Anno LXVI, 2024, Numero 1, Pagina 61
THE DIVISION OF COMPETENCES IN A FEDERAL UNION[*]
The Principles Established by the Current Treaties
The division of competences between the different levels of government is a classic problem of constitutional law within any federal system, since it needs to be made perfectly clear exactly which competences are to be exercised by the federation, and which instead reserved for — and therefore exercised by — the federation’s member states. The current EU, while not a fully-fledged federation, bases the division of competences between it and its member states on the principles applied within a federal system, the only difference being that the EU’s competences are conferred upon it by the member states, which consider themselves (and have formally established that they are) the ‘masters of the Treaties’. Conversely, in federations the division of competences is based on an autonomous act of federation ratified by the sovereign people (the US Constitution opens with the words ‘We, the people’, while German Basic Law states that ‘constituent power belongs to the people’).
Article 5 of the Lisbon Treaty establishes that the Union’s competences are limited by ‘the principle of [their] conferral’ by the member states, which, as mentioned, are the ‘masters of the Treaties’. The same article also specifies that the principles of subsidiarity and proportionality shall apply to the exercise of the Union’s competences, which in reality means its shared competences (listed non-exhaustively in Article 4 TFEU), given that the ‘exclusive’ ones, by definition, exclude legislative intervention by the member states, and the ‘supporting’ ones, by definition, exclude legislative harmonisation intervention by the EU. In practice, what the application of subsidiarity and proportionality in the area of shared competences means is that the EU, to allow its institutions to exercise legislative powers, must demonstrate that the adoption of a ‘European law’ (regulation or directive) in any of the areas listed in Article 4 TFEU is more effective than national laws adopted by the member states individually (and also that the ‘European law’ is strictly proportionate to the aim pursued).
Federal Union of States or Federal State?
Contrary to what Italian prime minister Giorgia Meloni claims, federalists are not seeking to create a European federal super-state that will exercise the legislative or executive powers currently held by Europe’s nation states, most of which have existed for centuries. The federalists, as well as political figures such as Luigi Einaudi, have long realised that the nation state, a model that has prevailed for centuries, is no longer capable of fulfilling all the functions it exercised in the nineteenth century, or of exercising absolute sovereignty in all the areas of its activity. The most realistic solution would therefore be to create, through aggregation, a federal union of the existing nation states (or of most of them) along the lines of the model used by the United States of America in 1789, or by the Swiss Confederation in 1848. This solution corresponds to the one advocated by Prof. Sergio Fabbrini in his 2015 book Which European Union?[2], and it is also indistinguishable from the one suggested by Jacques Delors when he proposed the creation of a federation of nation states (only seemingly an oxymoron). In such a federal organisation, the nation states would remain responsible for the areas they have they managed for centuries, by which I mean, principally, internal security policy and public order, the organisation of national-level transport networks, and essential social rights such as health care, education, employment, social security and pensions (along the lines of the Nordic welfare state model, designed to protect the citizen from the cradle to the grave, that has existed since the last century).
The European Union’s Current Competences
Under Articles 3 and 4 TFEU, the European Union has exclusive legislative competence in five areas of activity (customs union, monetary policy, competition rules necessary for the functioning of the internal market, common commercial policy, and the conservation of marine biological resources), whereas it shares legislative competence with the member states in eleven areas, for example, the internal market, agriculture and fisheries, the environment and transport. In some particular areas such as research, technological development and development cooperation, the EU may carry out specific actions without its right to do so preventing member states from exercising their competences (contrary to what is the general rule for shared competences).
What a Federal Union of States Would Need
1. A Fundamental Law That Assigns Competences.
The future federal union should have a Fundamental Law that has been approved by a majority of the European citizens, either through a European-wide popular referendum or through the favourable vote of a majority of the national parliaments (the latter would bind only those countries that came out in favour of the text of the Fundamental Law). I prefer to use the term ‘Fundamental Law’ rather than ‘European Constitution’ since the Constitutional Courts of some European countries (Germany and France in particular) have objected, concerned that a European Constitution could potentially take precedence over the national ones. Also, a different name highlights the fact that it would regulate something not present in national constitutions, namely the division of powers between the federation and the member states. The Fundamental Law should end the member states’ current power to confer legislative competences to the Union (in other words, it should abolish their role as ‘masters of the Treaties’). The new federal union should therefore be able to autonomously define its own competences. Its exclusive legislative competences could be the same as those of the current EU (i.e., the five exclusive competences listed in Article 3 TFEU), while the shared competences listed in Article 4 TFEU should be expanded.
