Karina rd thesis-how do financial crises affect the process of regional integration-14-08-2013

1,782 views
1,678 views

Published on

MA Thesis International Relations: EU Studies
Leiden University

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,782
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
7
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Karina rd thesis-how do financial crises affect the process of regional integration-14-08-2013

  1. 1. How do financial crises affect the process of regional integration? Explaining the evolutions of the EU and ASEAN after the European sovereign debt crisis and the Asian financial crisis MA International Relations: EU Studies (2012-2013) Leiden University August 2013 Supervisor : Prof. Dr. J.Q.T. (Jan) Rood Karina Rinaldi-Doligez (s1139711) Words count: (main body text) 12775
  2. 2. 2 Acknowledgments What an adventure! It would be unconceivable to submit this thesis without thanking those who have been involved in it. First and foremost, Professor Jan Rood. Thank you so much for your precious comments and advice, but also for your generosity, patience and availability. Dr. Bas van Bockel for your support and comments on the literature review. Dr. Dennie Oude Nijhuis for your advice on the economic part of the thesis and for reviewing the final version. Mr. Georges Lantu. Terima kasih banyak pak untuk waktunya, dan juga untuk kebaikan bapak. Dr. Pingtjin Thum and Kerstin Radtke for your availability and for your comments and advice. Miss Linn ten Haaf for your availability and for the great administration. My friend Sarah Merette, whom I met in Portugal after so many years. Comme quoi, le hasard fait bien les choses. Thank you so much for your comments and advice. My friends and colleagues in Leiden, especially Bahana, Willem, Abi, Rianne, Julinta, Ravando, the PPI Leiden, Jong, Demi, Elena, Pav, Tedy, Dimitar and Rosi. It was a great pleasure to know you all. Thank you for being so understanding. I do wish I could spend more time with you. Last but certainly not the least, my family and relatives for their valuable supports and advice. Mama, Papa, dan Rama, you are the heart of this thesis. Opa et Oma, merci pour votre soutien et pour vos précieux conseils. Mon grand Bassie, your support has been tremendous, and that is the reason why the only sentence in Dutch that I understand and can pronounce perfectly well is ‘Dankjewel schat!’. Jeanette and Ger, hartelijk dank voor uw steun en vrijgevigheid. Tante Nelly and Kak Sandra, terima kasih banyak untuk semuanya. Leiden tidak akan sama tampa tante dan kakak.
  3. 3. 3 Table of Contents Introduction…………………………………………………………………………………………2-6 I- Institutional evolution in the EU and the ASEAN following the European sovereign debt crisis 1- Institutional evolution in the EU………………………………………………………………..10-16 1.1- The roles of supranational institutions……………………………………………….10-12 1.2- The prevailing influence and power of the member states…………………………...12-15 1.3- Conclusion……………………………………………………………………………15-16 2- Institutional evolution in the ASEAN…………………………………………………………..17-23 2.1- Evolution within the ASEAN………………………………………………………...17-19 2.2- The AFC: an impetus for an East Asian integration?...................................................20-22 2.3- Conclusion……………………………………….............................................................22 Conclusion of part I……………………………………………………………………………………23 II- The strength of regional norms in the EU and the evolution of the principle of sovereignty in the ASEAN 3- The strength of the ‘doxa of an ever closer union’ in the EU……………….………………….25-30 3.1- Challenges to the idea of European integration……………………………………...26-28 3.2- The strength of the idea of European integration…………………………………….28-30 3.3- Conclusion…………………………………………………………………………….…30 4- The strength of the principle of sovereignty in the ASEAN countries………………………....31-35 4.1- Divisions between the member states……………………………………………...…32-33 4.2- Some evolutions……………………………………………………………………...33-35 4.3- Conclusion……………………………………………………………………………….35 Conclusion of part II…………………………………………………………………………………..36 Analysis and conclusion………………………………………………………………………….37-39 References list……………………………………………………………………………………..40-43 Appendix………………………………………………………………………………………….44-53
  4. 4. 4 Introduction In Europe, the adoption of the euro was seen as a major step to regional integration. Since the emergence of the nation state in the 17th century, no other region in the world has reached this level of integration. A currency is indeed a strong symbol of sovereignty and the adoption of the euro within the Eurozone implies an even stronger economic and political interdependency between the members. Less than a decade after the adoption of the euro, the European Union was faced with a sovereign debt crisis which led to the necessity to reform the European Monetary Union (EMU), notably by increasing the convergence of the member states’ economic and financial policies. However, the shock of the crisis also put in doubt the credibility and the legitimacy of the EU and the common currency. The idea of ‘an ever closer union’ (that is enshrined in all European Communities and the European Union treaties since the Treaty of Rome and expresses the tacit understanding in Europe that the process of European integration is a reality will always move forward) was therefore put under strong pressures. In developing countries, changes in world politics and technology by the end of the Cold War have led to a high growth of capital flows. The Asian financial crisis (AFC) in the end of the 1990s has shown that these flows of capitals can also bring serious problems. In Southeast Asia, the crisis reached a scale that had never been attained since the creation of the Association of Southeast Asian Nations (ASEAN) in 1967. It affected four ASEAN founding countries in particular: Thailand, Indonesia, the Philippines and Malaysia. The role of the ASEAN at the time was wholly insufficient, not to say non-existent. Indeed, ASEAN was created as an association of countries without any legislative power and which role is limited to co-operation between member states. It was never created to further integrate. Yet, the necessity to regulate capital flows, the flight of foreign investors to China and India (two emerging economies and ASEAN neighbors) and the pressures from the IMF and international communities for trade liberalization led ASEAN member states to consider further economic (and political) co-operation between them. This thesis is an attempt to assess the extent to which these pressures have led to further regional integration in both institutions. The word ‘integration’ should be considered differently in both cases. For the EU, it means further sharing of competences between the member states. For ASEAN, it refers to further economic, political, or financial co-operations
  5. 5. 5 between member states. The process of integration in both regions should also be considered differently. The EU process of integration is quite clear, in that it is understood to be in a constant forward movement. Thus, the effects of the crisis on the EU can also be assessed by finding out whether the crisis has affected this process. In the pre-crisis ASEAN, it was (and some would argue that it continues to be) based on the strong principle of sovereignty, meaning the autonomy of the member states to exercise their powers (economic, political or cultural) in their own territory. It also means that member states cannot interfere in each other’s affairs. It is one of the basic principles of the ‘ASEAN Way’, in which human relations (dialogues and networking) are considered to be more important than bureaucracy. It is why the model of regional integration in ASEAN is called an ‘open regionalism’. Therefore, the effects of the crisis on the ASEAN can be assessed by finding out whether the crisis has affected this strong principle of sovereignty. In other words, it will answer the research question: ‘How do financial crises affect the process of regional integration? Explaining the evolutions of the EU and ASEAN after the European sovereign debt crisis and the Asian financial crisis’. Methodology The thesis will assess the effects of financial crises (independent variable) to the process of regional integration in the EU and ASEAN (independent variable). It will investigate two different forms of regional integration – the EU supranational union and the ASEAN ‘open’ regionalism. Two features of regional integration will be analyzed in each region. First, the structural evolution of each regional institution. Second, the evolution of the norms that characterize each regional institution (the principle of ‘an ever closer union’ for the EU and the principle of ‘sovereignty’ or ‘non-interference’ for the ASEAN). These are the two units of analysis for this study. Concerning the first unit of analysis this thesis will look at the institutional evolutions observed in each region during the crises (part I of the thesis). For the EU, it will assess the evolution in the EU distribution of competences (chapter 1). Has dealing with the crisis resulted in more (or less) competences being given to the Union ? In ASEAN, the assessment
  6. 6. 6 would be about the evolution in the structure of ASEAN following the Asian financial crisis (chapter 2). Has the crisis led to further ASEAN economic, political and social co- operations? To measure the extent to which the evolution on the structure of the EU and the ASEAN can be considered as an evolution in the process of the EU and ASEAN integration, this thesis will also assess the strength of the normative power that characterize each regional institution (part II of the thesis). This will be the second unit of analysis. On the one hand, the analysis of the crisis management in the EU will reveal the strength of principle of ‘an ever closer union’ (chapter 3). Has the principle of European integration resisted the sovereign debt crisis? Or, on the contrary, has the crisis undermined this principle? On the other hand, the analysis of the different reactions of the member states in ASEAN during the AFC will reveal the strength of the principle of sovereignty in the region (chapter 4). Has the AFC affected the principle of sovereignty of the member states? Or, on the contrary, has this principle resisted the AFC? Hypothesis The hypothesis is that both in the case of the EU and in the case of Southeast Asia (supranational union and “loose” regionalism) there have been some institutional movements towards regional integration. In the EU, these movements can be explained by the proactive role of the EU supranational and independent institutions, as well as the bigger member states, especially Germany and France. However, this was limited because of some factors. The crisis management has tilted the balance of power towards the member states and has divided the EU into different groupings. Thus, the movements only concern some groups of states (especially the Eurozone countries) but not the EU as a whole. By the same token, national pressures and divisions between member states have strongly challenged the principle of ‘an ever closer union’, therefore limiting the progress of European integration. In ASEAN, the institutional movements were created by strong external economic pressures and a process of dialogues and networking that avoided confrontations and conflicts between ASEAN member states. The symbolic value of this regional integration is
  7. 7. 7 significant, but the process of regional integration was limited by the predominance of the principle of sovereignty and the strong dependency of the member states’ economies to foreign investments from outside the region. The conclusion will verify the accuracy of this hypothesis and suggest (if possible) (a) common feature(s) of regional integration between the two regional institutions.
  8. 8. 8 I- Institutional evolution in the EU and the ASEAN following the European sovereign debt crisis The shock over the realization that the EU system of economic and monetary union contains some failures was deeply felt by EU leaders and citizens. Pressured by the economic and political downturn that had started in Greece but rapidly expanded to other EU periphery countries (such as Portugal, Ireland and Spain), EU decision-makers understood that the prevailing system could not be maintained, and some emergency -as well as mid-term and long-term- responses were vital to the survival of the common currency and the entire project of European integration. Most importantly, the EU member states needed to harmonize their economic and financial policies. A structural reform, which would involve a further sharing of competences, is needed to address these issues. Chapter 1 will assess the evolution in the distribution of competences between the member states and the EU supranational institutions following the crisis. In Southeast Asian countries, the Asian financial crisis (AFC) has shown that the increasing flows of capitals can represent dangers. As the AFC unfolded, it was clear that ASEAN was too weak to provide solution. Therefore, further co-operations between the countries of ASEAN are needed to address these issues, implying a certain reform or restructuration of ASEAN (by giving it more power). How did member states in ASEAN responded to these pressures? Chapter 2 will assess the structural evolution of ASEAN following the crisis.
