WHAT IS POLITICALUNION?Sebastian Dullien and José Ignacio TorreblancaPOLICYBRIEFSUMMARYFor much of the history of European integration, the finalgoal of political union – the famous finalité politique – wasseen as a distant one. Even when attempts were made todefine it – for example, in the European Convention andthe Constitutional Treaty – they failed completely. But theeuro crisis has led to a massive transfer of power to the EUlevel and made political union a real possibility. Politicalinitiatives by European Council President Herman VanRompuy and German Foreign Minister Guido Westerwelle,together with the rulings of the German Constitutional Courtand European Commission President José Manuel Barroso’srecent call for a “federation of nation states” have kickedoff a new debate about political union. But while many pro-Europeans now agree that political union is necessary to savethe euro, they often have in mind very different things.In particular, European leaders must make three choicesabout what type of political union they want. The first choiceis between a limited economic federation aimed at stabilisingthe euro and a full economic federation taking on traditionalnation-state tasks such as taxation, social welfare, andredistribution. The second choice is between a rules-basedfederation with a very small margin for policy innovationand flexibility and one with ample discretionary powers andpolicy instruments. The third choice is between a politicalsystem that relies on indirect legitimacy and is governedmostly through intergovernmental mechanisms and onethat draws on direct legitimacy instruments and confersample executive authority to supranational institutions suchas the European Commission.SUMMARYMuch discussion about political union hasbeen framed as a simple choice between twooptions: federalism or intergovernmentalism.In fact, the choice facing Europe is much morecomplicated. European leaders must decidehow far to go in creating a genuine economicfederation involving debt mutualisation, howmuch “policy space” to create at the Europeanlevel, and whether to legitimise politicalunion through national governments andparliaments or through developing existing EUinstitutions such as the European Parliamentor creating new EU institutions. However,some combinations of answers to these threequestions might prove unsustainable and leadto new crises in the future.In particular, a very ambitious economicfederation combined with a rules-basedapproach to policymaking and indirectlegitimacy, as proposed by some in Germany,willlikelybeunsustainable.Equally,itwouldberisky to introduce more political competition ina limited economic federation working on verynarrow rules, which might lead to political andsocialunrestandinstabilityatthenationallevel.Nor can the German model of constitutionaldemocracy simply be exported to the wholeof the EU. The wrong approach to politicalunion could lead to a failure to stabilise andlegitimise monetary union or a split at the coreof the eurozone. Thus an attempt to overcomethe crisis could push the EU off a political cliff.
WHATISPOLITICALUNION?2ECFR/70December2012www.ecfr.euA failure to adequately balance these three dimensionscould create havoc in Europe. In particular, a very ambitiouseconomic federation with only a rules-based approach andeither direct or indirect legitimacy will be unsustainable. Itis already clear that bold moves towards political union willcreate a three-tier Europe consisting of a highly integratedpolitical core, a second tier including those who want to jointhe first group but cannot, and a third tier comprising thosewho do not want to join the core. While the EU can – andmay have to – live with such a three-tier Europe, it cannotlive with a split core or a failure to stabilise and legitimisemonetary union. There is a danger that, in creating politicalunion in order to overcome an existential crisis, the EUcould paradoxically create another existential crisis andpush the EU off a political cliff.Integration and legitimacySince the onset of the euro crisis, we have witnessed amassive transfer of powers to the EU level: the “EuropeanSemester” (2010) gave the European Commission an ex-ante capacity to monitor and eventually veto nationalbudgets before they are approved by national parliaments;the “Euro Plus Pact” (2011) established new commitmentsfor community supervision of key national policies suchas labour markets, pensions, and taxation; the “Six-Pack”(2011) strengthened both the preventive and corrective armof Commission and Eurogroup powers to monitor fiscaldeficits and macroeconomic imbalances in member states;the “Two-Pack” (2012) further strengthened the EuropeanCommission’s capacity to monitor national budgets;and finally the “Treaty on Stability, Coordination andGovernance in the Economic and Monetary Union” (2012),the so-called fiscal compact, a treaty of intergovernmentalnature which has not been approved by the EuropeanParliament, obliged member states to change their nationalconstitutions to introduce debt-brake provisions and, inparallel, accept monitoring and sanctions by the EuropeanCourt of Justice (ECJ) should they fail to comply with thenew provisions.The shift does not stop there: access to support from theeurozone’s rescue mechanisms, the European FinancialStability Facility (EFSF) and its successor, the EuropeanStability Mechanism (ESM), also include severe macro-economic conditionality programmes, jointly implementedby the so-called troika of the European Commission, theEuropean Central Bank (ECB), and the InternationalMonetary Fund (IMF). These programmes cut to the boneof extremely sensitive national issues such as pensions,the labour market, taxation, and welfare provisions. Ontop of this “visible” conditionality, there is also a greatdegree of invisible or implicit governance. The letters sentby then ECB President Jean-Claude Trichet to SpanishPrime Minister José Luis Rodríguez Zapatero in 2011 andto Italian Prime Minister Silvio Berlusconi in 2010, askingthem to reform pension laws or labour markets, revealed theextent to which the ECB was acting as a shadow governmentfor Spain and Italy.1The “Deauville agreement” betweenFrench President Nicolas Sarkozy and German ChancellorAngela Merkel unilaterally changed the terms of the Greekbailout, sidelining European institutions and creating havocin Europe and beyond.There is still more to come: the EU is currently discussingplans for economic, fiscal, and banking union. Firstly, theEuropean Council is discussing what is euphemisticallycalled an “integrated financial framework” – euro-jargon fora banking union – which means that the EU will be able todirectly supervise, sanction, intervene, recapitalise, bail out,or close national banks and, at the same time, guaranteethe deposits of savers across all of the eurozone. Secondly,the European Council is also discussing an “integratedbudgetary framework”, which, if adopted, would meanthat the EU would become a fiscal union that would beable to coordinate national taxation and, most likely, levyEuropean taxes or establish redistribution or compensationmechanisms among different member states. Thirdly, thereis discussion of an “integrated economic policy framework”,which would effectively mean an economic union in whichkey macroeconomic policies (labour market, pensions,unemployment) would be jointly adopted, harmonised, andsupervised.Should these proposals be adopted, the EU would have takena giant step towards completing its economic integration:the EU would not only have a common currency but alsoa common financial, fiscal, and economic framework and,equally importantly, institutions with the right amount ofauthority for making this economic union work properly. Forsupporters of European integration, this would obviouslybe progress. But despite this massive shift of power to theEU level, the EU’s political and democratic structures haveremained almost completely unchanged. Worries haveemerged that the existing legitimacy of the EU would be toothin to support such a massive transfer of power, especiallyas these go deeply into the bone of political representationand legitimacy. Ever since the dawn of the modern state,conflicts about taxation and representation have beencentral to political life. The fear now is that European leadersmight end up sitting at the top of an economic federationwithout the political structures that would democraticallylegitimise it.These difficult issues are the background to the proposalsbrought forward in June 2012 by Van Rompuy’s paper, inSeptember by a group of foreign ministers at the initiativeof Westerwelle, and in November with the EuropeanCommission’s “blueprint for a deep and genuine economicand monetary union”. Whereas the Van Rompuy paperrecognises that “decisions on national budgets are at the1 The letter was leaked and has been translated into English. See “Trichet e Draghi:un’azione pressante per ristabilire la fiducia degli investitori”, Corriere della Sera, 29September 2011, available at http://www.corriere.it/economia/11_settembre_29/trichet_draghi_inglese_304a5f1e-ea59-11e0-ae06-4da866778017.shtml. The ECB notonly suggested the measures to be adopted but also recommended their adoption by“decree”, i.e. without going through national parliaments.