2. Its Own Fiscal Capacity.
The federal union should have its own fiscal capacity, that is, the power to legislate on both the Union’s revenue and its expenditure. To be able to fulfil the tasks assigned to it under the Fundamental Law, the Union would have to have the capacity to collect its own direct or indirect taxes (or have a share of the revenue of the national direct or indirect taxes), issue loans, and buy and sell movable and immovable property in the territory of the member states (without this negatively impacting the member states’ right to collect national taxes). The Union would therefore have to have a European federal budget amounting to at least 3 per cent or 4 per cent of the overall budget of the member states (along the lines of the ‘federation lite’ proposed a few years ago by Emma Bonino).[3] A paper by the Turin-based Centre for Federalism Studies,[4] has outlined what the ‘own resources’ allocated to the European budget might comprise: essentially European tobacco and gambling taxes (in addition to the national ones), and a European tax on financial transactions. Together, these would provide the European budget with around 100 billion euros per year, on top of other own resources, worth around 50 billion euros per year, already proposed by the European Commission. Thus, own resources would give the European budget around 150 billion euros per year.
3. A European Industrial Policy.
Today, the Lisbon Treaty makes provision for industrial policy measures designed only to accompany or support European industry. But the profound transformations of the global economy now demand that European industrial policy be revised so as to encourage and promote energy efficiency, the so-called circular economy, digitalisation and the development of artificial intelligence in a way that is compatible with the objective of full employment. It is necessary to promote innovation, investments and financial instruments that will allow small and medium-sized enterprises (which account for almost all European companies) to grow. The federal union has to be able to count on a federal system of public investment banks, on European public procurement and on European public companies capable of implementing common projects such as Galileo, Ariane, Airbus and the European Microchips Act. The federal union would therefore need to have true legislative competence in the field of industrial policy.
4. Guaranteed Strategic Autonomy.
The future federal union will need to enjoy real external security, and to this end must have a common foreign and defence policy. Contrary to what some stereotyped criticisms would have people believe, it is not a question of establishing a so-called European army, but rather of exploiting the economies of scale to be derived from the integration of national defence systems and the standardisation of armaments. At most, it will be necessary to create a rapid response force, capable of dealing with international crises, that must be far greater than the 5,000 troops mentioned in High Representative Borrell’s ‘Strategic Compass’[5] (one need only consider that a European Council meeting in Helsinki back in 1999 decided to create an approximately 50,000-strong rapid response force).[6] A European defence should be conceived as an instrument enabling the federal union to act effectively for the purposes of peacekeeping and peacebuilding, and also to intervene within the framework of UN mandates. The federal union should strictly regulate the sale of armaments and seek to bring about, at global level, a mutual and balanced reduction of existing military forces and armaments. Certainly, it would at least need to have specific responsibility for coordinating national defence policies through the adoption of common rules. Of course, there would first of all need to be clear foreign policy objectives (shared not necessarily unanimously, but at least by a large majority of the member states), a widely shared perception of the external threats, a willingness to pool defence instruments (including nuclear ones) in support of common missions and strategies, greater interoperability of national armed forces, a common public industry base and common rules on the sale of arms to third countries. And the European defence would of course have to be subject to the control of a federal government accountable to a parliament democratically elected by the European citizens.
In the not-too-distant future, we need to see a European government representing the European Union in the UN Security Council. This would be a logical consequence of the allocation of a single European seat within the framework of a reform of the United Nations. Naturally, however, giving the federal union competence for common foreign and defence policy matters would make it necessary to change the decision-making process (switching to majority voting).
5. The Rule of Law.
Thanks to Article 7 of the Lisbon Treaty, today’s European Union already has the power to sanction a member state that breaches provisions relating to aspects of the rule of law (particularly the independence of the judiciary from the executive power and the freedom of the press). However, given the need for unanimity of all the states (excluding the member state in question) in the Council of the European Union, Article 7 TEU does not, in practice, allow the sanctioning of a state whose government violates the rule of law. It would therefore be necessary to entrust sanctioning power to the Court of Justice (as was proposed in Spinelli’s Draft Treaty on European Union, voted on by the EP in February 1984), and provide for suspension of the defaulting state (not only its right to vote), as is envisaged within the UN or in the Statute of the Council of Europe.