  9. 9. 9 Chapter 1- EU Institutional evolution The EU institutional system is based on the logic of balance of power between on the one hand the intergovernmental institutions (represented by the Council and the European Council) and on the other hand supranational institutions (represented by the Commission, the European Parliament and politically independent institutions such as the European Central Bank [ECB] and the European Court of Justice [ECJ]). This logic is strongly safeguarded under the proportionality and subsidiarity principles enshrined in Article 5 of the Treaty on European Union (TEU). The Treaty of Lisbon defines the distribution of competences regarding the EU’s economic policies. Article 3 of the Treaty on the Functioning of the European Union (TFEU) gives the ‘Union’ (meaning the EU intergovernmental and supranational institutions) exclusive competences in policies regarding customs union, competition rules, monetary union and commerce. Article 4 gives the Union and the member states shared competences1 in the areas of internal market; some aspects of social policy; economic, social and territorial cohesion; agriculture and fisheries; consumer protection; and transport and energy. Article 5 leaves the coordination of the member states’ economic, labor and social policies to the member states and the Union: ‘1. The Member States shall coordinate their economic policies within the Union. To this end, the Council shall adopt measures, in particular broad guidelines for these policies. Specific provisions shall apply to those Member States whose currency is the euro. 2. The Union shall take measures to ensure coordination of the employment policies of the Member States, in particular by defining guidelines for these policies. 3. The Union may take initiatives to ensure coordination of Member States’ social policies.’ 1 Meaning that the member states can legislate and adopt legally binding acts in these areas as long as the Union has not done so.
  10. 10. 10 This distribution of competences in economic policies reflects the complexity of the EU system and can explain the challenges facing the EU when the sovereign debt crisis wreaked havoc. If the articles 3 is clear enough in that it defines the areas in which the member states have given up their sovereignty, the articles 4 and 5 are not so clear. This means that the legislation and adoption of legally binding acts in the areas defined in the articles 4 and 5 would depend on the power relations in negotiations between the intergovernmental and supranational institutions. Yet, multiple reports and analyses have demonstrated that it would be difficult to maintain a monetary union without the willingness of the member states to cooperate and harmonize their economic policies (the ‘chacun pour soi’ or ‘beggar-thy-neighbor’ attitude).2 This attitude would plunge the affected member states further into debt spiral, precipitating the contagion effect of the sovereign debt crisis. Thus in this regard, the crisis has created economic and political pressures on the competences of the member states since it has revealed that the EU economic and fiscal coordination are not sufficient and has reinforced the fact that the EU economic and fiscal problems cannot be solved without a strong harmonization of economic, labor and social policies within the member states, and especially within the Eurozone countries. By looking at the policies and the roles played by the EU institutions during the crisis management, this chapter will discuss the extent to which economic and political pressures have affected the powers of member states vis-à-vis supranational institutions. It is to be noted that ‘member states’ here refers to the EU intergovernmental institutions (the European Council and the Council) and the national parliaments. First it will assess the roles of supranational institutions during the crisis management, then it will describe the way member states have managed to keep their competences. 2 See for instance De Larosière Report (The de Larosière Group, 2009), and Hix (2012).
  11. 11. 11 1.1- The roles of supranational institutions The necessity to converge financial and economic regulations at the EU level has pushed member states to give more power to supranational institutions to supervise and coordinate the member states’ finance and economy. Indeed, the measures detailing the member states’ decisions were achieved through negotiations between the EU institutions using the Ordinary Legislative Procedure (OLP). According to this procedure, the Commission has the power to issue proposals (‘the power of initiative’) and recommendations. It did use this initiative power in the case of the European Financial Stability Facility (EFSF) and the European Financial Stabilisation Mechanism (EFSM) and it also used its right to issue recommendations in the cases of the Six Pack, the Two Pack, and the two necessary measures for the creation of a Eurozone (and possibly an EU) Banking Union: the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). For its part, the EP has also made some achievements: It supported the financial transaction tax under the enhanced cooperation procedure; it played a role in adopting and amending detailed rules contained in the broad guidelines of stringent regulations such as the Six Pack3 , the Two Pack (see appendix I), the SSM and the SRM; it was successful in imposing reverse QMV for sanctions against the Eurozone countries who contravene the debt and deficit rules (stipulated in the preventive arm of the strengthened Stability and Growth Pack) despite oppositions from all Eurozone countries (except the Benelux) (Dinan, 2012: 92- 93); it managed to pressure the European Council to agree to let the Commission run the European Stability Mechanism (ESM) rather than the Member States (EP Press Release, 2011); finally, it managed to incorporate medium-term growth and unemployment prospects and insert social dimensions into the Six Pack and the Two Pack (see appendixes III and IV). The crisis has also reinforced the roles of the politically independent ECB. The Outright Monetary Transactions (OMT), which was decided by the ECB Governing Council in September 2012, is an exceptional measure aimed at easing the global financial market. It was taken independently of the member states’ national government and the EU decision- makers. Although outright purchases had already existed as one of the ECB monetary policy instruments since 1999, it remained unused until June 2009 (ECB, 2013). The ECB has also 3 Although, as we have previously seen, only 4 out of the 6 measures were adopted.
  12. 12. 12 created the Securities Markets Programmes (SMP) in May 2010, which implies the purchases of distressed government bonds of the European periphery (the GIPS countries). The SMP lasted until September 2012, the same day as the OMT was announced. These measures are exceptional due to the fact that the ECB is not given the power by the Treaty of Lisbon to finance the Eurosytem member states (see the ‘no bail-out’ provision of Art. 125 TFEU). However, it can use some financial instruments, such as the purchase of bonds via the national central banks, to guarantee price stability in the Eurosystem member states. Therefore, outright purchases remain a non-standard measure (Ibid.). In contrast to the SMP, the OMT contains ‘strict and effective conditionality attached to an appropriate EFSF/ESM programme’(Ibid.). In addition to this, the ECB could be given stronger roles through the SSM and the SRM. This is a major leap considering the fact that the ECB has consistently (at least every year) warned about the growing financial imbalances since its 2005 Financial Stability Review (ECB, 2005) without being responded clearly and boldly by the member states. Thus, the ECB’s role has been enhanced through the crisis, although it is still early to find out whether such bold a measure as the OMT would be approved by all the member states, especially Germany (Pop, 2013). Another politically independent EU institution which also played an important role in the decision-making during the crisis management is the European Court of Justice. Indeed, it has intervened in the EU economic and financial coordination by allowing the ESM to be effective even before the necessary amendment of the Art. 136 TFEU was effective (see the ECJ’s judgment of the Pringle case). There are similarities and differences between the EU supranational institutions in terms of their importance during the crisis management. Both types of institutions have been given more importance in the coordination of the member states’ economy and finance. However, what makes the ECB stand out from the rest of the EU institutions is its political independence, its technocratic approach to the crisis and its connection with the financial market. These factors have given the ECB more room for maneuver and stronger influence. The President and the boards of the ECB are members of the Eurogroup and the Eurosummit meetings and they exert strong influence during negotiations. Dinan observes that the President of the ECB (Jean-Claude Trichet or his successor Mario Draghi) ‘faced fewer political constraints and were able to provide more decisive leadership’. ‘They did not hesitate to tell political leaders what they should be doing, while protecting the independence of their own institution’ (Dinan, 2012: 96-97). Moreover, the ECB’s direct link with the
  13. 13. 13 financial markets makes it the most influential and effective institution to deal with one of the main origins of the crisis: the instability of the financial markets. Mario Draghi’s speech at the Global Investment Conference in London on July 26th , 2012 (ECB, 2012) in which he confidently guarantees that the ECB was ready ‘to do whatever it takes to safeguard the euro’, was responded positively by the market and contributed in regaining the much-needed confidence in the common currency.4 However, the divisions within the ECB’s governing board, which can hamper both the efficiency and the credibility of the ECB decisions, are the reflection of the still important influence of the nation state in steering the European integration. The Bundesbank itself, and most and foremost its Head Jens Weidmann, is ‘openly critical to the ECB’s efforts to provide a back-stop in European sovereign debt- markets’ (Jones, 2013: 91). These are the reasons that make Erik Jones point out that ‘Cyprus5 is not a template!’ and that ‘the buck does not stop with the ECB’ (Ibid. :89-91). 1.2- The prevailing influence and power of the member states The harmonization of the economic and fiscal governance of all the member states touches upon the very important issue of sovereignty, and the heads of state/government know that it would be very difficult to achieve concessions on such sensitive matters as labor, social policy, and budget reforms at the EU level. It is therefore necessary for them to discuss and put these matters at the top of the agenda of the European Summits. Dinan (2012) describes 2011 as a year when ‘economic governance was the most important item on the agenda’ (Ibid.: 85) and when a ‘surfeit of summits6 ’ took place. This tendency implies the politicization of the decisions and the increasing exposure of the heads of states/government 4 Eric Jones stated the effects of this announcement: ‘European bond Markets have moved into a period of relative calm. The spread between long-term Italian and German government interest rates is back down to levels last seen when Silvio Berlusconi was Italian prime minister. The spread between Spanish and German debt is higher, but not by much. Moreover, nothing in the news seems to rattle the markets significantly. The near collapse of the banking sector in Cyprus caused only a blip; the imposition of capital controls by the Cypriot government had little impact either. The small Mediterranean island country suffered huge losses (which augur even greater economic suffering to follow) and yet the threat of crisis spreading from one country to another has not materialised.’ (Jones, 2013: 81). 5 Referring to the Cyprus bailout (Jones, 2013: 89-90). 6 When counting the European Summits’ conclusions, one would notice that the frequency of summits has indeed increased since 2008 (from around 5 per year in average to 7). However, the number of summits has never reached that of 2011 (10) (data retrieved from the European Council website: http://www.european- council.europa.eu/council-meetings/conclusions).
