reform capable of facing up to the challenge of enlargement must necessarily be of a federal nature, and that this reform would be destined to involve, initially, only some members of the Union. This is because, on the one hand, some governments (primarily Great Britain), while theoretically eligible, would not be prepared to enter a federal Union today; and because, on the other hand, since political union can not come into being except in the context of monetary union, the composition of the two groups should in a certain sense coincide, so that states (starting with the candidate countries from central and eastern Europe) which lacked the objective requirements for entering the monetary union could not enter the political union. Political union would therefore be born with two distinct categories of states excluded: those who did not want to join, and those who would have liked to but could not.

Moreover, the fact that the federal core can not avoid being created within the bounds of a monetary union does not mean that it must necessarily be composed of all the states which form the monetary union. On the contrary, it is foreseeable that only some of the member states of the monetary union will form the federal core. Hence, nothing would prevent Great Britain itself from joining the monetary union while continuing to maintain an attitude of rigorous opposition to any cession of sovereignty. It is on the other hand hard to imagine that genuinely federal institutions can be created in a wider context than that of the monetary union, since the states excluded from the latter would in fact have the power, through an independent monetary policy, to frustrate any decisions taken by a federal government in the area of economic policy.

Be that as it may, monetary union and political union should be thought of as one process, to begin with the restricted nucleus of politically and economically more advanced countries and to extend itself gradually to the whole Union. Moreover, it should be noted that there is no lack of participants in the debate who, while hoping for solutions of a federal nature, and recognising that to force the whole Union to proceed at the pace of the slowest country would paralyse the process, reject all formulas of the “two-speed Europe” or “ Europe of concentric circles” type, maintaining that such formulas would bring about the definitive division of the Union into two groups of countries of differing status. Yet the presence of incoherent positions in the debate does not make the problem of creating the federal core any less decisive or urgent.
 

Possible Strategies.

There remains the problem of which strategy to pursue in order to achieve the formation of the federal core. This choice represents in fact an objective and pressing necessity. Yet until now its significance was understood, apart from by federalists and a few isolated, though important, French politicians, only by the German MPs of the CDU/CSU group who drafted the by now famous document published on 1st September 1994. Aside from this instance, attitudes toward this issue have generally been confused and uncertain. In the countries that evidently possess the vocation to form part of the federal core, a clear will to achieve it has not yet been manifested.

As always occurs when faced with crucial historic decisions, so in this case too a lack or weakness of political will are hidden behind claims of objective difficulties which are held to impede the realisation of the project. With regard to the proposed creation of a federal core within the Union the difficulty which is put forward is that it would be incompatible with the treaties that are currently in force, and hence could not be realised without violating them or without profoundly modifying them in order to make the institutions and competences of the federal core compatible with the Union’s institutions and competences. The first of these alternatives would be unacceptable because of the respect due to the treaties, and in any case unachievable because the states eligible to constitute the federal core would themselves be unwilling to pay the price of denouncing the treaties in order to realise this objective. The second would be impracticable because it would have to be realised through the unanimous consent of all the Union’s members, in accordance with art. N of the Maastricht Treaty and art. 236 of the EEC Treaty, and therefore also by the governments of states that would be excluded from the federal core. Such states, starting with Great Britain, would refuse any arrangement which would restrict them to a peripheral position, and hence would withhold their support.

This way of approaching the problem presupposes a conception of the law, and in this specific case of the founding treaties of the Union, as a collection of abstract and petrified rules instead of as a living reality, which the evolution of political, economic and social relations incessantly transform so as to adapt them to changing circumstances. It remains a fact that if there already existed in some countries the determination to create a federal core within the Union, then the legal forms to realise this objective and to put relations with the countries that were initially excluded on a new basis would easily be found, just as they were easily found at all the decisive turning points of the European integration process, when the will to achieve advances was really manifested.