3heart of Europe’s parliamentary democracies” and thereforeacknowledges that “moving towards more integratedfiscal and economic decision-making between countrieswill therefore require strong mechanisms for legitimateand accountable joint decision-making”, the Westerwellegroup specifically calls for “a streamlined and efficientsystem for the separation of powers in Europe which hasfull democratic legitimacy”.2The Commission is even morespecific: “The European Parliament that primarily needs toensure democratic accountability for any decisions taken atEU level.”3Three dimensions of political unionIt is of utmost importance that political union is sustainable– that is, that it is set up in such a way that it does not leadinexorably to further economic and political crises in thefuture. Without the transfer of key regulatory and fiscalpowers to the EU level, the crisis will continue and coulddestroy the eurozone and potentially even the EU as weknow it. Yet, as crucial as it is, the EU is in uncharteredwaters in its attempts to complement the emergingeconomic federation with an adequate political structure.Historically, democracy has existed only at the city andnation-state level, and there are no historical precedents ofhow to build a supranational democracy. Unlike proposalson fiscal or banking union, which are based on a clear setof assumptions about how a monetary and economic unionshould work and which institutions, competencies, andlevel of authority are needed to make it work, there is noexisting model for political union that would fit the EU’sidiosyncrasies.Were it a simple choice between federalism orintergovernmentalism, things would be relatively easy. Infact, the choice facing Europe is much more complicated.European leaders must decide how far to go in terms ofcreating a genuine economic federation involving debtmutualisation, how much “policy space” to create at theEuropean level, and whether to legitimise political unionthrough national governments and parliaments or throughdeveloping existing EU institutions such as the EuropeanParliament or creating new EU institutions. In other words,there are three distinct dimensions of political union:limited versus full economic federalism; rules versusdiscretion; and direct versus indirect legitimation. While thefirst two dimensions concern the substance of an economicand political union – that is, which powers are attributed towhich level of government and to which degree they can beexercised – the third dimension concerns the procedures androadmap that would eventually lead the EU to political union.Dimension 1: Limited versus full economic federalismThere are two visions of which powers to attribute to theEU level: a minimalist vision and a “great leap” vision. Inthe minimalist vision, member states would only transferto the EU level those powers that are strictly necessaryto end the crisis and prevent a breakup of the currencyunion. This would include the existing powers to regulatethe single market, the recently agreed transfer of fiscalpolicy supervision as embodied in the fiscal compact, the“Six-Pack” and “Two-Pack”, and a limited banking union,including the common financial oversight by the ECB(but not necessarily a common bank resolution regimeor Eurobonds, as proposed by the European Commission,since this would entail fiscal transfers from one memberstate to the other). The assumption behind this approach isthat the euro crisis was largely created by debtor countries,who therefore have to adopt and enforce the right reforms.The EU would need powers to police the adoption of thesereforms by member states and thus ensure that agreementson debt, deficits, and macroeconomic imbalances arecorrectly enforced. Germans like to quote Lenin: “Trust isgood, control is better.”Others, however, argue that the euro crisis originated in theincomplete and defective design of monetary union. Theyargue that what is now needed is a “great leap” towardseconomic federalism that would complete monetary unionby creating a full banking, fiscal, and economic union andset up new, strengthened, and centralised governancestructures. This approach is based on the theory of fiscalfederalism and follows the basic idea that all policy decisionsthat have a potential significant positive or negative externaleffect on other countries should be transferred to the EUlevel. Those in favour of a “great leap” would thus thinkfrom scratch which economic policy powers could be moreefficiently transferred to the central level and would allowfor endogenous mechanisms for the central governmentto pull certain competencies to the centre should the needarise.In the beginning, this would of course mean a real bankingunion comprising a unified regulatory, oversight, andresolution mechanism for all European banks and a strongermacroeconomic stabilisation policy through the EU level,either through Eurobonds in whatever guise (for example,a “redemption fund”), project bonds, or “shock absorption”funds levied through contributions from member states.Later on, this might entail moves towards more ambitiousproposals such as European unemployment insurance,poverty eradication programmes, common labour marketregulations, or massive infrastructure investment funds.This would only be viable if the EU were also given the powerto levy some taxes, for example a European corporate tax orits own VAT surcharge. With a larger budget of 4–5 percent2 “Foreign Ministers Group on the Future of Europe: Chairman’s Statement for anInterim Report”, 15 June 2012, available at http://www.auswaertiges-amt.de/EN/Europa/Aktuell/120620_Zwischenbericht_Zukunftsgruppe.html?nn=479786;“Towards a genuine economic and monetary union”, Report by President of theEuropean Council Herman Van Rompuy, Brussels, 26 June 2012, available at http://ec.europa.eu/economy_finance/focuson/crisis/documents/131201_en.pdf.3 European Commission, “A blueprint for a deep and genuine economic and monetaryunion:Launching a European Debate”, Brussels, 30 November 2012, available athttp://ec.europa.eu/commission_2010-2014/president/news/archives/2012/11/pdf/blueprint_en.pdf.