  14. 14. 14 to the control of their national parliaments. In this regard, the crisis has pushed member states to retain their powers vis-à-vis supranational institutions. What is clearly visible when one observes the EU crisis management is that measures decided through non-ordinary procedures- such as the Simplified Revision Procedure (SRP), the Special Legislative Procedure (SLP), and Enhanced Coordination- have multiplied since the crisis. National leaders have used these tools as a way to enhance the EU economic and financial co-ordination without affecting the distribution of competences enshrined in the Treaty of Lisbon. The multiplication of non-ordinary procedures reflect the tilt of the EU balance of power towards the member states. One illustration of this is the adoption of intergovernmental treaties which naturally marginalizes the European Parliament (EP) while strengthens the roles of the national parliaments who have the power to ratify treaty reforms and are thriving for more influence in the EU decision-making process (Dinan, 2012: 94-95). Indeed, the adoption of the Treaty Establishing the European Stability Mechanism (T/ESM), for instance, only necessitated the amendment of Article 136 TFEU (see appendix II). This allows member states to use the SRP rather than the Ordinary Revision Procedure (ORP). Unlike the ORP, the SRP does not require the convening of the Intergovernmental Conference (IGC) which would include the EP. Furthermore, the role of the EP under this procedure is limited to consultation, which means that the Council is obliged to consult the EP before voting on a proposal by the Commission but is not bound to adopt the latter’s position. Although the EP has nonetheless managed to negotiate the involvement of the Commission in the ESM (see the achievements of the EP described above), the amendment of the Article 136 TFEU and the adoption of the T/ESM still reflect the predominance of the member states. Indeed, despite the fact that the ESM has a permanent character, it only applies to the Eurozone and ‘will not create any liability on the EU budget or on Member States outside the euro’ (Foreign and Commonwealth Office of the UK, 2011). Moreover, since the mechanism is based on loans rather than aids or “bail-outs” (not permitted under Article 125 TFEU), it does not constitute a transfer of competence to the Union. It is for these reasons that the European Union Committee of the UK Parliament and the UK government have agreed to the amendment of article 136 (European Union Committee of the UK Parliament, 2011). Another illustration of how intergovernmental treaties affect the power of supranational institutions is the process of adoption of the Treaty on Stability, Coordination
  15. 15. 15 and Governance (TSCG or the so-called Fiscal Compact), an intergovernmental treaty existing separately form the Lisbon Treaty which did not even involve the EP. In addition to this, the powers of the member states are also strengthened through the multiplication of differentiated integration, an EU strategy which allows for the deepening of integration for only a certain number of member states while the rest of the member states either choose not to join or do not fulfill the necessary conditions to do so. This means that in times of divisions, this strategy allows for the deepening of the EU integration (more transfer of sovereignty to the Community Method) without the participation of those who do not wish to or are not yet ready to join. In this way, the EU member states are divided into different groupings in which each group adopts its own pace of integration. The EMU and the Schengen Area are the most known measures resulting from this strategy. It can be achieved through multiple tools (opt-outs, enhanced co-operation, accelerator clause, simplified revision procedure, intergovernmental negotiations and so on) and can cover all EU policies such as monetary union, fiscal policy, area of freedom, security and justice, human rights and many others. This method can be seen in the light of the European sovereign debt crisis by analyzing the measures taken by the EU. Indeed, tables 1.1 and 1.2 in the appendix I show that most of the measures are only applied to the Eurozone or do not include all the member states. The EU has been divided into different groups such as the 11 members of the financial transaction tax, the 17 members of the Eurozone, the 23 members of the Euro Plus Pact, the 25 members of the Fiscal Compact, and so on. Over the course of the crisis, this strategy has become ‘an important –and most probably- permanent feature of European integration’ (Hollzinger and Schimmelfenning, 2012: 293). Indeed, the multiplication of differentiated integration during the crisis management and the permanent character of the measures would make it hard for the EU leaders to avoid this strategy in the future. Von Ondarza even considers that there has been such an increase in the use of this strategy that he calls it a ‘plethora of differentiated integration’ (Von Ondarza, 2013: 24-5). The effects of this strategy on the EU supranational institutions are considerable, especially for the EP. Indeed, it brings the EP into the issue of ‘political dilemma’ (Von Ondarza, 2013: 24-25). In other words, it is faced with the dilemma of whether to represent itself as an entity which defends the interests of all EU member states (in which case it will lose legitimacy as MEPs from non-Eurozone countries will vote for legislative measures that
  16. 16. 16 are not binding to them) or to separate by creating a Eurozone sub-committee or a separate Parliament for the Eurozone countries (which would be politically disastrous)7 . This internal dilemma cannot be at the advantage of the EP, since it can further feed doubts about its legitimacy. The Commission, on the other hand, is not faced with such a dilemma. Nonetheless, these divisions have created such a complex EU configuration with multiple interests. As a result, the tasks of the European Commission President and the Commission Vice-President for Economic and Monetary Affairs (which consist in defending the EU interests during the negotiations in the European Council, the Euro Summits and the Eurogroup) have become more difficult. Jacques Delors’s success in advancing the Single market was helped by rather favorable conditions: The Community economic situation was not as difficult as during the current Eurozone crisis, and the political willingness of French President François Mitterand and German Chancellor Helmut Kohl to reunite Europe following the reunion of Germany and the end of the Cold War certainly contributed to the progress of the agenda and the creation of the common currency. Yet, even under these favorable conditions, Delors faced many challenges and had to make important concessions (the UK rebate, the UK and Danish opt-outs, the non-adoption of the pact for economic coordination among others). In the case of the present crisis in which the EU credibility and legitimacy has been strongly challenged, the conditions are not so favorable. Conclusion In sum, the European sovereign debt crisis (which has raised the sensitive issue of how to refinance the accumulation of sovereign debts in some Eurozone countries and how to harmonize the member states’ economic and financial regulations) do not create a favorable environment for the EU supranational institutions -and especially the EP- to get the upper hand and be included in the adoption of some important measures (such as the T/ESM and the TSCG), although they have played major roles in designing some main measures and even managed to gain some concessions form the member states. The statement of the German Constitutional Court in a public hearing that it was not going to judge the OMT on 7 The reaction of the European Parliament Committee on Constitutional Affairs to the suggestion of the French socialist MEP Pervenche Beres to create a sub-committee for the Eurozone countries was clearly negative (EP Committee on Constitutional Affairs, 2011: point 11). The Eurozone sub-committee has never been created.
  17. 17. 17 its ‘efficiency’ but rather on its ‘legality’ (Pop, 2013) echoes the still vivid confrontation between national governments and supranational institutions and the way a nation state puts some limits to further political integration. Therefore, it is safe to conclude this chapter by stating that there has been a certain evolution in the European integration which is expressed by the emergence of the ECB, some achievements of the EP in negotiating some conditions for some measures (see above) and the power given to the Commission to supervise member states’ budgets through the European Semester. However, it is also important to note that it has not majorly affected the EU distribution of competences. Indeed, the only change in the Treaty of Lisbon is the amendment of the Article 136 TFEU, which does not constitute an increase of the Union competence. Chapter 2: Institutional evolution in the ASEAN
  18. 18. 18 As previously mentioned, the role of the ASEAN was very limited during the crisis. The ASEAN Free Trade Agreement alone, created in 1992 and accelerated in 1994, surely was not sufficient in addressing the economic issues resulting from the crisis. There was indeed a currency swap arrangement agreed in August 1977 between the central banks and the monetary authorities of the five founding ASEAN countries. It created a financial safety net of $100 million which was further increased to $200 million a year later (ASEAN Century Institute, 2013). However, the amount was far too small compared to the scale of the crisis. Thus, ASEAN needed to restructure itself. By looking at the decisions taken following the crisis, this chapter will discuss the extent to which the AFC has affected the structure of the ASEAN following the crisis. Interestingly, the AFC also triggered another momentum in East Asia that may mark the beginning of a process of regional integration. 2.1- Evolution within the ASEAN On December 1st , 1997, the finance ministers of the ASEAN states held a special meeting discussing about the effects of the Asian Financial Crisis. The joint statement of the meeting highlighted the importance of enhancing cooperation in four areas: regional surveillance, economic and technical cooperation, measures ‘[to support the strengthening of] the IMF’s capacity to respond to financial crises’ and support to other cooperative financing arrangements ‘that would supplement the IMF’s resources’ (ASEAN, 1997a). As a result, the ASEAN Surveillance Process (ASP) was created a year later. The Asia Regional Integration Center (ARIC), an ongoing technical assistance project of the Asian Development Bank’s Office of Regional Economic Integration, described the ASP as follows: ‘The ASP reviews global, regional, and individual country developments, and monitors exchange rate and macroeconomic aggregates as well as sectoral and social policies. It facilitates consideration of policy options, encouraging member countries to develop prompt individual or collective responses to prevent crises. The ASP also provides a mechanism for sharing information and for developing early warning
  19. 19. 19 systems. To carry out these objectives, ASEAN Finance Ministers meet annually with ministries of finance and central bank deputies meeting semiannually.’8 Therefore, the ASP is an informal mechanism that allows member states to share information and therefore encourage them to work in cooperation and identify issues that need to be tackled in order to prevent future crises. Another process of a deeper regional integration is the adoption of the Hanoi Plan Of Action by all ASEAN member states. It was adopted under the framework of the ASEAN Vision 2020 which was decided at the second ASEAN Informal Summit held in Kuala Lumpur on December 15th , 1997. The main measures of the ASEAN Vision 2020 (ASEAN 1997b) were, among other things: - the strengthening of macroeconomic and financial surveillance; - the acceleration of the implementation of the ASEAN Free Trade Agreement (AFTA), especially in trade of services, investments (setting goals for an ASEAN Investment Area by 2010 and the free flow of investments by 2020) and customs harmonization (the implementation of the ASEAN Harmonised Tariff Nomenclature Procedure by 2000); - more directional roles for the Secretary of ASEAN. - a further strengthening of the links between the member states through economic and socio-cultural activities such as the implementation of ASEAN Plan of Action on Social Safety Nets or the creation of an ASEAN satellite Channel (ASEAN Hanoi Plan of Action: par. 4.2 and 9.3). The ultimate sign of the deepening of ASEAN institutional co-operation is the signing of the Declaration of ASEAN Concord II (Bali Concord II) on October 7th , 2003 which saw the engagement of the ASEAN leaders to create an ASEAN Community based on three pillars: Political-Security, Economic and Socio-cultural. A year later, they agreed to work towards the development of an ASEAN Charter at the Tenth ASEAN Summit in Laos on November 29th , 2004, through the adoption of the Vientiane Action Programme (ASEAN 2004). The Charter will be ratified by all member countries 4 years later (ASEAN 2008). This process of 8 Retrieved from the ARIC website: http://www.aric.adb.org/initiativetable.php?iid=62&ssid=2&title=ASEAN%20Surveillance%20Process%20(AS P) (accessed June 10th , 2013).
