Karina rd thesis-how do financial crises affect the process of regional integration-14-08-2013
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)
Supervisor : Prof. Dr. J.Q.T. (Jan) Rood
Karina Rinaldi-Doligez (s1139711)
Words count: (main body text) 12775
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
Dr. Pingtjin Thum and Kerstin Radtke for your availability and for your comments
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.
Table of Contents
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
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
Conclusion of part I……………………………………………………………………………………23
II- The strength of regional norms in the EU and the evolution of the principle of sovereignty in the
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
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
Conclusion of part II…………………………………………………………………………………..36
Analysis and conclusion………………………………………………………………………….37-39
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
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
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’.
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
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-
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?
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
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.
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.
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
2. The Union shall take measures to ensure coordination of the employment
policies of the Member States, in particular by defining guidelines for these
3. The Union may take initiatives to ensure coordination of Member States’
Meaning that the member states can legislate and adopt legally binding acts in these areas as long as the Union
has not done so.
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.
See for instance De Larosière Report (The de Larosière Group, 2009), and Hix (2012).
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
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
, 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
Although, as we have previously seen, only 4 out of the 6 measures were adopted.
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
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
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
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).
Referring to the Cyprus bailout (Jones, 2013: 89-90).
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-
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
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
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
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
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.
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
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.
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
Chapter 2: Institutional evolution in the ASEAN
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
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
, 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
Retrieved from the ARIC website:
P) (accessed June 10th
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
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.
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
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
(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
, 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
of the need to develop formal relations to deal with any future crisis and ensure continued
economic growth’ (Stubbs, 2007: 84-5).
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.
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.
II- The strength of regional norms in the EU and ASEAN
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.
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
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
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
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
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
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.
Taken from Francois Hollande’s manifesto. Retrieved from: http://www.parti-
socialiste.fr/articles/engagement-3 (accessed June 29th
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
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.
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
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.
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
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.
Retrieved from: http://www.kuleuven.be/communicatie/evenementen/evenementen/jurgen-
habermas/en/democracy-solidarity-and-the-european-crisis (accessed June 29th
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
Attended by the author.
Chapter 4- The strength of the principle of sovereignty in the ASEAN
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.
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.
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
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
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.
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
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,
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).
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.
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.
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
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
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
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
Asian Century Institute, 2013.
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.
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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
Applicable to Lending Capacity Form and Treaty legal base Process of adoption
Eurozone €440 B - Company (legal entity: ‘Société
- Legal base: Art. 122(2) TFEU
Commission proposal adoption ECOFIN
EU MS €60 B - Emergency Funding
- Legal base: Art. 122(2) TFEU -
- Council Regulation
Commission proposal adoption ECOFIN
March 1, 2013
€500 B - International Organization
- Allowed by Amendment of Art.
136 TFEU + creation of
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
OMT Made official by
2012 at the ECB
when the aim is
- Replace the ECB
- Purchase of
bonds that mature in
1 to 3 years, but
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 (two-thirds majority of Governing
but currently still
EU MSs, but
only 11 have
- 0.1% of
- Could raise €35
- Levy on financial transactions,
therefore increasing EU own
- Art. 20 TEU and Arts. 326-334
Enhanced Cooperation: MSs request
Commission proposal EP Consent
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
Date of entry into
Applicable to Form and Treaty legal
Measures Process of adoption
January 2011 EU MSs - Series of proposal
based on Arts. 121 and
- Decided in the
European Council Task
Force on economic
Cycle of economic and fiscal policy
coordination within the EU
25 March 2011 EU MS, but 4 (Czech
Sweden and UK) chose
not to participate
- Based on Arts. 121 and
- Open Method of
Strengthening of SGP in areas of:
- public finances
- financial stability
13/12/2011 EU MS (but specific
rules for Eurozone)
- Based on Arts. 121 and
- 5 Regulations of
1 Directive (EU
Strengthen SGP through sanctions and
- More precise definition,
- Extension of EDP to debt ratio
- Introduction of Reverse QMV for most
sanctions for euro-area
Special Legislative Procedure
1- Adoption of broad
draft European Council
Adoption ECOFIN (QMV)
2- Adoption of detailed rules:
Procedure) (OLP): ECOFIN +
1/1/2013 for the 16
states which have
before this date.
Others: 1 month after
EU MS (but only binding
to Eurozone). Currently
ratified by 25 MS
(except UK and the
Treaty (Not EU Law)
Reinforce SGP rules:
- Convergence via MTO and lower limit of
- 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
- 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
Two-Pack Deal concluded
February 20, 2013.
Directly applied to
national budgets of
Eurozone - Based on Art. 136
- 2 Regulations (EU
- 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
Special Legislative Procedure
1- Adoption of broad
draft European Council
2- Adoption of detailed rules:
Procedure) (OLP): ECOFIN +