WHATISPOLITICALUNION?4ECFR/70December2012www.ecfr.euof GDP, the EU would effectively become a “transfer union”– in practice, an economic federation with the resourcesto make a real impact on the business cycle or in certainstructural areas, and some type of joint and federal debt.Of the recent contributions to the debate about politicalunion, Barroso’s remarks and the European Commission’sblueprint go the furthest towards economic federalism, evenif not all of the details are spelled out. Barroso called notonly for a banking and fiscal union, but also for much closercoordination of national economic policies, a “crediblecommunity fiscal capacity” (which could mean taxationpower) and “genuine mutualisation of debt redemption anddebt issuance”.4Moreover, he demanded that the EU seteconomic policy priorities, for example in making Europeless dependent on energy imports. Many of these elementshave been further specified in the Commission’s blueprint,which would go a long way into turning the eurozone into atrue economic federation.The Westerwelle group, on the other hand, is moreminimalist. While it envisions a “European army” inthe long run, it is less federalist in economic terms. Thepaper produced by the group talks about the importanceof developing and adopting a legal framework for therestructuring and orderly winding-up of ailing banks, butdoes not go further, and does not explicitly ask for commonfunds or even common oversight of banks. When it comesto additional economic powers, the Westerwelle group isnot going much beyond making the Euro Plus Pact binding.Bundesbank President Jens Weidmann has not produceda vision as such but his remarks on this issue suggest thathe is even more minimalist. He is, in principle, in favour ofcommon banking supervision but opposes European actionto resolve legacy problems in the banking sector and is astaunch opponent of Eurobonds.Both visions have dangers. The minimalist approach createsgreater danger of economic and institutional instability.Settling for what is perceived to be the absolute minimumto stabilise the eurozone now might, as in the past, prove tobe too little. If this were the case, the economic crisis mightonce again become acute and create renewed economicupheaval and lead to a new recession, a break-up of the euro,and political instability at the national level. Full economicfederalism, on the other hand, would mean the transfer ofmore powers to the EU level and therefore make politicalquestions more pressing, both for reasons of legitimacy andto fulfil the German Constitutional Court’s demand on theneed to match transfers of powers with adequate democraticaccountability mechanisms.A “great leap” might lead to an improvement in economicperformance: if it were designed well, a centrally definedeconomic policy could boost economic growth and helpdeepen the single market, which in turn would increasethe EU’s legitimacy. It would also offer strong incentivesto move on to a truly common external and defence policy,which would give the EU much more leverage in the globalarena. However, if it were badly designed, full economicfederalism could worsen overall economic performance– for example, if it turns out later that while powers havebeen transferred, they cannot be employed effectively tomeet economic needs. Legitimacy will also be crucial toprevent a permanent paralysis of European policies and adeep political crisis as powers are taken away from nationalgovernments.Dimension 2: Rules versus discretionClosely related to the question of which powers areattributed to the European level is the question of howmuch discretion political institutions, whether governmentsor parliaments, have to approve new policies or changeexisting ones. At one end of the spectrum are those whoenvision a Europe in which the centre sets some bindingrules (as in the fiscal compact) that prevent national andsub-national governments from adopting certain policies.This rule-setting might be far-reaching and touch uponcentral elements of sovereignty such as the power to decideon a public budget. This approach can also be seen as anextension of the Maastricht vision of macroeconomicpolicymaking, which limited the ECB’s objective to pricestability and tried through the Stability and Growth Pact(SGP) to curtail activist national fiscal policies. This is whatmany Germans such as Merkel have in mind when they linkthe fiscal compact to the idea of “Wirtschaftsregierung”, oreconomic government.At the other end of the spectrum are those who believethat a political union needs a government that is able totake discretionary decisions on economic policy issues.They argue that reality is too complex to be catered toby simple rules and that a real European governmentmust therefore have the discretionary power traditionallyenjoyed by national governments. Those in favour of rules-based policymaking see rules as public goods that benefitall members by guaranteeing stable and sound finances. Tothose in favour of discretion, however, the rules embodiedin the Euro Plus Pact, the fiscal compact, and the debtbrakes are not neutral but ideologically biased: they reflecta set of economic doctrines (ordoliberalism or monetarism,as opposed to Keynesianism), which heavily penalise somepolicies at the expense of others. The result is a yoke thatlimits the role of the public sector and prevents it fromplaying an active role in economic growth.As in the first dimension of political union, the Barrosoproposals are at one end of the spectrum while Weidmannis at the other, with the proposals of the Westerwelle groupsomewhere in between. Barroso wants EU institutions to beable to set certain policy priorities and his call for a bigger4 José Manuel Durão Barroso, State of the Union 2012 Address, Plenary session of theEuropean Parliament, Strasbourg, 12 September 2012, available at http://europa.eu/rapid/press-release_SPEECH-12-596_en.htm.