  20. 20. 20 integration (which has already started before the crisis through the ASEAN Free Trade Agreement or AFTA in 1992) is aimed at increasing the competitiveness of ASEAN, now faced with the two most rapidly rising exporter economies in its neighborhood: China and India. These economic measures cannot be compared with the EU measures decided during the European sovereign debt crisis management. First, they are not binding and reflect the ASEAN ‘loose’ form of cooperation: the goals of these measures are stipulated in joint agreements and declarations rather than concrete measures. Second, they were clearly pushed by the conditions attached to the IMF bailout. Indeed, the influence of the IMF on the decisions of the December 1st , 1997 ASEAN Finance Minister meetings and on the ASP was clear (see above). The preamble of the Framework agreements on Enhancing ASEAN Economic Cooperation signed on January 28th , 1997 states the commitment of the signatories to the GATT rules and the advantages of trade liberalization (ASEAN, 1997). Just around 6 years after the AFC wreaked havoc, member states signed the agreement of Bali Concord II, engaging themselves to create an ASEAN Community based on three pillars including politics and security, economy, and culture. This project is indeed ambitious. Further, the creation of ASEAN Charter in 2008 as well as the ASEAN Political Community blueprint, ASEAN Economic Community blueprint and ASEAN Socio-cultural Community blueprint (also in 2008) reflect the real commitment of the member states to enhance co-operation. The ASEAN Community is expected to be fully realized by 2015. Therefore, the AFC triggered a structural evolution of ASEAN, since member states agreed to enhance their economic co-operations. Although the agreements reached by the member states are not binding regulations and are still based on the member states’ commitments, it nonetheless represents a significant step for an association of member states that is strongly based on the principle of sovereignty. Interestingly, the AFC also led to another evolution in the region. It triggered economic and political co-operations in East Asia between ASEAN and its three big neighbors: China, Japan and South Korea. It is important to mention and to develop this fact in the thesis in order to better understand the evolution of ASEAN due to the crisis. The AFC did lead to an impetus for economic and political co-operations between ASEAN and the three East Asian countries, forming a regional entity called the ASEAN+3.
  21. 21. 21 2.2- The AFC: an impetus for an East Asian integration? The idea of an East Asian regional integration had been suggested prior to the crisis, but it had never been realized. The creation of APEC, the failure of the Uruguay Round in 1990, incited Malaysia Prime Minister Mahathir Mohammad to propose the creation of an East Asian Economic Caucus (EAEC) or East Asia Economic Group (EAECG), a regional free trade zone encompassing ASEAN member states and the Plus Three countries (China, Japan and South Korea). The aim of the caucus was to counterbalance the Western influence in the region by grouping ASEAN countries and its Eastern neighbors together. However, the idea was strongly opposed by the US and received cool reactions from Japan and some of the ASEAN members and APEC partners. Interestingly, the East-Asian co-operation really kicked off with the preparation of the Asia-Europe meeting (ASEM), a platform of negotiations initiated by Singapore Prime Minister Goh Chock Tong in a speech in Paris in 1994 and agreed by ASEAN and the EU in 1995. The ASEAN members then asked China, Japan and the Republic of South Korea to join and to represent Asia. China and Japan had reservations, but all the three finally accepted to meet for the preparation of the first ASEM held in Bangkok, in March 1996. Several meetings that ensued in 1996-1997 increased coordination and discussions among ASEAN and its Northeastern partners. Japan and China eventually requested regular summit meetings with ASEAN members to discuss about economic co-operations (Stubbs, 2007: 84). During the preparation of the 1997 ASEAN annual summit in Kuala Lumpur, the ASEAN members, taking advantage of the newly forged link with their Northeast neighbors, invited the leaders of the Northeast Asian states (Ibid.). China agreed, as it was willing to take advantage of its economic expansion to invest in Southeast Asia and find a partner as it was preparing to join the WTO. Japan cannot leave China leading this process of cooperation alone, and therefore agreed to join as well. The latter represents a counterbalancing force to China’s leadership. Thus, the first APT summit took place in December, 1997, at the same time as the ASEAN Kuala Lumpur Summit. The post-crisis period sees the emergence of the APT project (ASEAN Plus Three, meaning China, Japan and South Korea), with multiplications of summits that are hold annually and at the same time as the ASEAN Annual Summit Meetings. It includes regional financial co-operations under the framework of the Chiang Mai Initiative, which created the ACU (Asian Currency Unit) and later developed to AMU-wide
  22. 22. 22 (including Australia, New Zeeland and India). Further negotiations on bi-lateral free trade agreements ensued (table 2), but also the development of the Asian Bond Initiative (ABI) and the creation of AMRO (ASEAN + 3 Macroeconomic Research Office), a macroeconomic surveillance unit. These co-operations are important, in the sense that it marks the beginning of a regional co-operation in East Asia. Japan suggested the idea to set up an Asian Monetary Fund (AMF) at the G7/IMF meeting in Hong Kong, China in September 1997. The proposal was strongly rejected by the IMF and the US, since it came just after the IMF was already implementing the rescue package for Thailand, but also due to the absence of background work, informal discussions and lobbying by the key stakeholders (Sussangkarn, 2010: 4). Although not adopted at the time, the region still continued looking for another initiative. As a result, the idea of setting a ‘New Framework for Enhanced Asian Regional Cooperation to promote Financial Stability’ or the so-called ‘Manilla Framework’ was agreed at a meeting of Asian Financial Central Bank Deputies in Manilla, Philippines, on November 18th -19th , 1997. It is the precursor of the Chiang Mai Initiative. Chalongphob Sussangkarn observed that the US and the IMF’s influence in these decisions was predominant (Ibid.: 4-6). However, he believes that the idea ‘of East Asia having its own financial and monetary organization’ has not ‘disappeared completely’, and that ‘twelve years after the original AMF proposal was made, such an organization may eventually still emerge’ (Ibid.). Therefore, the AFC represented a watershed in the East Asian regional governance. Today, the Chiang Mai Initiative has developed from ASEAN and Bi-lateral Swap Arrangements (ASEAN Swap Arrangement/ASA and Bilateral Swap Arrangements/BSAs) to ‘multilateralized self-managed reserves pooling scheme governed by a single contractual agreement, or the Chiang Mai Initiative Multilateralized (CMIM)’ (Ibid.: 8). The broad decision-making mechanism was also strengthened, with ‘fundamental issues (review of size, contributions, and borrowing multipliers, readmission, membership, terms of lending, etc.) […] decided through consensus of the members of ASEAN+3, while the lending issues (lending, renewal, default) […] decided by majority vote’ (Ibid.). Moreover, Mahathir Mohammad’s EAEC project continues to be discussed, and the APT meetings have expanded into several ministerial level meetings in other areas such as agriculture, ICT, energy, environment and transnational crime (Ibid.: 4). Richard Stubbs observed that, ‘among the Northeast Asian states [China, Japan and South Korea], the crisis changed the way business and political leaders viewed their relationship with Southeast Asia and increased recognition
  23. 23. 23 of the need to develop formal relations to deal with any future crisis and ensure continued economic growth’ (Stubbs, 2007: 84-5). Conclusion In sum, the AFC did trigger further economic, political and cultural co-operations in ASEAN, an unprecedented situation in the history of the region. However, there are limits to these co-operations. First, the exclusively state-led process of the ASEAN integration. Indeed, the ASEAN secretariat was given a more directional action according to the Hanoi Plan of Action, but this is the limit of competence that the Secretariat was allowed to have. Second, the measures taken are non-binding, and therefore rely on the member states’ commitments. Finally, these co-operations seem to be driven by exogenous ‘liberal forces’ such as the IMF (that imposed a strict agenda of trade liberalization and stringent measures) and the emergence of competition from its neighbors (mostly China and India). The AFC also triggered economic and political co-operations between ASEAN and China, Japan and South Korea, which is also an unprecedented in the history of East Asia.
  24. 24. 24 Conclusion of part I Therefore, the analyses of the institutional evolutions of the EU and ASEAN following the crisis show that financial crises do trigger some institutional evolutions towards further co-operations both in the EU and ASEAN. As a supranational Union with a common currency, the proactive role of the supranational institutions shows the strength of institution in shaping the EU process of integration. However, the crisis has increased divisions between the member states (especially between the Eurozone and the non-Eurozone countries) and has not affected the EU distribution of competences that are defined in the Lisbon Treaty. This can be explained by several factors. First, the Treaty of Lisbon was only effective in 2009, just when the crisis started to wreak havoc. It was therefore too early to reform the treaty. Second, the principles of subsidiarity and proportionality are strongly applied in the EU. With the increasing role of the national parliaments during the crisis, these principles are more and more subject to control. Finally, the fact that competences in economic policies are dispatched and not yet clearly defined has resulted in the divisions of the member states into different groups, each having its own pace of integration. In the ASEAN, the institutional evolutions are much slower than in the EU. Moreover, the measures decided by the member states are non-binding and based on the commitments of the member states. Furthermore, the influence of external factors such as the strong economic link between the US and Japan also prevented a further development of the process of integration in East Asia. Nonetheless, they constitute a watershed in the history of the region, since it has shifted the ASEAN member states’ focus and strong dependency on the US and Europe (their former colonies) towards each other and their neighbors.
  25. 25. 25 II- The strength of regional norms in the EU and ASEAN countries The effect of the European sovereign debt crisis on the EU can also be assessed through the normative power of the European integration. To this aim, this thesis will assess the strength of the ‘doxa’ of ‘an ever closer union’ following the crisis in chapter 3. This doxa means the ‘tacit understanding (in a given society) operating as if it were the “truth”’, or ‘the idea that Europe must continue to move forward’ (Adler-Nissen, 2011: 1099). This is the starting point of the process European integration, that it continues to move forward. By contrast, the ASEAN was never intended to further integrate. It was created in 1967 as an association of state which aim was to assure the security of the region (ASEAN, 1967), and the principle of sovereignty was at the very heart of its foundation. No economic co-operation was mentioned in the ASEAN Declaration. (Ibid.) Therefore, in chapter 4 the thesis will assess whether the AFC did affect this principle of sovereignty.