But in the present situation, while it is true that the issue of the federal core is unavoidable, and that the moment when it needs to be faced is approaching and that therefore a real historic opportunity is about to be presented, it is also true that the political will of governments, with the partial exception of the German one, is still weak and confused. This, and only this, explains why both the strategy of a break and the strategy of consensus appear so difficult to pursue. The problem remains therefore to strengthen the political will where it is insufficient, and to help arouse it where it does not yet exist. In order to achieve this it is necessary to enter into the debate about which procedure to follow, and to examine more deeply the feasibility of what seem to be the only two conceivable strategies with which to achieve the creation of a federal core. That means not evaluating them on the basis of the political will that exists today, and on the current degree of evolution of public opinion, but in the knowledge that these, provided the politicians and citizens are presented with objectively reasonable solutions, will develop in the course of the process under the weight of the problems to be dealt with; and that to rule them both out prematurely as impossible would simply mean giving up on the creation of a federal core. It would also mean therefore accepting that the future of the Union should be decided by the countries that are opposed to any evolution of the Union in a democratic and supranational sense, in other words that the convoy should continue to proceed at the speed of the slowest wagon, in the expectation (illusory and suicidal against a background of the menacing rebirth of nationalism) that the European will would mature slowly in all the Union’s members until it brings them to decide unanimously, in a far-off and indeterminate future, and at the cost of who knows what terrible consequences, in favour of the creation of a European federation of twenty or twenty-five members.

We come therefore to an examination of the two possible strategies. The first consists of drawing up a new treaty whose exclusive content is the creation of a federal core among the states which have the will to achieve it, postponing to a later date the problem of regulating its relations with the rest of the Union. This approach would entail the denunciation, explicitly or implicitly, of the treaties in force, with particular reference to the procedure laid down in art. N of the Maastricht Treaty and in art. 236 of the EEC Treaty. The second consists of inserting the creation of the federal core into the framework of a broader treaty, drawn up with the consent of all the Union’s members in accordance with article N of the Maastricht Treaty and art. 236 of the EEC Treaty. This, through the necessary adaptations, would regulate relations between the federal core and the member states which remained excluded from it, as well as provide the instruments and forms for subsequent enlargements of the federal core.

It must be stressed, and this point will be returned to briefly in the conclusion, that the two approaches are not alternatives, but compatible. The objective of the federal core can only be achieved if intransigence as regards keeping firmly to the result to be pursued is accompanied by the greatest openness in finding satisfactory arrangements with the countries that will remain, at least initially, excluded from the project. Yet it is essential that from the very outset the federal core proposal avoid any suggestion of an intent to introduce a permanent element of division into Europe. The creation of the federal core must, in other words, be presented for what it is, namely the only possible way of beginning a process that is destined to extend itself rapidly beyond its initial borders, until it embraces the whole of Europe.

In particular, the initial proposal, while clearly declaring the non-negotiability of the federal nature of the core, must have three characteristics: a) the federal core should be presented from the very beginning as part of a broader agreement regulating relations between the core’s institutions and those of the Union, and the allotment of competences between the two spheres, so as to guarantee the other states the continued enjoyment of the rights that are bestowed on them through their membership of the Union; b) the countries of the federal core should undertake to give concrete help to those among the excluded countries which possess the will to enter it, so that they can realise the necessary policies to make their principal economic indicators converge with the economies of the federal core countries; c) a schedule of intergovernmental meetings should be established, in which the position of the initially-excluded countries would be periodically re-examined with a view to their future accession.

Whereas an approach that took a breaking away for granted from the outset would push into the opposing camp all the waverers and those who consider the rigorous formal respect of the procedures currently in force to be an absolute priority, a proposal of this type would probably be accepted by the part of public opinion that is not prejudicially opposed to the concept of a federal core, not only in countries which will have the opportunity and possess the will to be part of such a federal core from the outset, but also in those which initially want, or have, to remain outside. It would therefore represent an important factor in developing the collective consciousness, and this would make the project’s passage easier and would speed up a positive outcome. Moreover it would not exclude, but rather would bring to life, or in any case reinforce during the course of the negotiations, the will of those countries in favour of breaking away if necessary; but this determination would emerge at the end of a negotiation process begun from a position of openness, and would appear clearly as the result of the counterpart’s inflexibility. Furthermore it would follow that in the final instance some of the states which, while having the requirements to be part of the federal core, opposed it for political motives, when faced with a firm stand from the governments in favour, and having thus become aware that they can not stop the process by exploiting their divisions, would find it more convenient to enter the core from the outset instead of remaining outside.

Francesco Rossolillo


* This report was delivered at the Federal Committee of the European Union of Federalists (UEF), held in Brussels, 8-9th April 1995 and published on The Federalist, 37, n. 1 (1995).

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