5budget is supposed to provide the means for it. However,his remarks on the coordination of national economicpolicies through the “Six-Pack” still show that he does notwant institutions that have as much discretion as US ones.The Westerwelle group proposes giving existing rules-based coordination mechanisms such as the Euro Plus Pactmore teeth. Weidmann always insists on existing rules andunderlines that the German constitution prohibits furthertransfer of powers to the European level.One example of this debate about rules versus discretionis the current debate between austerity and growth. Whathappens when the rules fail to promote growth, or evenmake it harder, as is currently the case? Should the rulesbe changed? Or should alternative policies be discussed?With the current configuration of the debate, the answerto both questions is no: while the austerity targets areconsidered untouchable, no growth policies are approved tocomplement for the lack of growth. How this austerity trap isworking at present provides the best warning for the future.Does it make sense to further lock and constitutionalise thisvery rigid system or should the discussions on economicunion include a debate on “discretion”, i.e. when and howexisting rules can be relaxed or alternative policies applied.Imagine a scenario in which elections were held for theposition of European Commission President in 2014, asBarroso and the G11/G9 propose. If the Socialists won theelection and the European Parliament named Martin Schulzas Commission President, how much discretion would hehave? Would he be able to promote growth using the EUbudget? Would he be able to propose a pan-Europeanemployment insurance programme, a new infrastructure orresearch and development policy, or a poverty eradicationpolicy? In reality, without the power to raise taxes andwith a tiny budget at 1 percent of GDP, there would belittle he could do. In fact, at present, it is the ECB ratherthan the Commission that has the power to approvestimulus packages and take growth- and jobs-orientedmeasures. However, unlike the Federal Reserve, whosemandate includes jobs and growth, the mandate of the ECBprevents it from being responsive to demands for jobs andgrowth policies. Thus increasing the powers and raisingthe political profile of the European Commission and theEuropean Parliament without also endowing them withthe instruments to agree policies that respond to citizens’demands would aggravate rather than alleviate disaffection.The EU could be an economic federation without a realgovernment because the European Commission would stillbe more of an implementing agency than a political actor.Another example of tension between the rules-basedapproach and the discretion-based approach, and itsconstitutional implications, is the debate about the ECB’sOutright Monetary Transactions (OMT) programme. Manyin Europe support the attempt by ECB President MarioDraghi to introduce flexibility and discretion to the systemin order to preserve it. However, the Bundesbank seesit as a threat to the system and a breach of the rules, andWeidmann voted against it in the ECB board. The GermanParliament and Constitutional Court may also object to thismove. Thus the OMT has triggered a debate about rules anddiscretion of profound political, democratic, and legitimacyimplications.This is a debate about economic policy rather thanfederalism. The US federal system confers de factoindependent institutions such as the Federal Reserve,representative institutions such as Congress, and executiveinstitutions such as the Presidency, wide and discretionarypowers. Some of them have to be exercised in agreement,such as the Troubled Asset Relief Program (TARP), butthe Fed can approve three rounds of “quantitative easing”at its discretion. The German federal model, in contrast, isformally more on the rules side, and seeks to limit discretion.For obvious reasons, given the power of Germany, any movetowards political integration in Europe is more likely toimport German rather than US institutions, which meansthat some EU institutions will be legally prevented frombeing responsive to citizens’ preferences. But although thestrict rules-based approach is favoured in the economicacademic literature, it has not yet been proven in reality. Infact, attempts to implement strict rules such as the Argentinecurrency board, the SGP, or the “no bailout” clause of theMaastricht Treaty have failed. The German constitution’sown “debt brake” has only been in place since 2009 – muchtoo short a period to judge its long-term stability.Dimension 3: Direct versus indirect legitimacyThe various proposals for political union currently on thetable have one thing in common: the belief that currentplans under discussion to complete monetary union witha fiscal, banking, or economic union imply such a massivetransfer of sovereignty from the national capitals to theEuropean institutions that they make strengthening thelegitimacy of the EU upon European citizens unavoidable.But this is the only point in agreement. In fact, there aretwo opposing visions about how to do this: a “minimalist-intergovernmentalist” one and a “maximalist-federalist” one.The minimalist-intergovernmentalists believe that memberstates are the ultimate repositories of legitimacy anddemocracy, and that the transfer of sovereignty impliedby political union would require a parallel upgrading andstrengthening of the presence of member states in the EUdecision-making process. This translates into a preferencefor mechanisms such as the fiscal compact or the ESM thatfall outside the treaties, for unanimity (except to preventdebtors breaking the rules or failing to fulfil their austeritycommitments), for European Council summitry, and forkeeping the European Commission and the EuropeanParliament at arm’s length when it comes to setting thedirection and policies to move the EU forward. This does notnecessarily mean abolishing the community method, butit does mean at least maintaining and perhaps enhancingor formalising the current division of labour, in which the
WHATISPOLITICALUNION?6ECFR/70December2012www.ecfr.euCommission, the Parliament, and the ECJ are left to dealwith the day-to-day policies, while the European Councilacts as the true government of the EU.The maximalist-federalists, on the other hand, want tostrengthen the policy capacity and democratic legitimacyof existing European institutions, especially the EuropeanParliament and the European Commission. Their proposalsusually revolve around the election of the EuropeanCommission President in the 2014 European elections.They propose streamlining the Commission by reducingthe number of members and by dividing them into seniorand junior Commissioners, and allowing the CommissionPresident to freely pick the Commissioners and thusintroduce a more partisan bias in its proposals so as toplease the parties supporting him/her in the EuropeanParliament. In short, they aim to replicate at the EU levelthe national system of government and opposition, left andright, incumbent and challenger. If these measures cametogether with new powers for the European Parliament –in particular to raise new taxes, increase the size of the EUbudget, or approve new expenditure programmes – theEU would take a giant step towards the creation of a truepolitical union.Under the Van Rompuy proposals, which are based on theminimalist-intergovernmentalist vision, the three buildingblocks (fiscal, banking, and economic union) would lead toa de facto economic federation which would be governedfrom a reinforced Eurogroup, acting as the Cabinet of theeurozone. This Eurogroup would rely on the authorityprovided by a reduced version of the European Council, the“EuroCouncil”(whereheadsofstateandchiefsofgovernmentof