  26. 26. 26 Chapter 3: The strength of the ‘doxa of an ever closer union’ in the EU The term ‘ever closer union’ has been enshrined in the EU Treaties since the Treaty of Rome. It is a formula coined by one of the main negotiators of the Rome Treaty, Jean- François Deniau. As previously mentioned, it expresses the idea that European integration should always continue to move forward. Adler-Nissen (2011) took this expression to study its accuracy under the system of differentiated integration. As previously seen in chapter 1, the method of differentiated integration has multiplied since the crisis and would probably become a permanent feature of the EU integration. Her analysis finds that although there are divisions created by the strategy of differentiated integration, member states are, in practice, bound by the doxa of an ‘ever closer union’. Indeed, by analyzing the UK and Danish opt- outs from the EMU, she found that these opt-outs reflect ‘a retreat from national sovereignty rather than an expression of it’. (Adler-Nissen, 2011: 109). She justifies this view by analyzing the different concepts of sovereignty and by looking at the extent to which national officials have adopted this doxa. Using this approach to the UK and Danish opt-outs, she finds that both governments and officials ‘work within a doxa of European integration and are convinced of its concrete legal and practical benefits’ (Ibid.: 107). In this sense, the British and Danish opt-outs do not portray the strength of their sovereignty, but rather the ‘strength of the idea of European integration and the difficulty of practicing national sovereignty in the EU’. (ibid.) Her analysis can be observed in the light of the current crisis, in order to see whether the crisis has affected this doxa. The focus will be directed to the EMU, to see whether the crisis has affected the strength of the idea of European integration. In other words, this chapter will assess the strength of the doxa of an ever closer union by looking at the extent to which the idea of European integration still prevails despite strong economic challenges resulted from the crisis. These challenges will be discussed in the first subpart. How the idea of European integration has prevailed despite these challenges will be explained in the second part.
  27. 27. 27 3.1- Challenges to the idea of European integration The main challenge facing the the doxa of an ever closer union due to the sovereign debt crisis is the division between the Eurozone countries over the debt financing and the regulation of the financial system. For instance, the division between the Eurozone member states over the Financial Transaction Tax have led the Dutch government to take a step in affirming its position against further sharing of competences. The most striking example is the Dutch government’s decision to propose an extensive list of powers that should not be given to Brussels. According to the Financial Times in an article entitled ‘Time for “ever closer union” in Europe over, say Dutch’, the list contains ‘54 specific competencies, from taxation to coastal management, that the Dutch believe should remain at the national level, following the […] “subsidiarity” principle (Steinglass and Parker, 2013). According to the article, ‘the document reiterated Dutch opposition to several EU-wide financial initiatives, such as a transaction tax and a separate EU budget for countercyclical “shock-absorption”’. It further quotes the statement of Dutch Prime Minister Mark Rutte at a press conference: ‘I find it important that Europe not continue to get more and more tasks, as is happening now […] This is the first time that a member of the EU says, we’re making an inventory of points that should not go to the European level’ (Ibid.) The austerity measures that were imposed on the affected member states have also played a role in the hampering the strength European integration. The conditions attached to the bailout funds addressed to the Eurozone affected economies are based on rules aimed at liberalizing the market through stringent measures such as wage reductions, tax cuts, cuts in social benefits, and labor reform. As the common currency has deprived member states of monetary policy that would cushion the effects of the crisis (by, for instance, increasing their foreign reserve through devaluation), the affected member states had no other choice than to apply ‘internal devaluation’ (such as budget cuts, spending cuts and more flexible employment policies) to meet the criteria stipulated in the Stability and Growth Pact (SGP). As a result, unemployment rate rose and growth slowed down, plunging the affected countries even further into the debt spiral. Their leaders had then no other choice than to accept the conditions attached to the bailout fund, a situation that fed the resentment of their citizens. These conditions are imposed by the ‘Troika’ (The IMF, the Commission and the
  28. 28. 28 ECB) and have stirred political unrests in the affected countries: Greece, Ireland, Portugal and Spain especially (GIPS). Moreover, as the crisis progressively reached the core Eurozone countries, the EU solution and the benefits of the euro became more and more contested. For instance, the crisis has affected the outcome of the presidential elections in 2012 in France, the second economy of the Eurozone. Indeed, the crisis had not spared France as its unemployment rate continued to rise and reached 9.6% in the first semester of 2012,9 its purchasing power declined and its credit rating downgraded by Standard & Poor. German Chancellor Angela Merkel reacted by multiplying efforts to support the incumbent French President Nicolas Sarkozy during the campaign and by refusing to meet his Socialist opponent François Hollande. To no avail. Meanwhile, the French media took advantage of this situation by exposing Sarkozy’s luxurious way of life, his alleged involvement in the embezzlement of funds in the Karachi case and his budget minister’s alleged involvement in the Bettancourt case.10 Nicolas Sarkozy had to face the consequence of losing the 2012 Presidential elections. A month later the Socialist Party not only won a majority in the French Assembly, but also in the Senate –an unprecedented situation in the history of the French 5th Republic. The Socialist candidate Hollande won the elections with the promise of preserving the public status of companies whose shares are in large part owned by the state, incite inshoring to limit the departure of businesses, preserving jobs in the public sector (especially in the education) 11 , and imposing high taxes for people whose revenues are superior than one million euro. He also expressed his willingness to renegotiate the TSCG by adding an extra chapter on growth. As soon as he took office, he created a ministerial post called ‘Industrial Renewal’ which he gave to Arnaud Montebourg, his socialist rival who managed to reach the 3rd position in the Socialist primaries elections (right after Hollande and Martine Aubry) and defeated Sarkozy’s formal rival Ségolène Royal. Montebourg is famous for his close relationship with French 9 Data from INSEE, the French Institute of statistics and economic studies. Retrieved from: http://www.insee.fr/fr/themes/info-rapide.asp?id=14 (accessed June 29th , 2013). 10 Eric Woerth’s wife was accused of receiving bribes from Mrs. Ingrid Bettancourt, a cosmetic industry magnate (she is heir of of the founder of the cosmetic brand L’Oreal) and the richest woman in France. 11 Taken from Francois Hollande’s manifesto. Retrieved from: http://www.parti- socialiste.fr/articles/engagement-3 (accessed June 29th , 2013).
  29. 29. 29 intellectuals who are part of a movement called the ‘de-globalization’12 and for claiming that globalization has threatened the French economic model and welfare system. Thus, the economic downturn and the agitations surrounding the crisis have led to political instabilities in many countries, as reflected by the resignation or the shift of the incumbent governments in ten Eurozone countries (Greece, Portugal, Ireland, Finland, Spain, France, Slovenia, Slovakia, the Netherlands and Italy). The circumstances are different for each country, but the discussions over the austerity measures and economic convergence are proved to be sensitive and that the EU solution has not been effective in addressing the economies of the affected countries. Outside the Eurozone, the main challenge comes from the UK. The experience of the crisis has strengthened the UK’s stance in proposing another alternative EU economic model, implying a more liberal economy and a retreat of the Union competences. UK Prime Minister David Cameron famously suggested a referendum on the UK membership in the EU and a further consideration of the European integration. In joint interviews with five European newspapers, he also stated: ‘[The EU] sometimes overreached itself with directives and interventions and interference […]What I want to do is achieve a reform of the European Union. We're in a global race where we have to compete with [countries such as] India, China, Indonesia and Malaysia. We need a Europe that is more open, that is more competitive, that is more flexible, that thinks more about the cost that it's putting on businesses, particularly small businesses. We want a world that wakes up to this modern world of competition and flexibility. That is the aim.’ (cited in Sparrow, 2013). The extent to which the Euro and the EU has managed to resist these pressures will unveil the strength of the idea of European integration. 3.1- The strength of the idea of European integration Despite the fact that the general support for the euro within the EU has slightly declined since the beginning of the crisis (European Commission, 2013), the Eurobarometer 12 A movement launched by the Filipino intellectual Walden Bello in his book Deglobalization: Ideas for a New World Economy (Global Issues, 2004). To see his involvement in the Asian Financial Crisis, see chapter 4.
  30. 30. 30 surveys conducted during the crisis (from 2009 to 2013) indicate that a majority of Europeans still support the European economic and monetary union within a single currency, the euro (European Commission, 2013, 2012, 2011, 2009)13 . This public perception can be explained through different factors. For instance, the proactive role of the EU supranational and independent institutions (especially the ECB) but also the leaders of the Eurozone countries, that have manage to secure the survival of the euro (see chapter 1). Moreover, the prospect of a referendum or a member state’s exit from the common currency are expressed by the media as economically and politically disastrous and would deeply affect the EU’s credibility on the world stage. The general perception is that an exit of a country from the euro would lead to a domino effect and could further lead to the collapse of the entire euro project. In this regard, some five years after the crisis, there has not been a backward movement of the EMU nor the European integration, even in the affected countries. Another assessment that one can make to see the effect of the crisis on the doxa is how the pre-in countries (the EU member states who are still in the process of joining the euro such as Poland and Lithuania) have reacted to the crisis. The more stringent measures decided during the crisis management (mostly for the Eurozone) make it harder for the pre- ins to get accepted in the Eurozone since they have to deal with stricter criteria. Their frustration and the way negotiations between the Eurozone and the non-Eurozone leaders during the European Council Summits took place are described in the studies of Nicolai Van Ondarza (2013) and Desmond Dinan (2012). And yet, the crisis has not prevented the Croatian entry into the European Union with a prospect of joining the Euro. Not only that, but three Baltic countries have decided to join too: Estonia joined in 2011, Latvia will join in January 2014, and Lithuania has claimed its willingness and efforts to join the common currency and use its EU Presidency to put this issue forward on the agenda (Pop, 2013). Their main argument is that their monetary policies are already tightened to the euro, due to the massive flow of the currency in their banks (Thomson, 2013). Thus, these countries are already bound by their economic ties and dependency to the Eurozone countries and therefore the monetary union would only constitute a confirmation of this relationship. Concerning the Dutch position (to clearly delimit 54 competences that it will not share to the Union), it is an exaggeration to state that it marks the end of the era of ‘an ever closer union’. Indeed, the Dutch government is opposed to giving competences back to the member 13 It is to be noted that there is a large difference between the member states and more generally between the Eurozone and the non-Eurozone countries.