6. Stronger Social Policy.
In my view, a true European welfare system should essentially be based on national welfare policies (social security and pension schemes), not on the legislative power of a federal union. However, this principle should not prevent the social policy of the future federal union from being stronger than what the current EU’s legislative competences allow. It is worth remembering that until now social policy has always been the ‘poor relation’ of EU legislative activity; indeed, of the approximately 15,000 existing European laws, only 80 or 90 deal with this area. Fortunately, the EU institutions’ relatively recent adoption of a ‘European pillar’ of social rights has allowed the European Commission to propose a programme for the implementation of 20 social principles or rights recognised within its member states and/or in the Charter of Fundamental Rights. This programme has allowed the EU to act on a legislative level, introducing European directives on working conditions, gender equality and even the minimum wage, despite the Treaties excluding the adoption of European laws on pay. In addition, the SURE programme has allowed the European Commission and the ECB to grant loans worth around 100 billion euros aimed at preserving jobs through redundancy payments, or relating to vocational training initiatives. Even though welfare policy should remain, with regard to social security and pension systems, an essentially national competence, it would be necessary to extend the ordinary legislative procedure, and therefore majority voting in the Council, to all the social policy measures covered by Article 153 TFEU. This should also apply to agreements reached between social partners pursuant to Article 155 TFEU.
7. Further Strengthening of the Shared Competences That Exist in the Present EU.
In addition to the new shared competences that the federal union should have (see above), the EU’s current competences in the field of energy policy should be extended to include the conclusion of international agreements relating to the joint supply of energy resources. Furthermore, in terms of economic policy, it would be necessary to modify the provisions that entrust the member states with the task of coordinating their economic policies (Articles 119, 120 and 121 TFEU), instead assigning legislative competence in this area to the federal union. This would allow the ordinary legislative procedure to be used for legislative decisions on financial assistance to countries in difficulty pursuant to Article 122 TFEU. The same would apply to decisions under Article 126 on excessive deficits, and to those under Article 136 on the economic policy guidelines for the eurozone countries. It would also be necessary to amend Article 125 TFEU in order to allow the creation of financial instruments along the lines of the NextGenerationEU recovery plan which would provide for the creation of a European ‘common debt’ financed by the federal union’s own resources.
Concluding Remarks
In conclusion, a European federal union would not need new areas of exclusive competence (the EU’s current five would be sufficient). Rather, a federal union could be created by giving the current EU the power to determine the extent of its own jurisdiction (kompetenz-kompetenz), enshrining this power in a Fundamental Law approved by a majority of European citizens or national parliaments, and by extending the number and content of new shared competences to certain additional areas of activity (see above). In purely numerical terms, then, it would be enough to give the federal union shared competence in the four or five areas mentioned earlier. Naturally, however, there can be no ignoring the fundamentally political nature of certain highly sensitive choices, such as a single seat for the federal union in the UN Security Council or the placing of French nuclear power at the disposal of the federal union’s government.
Paolo Ponzano
[*] This paper was presented during a Debate Office meeting on Sovereignty and subsidiarity: two souls of European federalism organised by UEF Italy (Movimento Federalista Europeo-MFE), which took place in Ferrara on 13 April 2024.
[2] S. Fabbrini, Which European Union?, Cambridge, Cambridge University Press, 2015, https://doi.org/10.1017/CBO9781316218945.
[3] S. Santucci, “L’euro aveva una governance imperfetta dalla nascita. Serve una federazione europea leggera”. L’intervista ad Emma Bonino, Lab Parlamento, 30 November 2018, https://www.labparlamento.it/leuro-aveva-una-governance-imperfetta-dalla-nascita-con-la-tempesta-non-ha-retto-piu-serve-una-federazione-europea-leggera-lintervista-ad-emma-bonino/.
[4] O. Fontana and L. Gasbarro, Nuove risorse proprie per il bilancio europeo, Turin, Centro Studi sul Federalismo, Policy Paper n. 63, April 2024.
[5] J. Borrell, A Strategic Compass to Make Europe a Security Provider, EEAS Strategic Communications, 24 March 2022, https://www.eeas.europa.eu/eeas/strategic-compass-make-europe-security-provider-foreword-hrvp-josep-borrell_en.
[6] Helsinki European Council, 10 and 11 December 1999 – Presidency Conclusions, https://www.europarl.europa.eu/summits/hel1_en.htm.