the 17 eurozone countries would gather) and, as said, onthe implementation capacity of regular EU institutions. Inparallel to this, some such as German Finance MinisterWolfgang Schäuble have proposed that a Commissioner actas super-economic tsar with powers of oversight of fiscal,banking, and macroeconomic policies equivalent to thosethat the current Competition Commissioner enjoys. Manyof the other recent contributions to the debate, includingthose by Barroso and the Westerwelle group, are closer tothe maximalist-federalist vision.The advantage of the minimalist-intergovernmentalistapproach is that though there would be a core (made of the17 eurozone countries) and a periphery (made of “pre-ins”and “opt-outs”), the EU would at least preserve a commoninstitutional framework in the form of a common EuropeanCommission and European Parliament. The disadvantage isthat it would create a further legitimacy problem: MEPs fromcountries outside the eurozone could vote in arrangementsfor eurozone countries and MEPs from eurozone countriescould impose legislation on countries outside the eurozone.Were this arrangement to be mismanaged, it could createmajor tensions and lead to the definitive splitting into two ofthe EU: not a two-speed Europe but two Europes.A related problem with this type of institutional set-up is thatits democratic legitimacy would be mostly indirect becauseit relies on the legitimacy provided by national governmentsacting through intergovernmental institutions. Those whosupport this view are not willing to beef up the EuropeanParliament with new powers, but also recognise that the setof measures adopted to overcome the euro crisis have exacteda high toll on national parliaments. Thus they regularlytoy with the idea of setting up a third chamber made up ofmembers of national parliaments, which would play a role inlegislation on sovereignty-sensitive issues such as taxation.Such a chamber could grow out of the current Conference ofCommunity and European Affairs Committees of Parliamentsof the European Union (COSAC) and also include nationalparliaments’ budgetary affairs committees. Needless to say,the European Parliament considers this move a casus belliand will fiercely oppose it, preferring to consider ways ofmore closely involving national parliaments which would notdiminish its power or undermine its legitimacy and capacityas the only EU institution in which its members are directlyelected by citizens.The minimalist-intergovernmentalist approach might alsoperpetuate the current opaque and unaccountable wayof managing the euro and could therefore further erodethe EU’s legitimacy. The idea of a third chamber made ofnational parliamentarians is also problematic. The FrenchandSpanishparliamentshaveneverwantedtohaveanactiveEuropean role and are unlikely to treat the new chamberas a place for real debate and policymaking. In contrast,Germany’s parliament would likely take parliamentarycontrol of EU affairs very seriously and might use the newchamber to exert substantial influence over, and even block,EU policies. In short, the minimalist-intergovernmentalistapproach would not really solve existing problems. If it wereadopted in conjunction with a strict rules-based economicunion with very few discretionary powers – in short,the German vision of political union – it might actuallyexacerbate existing tensions and problems.On the other hand, the maximalist-federalist approachwould require clear and solid backing from member states,whether through national parliaments or referendums.Some constitutional courts are also likely to object to itunless national constitutions are adapted, which againwould require a lengthy, costly, and risky consultationprocedure which might well fail. In the last decade, citizensin various countries rejected a European Constitutiondespite the decent economic performance of the euro area.Thus, while the maximalist-federalist approach may bedesirable, European leaders should first clearly establishhow ratification would proceed and what would happen ifsome member states rejected it. The question of sequencingwill be crucial.
7A sustainable political unionIn each of the three dimensions of political union, Europeanleaders face difficult choices. In each case, there are twoextreme positions: in the first dimension, limited and fulleconomic federalism; in the second dimension, an approachto policymaking based on the enforcement of rules and anapproach based on the creation of space for discretionarypolicymaking at the EU level; and, in the third dimension,indirect legitimacy through member-state governmentsand parliaments and direct legitimacy through a reform ofthe EU institutions. The three dimensions are illustrated inFigure 1.Figure 1Three dimensions of political unionDimension 1 Dimension 2 Dimension 3Model 1 LimitedeconomicfederalismRules-based IndirectlylegitimisedModel 2 Full economicfederalismDiscretionary Directlylegitimised A model based on limited economic federalism, a rules-based approach to policymaking, and indirect legitimisationthrough member-state governments and parliaments(Model 1) would represent the point of minimum departurefrom the existing status quo. The most ambitious approach,on the other hand, would be to create a full-fledgedeconomic federation, ample powers for discretionarypolicymaking, and direct legitimisation through reformedEU institutions (Model 2). This would be an economicfederation that would also be a full-fledged political union,with something very much like a European governmentand a parliamentary democracy with two chambers, theEuropean Parliament and the Council of Ministers. Ofcourse, there could also be combinations of other choices ineach of the three dimensions. However, it is not a matter ofpicking and choosing freely from the three different options:some combinations are unsustainable and could lead to newpolitical and economic crises.In particular, an economic federation based on a rules-basedsystem and relying on mostly indirect legitimation strategieswould likely be unsustainable. It would likely come underpressure from two sides. First, the rules might prove asinadequate for dealing with economic needs in the futureand lead to a new economic crisis. Second, this approachwould likely suffer from a lack of direct legitimacy, causingpolitical upheaval at the member-state level. Thus it mightlead to a new crisis that would force a further move to greaterdiscretion at the EU level and full direct legitimation. On theother hand, if such an economic federation based on a rules-based system were combined with direct legitimation – forexample, through the election of the European CommissionPresident – citizens might revolt when they discoveredthat the EU government they elected had no real powers tointroduce new policies or change the rules.In other words, thinking about the three dimensions ofpolitical union shows that the stereotypical “German vision”– as represented, for example, by Bundesbank PresidentJens Weidmann – will not work. Because it is a rules-basedsystem with very little policy space and room for innovativepolicymaking, it will be inefficient and unable to adapt to achanging environment. At the same time, the idea of simplyexporting the German model of constitutional democracyto the whole of the EU is so demanding (and potentiallyincompatible with other member states’ understandingof “democracy”) that it will be all but impossible for theEU to accept it. In other words, the German vision mightpush the EU off a political cliff. One must wonder whetherall members of the German elite who have this version of“political union” in mind are really sincere or whether theirdemands are just a way of derailing European integration.