  31. 31. 31 states, as suggested by David Cameron, therefore isolating the latter’s position. Moreover, considering that it is a unilateral and single initiative, its effects on the strength of the idea of European integration are still too small. As regards to the UK, the referendum on the UK membership do not reflect the strength of the UK sovereignty, but rather confirms ‘the strength of the idea of European integration and the difficulty of practicing national sovereignty’ as suggested by Adler Nissen (2011: 109). Conclusion Thus, despite some serious challenges triggered by the crisis, the idea of European integration still prevails within the EU. This doxa is strongly defended by politicians and intellectuals: Professor Jürgen Habermas delivered a lecture on April 26th, 2013 at the Catholic University of Leuven calling for more solidarity within the EU during the crisis; 14 on his visit to Montesquieu institute in The Hague on October 4th, 2011, German Foreign Minister Guido Westerwelle insisted in explaining the EU achievements and the importance of a unified Union, while inciting students to further spread the values of Europe; 15 on his recent visit to Leiden University on June 12th, 2013,16 Polish Foreign Minister Radoslaw Sikorski made a discourse that was clearly pro-Europe, emphasizing the importance of labor mobility and the Polish positive contribution to the EU economy. 14 Retrieved from: http://www.kuleuven.be/communicatie/evenementen/evenementen/jurgen- habermas/en/democracy-solidarity-and-the-european-crisis (accessed June 29th , 2013). 15 Attended by the author. A summary of the visit written by a former student can be retrieved here: http://www.hum.leiden.edu/history/eu-studies/news1/seminar-westerwelle.html (accessed June 29th , 2013) 16 Attended by the author.
  32. 32. 32 Chapter 4- The strength of the principle of sovereignty in the ASEAN countries The ASEAN approach of regional integration is different than that of the EU. If the EU regionalism is based on institutional arrangement and the existence of the doxa of an ‘ever closer union’, ASEAN’s form of regional integration is based on a solid principle of sovereignty. Therefore, in order to assess the extent to which the AFC led to further integration in the ASEAN, one can look at whether the crisis affected the concept of sovereignty of its member states. The ASEAN was first created in 1967 with the Declaration of Bangkok, signed by the Foreign ministers of the five founding countries: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Southeast Asia is a vast region comprised of very diverse ethnic groups, governments, religions, geography (continental and insular) and resources. This diversity, the Southeast Asian contacts with its Eastern neighbors and more than three centuries of colonization17 have shaped the politics, economies and societies of the region today. Considering this diversity and the context of the creation of the ASEAN depicted above, it is not surprising that the principles of sovereignty (in the sense of autonomy of the state to exercise its powers in its own territory) and non-intervention (or non-interference) are highly respected. They are now deeply anchored in the ASEAN Charter (ASEAN Charter). These principles form the very bases of the ASEAN regionalization. Furthermore, ASEAN in the 1990s was also a highly diverse region, ranging from one of the wealthiest nation in the world (Singapore) to one of the poorest (Cambodia and Lao People’s Democratic Republic), therefore expressing various levels of industrialization and development. Did the AFC affect these principles? Although most of the literatures suggest that the AFC did strengthen the divisions between the ASEAN member states, and therefore strengthened the member states’ stance to defend their sovereignty, this part argues that there was nonetheless some evolution in the Asian countries’ relationship following the AFC. 17 All Southeast Asian countries, with the exception of Thailand, have experienced colonization by different European countries (Portugal, Spain, The Netherlands, Great Britain and France), Japan and to a certain extent the US and the USRR. Thailand, despite never being colonized, has also been deeply influenced by its neighbors’ experience of colonization and has been involved in the process since the beginning (see Ricklefs et. al: 134-362). To see the struggles of Southeast Asian countries for independence in the decades after 1945 and their process of ‘nation-building’ (1945-1990s), see Ibid.: 318-424.
  33. 33. 33 4.1- Divisions between the member states The period of Asian financial crisis was filled with events marked with social and political turmoil in a scale that is even higher than what is currently facing the EU today. In Indonesia, the devastating effects of the economic crisis triggered students demonstrations in some important cities and mob violence against the Indonesian Chinese ethnic community18 in most of the main Indonesian islands. It culminated in the episode of the May 1998 riot that killed more than a thousand people and hundreds of other victims (rape and injuries). Pressured by the social upheaval and abandoned by a certain fraction of the elites, President Suharto was eventually forced to resign one week after the riot had reached an unprecedented scale of violence. In Thailand, the mass unemployment and poverty initiated political instabilities (the year of 1997 was marked by the two consecutive resignations of the Thailand Finance Minister, but also that of the Prime Minister Chavalit Yongchaiyudh). In Malaysia, the crisis provoked a conflict between the Prime Minister Mahathir Mohammad and his Deputy Anwar Ibrahim. The latter, favorable to the IMF solution, called the government to end its ‘crony capitalism’. The former responded by sacking Anwar from his cabinet under charges of ‘abuse of office, corruption and sexual misconduct’ (quoted in Roberts, 2012: 92) and getting him arrested. This resulted in criticisms by Thailand, the Philippines and Indonesia, creating a conflict between them and Malaysia (Ibid: 92-94). In addition to this, the 1997-1998 haze problem, ‘the most acute in terms of economic costs and life-threatening consequences’ (Roberts, 2012: 88), led Singapore and Malaysia to publicly pressure the Indonesian government to address the issue. Singapore, for instance, uploaded satellite imagery of the fires on the Internet (Ibid.: 90). The crisis has therefore triggered some tensions and incited member states to close in on itself further. Christopher Roberts argued that ‘a further consequence of the crisis was the degeneration of relations between the ASEAN members together with an associated decline of the ASEAN Way’ (Ibid.), and went even further by saying that ‘the economic crisis had also contributed to a decline in other aspects of regional relations leaving the impression that 18 In most of the countries of Southeast Asia, has maintained trade contacts with China ever since the pre- colonial era. During the colonial era, most of the Chinese community served as trade intermediary. After the 1949 Chinese Revolution, their number increased as many Chinese migrated to Southeast Asia and chose to settle there. In Indonesia, the ethnic Chinese was a victim of the peoples’ resentment against the corrupt practices of the Suharto government, as the Chinese were directly associated in the mass consciousness with businesses protected under Suharto.
  34. 34. 34 the “only shared regional value” was recourses to a Darwinian notion of the survival of the fittest”’ (Ibid.: 93). Jorn Dosch found that ASEAN responses to the crisis ‘has been seen as ineffective in and outside the region’, and cited an inside source who warned about the danger of depression and disintegration (Dosch, 2003: 40): ‘ASEAN will definitely become less cohesive and more distracted, and longstanding rivalries within the grouping may resurface. This will make the association a whole more susceptible to penetration by external powers or actors… ASEAN is not only at the crossroad, but it is also on the brink of depression and disintegration’ (Bantarto Bandoro, cited in Ibid.) Jürgen Rüland (2000) goes even further by saying that there has been a collapse of the Asian identity after the crisis. In a later paper (Jetschke and Rüland, 2009), he further observed the dichotomy between the ASEAN rhetoric of co-operation and its practice. The paper’s argument is that ASEAN adopted a dual attitude towards regional integration, meaning that ‘ASEAN member states declared and continue to declare their intention to enhance cooperation and devise projects when implementation lags behind their rhetoric or in some cases never materializes’ (Ibid.: 181). Indeed, the question of integration was clearly problematic for ASEAN. Rivalries, diversities, and the still top-down politics of the member countries in the region were not conducive to the formation of a solid regional integration. 4.2- Some evolutions The process of economic integration in ASEAN had already started with the creation of AFTA, pushed by the inward movements of economic integration elsewhere in the world in the 1990s (the EMU, NAFTA and MERCOSUR, for instance) and the increasing competition from China and India. Although the agreement was not as strong as the proponents of free trade had wished for, the effects of it was visible and the process would be difficult to counter. Some even argue that it is this process of integration that have worsened the effects of the AFC in Southeast Asia since it intensified the contagion effects of the crisis, as ‘institutional investors, such as mutual funds, insurance companies, pension funds and
  35. 35. 35 hedge funds, tend to lump together sub-regions and countries in emerging markets, regardless of the specific economic soundness of those respective sub-regions and countries’ (Bustelo, 2003: 149). Moreover, since the primary and driving motive of the creation of the ASEAN was to settle peace in the region (see previous chapter), ASEAN disintegration would create insecurities and instability in the region. As a result, some voices proclaiming changes to the principle of ASEAN Way were starting to emerge. Anwar Ibrahim proposed to replace the principle of non-interference with ‘constructive intervention’. ‘At the ASEAN Ministerial Meeting (AMM) in July 1998 in Manila, Thailand -supported by the Philippines- proposed that ASEAN’s non-interference policy should be replaced by “flexible engagement”’ (Dosch, 2003: 41). The concept was not accepted and finally replaced by ‘enhanced interaction’, but it ‘[shook up] the status quo of foreign relations in Southeast Asia’ (Ibid.). Prime Minister of Thailand Surin Pitsuwan clearly expressed its willingness to move forward the process of regional integration in a speech he delivered at the Foreign Correspondance Club in Bankok, August 11th, 1998: ‘In 31 years, diversity has become a problem for ASEAN […]. Diversity, which used to be a source of strength has become a source of weakness […]. We have no freedom and flexibility of expressing our views concerning our members. We have to be silent because we are members of the family. This is not fair, not just.’ (cited in Ibid.) The IMF failure in addressing the crisis and the disastrous political and social impacts of its intervention (especially in Indonesia) forced member states to not look only at the ‘Western’ solution anymore. On April 21st , 1998, Walden Bello, the Filipino founder of the ‘Focus on the global South’ organization, made a testimony before the Banking Oversight Subcommittee and the Banking and Financial Services Committee of the US House of Representatives, urging the members of the House to vote against the replenishment of the $14.5 billion IMF aid to Asia, stating that ‘the IMF's record in the Asian region does not inspire confidence in the institution nor in the possibility that the appropriated funds will be used wisely’, that ‘the world will not come to an end without an IMF replenishment’ and that ‘with IMF resources reduced, the Asian countries will be forced to come up with innovative, self-help cooperative solutions, like some revived version of the Asian Monetary Fund, to deal with the financial crisis that would not be a drain on American taxpayers' money.’ (Belo, 1998).