88WHATISPOLITICALUNION?ECFR/70December2012www.ecfr.euAcknowledgementsWe would like to thank our editor, Hans Kundnani, whowas able to find, save and give new life to the (presumably)good ideas buried in the original text. Thanks too to all ourcolleagues at ECFR, and especially to Jonas Parello-Plesnerand Ulrike Guérot, for their comments and suggestions to anearlier version of the text. José Ignacio Torreblanca wouldalso like to thank José M. de Areilza, Secretary General ofAspen Institute in Madrid and Professor at ESADE BusinessSchool, with whom he has discussed these ideas time andagain over the last year.About the authorsJosé Ignacio Torreblanca is a Senior Policy Fellow andthe Head of the Madrid Office at the European Council onForeign Relations. A professor of political science at UNEDUniversity in Madrid, a former Fulbright Scholar and Fellowof the Juan March Institute for Advanced Studies in Madrid,he has published extensively on the politics of EU integration,including institutional reforms, eastern enlargement andEU foreign policy, as well as on Spanish foreign policy. Since2008, he has also been a regular columnist for El País. Hispublications for ECFR include Spain after the elections: the“Germany of the South”? (with Mark Leonard, November2011).Sebastian Dullien is a Senior Policy Fellow at theEuropean Council on Foreign Relations and a professorof International Economics at HTW Berlin, the Universityof Applied Sciences. From 2000 to 2007 he worked as ajournalist for the Financial Times Deutschland, first as aleader writer and then on the economics desk. He writes amonthly column in the German magazine Capital and is aregular contributor to Spiegel Online. His publications forECFR include Why the euro crisis threatens the EuropeanSingle Market (October 2012).
9Among members of the EuropeanCouncil on Foreign Relations areformer prime ministers, presidents,European commissioners, currentand former parliamentarians andministers, public intellectuals,business leaders, activists andcultural figures from the EU memberstates and candidate countries.Asger Aamund (Denmark)President and CEO, A. J. Aamund A/Sand Chairman of Bavarian Nordic A/SUrban Ahlin (Sweden)Deputy Chairman of the ForeignAffairs Committee and foreignpolicy spokesperson for the SocialDemocratic PartyMartti Ahtisaari (Finland)Chairman of the Board, CrisisManagement Initiative; formerPresidentGiuliano Amato (Italy)Former Prime Minister; Chairman,Scuola Superiore Sant’Anna;Chairman, Istituto della EnciclopediaItaliana Treccani; Chairman, CentroStudi AmericaniGustavo de Aristegui (Spain)Diplomat; former Member ofParliamentViveca Ax:son Johnson(Sweden)Chairman of Nordstjernan ABGordon Bajnai (Hungary)Former Prime MinisterDora Bakoyannis (Greece)Member of Parliament; former ForeignMinisterLeszek Balcerowicz (Poland)Professor of Economics at the WarsawSchool of Economics; former DeputyPrime MinisterLluís Bassets (Spain)Deputy Director, El PaísMarek Belka (Poland)Governor, National Bank of Poland;former Prime MinisterRoland Berger (Germany)Founder and Honorary Chairman,Roland Berger Strategy ConsultantsGmbHErik Berglöf (Sweden)Chief Economist, European Bank forReconstruction and DevelopmentJan Krzysztof Bielecki (Poland)Chairman, Prime Ministers EconomicCouncil; former Prime MinisterCarl Bildt (Sweden)Foreign MinisterHenryka Bochniarz (Poland)President, Polish Confederation ofPrivate Employers – LewiatanSvetoslav Bojilov (Bulgaria)Founder, Communitas Foundation andPresident of Venture Equity Bulgaria Ltd.Ingrid Bonde (Sweden)CFO Deputy CEO, Vattenfall ABEmma Bonino (Italy)Vice President of the Senate; former EUCommissionerStine Bosse (Denmark)Chairman and Non-Executive BoardMemberFranziska Brantner (Germany)Member of the European ParliamentHan ten Broeke(The Netherlands)Member of Parliament andspokesperson for foreign affairs anddefenceJohn Bruton (Ireland)Former European CommissionAmbassador to the USA; former PrimeMinister (Taoiseach)Ian Buruma (The Netherlands)Writer and academicErhard Busek (Austria)Chairman of the Institute for theDanube and Central EuropeJerzy Buzek (Poland)Member of the European Parliament;former President of the EuropeanParliament; former Prime MinisterGunilla Carlsson (Sweden)Minister for International DevelopmentCooperationMaria Livanos Cattaui(Switzerland)Former Secretary General of theInternational Chamber of CommerceIpek Cem Taha (Turkey)Director of Melak Investments/JournalistCarmen Chacón (Spain)Former Minister of DefenceCharles Clarke(United Kingdom)Visiting Professor of Politics, Universityof East Anglia; former Home SecretaryNicola Clase (Sweden)Ambassador to the United Kingdom;former State SecretaryDaniel Cohn-Bendit (Germany)Member of the European ParliamentRobert Cooper(United Kingdom)Counsellor of the European ExternalAction ServiceGerhard Cromme (Germany)Chairman of the Supervisory Board,ThyssenKruppMaria Cuffaro (Italy)Anchorwoman, TG3, RAIDaniel Daianu (Romania)Professor of Economics, NationalSchool of Political and AdministrativeStudies (SNSPA); former FinanceMinisterMassimo D’Alema (Italy)President, Italianieuropei Foundation;President, Foundation for EuropeanProgressive Studies; former PrimeMinister and Foreign MinisterMarta Dassù (Italy)Under Secretary of State for ForeignAffairsAhmet Davutoglu (Turkey)Foreign MinisterAleš Debeljak (Slovenia)Poet and Cultural CriticJean-Luc Dehaene (Belgium)Member of the European Parliament;former Prime MinisterGianfranco DellAlba (Italy)Director, Confindustria Delegationto Brussels; former Member of theEuropean ParliamentPavol Demeš (Slovakia)Senior Transatlantic Fellow, GermanMarshall Fund of the United States(Bratislava)Kemal Dervis (Turkey)Vice-President and Director ofGlobal Economy and Development,Brookings.Tibor Dessewffy (Hungary)President, DEMOS HungaryHanzade Dog˘an Boyner(Turkey)Chair, Dog˘an Gazetecilik and Dog˘anOn-lineAndrew Duff (United Kingdom)Member of the European ParliamentMikuláš Dzurinda (Slovakia)Former Foreign MinisterHans Eichel (Germany)Former Finance MinisterRolf Ekeus (Sweden)Former Executive Chairman, UnitedNations Special Commission on Iraq;former OSCE High Commissioner onNational Minorities; former ChairmanStockholm International PeaceResearch Institute, SIPRIUffe Ellemann-Jensen(Denmark)Chairman, Baltic Development Forum;former Foreign MinisterSteven Everts (The Netherlands)Adviser to the Vice President of theEuropean Commission and EU HighRepresentative for Foreign and SecurityPolicyTanja Fajon (Slovenia)Member of the European ParliamentGianfranco Fini (Italy)President, Chamber of Deputies;former Foreign MinisterJoschka Fischer (Germany)Former Foreign Minister and vice-ChancellorKarin Forseke (Sweden/USA)Chairman, Alliance Trust PlcLykke Friis (Denmark)Member of Parliament; former Ministerfor Climate, Energy and Gender EqualityJaime Gama (Portugal)Former Speaker of the Parliament;former Foreign MinisterTimothy Garton Ash(United Kingdom)Professor of European Studies, OxfordUniversityCarlos Gaspar (Portugal)Chairman of the Portuguese Institute ofInternational Relations (IPRI)Teresa Patricio Gouveia(Portugal)Trustee to the Board of the CalousteGulbenkian Foundation; formerForeign MinisterHeather Grabbe(United Kingdom)Executive Director, Open SocietyInstitute – BrusselsCharles Grant (United Kingdom)Director, Centre for European ReformJean-Marie Guéhenno (France)Director of the Center for InternationalConflict Resolution, ColumbiaUniversity; former Deputy Joint SpecialEnvoy of the United Nations and theLeague of Arab States on SyriaElisabeth Guigou (France)Member of Parliament and Presidentof the Foreign Affairs CommitteeFernando Andresen Guimarães(Portugal)Head of the US and Canada Division,European External Action ServiceKarl-Theodor zu Guttenberg(Germany)Former Defence MinisterIstván Gyarmati (Hungary)President and CEO, InternationalCentre for Democratic TransitionHans Hækkerup (Denmark)Former Chairman, DefenceCommission; former Defence MinisterHeidi Hautala (Finland)Minister for International DevelopmentSasha Havlicek(United Kingdom)Executive Director, Institute for StrategicDialogue (ISD)Connie Hedegaard (Denmark)Commissioner for Climate ActionSteven Heinz (Austria)Co-Founder Co-Chairman,Lansdowne Partners LtdAnnette Heuser (Germany)Executive Director, BertelsmannFoundation Washington DCDiego Hidalgo (Spain)Co-founder of Spanish newspaper ElPaís; Founder and Honorary President,FRIDEJaap de Hoop Scheffer(The Netherlands)Former NATO Secretary GeneralDanuta Hübner (Poland)Member of the European Parliament;former European CommissionerAnna Ibrisagic (Sweden)Member of the European ParliamentJaakko Iloniemi (Finland)Former Ambassador; former ExecutiveDirector, Crisis Management InitiativeToomas Ilves (Estonia)PresidentWolfgang Ischinger (Germany)Chairman, Munich SecurityConference; Global Head ofGovernment Affairs Allianz SEMinna Järvenpää (Finland/US)International Advocacy Director, OpenSociety FoundationMary Kaldor (United Kingdom)Professor, London School of EconomicsIbrahim Kalin (Turkey)Senior Advisor to the Prime Ministerof Turkey on foreign policy and publicdiplomacySylvie Kauffmann (France)Editorial Director, Le MondeOlli Kivinen (Finland)Writer and columnistBen Knapen (The Netherlands)Former Minister for European Affairsand International CooperationGerald Knaus (Austria)Chairman, European Stability Initiative;Carr Center FellowCaio Koch-Weser (Germany)Vice Chairman, Deutsche Bank Group;former State SecretaryBassma Kodmani (France)Executive Director, Arab ReformInitiativeRem Koolhaas(The Netherlands)Architect and urbanist; Professor at theGraduate School of Design, HarvardUniversityDavid Koranyi (Hungary)Deputy Director, Dinu Patriciu EurasiaCenter of the Atlantic Council of theUnited StatesBernard Kouchner (France)Former Minister of Foreign AffairsIvan Krastev (Bulgaria)Chair of Board, Centre for LiberalStrategies
1010WHATISPOLITICALUNION?ECFR/70December2012www.ecfr.euAleksander Kwas´niewski(Poland)Former PresidentMart Laar (Estonia)Minister of Defence; former PrimeMinisterMiroslav Lajcˇák (Slovakia)Deputy Prime Minister and ForeignMinisterAlexander Graf Lambsdorff(Germany)Member of the European ParliamentPascal Lamy (France)Honorary President, Notre Europe andDirector-General of WTO; former EUCommissionerBruno Le Maire (France)Former Minister for Food, Agriculture FishingMark Leonard (United Kingdom)Director, European Council on ForeignRelationsJean-David Lévitte (France)Former Senior Diplomatic Advisor andformer Sherpa to the President of theFrench Republic; former Ambassador tothe United StatesSonia Licht (Serbia)President, Belgrade Fund for PoliticalExcellenceJuan Fernando López Aguilar(Spain)Member of the European Parliament;former Minister of JusticeAdam Lury (United Kingdom)CEO, Menemsha LtdMonica Macovei (Romania)Member of the European ParliamentEmma Marcegaglia (Italy)CEO