  36. 36. 36 Interestingly, the ASEAN also created a more flexible mechanism of decision-making called the ‘ASEAN Minus X’ or ‘Two Plus X’ formula (proposed by Thailand and Singapore at the Bali Summit 2003) in which ‘two or more members –not necessarily all- may go ahead and engage in a cooperative project, which is open to the others when they are ready’ (Severino, 2007: 42). In this regard, it resembles a more flexible version of the EU system of differentiated integration (although the formula is still purely based on consensus, while the EU enhanced co-operation is regulated by the Title III of the TFEU). In East Asia, the Chiang Mai initiative has also introduced majority vote for lending issues (see chapter 2). Conclusion In sum, although the principle of sovereignty still strongly prevails in ASEAN, the crisis has triggered some steps to further co-operation and strengthened the relationship between the ASEAN countries. It also strengthened the relationship between the ASEAN countries and their neighbors, especially in East Asia.
  37. 37. 37 Conclusion of part II Therefore, on the one hand, the experience of the European sovereign debt crisis in the EU proves the strength of the European integration. It is the reason why despite divisions and pressures on the euro, the EU and the common currency still continue to hold on tight. On the other hand, the experience of the AFC in the ASEAN proves the strength of the notion of sovereignty in East Asia. However, member states have strengthened their relationship in broader areas such as economy, politics and security, and culture. They have also strengthened their relationship with their neighbors in East Asia. These co-operations are a shift from the previous situation, in which the majority of the member states were economically dependent on the ‘West’ (mainly the US), as shown by the fact that most of the countries at the time of the crisis had pegged their currencies to the dollar. Indeed, the IMF intervention resulted in a ‘renewed skepticism over the Anglo-Saxon model of capitalist development’ in East Asia (Bustelo, 2003: 145), and therefore turned the attention of the member states towards each other and their neighbors.
  38. 38. 38 III- Analysis and conclusion: Crisis management and implications for the EU and the ASEAN In sum, the crisis management in the EU proves the importance of the EU supranational institutions in shaping the EU process of regional integration. The crisis was managed in the EU through a series of measures decided at the level of heads of state/government and negotiated within the different EU institutions. As described in chapter 1, the main EU supranational institutions -the Commission, the EP, the ECJ and the ECB- have been proactive in shaping measures that will have important effects for the mid- and long-term prospects of the EU economic and fiscal governance. Moreover, they represent the counterbalance of the powers of the nation states: the EP counterbalances the political powers of the EU heads of state/government, while the decisions of the Commission, the ECJ and the ECB bring more neutrality and technocratic aspects to the EU decisions, thus supposedly deliver more efficiency to the EU measures. Although the crisis management resulted in a tilt of the EU balance of power towards the nation states (through ad hoc measures that do not necessarily involve the EU supranational institutions), the EU ‘legislative triangle’ (meaning the Commission, the Council and the EP) still played important roles, as demonstrated in the cases of measures decided through the Special Legislative Procedure (such as Two-Pack, Six-Pack, SSM and SRM). Moreover, the crisis has not affected the idea of European integration. Indeed, despite the fact that it has revealed the flaws in the EMU design and that it has affected the credibility of the euro, the common currency and the EU still prevails. This fact clearly proves the strength of the EU as an institution today. However, the EU responses were judged as being too slow and its legitimacy was challenged. Not all member states have agreed to further deepen the EU integration (especially the UK). Some member states cannot join all the Union programs because they do not meet the necessary criteria (this is the case for the pre-in countries). Moreover, the EU strategy of differentiated integration has weakened the EU supranational institutions and has enhanced divisions within the EU member states. As this strategy seems to become a prominent feature of the European integration, the EU will need to make some adjustments to
  39. 39. 39 assure its good functioning (see suggestions made by Von Ondarza). The EU solution is still insufficient to address the core economic problems, in particular the lack of competitiveness and the increasing unemployment. Nonetheless, the sovereign debt crisis in Europe shows that a strong regional institution which provides the necessary tools for actions and co- ordinations can assure the continuation of its process of integration, even in times of division. As described in chapter 3, the crisis also reveals the strength of the idea of European integration. These two factors explain why the process of European integration continues to move forward despite the crisis. The AFC was an impetus for ASEAN and East-Asian integrations. Dialogues and networking are the main diplomatic tools used by the heads of states and governments to negotiate co-operations, affirming Mattli’s statement that ‘cooperation [in the context of regional integration] may still be possible on the basis of repeat-play, issue-linkage, and reputation’ (Ibid.: 43). Some express doubts about the real achievements, prospects and plausibility of this form of cooperation. Indeed, no formal structure nor true binding regulations were imposed on ASEAN members and its partners. Moreover, as Ravenhil (2009) has observed, there has been a lack of interest from the business sector to follow the process of integration. Furthermore, 16 years after the AFC and 13 years after its creation, the Chiang Mai Initiative (CMI) has never been called upon (Asian Century Institute, 2013). There are practical reasons for this. First, the very small amount at the disposition of the CMI (although increased in 2012 to $240 billion, it still only represents 1.5% of the ASEAN + 3 countries’ GDPs. By contrast, the EU funds represents 8% of the Eurozone countries’ GDPs19 ). Second, structural problems, such as the issue of distribution and the lack of a rapid response capacity due to ‘its complex procedures’ and the fact that ‘it is not a fund but a reserve pooling system’ (Ibid.). Yet, the “open” regionalism of ASEAN proves to be effective in countering future crises. Indeed, Das (2012) argues that the 2008 Global financial crisis –a second test after the 1997 experience- proves that Asian economies were the first to recover and even contributed to the global recovery. Moreover, despite some doubts, Asian countries have managed to improve their coordination (Hidetaka, 2006). As Mr. Georges Lantu, a former Head of 19 Asian Century Institute, 2013.
  40. 40. 40 Chancery at the Indonesian Permanent Representative to ASEAN, points out20 , the role of ASEAN in coordinating and creating networks with its neighbors and partners was successful in creating a relatively stable region. Therefore, the AFC has tightened the economic, political and cultural co-operations within the ASEAN and between the ASEAN and its neighbors. This is shown by the adoption of the Asian Surveillance Process in December 1997, and the development of the ASEAN Plus Three platforms (see chapter 4). In this regard, there has been a regional evolution in East Asia after the AFC. (A) common feature(s) of the EU and the ASEAN? It is difficult to find similarities between the EU and the ASEAN. They are two different institutions and each plays by different rules on a different playing field. Nonetheless, perhaps one can try to draw a general conclusion by saying that in a world where capital flows are increasing in a rapid pace and where technology is more and more accessible to the world population, regional integration (both in the sense of ‘sharing of competences’ and ‘economic, political and cultural co-operations’) appears to be inevitable. The European sovereign debt crisis shows the strength of the EU institutions and the idea of European integration, while the Asian Financial Crisis shows the limits of the hegemonic power of the ‘West’ in Southeast Asia, and marks the emergence of a regional (economic) power in Asia. 20 In an interview conducted by the author on May 23rd , 2013.
  41. 41. 41 References list Adler-Nissen, R. (2011). Opting out of an ever closer union: the integration doxa and the management of sovereignty. West European Politics, 34(5): 1092-1113. ASEAN (1967) The ASEAN Declaration (Bangkok Declaration), Thailand, 8 August 1967. _____ (1997a) Joint Ministerial Statement of the Special ASEAN Finance Ministers Meeting Kuala Lumpur, Malaysia, 1 December 1997 _____ (1997b) ASEAN Vision 2020, Kuala Lumpur, December 15th , 1997. _____ (2003) Declaration of ASEAN Bali Concord II, Bali, October 7th , 2003. _____ (2004) 2004 Vientiane Action Programme 2004-2010, Laos, November 29th , 2004. _____ (2007) Charter of the Association of Southeast Asian Nations, Singapore, November 20th , 2007. ‘ASEAN calls for greater economic integration’ (Oct. 9th , 1998), The Jakarta Post. Asia Regional Integration Center, ‘ASEAN Surveillance Process (ASP)’. Retrieved from: http://aric.adb.org/initiative/asean-surveillance-process (accessed July 29th , 2013). Asian Century Institute (May 21st , 2013) ‘Chiang Mai Initiative: An Asian IMF?’ Asian Century Institute. Retrieved from: http://www.asiancenturyinstitute.com/economy/248-chiang-mai- initiative-an-asian-imf (accessed July 20th , 2013). Belo, W. (2008) ‘Testimony of Walden Bello before Banking Oversight Subcommittee, Banking and Financial Services Committee, US House of Representatives, April 21,1998’, International Forum o Globalization. Bustelo, P. (2003) ‘The impact of the financial crises on East Asian regionalism’, in Liu F-K., Régnier, P. (eds.) (2003) Regionalism in East Asia: Paradigm shifting? RoutledgeCurzon, 141-52. Consolidated Version of the Treaty on the Functioning of the European Union, Official Journal of the European Union (C 83/47) March 30th , 2010. Consolidated Version of the Treaty on European Union, Official Journal of the European Union, (C 83/13), March 30th , 2013. Das, D. K. (2012) ‘How did the Asian economy cope with the global financial crisis and recession? A revaluation and review’, Asia Pacific Business Review, 18(1): 7-25. Dinan, D. (2012) ‘Governance and Institutions: Impact of the Escalating Crisis’, Journal of Common Market Studies, 50(Annual Review):85-98.
  42. 42. 42 Dosch, J. (2003) ‘The Post-Cold War development of regionalism in East Asia’, in Liu F-K., Régnier, P. (eds.) (2003) Regionalism in East Asia: Paradigm shifting? RoutledgeCurzon, 30-51. European Central Bank (2005) Financial Stability Review, 2005. _____ (2012) ‘Speech by Mario Draghi, President of the European Central Bank at the Global Investment Conference in London 26 July 2012’. Retrieved from: http://www.ecb.int/press/key/date/2012/html/sp120726.en.html (accessed: June 19th , 2013). European Commission (Spring 2013), Standard Eurobarometer 79. _____ (Spring 2012), Standard Eurobarometer 77. _____ (Spring 2011), Standard Eurobarometer 75. _____ (Spring 2009), Standard Eurobarometer 71. European Parliament Economic and Monetary Affairs Committee ‘FAQ on the economic governance “Six Pack”’ (September 21, 2011). Retrieved from: http://www.europarl.europa.eu/news/en/pressroom/content/20110920BKG27073/html/FAQ- on-the-economic-governance-six-pack (accessed: June 9th , 2013). _____ (2013) ‘Economic governance “two pack” background note’ (latest update March 7th , 2013). Retrieved from: http://www.europarl.europa.eu/news/en/pressroom/content/20130304BKG62046/html/Economi c-governance-two-pack-background-note (accessed: June 9th , 2013). European Parliament Press Release (2011) ‘Eurozone stability mechanism should be part of the EU, Says Constitutional Affairs Committee’, March 7th , 2011. European Parliament Committee on Constitutional Affairs (2011) OPINION on the European Semester for Economic Policy Coordination (2011/2071 (INI)), October 25th, 2011. European Union Committee of the Parliament of the United Kingdom (2011) ‘Amending Article 136 of the Treaty on the Functioning of the European Union’. Retrieved from: http://www.publications.parliament.uk/pa/ld201011/ldselect/ldeucom/110/11003.htm#n9 (accessed August 7th , 2013). Foreign and Commonwealth Office of the United Kingdom (January 10th , 2011) Explanatory Memorandum EUCO 33/10 on a Draft European Council Decision amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro. Hidetaka Y. (2006) ‘Collective Action Problems and Regional Integration in ASEAN’, Contemporary Southeast Asia: A journal of International and Strategic Affairs, 28(1): 115-140.