of Marcegalia S.p.A; formerPresident, ConfindustriaKatharina Mathernova (Slovakia)Senior Advisor, World BankI´ñigo Méndez de Vigo (Spain)Secretary of State for the EuropeanUnionDavid Miliband(United Kingdom)Member of Parliament; FormerSecretary of State for Foreign andCommonwealth AffairsAlain Minc (France)President of AM Conseil; formerchairman, Le MondeNickolay Mladenov (Bulgaria)Foreign Minister; former DefenceMinister; former Member of theEuropean ParliamentDominique Moïsi (France)Senior Adviser, IFRIPierre Moscovici (France)Finance Minister; former Minister forEuropean AffairsNils Muiznieks (Latvia)Council of Europe Commissioner forHuman RightsHildegard Müller (Germany)Chairwoman, BDEW Bundesverbandder Energie- und WasserwirtschaftWolfgang Münchau (Germany)President, Eurointelligence ASBLAlina Mungiu-Pippidi (Romania)Professor of Democracy Studies, HertieSchool of GovernanceKalypso Nicolaïdis(Greece/France)Professor of International Relations,University of OxfordDaithi OCeallaigh (Ireland)Director-General, Institute ofInternational and European AffairsChristine Ockrent (Belgium)EditorialistAndrzej Olechowski (Poland)Former Foreign MinisterDick Oosting (The Netherlands)CEO, European Council on ForeignRelations; former Europe Director,Amnesty InternationalMabel van Oranje(The Netherlands)Senior Advisor, The EldersMarcelino Oreja Aguirre (Spain)Member of the Board, Fomento deConstrucciones y Contratas; former EUCommissionerMonica Oriol (Spain)CEO, SeguriberCem Özdemir (Germany)Leader, Bündnis90/Die Grünen (GreenParty)Ana Palacio (Spain)Member of the Council of State; formerForeign Minister; former Senior VicePresident and General Counsel of theWorld Bank GroupSimon Panek (Czech Republic)Chairman, People in Need FoundationChris Patten (United Kingdom)Chancellor of Oxford University and co-chair of the International Crisis Group;former EU CommissionerDiana Pinto (France)Historian and authorJean Pisani-Ferry (France)Director, Bruegel; Professor, UniversitéParis-DauphineRuprecht Polenz (Germany)Member of Parliament; Chairman of theBundestag Foreign Affairs CommitteeLydie Polfer (Luxembourg)Member of Parliament; former ForeignMinisterCharles Powell(Spain/United Kingdom)Director, Real Instituto ElcanoAndrew Puddephatt (UnitedKingdom)Director, Global Partners AssociatedLtd.Vesna Pusic´ (Croatia)Foreign MinisterRobert Reibestein(The Netherlands)Director, McKinsey CompanyGeorge Robertson(United Kingdom)Former Secretary General of NATOAlbert Rohan (Austria)Former Secretary General forForeign AffairsAdam D. Rotfeld (Poland)Former Minister of Foreign Affairs;Co-Chairman of Polish-Russian Groupon Difficult Matters, Commissioner ofEuro-Atlantic Security InitiativeNorbert Röttgen (Germany)Minister for the Environment,Conservation and Nuclear SafetyOlivier Roy (France)Professor, European University Institute,FlorenceDaniel Sachs (Sweden)CEO, ProventusPasquale Salzano (Italy)Vice President for InternationalGovernmental Affairs, ENIStefano Sannino (Italy)Director General for Enlargement,European CommissionJavier Santiso (Spain)Director, Office of the CEO of TelefónicaEuropeMarietje Schaake(The Netherlands)Member of the European ParliamentKlaus Scharioth (Germany)Dean of the Mercator Fellowshipon International Affairs; formerAmbassador of the Federal Republic ofGermany to the USPierre Schori (Sweden)Chair, Olof Palme Memorial Fund;former Director General, FRIDE; formerSRSG to Cote d’IvoireWolfgang Schüssel (Austria)Member of Parliament; formerChancellorKarel Schwarzenberg(Czech Republic)Foreign MinisterGiuseppe Scognamiglio (Italy)Executive Vice President, Head of PublicAffairs Department, UniCredit S.p.ANarcís Serra (Spain)Chair of CIDOB Foundation; former VicePresident of the Spanish GovernmentRadosław Sikorski (Poland)Foreign MinisterAleksander Smolar (Poland)Chairman of the Board, Stefan BatoryFoundationJavier Solana (Spain)Former EU High Representative for theCommon Foreign and Security Policy Secretary-General of the Council of theEU; former Secretary General of NATOGeorge Soros (Hungary/USA)Founder and Chairman, Open SocietyFoundationsTeresa de Sousa (Portugal)JournalistGoran Stefanovski (Macedonia)Playwright and AcademicRory Stewart (United Kingdom)Member of ParliamentAlexander Stubb (Finland)Minister for Foreign Trade andEuropean Affairs; former ForeignMinisterMichael Stürmer (Germany)Chief Correspondent, Die WeltIon Sturza (Romania)President, GreenLight Invest; formerPrime Minister of the Republic ofMoldovaPaweł S´wieboda (Poland)President, Demos EUROPA - Centre forEuropean StrategyVessela Tcherneva (Bulgaria)Spokesperson and advisor, Ministry ofForeign AffairsTeija Tiilikainen (Finland)Director, Finnish Institute forInternational RelationsLuisa Todini (Italy)Chair, Todini Finanziaria S.p.A; Memberof the Board of Directors, RAILoukas Tsoukalis (Greece)Professor, University of Athens andPresident, ELIAMEPErkki Tuomioja (Finland)Foreign MinisterDaniel Valtchev, (Bulgaria)Former Deputy PM and Minister ofEducationVaira Vike-Freiberga (Latvia)Former PresidentAntonio Vitorino (Portugal)Lawyer; former EU CommissionerAndre Wilkens (Germany)Director Mercator Centre Berlin andDirector Strategy, Stiftung MercatorCarlos Alonso Zaldívar (Spain)Former Ambassador to BrazilStelios Zavvos (Greece)CEO, Zeus Capital Managers LtdSamuel Žbogar (Slovenia)EU Representative to Kosovo; formerForeign Minister
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