  43. 43. 43 Hix, S. (2012, January 4) ‘Possibilities for Reinforcing the Eurozone following the December European Council’, Evidence to the European Scrutiny Committee in the House of Commons. Holzinger, K., & Schimmelfennig, F. (2012) ‘Differentiated integration in the European Union: Many concepts, sparse theory, few data’, Journal of European Public Policy, 19(2), 292-305. Institut National de la statistique et des études économiques, ‘La hausse du taux de chômage se poursuit au quatrième trimestre 2012’. Retrieved from: http://www.insee.fr/fr/themes/info- rapide.asp?id=14 (accessed June 29th , 2013). Jetschke, A., Rüland, J.(2009) ‘Decoupling rhetoric and practice: the cultural limits of ASEAN cooperation’, The Pacific Review, 22(2): 179-203. Jones, E. (2013) ‘The Euro Crisis: No Plan B’, Survival: Global Politics and Strategy, 55(3): 81-94. Jones, L. (2012) ASEAN, Sovereignty and Intervention in Southeast Asia, Palgrave MacMillan. Liu F-K., Régnier, P. (eds.) (2003) Regionalism in East Asia: Paradigm shifting? RoutledgeCurzon. Mattli, W. (1999) The Logic of Regional Integration, Cambridge University Press. ‘Monetary Policy: Outright Monetary Transactions’ (January 31st , 2013), European Central Bank. Retrieved from: http://www.ecb.int/ecb/educational/facts/monpol/html/mp_011.en.html (accessed: June 19th , 2013). Parti Socialiste, ‘Le changement, le projet : Les 60 engagements de François Hollande’. Retrieved from: http://www.parti-socialiste.fr/articles/engagement-3 (accessed June 29th , 2013). Pop, V. (June 4th , 2013) ‘Lithuania in second attempt to join euro’, Euobserver. Retrieved from : http://euobserver.com/lithuania/120293 (accessed June 13th , 2013). _____ (June 12th , 2013) ‘German top court “not interested” in saving euro’, Euobserver. Retrieved from: http://euobserver.com/economic/120465 (accessed June 13th , 2013). Ravenhill, J. (2009) The “New East Asian Regionalism”: A “Political Domino” Effect?, UNU-CRIS Working Paper W-2009/11. Ricklefs, M.C, Lockhart, B., Lao, A., Reyes, P. and Aung-Thwin, M. (2010) A New History of Southeast Asia, Palgrave MacMillan. Roberts, C. B. (2012) ASEAN Regionalism: Cooperation, values and institutionalization, Routledge Security in Asia Pacific Series. Rüland, J. (2000) ‘ASEAN and the Asian crisis: theoretical implications and practical consequences for Southeast Asian regionalism’, The Pacific Review,13(3): 421-451. Severino, R., C. (2007), Know your ASEAN, Institute of Southeast Asian Studies Publication. Sparrow, A. (April, 12th 2013) ‘Cameron and Merkel to discuss EU reform in Germany’, The Guardian.com. Retrieved from: http://www.guardian.co.uk/politics/2013/apr/12/david- cameron-eu-angela-merkel (accessed July 20th , 2013).
  44. 44. 44 Stubbs, R. (2007) ‘China, Southeast Asia and East Asian Economic Regionalism’, in Zweig, D. and Zhimin, C., China’s Reforms and International Political Economy, Routledge, 77-91. Steinglass, M. and Parker, G. (June 21st , 2013) ‘Time for “ever closer union” in Europe over, say Dutch’, The Financial Times. Retrieved from: http://www.ft.com/intl/cms/s/0/5a973412- da86-11e2-a237-00144feab7de.html#axzz2bkMh8fFN (accessed July 1st , 2013). Suusangkarn, C. (June 2010) ‘The Chiang Mai Initiative Multilateralization: Origin, Development and Outlook’, Asian Development Bank Institute, Working Paper Series, 230. The de Larosière Group (2009) The High-Level Group of Financial Supervision in the EU: Report, Brussels, February 25th , 2009. Thomson, A. (June 14th , 2013) ‘Croatia Aims for Speedy Adoption of Euro’, The Wall Street Journal. Retrieved from: http://online.wsj.com/article/SB10001424127887324063304578525240431831674.html (accessed June 29th, 2013). Von Ondarza, N. (2013) ‘Strengthening the Core or Splitting Europe? Prospects and pitfalls of a Strategy of Differentiated Integration’ Stiftung Wissenschaft und Politik Research Paper.
  45. 45. 45 Appendix I- EU main decisions on funding and economic and financial regulations following the sovereign debt crisis Table 1.1: EU main decisions on funding following the sovereign debt crisis Instruments Date of entry into force Applicable to Lending Capacity Form and Treaty legal base Process of adoption EFSF 9/5/2010- 30/6/2013 (temporary) Eurozone €440 B - Company (legal entity: ‘Société Anonyme) - Legal base: Art. 122(2) TFEU Commission proposal  adoption ECOFIN EFSM 10/5/2010 (emergency fund) EU MS €60 B - Emergency Funding Programme - Legal base: Art. 122(2) TFEU - - Council Regulation Commission proposal  adoption ECOFIN ESM 08/10/2012 (permanent) Eurozone + Signatories TSCG before March 1, 2013 €500 B - International Organization - Allowed by Amendment of Art. 136 TFEU + creation of intergovernmental Eurozone Treaty Establishing the European Stability Mechanism (T/ESM)) 1- Amendment of Art. 136 through Simplified Revision Procedures (SRP) (Art. 48(6)TEU): Consultation procedure with EP, Commission and ECB  European Council adopt  Ratification by MSs 2- Adoption of T/ESM: Eurozone countries’ Head of State/Government  ratification Eurozone countries. OMT Made official by Mario Draghi’s speech of September 6, 2012 at the ECB press conference. End when the aim is achieved. Eurosystem/ Eurozone members - Replace the ECB Securities Markets Programme (SMP). - Purchase of unlimited Eurozone members’ government-issued bonds that mature in 1 to 3 years, but under Legal base: Art. 127(2) TFEU, second subparagraph of Art. 12.1 and Art. 18.1 of Protocol (4) on the Statute of the ESCB and ECB. ECB (two-thirds majority of Governing Council)
  46. 46. 46 ‘conditionality’. Financial Transaction Tax (FTT) Planned for January 2014, but currently still in negotiation EU MSs, but only 11 have agreed - 0.1% of transactions - Could raise €35 billion - Levy on financial transactions, therefore increasing EU own resource. - Art. 20 TEU and Arts. 326-334 TFEU Enhanced Cooperation: MSs request  Commission proposal  EP Consent  Council adoption Sources: TFEU, Protocol (4) on the Statute of the ESCB and ECB, ECB, Eurozone portal, European Commission, Council of Ministers, EFSF and ESM. Table 1.2: EU main decisions on economic and financial regulations following the sovereign debt crisis Framework instrument Date of entry into force Applicable to Form and Treaty legal base Measures Process of adoption European Semester January 2011 EU MSs - Series of proposal based on Arts. 121 and 136 TFEU (strengthening SGP) - Decided in the European Council Task Force on economic governance Cycle of economic and fiscal policy coordination within the EU European Council Euro Plus Pact 25 March 2011 EU MS, but 4 (Czech Republic, Hungary, Sweden and UK) chose not to participate - Based on Arts. 121 and 126 TFEU - Intergovernmental commitment plan - Open Method of Coordination (OMC) Strengthening of SGP in areas of: - competition - employment - public finances - financial stability European Council
  47. 47. 47 Six-Pack (reformed SGP) 13/12/2011 EU MS (but specific rules for Eurozone) - Based on Arts. 121 and 126 TFEU - 5 Regulations of macro-economic surveillance + 1 Directive (EU secondary Law) Strengthen SGP through sanctions and macroeconomic surveillance: - More precise definition, - Extension of EDP to debt ratio - Introduction of Reverse QMV for most sanctions for euro-area Special Legislative Procedure (SLP): 1- Adoption of broad guidelines: Commission recommendation  ECOFIN draft  European Council  Adoption ECOFIN (QMV) 2- Adoption of detailed rules: Ordinary Legislative Procedure) (OLP): ECOFIN + EP Fiscal Compact (TSCG) 1/1/2013 for the 16 states which have completed the ratification process before this date. Others: 1 month after ratification EU MS (but only binding to Eurozone). Currently ratified by 25 MS (except UK and the Czech Republic) Intergovernmental agreement/ Treaty (Not EU Law) Reinforce SGP rules: - Convergence via MTO and lower limit of structural deficit, - Makes SGP and six-pack rules binding and implemented into national law, - Monitoring by independent institutions, - ECJ may impose financial sanctions, - Reinforced surveillance and coordination of economic policies (including ex ante coordination), - Economic governance in the Eurozone (e.g Summits, reinforced cooperation), - No ESM eligibility for those who do not ratify the TSCG before March 1, 2013. EU MSs Head of State/Government Two-Pack Deal concluded February 20, 2013. Directly applied to Eurozone countries’ national budgets of 2014. Eurozone - Based on Art. 136 TFEU - 2 Regulations (EU secondary Law). - Regulation on monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficits in the Eurozone (original Commission proposal). E.g: the strengthening of the legal basis of the ‘European Semester’, - Regulation on enhanced surveillance of Eurozone experiencing or threatened with financial difficulties. Special Legislative Procedure (SLP): 1- Adoption of broad guidelines: Commission recommendation  ECOFIN draft  European Council  Adoption ECOFIN 2- Adoption of detailed rules: Ordinary Legislative Procedure) (OLP): ECOFIN + EP

×